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.”
This article appears in Jan 21-27, 2010.
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Looks like maybe we need an up to date server farm:)
Things do happen that really catch us off base and mr. miller I do understand. Now does’nt it just blow your mind that the guy who replaced ted K in Mass is a republican? I mean really Mass is way more liberal than Oregon tell me what is going on?
Let’s see if I have this stright now HBM. I won’t need a calculator, thank you.
Facebook (“FB”) will pay $27,000 per year in property taxes; FB will pay $110,000 per year for a community fee; FB will pay, according to your calcs, $200,000 per year for a franchise fee; FB will pay at least $1,680,000 per year in payroll, FB will pay about $32,000 per year in Oregon state unemployment taxes; FB will pay about $20,000 per year to refuel its jet in Prinevile and/or pay for local lodging of corporate visitors; FB is likely to pay another $200,000 per year for local services associated with operating a facility that size. The additonal cash flow each year to the area will likely approach $2,300,000.
In terms of one time expenditures, FB is likely to spend close to $100.00 per square foot, or close to $15,000,000 to construct a building of that size that also requires specialized air handling equipment and electrical componentry for a large server farm. How much of that will be subbed out to local contractors…say 15% to 20% at least. That is another $3,000,000 for Central Oregon easily.
So let’s recap. You would not extend the enterprise zone designation to Facebook since it is such a give away. Your math is thus easy to figure out because Central Oregon would have zilch, nada, nothing. It would never have been considered at all. Now Central Oregon will have about $2,300,000 (or more) added to its economy each and every year plus a like amount (or more) in one time construction expenditures.
It’s amazing the mind set of most liberals that see this as a give away. It seems to me that you must have something first in order to give it away.
The bigger picture always evades your consciousness as it has done so in Virginia, New Jersey and most recently in Massachusetts. The working classes of both parties get it and apply common sense to their daily lives. It is these elitist theoreticians who always know better and believe they are the smartest ones in the room that are so often at the center of today’s problems.
So please be my guest, strap on your sandals, pick up your protest sign, and stand out in the middle of Rt.126 at the Facebook site or better yet, stand out on the runway at the Prineville airport. It’s up to you to keep these capitalist pigs out of Central Oregon.
“FB will pay about $20,000 per year to refuel its jet in Prinevile and/or pay for local lodging of corporate visitors; FB is likely to pay another $200,000 per year for local services associated with operating a facility that size.”
You just pulled those numbers out of the air. I don’t see why Facebook executives or “corporate visitors” would need to visit the server farm often, if ever, nor will there be much need for “local services.”
News reports say the jobs at the server farm will be highly technical, and I doubt many of the unemployed people in Central Oregon will qualify for them. Facebook will be advertising those jobs on its Web page and it will get applications from all over the country — probably hundreds if not thousands of them. The net impact on Central Oregon’s unemployment rate is likely to be zero or close to it.
I’m not saying that enterprise zones are always a bad idea or that some businesses shouldn’t get tax breaks to encourage them to locate in the area. I’m just saying the Facebook server farm doesn’t look like the great deal everybody’s making it out to be.
“I mean really Mass is way more liberal than Oregon tell me what is going on?”
This isn’t the place for a protracted discussion of national politics so I’ll just quote what Frank Rich of the NY Times had to say this morning: “Obama has blundered, not by positioning himself too far to the left but by landing nowhere – frittering away his political capital by being too vague, too slow and too deferential to Congress.”
Incidentally, those who are declaring the Obama presidency a failure because his approval rating is down to 50% might like to know that after his first year in office, Ronald Reagan’s approval rating was 49%.
HBM: “You just pulled those numbers out of the air. I don’t see why Facebook executives or “corporate visitors” would need to visit the server farm often, if ever, nor will there be much need for ‘local services.'”
Sure I made a couple of reasonable assumptions, but I can assure you the annual operating costs of a 147,000 sq ft facility excluding utilities are quite substantial and you’re kidding yourself if you don’t think there will be $20,000 of annual traveling costs associated with this facility. The facility is right next to an airport that can handle and service a G5 with commercial aviation ammenities at Roberts Fiels in Redmond.
You further made my argument when you state these jobs will be of a higher technical nature and would pay higher than the $48K I used in my summary. Instead of a payroll of about $1.7 million, use a higher average rate of $70K per job, and the payroll would be about $2.5 million.
If you would actually do a little work and research instead of bloviating ad nausium, you would find that the multiplier effect of an enterprise zone is about 2.5 to 3.0 times the ampount of the cost. Check out IMPLAN modelling and you might learn something.
HBM says, “News reports say the jobs at the server farm will be highly technical, and I doubt many of the unemployed people in Central Oregon will qualify for them.” First of all, I don’t accept that there are unqualified Central Oregonians. I continue to be amazed by your liberal group think mentality that paints Central Oregonians as stupid. I’ll bet you a nice dinner at the restaurant of your choice that at least half of the employees will come from a 50 mile radius of the site. However I am certain that even if few Central Oregonians are hired directly by Facebook, the ancillary jobs created by this operation will indeed provide opportunities to many unemployed Central Oregonians.
You need to get beyond your liberal mind block that sees the prudent use of tax incentives as a zero sum game. You have spent too much time in the non-profit world where any profit is a crime against humanity.
It appears Facebook is acting upon a “lessons learned” from google after they built a large facility at The Dales (off the Columbia River). But, if Les Schwab relocated their corporate offices from Prineville in part to attract technical and other employees it seems that Facebook might have been a bit more thoughtful to build their facility in Juniper Ridge…as did Les Schwab (with their data center in tow).
Server-Farming is the lowest tech in the biz. All technical will be done remote. The biggest problem will be when a PC crashes, then some monkey will pull the rack, and replace component rack.
The only people that need to work at these places are janitors and security folk. The biggest problem will be the ‘evaporative cooling’ system which means ponds outside and lots of filtration and pumping problems, ok so they have to have a few ‘high tech plumbers’ on staff.
98% of these jobs are NOT going to be $30k/yr jobs.
All the software and enterprise and redundancy is done off campus remotely by HQ.
A high school kid could run a server-farm, just need someone to pull out processor rack ( look like component stereo ) when they fail. The systems are designed to tell an operator when a component CPU fails. PURE monkey work.
New education required to work in these places.
Perfect for the PNW.
Home of cheap water, power, and white english speaking labor.
You forgot to factor in that all of Prineville gets free Facebook accounts 😉
Won’t even need thirty-five… one man and a dog.
The dog to keep the man from messing with the machinery.
The man to feed the dog.
“… way more liberal than Oregon …”
Apparently not.
“you’re kidding yourself if you don’t think there will be $20,000 of annual traveling costs associated with this facility.”
Again, you have nothing to back up this claim. Just because there’s an airport in the vicinity doesn’t mean Facebook will be flying in and out on a regular basis. There’s no reason for Facebook executives to visit the server farm or bring guests there frequently, if ever.
“I continue to be amazed by your liberal group think mentality that paints Central Oregonians as stupid.”
I continue to be amazed (well, not really) at how right-wingers like you twist and distort what their opponents say. I didn’t say Central Oregonians are stupid; I said they would face very tough competition for the small number of jobs available.
“You have spent too much time in the non-profit world where any profit is a crime against humanity.”
I have never worked in the “non-profit world” in my life.