Facebook Doesn’t Miss the Turn at Albuquerque. Windfall Highlights Data Center Cost Advantages Enjoyed by Web-Scale IT Enterprises.

Facebook "Makes the Turn" at Albuquerque
Facebook "Makes the Turn" at Albuquerque

Bugs Bunny missed his turn at Albuquerque, but after playing local officials in Utah and New Mexico like a Stradivarius, Facebook went from Silicon Valley to the ABQ and took a right turn to claim a pile of incentives in exchange for planting their latest data center in the Land of Enchantment.

The back-and-forth battle between New Mexico and Utah for the newest Facebook data center has been fought, and the “winner” is Los Lunas, New Mexico, with an economic package that the social media giant simply couldn’t resist. Los Lunas has issued $30 billion in industrial bonds for the construction of the data center (to be repaid by Facebook) and is foregoing all property taxes in exchange for 30 years of payments from the company starting at $50,000 and progressing to $300,000 over the next thirty years.

Facebook is estimating 30-50 data center operations jobs (usually those end up on the low end of estimates) but in the company’s industrial bond proposal claimed that the data center would, over the course of 20 years, generate “multiplier spending effects” that could mean thousands of jobs and an economic impact of “billions of dollars.”

It the company’s industrial revenue bond application Facebook claimed “large data centers tend to create a ‘follow the leader’ effect. Once one large data center project locates in an area, others follow shortly thereafter (and so do their vendors).”

Whether the investment by New Mexico public officials will be worth it or not remains to be seen. The project promises to utilize 100% renewable energy, including a solar component, and the construction jobs should be plentiful. But the long-term job-creation effects of a large enterprise data center in a new locale cannot be projected with certainty.

One thing that is not debatable, and that is the huge advantage that existing enterprises have in leveraging their leadership status with local and state government officials. Politicians and economic development leaders dangle incentives that (assuming similar technology) provide a much lower cost of doing business for existing web-scale IT enterprises than an upstart challenger could ever hope for. That’s a significant advantage for social media, search, and cloud providers that shows no signs of reversing any time soon.