Saturday, January 23, 2010

How're Ya Gonna Keep 'Em Down on the Server Farm?

Posted By on Sat, Jan 23, 2010 at 6:52 PM

Everybody is shouting hallelujahs and hosannas over Facebook’s decision to build its new “data center” in Prineville.

The Bulletin had a big bold banner headline on the front page this morning: “Enterprise zone lured Facebook to Prineville.” The story below it described how, thanks to the enterprise zone designation, Facebook will get out of paying as much as $2.8 million a year in local taxes.

To be fair, it should be noted that Facebook will still have to pay $27,000 a year in local property taxes. It also has agreed to pay a “community fee” to Prineville and Crook County of $110,000 a year. And, according to The Bulletin, it’s also supposed to pay a “franchise fee” for its power usage that could amount to “hundreds of thousands of dollars” a year.

But according to my trusty pocket calculator, that still leaves Facebook – a company with $500 million in revenue in 2009 – with a subsidy of about $2.5 million a year, assuming the franchise fee is in the neighborhood of $200,000.

The justification for this corporate welfare is that the Facebook data center will provide jobs – and Crook County, with an unemployment rate somewhere north of 17%, certainly needs them.

But the 147,000-square-foot facility will be, in fact, a “server farm” – a big, climate-controlled building housing hundreds of computer servers to process the Himalayan mountains of data generated by Facebook’s 300 million worldwide users. Server farms are not labor-intensive operations; Facebook is expected to employ only about 35 people to tend the servers. (What’s the correct term for that job? “Server wrangler,” maybe?)

Turning to my trusty calculator again, I figured out that Prineville will be paying $71,428.57 per year per job. Under the enterprise zone rules, Facebook must pay the average employee on the farm 150% of the Crook County average annual wage. The average annual wage in the county is about $32,000, meaning that the average for the 35 Facebook employees in Prineville will be around $48,000. Of course some will make a lot more, and most probably will make a lot less.

And there’s no guarantee that all, or any, of the 35 jobs will go to locals. Facebook executive Tom Furlong said at a press conference Thursday that the company “will ensure Central Oregonians and Prineville residents are able to apply.” Gosh, that’s big of them.

There’s also no guarantee that Facebook will stick around for any specific length of time. Its business could go belly-up, or it could find greener pastures elsewhere.

(UPDATE: According to an Oregonian story, the deal with Facebook includes provisions that it will have to refund some of its tax incentive money if it doesn't employ as many people as promised or closes the facility early.)

This might turn out to be a wonderful thing for the people of Prineville and Crook County; I hope it does. But frankly I’m always skeptical of enterprise zone deals. In the words of Duncan McGeary, the Sage of Minnesota Avenue: “Whenever I hear the words ‘enterprise zone’ I think: We gave it to them.”

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