Expertly playing competing suitors against one another, Facebook is being offered continuingly sweeter deals by economic development officials and politicians in New Mexico and Utah hoping to be the home of Facebook’s newest data center. The feverish competition led Utah interests to drop out of the bidding for a day before jumping back in with an incentive package expected to be valued at over $200 million.
According to Iowa State University economist Dave Swenson, both New Mexico and Utah are offering more money in incentives to Facebook than Iowa dangled in total to land eight major enterprise data center projects.
Will the Utah/New Mexico battle be a tipping point in the relationships between large technology enterprises and the local government officials who recruit them? Will this prove to be the peak for public incentives?
An Olympic Comparison: A few short years ago, cities from around the globe aggressively competed to host Olympic games, to the point where bribery was an established part of the process. But times have changed, as the massive costs (Sochi, Russia spent $51 billion on the 2014 Winter Games) and questions as to the true benefits to the host has scared off potential hosts. Options were so limited the International Olympic Committee reluctantly selected Beijing (summer host in 2008) as host for the 2022 Winter Games when the only other bidder was Almaty, Kazakhstan.
The political establishment and public at large appears to have gotten wise to the rising costs and limited benefits of hosting the Olympics. Harry Arne Solberg, a professor of sports economics at Trondheim Business School in Norway told Time, “People used to think ‘We can get sports arenas paid for by American TV revenues, so why not?’ But that’s never been the case. Now they’re more realistic.”
Will the massive offers in the current bidding war between Utah and New Mexico be a tipping point that leads to more modest proposals by officials in prospective data center locales? While there are unquestionably benefits to being the home for sizeable data center, (as we covered here) the relatively modest employment provided by major data centers may become a more publicly acknowledged factor limiting data center incentives moving forward.
Will Facebook negotiators hold their gold medal for tax incentive obtainment in perpetuity? Maybe not. Given the obvious hunger by Utah and New Mexico public officials to roll out the red carpet, another tech enterprise may clean up soon. It only takes one agreeable municipality or state government to crown another tech behemoth as the new champion.
Image used under Creative Commons, courtesy of: Wikimedia