Oregon and Washington offer top tax breaks to data centers, report finds

By Mike Rogoway

A study out Tuesday finds that Oregon and Washington offer some of the most lucrative tax breaks in the nation to large data centers.

Washington provided tax breaks worth $57.4 million to data centers in its last fiscal year, according to the report, which valued Oregon's incentives at $33.7 million. Georgia was the only other state in that range, with incentives of $42 million in fiscal 2013.

The findings come from Good Jobs First, an advocacy organization that tracks government spending on economic development. The report is critical of the data center incentives because server farms produce relatively few jobs – even a large facility might employ just a few dozen people.

The report follows last month's decision by Facebook to build a data center in New Mexico after

officials in Utah split over granting the social networking company tax breaks it had been seeking there

.

The absence of a state sales tax coupled with property tax breaks on data centers' computers make

Oregon one of the most attractive destinations in the country for data centers

. Google and Facebook each built their first corporate data centers in the state after winning tax exemptions from local governments, and each has expanded considerably in the years since.

Apple and Amazon also have large data centers in central and eastern Oregon, while several smaller facilities have taken advantage of tax breaks to build server farms in Hillsboro.

Good Jobs First recommends that state and local governments cap the value of tax breaks at $50,000 per job. In Prineville, where Facebook has about 150 employees, that would limit the value of its tax incentives to $7.5 million. Facebook received exemptions worth $15.7 million in the 2014-15 fiscal year,

according to state data

.

On a statewide level, 150 jobs represent a negligible contribution to Oregon's economy. In tiny Prineville, though, with roughly 9,000 residents, Facebook and Apple data centers have had a profound effect on the local economy.

For example, franchise fees generated by data centers' electricity use generated $1.6 million for Prineville in its last fiscal year. The city's general fund budget was $6.4 million.

Franchise revenue will likely rise in the coming years as Apple and Facebook complete work on additional data centers and those begin operating.

In the meantime, construction brings hundreds of jobs to town on a temporary basis – so many that

Prineville is facing a short-term housing shortage

.

In that city, which has ample land and very few employers, there is little controversy about data centers' tax breaks.

The calculus is different in The Dalles

, where Google has consumed much of the city's remaining industrial land. And in suburban Hillsboro,

data centers occupy acres of industrial land that might conceivably have more job-intensive alternatives

.

— Mike Rogoway