New Mexico Businesses Hardly Enchanted by Facebook Demands on Data Center Contractors

Facebook demands hard on contractors.
Facebook demands hard on contractors.

In the debate over the true economic impact of a major data center build a case can be made that the jobs created and business generated make the projects beneficial enough for local governments to offer significant incentives to attract major data centers.   But when big promises are made, public financing is secured, and one of the first moves is to exclude a large portion of the business community hoping to participate in the project, it can be a black eye for the data center industry.

For Facebook’s massive data center build in Los Lunas, New Mexico, the company’s contractor has set a standard that its primary subcontractors will need to have no more than 20 percent of their annual revenue committed to the Facebook data center project.

After Facebook (wisely) milked a bidding war between Los Lunas and West Jordan, Utah, Los Lunas issued $30 billion in industrial bonds for the construction of the data center campus, which will be repaid by the company. To further sweeten the pot, Los Lunas is foregoing all property taxes in exchange thirty years of annual payments from the company starting at $50,000 and progressing to $300,000.

In their sales pitch for the incentive package, Facebook had projected that their data center would draw other data centers and associated business into the Los Lunas area, as well as suggesting 30-50 data center operations jobs and 500 construction jobs (over several years) would materialize as a result.   Local contractors saw the project as a cure for the regions building woes, as New Mexico has the second-highest construction unemployment rate in the country at 8.6%.

The true economic impact of large single-location data centers is not clear, and employment projections have fallen short after major data center builds in North Carolina and other areas. The case for the benefits of attracting data center builds is not helped by excluding what a leading construction industry organization claims is 85-90% of all the state’s contractors.

Facebook and the company’s contractor are talking about easing these guidelines to open up construction opportunities beyond such a limited circle of contractors. Facebook’s misstep coming so soon after claims of widespread economic benefit for those in New Mexico gives the opponents of major data center projects another arrow in their anti-data center-development quiver.

 

 

 

Flickr image used under Creative Commons License 2.0.