Washington State Revisits Data Center Tax Break

An aerial view of Quincy, Washington showing major data centers, including a visualization of a planned site for Sabey Corp. A coalition is seeking to reinstate tax breaks that helped develop the Quincy cluster. (Image: Sabey Corp.).

A coalition of data center companies and economic development groups is seeking to reinstate tax breaks that attracted major data center projects to the state, and express optimism that the effort will have improved legislative support.

The group, Washington Needs Jobs, last week hailed the introduction of two bills in the Washington Legislature (SB 6789 and HB 3147) that would allow a 15-month sales tax exemption on the purchase and installation of computers and energy for new data centers in rural counties.

The repeal of the tax benefits in November 2007 has slowed data center development in the state, which had seen a boom in mission-critical projects in 2006 and 2007. Microsoft cited the tax issue in its decision to migrate its Windows Azure cloud computing service out of Washington state. Meanwhile, rival Oregon is attracting major new projects, including a $188 million Facebook data centerin Prineville.   

The Washington Needs Jobs coalition includes Microsoft, Yahoo, VMware, Sabey Corp. and Base Partners – which all have data center projects in the state – along with the Washington Technology Industry Association and the town of Quincy, Wash. The group says the impact of the tax decision on data center development is now clear.   

Quincy’s Gain: Huge Growth in Tax Revenue

Taxes and data centers have become a hot-button issue in Washington State, where state officials ruled last year that data centers were no longer covered by a sales tax break for manufacturers. The downside of that move was highlighted today at an economic development in Quincy, the small town in Washington that has become the poster child for data center development.

Local officials made it clear that Quincy has experienced enormous benefits from the influx of data centers from Microsoft Corp., Yahoo, Intuit and Sabey Corp. Quincy Mayor Jim Hemberry said the city experienced an eight-fold increase in sales taxes between 2001 and 2007, and a tripling of property tax revenues from 2001 to 2009. “No question, those data centers had an impact,” Hemberry said at the event, which was covered by the Wenatchee World.

Windows Azure Flees From State
That spigot of revenue may be short-lived due to the state’s stance on data center tax incentives. Microsoft announced in August that it was migrating its Windows Azure cloud computing infrastructure from its data center in Quincy to another Microsoft facility in San Antonio. The reason: Microsoft’s unhappiness with tax policies in Washington state.  

Intuit Opens Its Quincy Data Center

Last month Intuit celebrated the opening of its new 240,000 square foot data center in Quincy, Washington, not far from large data centers built by Yahoo and Microsoft. Intuit President and CEO Brad Smith visited Quincy to celebrate the official opening, but some of the most interesting comments at the ceremony were from local officials discussing how the arrival of large data center projects has affected Quincy, once a small farming town of 5,000 people. “Not that long ago, Quincy was like most small communities in the state, trying desperately to make ends meet in a time of reduced revenues,” says Quincy Mayor Jim Hemberry in this video of the event posted by the Grant County Economic Development Council. “It was difficult to provide the essential services needed for our community, and we could only dream of major capital improvements. Then, for whatever reason, Quincy was discovered. The revenues generated by Intuit and other new construction allowed our dreams to become a reality, and the city was able to complete several projects to improve the quality of life for our citizens.” This video runs about 4 minutes.

For additional video, check out our DCK video archive and the Data Center Videos channel on YouTube.

Quincy Plans Recycled Water for Microsoft

The city of Quincy, Washington is spending millions of dollars to build a system to supply recycled water for huge data centers operated by Microsoft Corp., Yahoo, Intuit and Sabey Corp. The system will allow Quincy to shift the data centers’ water requirements to a separate “gray water” system rather than depleting the city’s potable water supply.  

The water recycling program is similar to one implemented in San Antonio, which Microsoft cited as a key factor in its choice of the city for a $500 million data center. It reflects a trend in which municipalities and data center operators are working to minimize the impact of these facilities on local water systems.

The Quincy project, which will treat up to 5 million gallons of water a day, will cost $9 million. The first phase is being built with a $4.5 million grant from the state, according to the Wenatchee World, which said the city has appealed to federal lawmakers for the rest of the money.

Sabey Confirms Huge Quincy Data Center

It’s official: Sabey Corporation will build a 525,000-square-foot data center campus in Quincy, Wash., the company said today. Sabey will break ground this summer on Intergate.Quincy, which will feature three data center facilities on 40 acres.

Sabey Corp. decided to build the campus in Quincy after its leasing success at its Intergate.Columbia in nearby East Wenatchee, where T-Mobile and VMware signed on as tenants within a year of groundbreaking. Sabey, a Seattle-based developer, began evaluating prospects for a data center in Quincy in 2007, and has listed the project on its web site for several months.

The new development continues the data center building boom in central Washington, where Microsoft, Yahoo, Ask.com and Intuit, have opened large data centers, drawn by the area’s low power rates and clean hydro-electric power from nearby dams on the Columbia River. Sabey notes that while the other projects are company-built and operated, Intergate.Sabey is “wholesale” data center space designed for companies who prefer to lease rather than own.

T-Mobile Moves In, Sabey Eyes Quincy

T-Mobile officially opened its new $250 million data center in East Wenatchee, Washington last week, as local officials touted the impact of local data centers on the township’s tax base. The facility is the first of two major data centers being built at Sabey Corp.’s Intergate.Columbia development, where VMware has also leased more than 100,000 square feet of data center space.

The new data centers are already boosting tax revenues. At last week’s ceremony to mark the opening og the T-Mobile project, Douglas County Commissioner Ike Stanton said the county’s sales tax revenue jumped 280 percent in a single year, increasing from $220,000 in February 2008 to $838,000 in February 2009. “We refer to this in Douglas County as our own, federal stimulus package, because it’s been very good for Douglas County,” Stanton said, according to the Wenatchee World.

Yahoo Mulls Wenatchee Expansion

In its bid to convince Washington state legislators to reinstate a tax break for data center operators, Yahoo is using a carrot as well as a stick. A Yahoo executive said Thursday that the company would consider building a second major data center complex in Wenatchee, Wash. if the state restores the sales tax incentive.

Kevin Timmons, vice president of operations for Yahoo, told the Wenatchee World that the company has scouted land in Wenatchee for a data center “similar in size” to the company’s 140,000 square foot data center in Quincy. If the tax break materializes, Timmons said, Yahoo will continue with its plans to add a second phase of the Quincy data center as well as construct a new data center in Wenatchee. However, those plans are conditional. “Without a tax exemption it makes no sense,” Timmons said.

Legislation in Washington state that would have restored a tax break for data centers won’t be passed in 2008. The tax package was drafted after the state ruled that data centers were no longer covered by a state sales tax break for manufacturing enterprises, and thus must pay a 7.9 percent tax on data center construction and equipment.

Data Centers Boost Tax Revenue in Quincy

New data centers from Microsoft, Yahoo and several other high-tech firms are providing a significant boost to the economy of Quincy, Washington, local officials said this week. Quincy city administrator Tim Snead told the Wenatchee World that the building phase of the new data centers server farms had a huge impact on the city’s sales taxes. After receiving $700,000 in sales taxes in 2005, Quincy’s tax revenue grew to $1.5 million in 2006 and nearly tripled to $4.3 million last year.

Sales tax revenue is expected to recede as a number of data center projects are completed, reducing the volume of construction workers at local sites. Quincy is a small farm town that had 5,300 residents when it was selected for the Microsoft project in 2006. Yahoo, Ask.com, Intuit, Sabey Corp. and Base Partners have since announced projects in central Washington.

Quincy Update: Some Growth, No Starbucks Yet

Can data center clusters transform a rural town into a vibrant tech center? The Los Angeles Times provides an update on life in Quincy, the small farm town in Washington state that has become a case study for the economic development potential of data center projects. An excerpt:

For a town like Quincy, built on potatoes and apples, the arrival of high tech has proved an inspirational and a cautionary tale. With its two stoplights, four banks and almost 6,000 residents – two-thirds of them Latino, many of whom work the fields, orchards, vineyards and packing plants – Quincy seemed an unlikely destination for the likes of Intuit, or Microsoft and Yahoo, which also have built data centers in town. The median income ($35,000) and the median price of a home ($108,000) are far below the state medians. Unemployment is relatively high and education levels relatively low – typical of the divide between Washingtonians east of the Cascade Mountains and those west of them. Still, Quincy has done better than many small towns. Some believe the high-tech utilities – which town officials courted – will further transform it.

The verdict thus far: business is booming for the hardware store, and a new shopping center is coming. But there’s no sign of Starbucks yet. “It’s like we’re still waiting for something,” said Aleeta Merred, executive director of the Quincy Valley Chamber of Commerce. “So far, we’re not really seeing the growth we expected.”