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Yahoo Mulls Wenatchee Expansion

Yahoo (YHOO) has scouted land in Wenatchee, Wash. for another major data center project, but only if the state restores a sales tax incentive.

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.

Yahoo's initial reaction was to threaten to move elsewhere. In a letter to legislators, Yahoo co-founder David Filo said the withdrawal of the sales tax incentive "swings the decision strongly in favor of freezing construction in Washington, and building instead in Oregon (which has no sales tax), as some of our competitors are already doing."

Mark Urdahl, executive director of the Port of Chelan, told the World that he knew Timmons was looking at land in Chelan County for a data center but did not know if he had looked at land in Wenatchee. He said he was "not at liberty to discuss" sites Yahoo has looked at. Yahoo already has one data center in Wenatchee at the Confluence Technology Center.

Timmons noted that Yahoo has been lobbied by economic development officials in Oregon, North Carolina, Nebraska and other states. "Regardless of what happened in the past we want the state (Washington) to compete," he said. "There are other communities in other states who want our business. The question is, does the state want to compete for that business or not? If Washington wants to compete for that business we would whole heartedly welcome that."