Lawmakers OK Tax Breaks To Lure Mega-Data Center To Michigan
By David Eggert, Associated Press
LANSING (AP) - A major data center developer said it will expand into Michigan after securing tax breaks approved late Tuesday by lawmakers and that are expected to be signed into law.
The legislation exempts Nevada-based Switch and its "co-located" clients from paying sales or use taxes on servers, computers and other equipment for 20 years at a planned mega-data center campus near Grand Rapids. The tax incentives also will be available to about 40 existing Internet data centers in Michigan.
The data center industry, as a whole, must add 400 jobs by 2022 and a total of 1,000 jobs by 2026 for the tax exemptions to continue under amended bills passed 61-46 in the House and 26-12 in the Senate at the end of lengthy sessions.
Switch, which has more than 8 million square feet of data centers in Las Vegas and Reno, will make Michigan the site of its first facility in the eastern United States. The company in November announced plans to build a 2 million-square-foot "Supernap" campus in Gaines Township contingent on approval of tax breaks it were needed to even the playing field with 22 other states.
Switch said construction planning and work will begin immediately. The data center, which is to be based in a pyramid-shaped building that once housed officer furniture maker Steelcase's research facility, will be operational by the end of 2016.
"We look forward to working in partnership with Michigan to attract the largest companies in the world to the Switch ecosystem here in the Great Lakes State," Adam Kramer, Switch's executive vice president of strategy, said in a statement.
Switch's 1,000 clients include eBay, Google and Amazon. The demand for data centers, especially large ones, is being fueled by cloud computing and an increasing reliance on outside firms to provide computer infrastructure for businesses because of cost, security and other reasons.
"There's nothing certain in this world except that data is growing faster than anything on the planet," said Rep. Jim Townsend, D-Royal Oak.
Rep. Rob VerHeulen, R-Walker, said Michigan "has a unique opportunity to compete for high-tech, well-paying jobs in an emerging industry."
Opponents said the legislation unfairly favors data centers at the expense of other companies. They said it flies in the face of Michigan's recent elimination of film industry tax incentives, and they noted how the state faced budget problems this year due to billions of dollars in business tax credits that were awarded under a former economic development program.
"To pick and choose the property that is exempt is to leave every other taxpayer, every other loyal taxpayer, without the political muscle to extract an exemption for themselves to wonder who is representing them and why they must carry the cost of government," said Rep. Earl Poleski, R-Jackson.
He said to support the bills is to acknowledge that majority Republicans' passage in the past five years of a corporate income tax overhaul, reduced equipment taxes, right-to-work laws and other business-friendly policies is "inadequate."
"We owe greater diligence to our Michigan taxpayers and we should have greater confidence in the cards we hold not to fold at the first raise," Poleski said.
Switch estimates the campus will employ at least 1,000 workers and spend $5 billion over 10 years. The minimum starting wage is $15 an hour plus benefits. Most jobs pay between $60,000 and $200,000.
The nonpartisan House Fiscal Agency projects a $13 million annual loss in revenue from current data centers, not including any co-located businesses that also will qualify for the preferential tax treatment and the possibility that existing companies will spin off their data departments into subsidiaries in an attempt to obtain the tax breaks.
In the House, 32 Republicans and 29 Democrats backed the bills while 28 Republicans and 17 Democrats opposed them. In the Senate, 21 Republicans and five Democrats voted yes, and six from each party voted no.
Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
