Race for Facebook data center raises tax-break questions

Facebook’s first wholly owned build data center was built in the once-struggling timber town of Prineville, Ore. Since then, the town is reinventing itself as a digital hub. Courtesy Facebook

Facebook has chosen the village of Los Lunas outside of Albuquerque for its new data center after a topsy-turvy contest between Utah and New Mexico to attract the social media giant.

The company’s decision, announced Wednesday, drew wide praise from New Mexico officials and offered welcome relief in a state that has been dogged by stuttering job growth, high unemployment and gaping budget deficits. The company said it expects to break ground on the sprawling facility, which will be entirely solar powered, within the year.

Los Lunas agreed to give up property taxes for 30 years in exchange for annual payments from Facebook starting at $50,000 and going as high as $500,000. The village council in June also approved an ordinance allowing for the issuance of up to $30 billion in industrial revenue bonds to lure the facility to Los Lunas. West Jordan, a suburb of Salt Lake City, also offered a generous tax package but did not enjoy the same political backing, at one point even withdrawing from the contest before jumping back in the next day.

Gov. Susana Martinez, New Mexico’s five-member congressional delegation and state Attorney General Hector Balderas, as well as the Public Service Company of New Mexico, which created an energy proposal to help attract the center, all released statements enthusiastically welcoming the company to New Mexico.

The governor said she and her team began courting Facebook more than a year ago during a meeting with company executives in California.

“When we first sat down with Facebook executives 13 months ago, we weren’t even on their radar,” Martinez said. “But we made a strong case and laid out how competitive we have become.”

Martinez attributed this to her efforts in creating a business-friendly administration by lowering business taxes, creating corporate incentives and developing a closing fund.

Balderas called it an “exciting opportunity” for the state, and the congressional delegation said, “Facebook will bring innovative opportunities for our economy and much needed jobs. As a leader in energy development, New Mexico is an ideal fit for the new facility.”

The proposed $250 million data center is expected to span 850 acres and use at least 30 megawatts of solar and wind power to fuel technology at the site that will come online by 2018, with the potential to expand to 100 megawatts in the coming years. Facebook also has committed to a minimum of 30 full-time workers in Los Lunas, with the potential for thousands more during the construction phase and a promise to source workers and materials locally.

In Prineville, Ore., a Facebook data center that broke ground in 2009 has so far cost $450 million and employs 165 full-time workers, but has offered 3,800 temporary jobs over the last seven years, with a gross economic impact of $637 million, according to the company’s fiscal impact reports.

Tomas Furlong, vice president of infrastructure at Facebook Data Centers, said the company is “excited to announce this initial investment and looks forward to future phases of development.”

In June, the village of Los Lunas approved an ordinance for up to $30 billion in industrial revenue bonds for Facebook subsidiary Greater Kudu LLC to construct a data center campus and related facilities within Los Lunas.

And in mid-August, the five-member state Public Regulation Commission unanimously approved PNM’s proposal, first pitched in July, to bring the data center to New Mexico. PNM will power the data center, and a subsidiary of the company will build solar arrays and eventually add wind power. Facebook will cover the costs of both investments. PNM also will provide backup power, should renewable energy be insufficient to meet the demands of the center.

But while New Mexico officials have been steadfast in their support of the company coming to Los Lunas, other states have been more hesitant about the environmental impacts of a large data center.

After initially competing with New Mexico for the Facebook center, Utah officials and residents raised concerns late this summer about the amount of water the center would require to cool its computers and the cost of tax breaks.

Facebook hasn’t released specific statistics on projected water usage, but the company said it is expected to be “far less” than the “theoretical maximum quoted publicly.” And during winter months, it said, “New Mexico’s cool temperatures and dry weather will mean the data center will consume very little water in comparison to hot, humid days.”

A 2015 Wall Street Journal article reported that a midsize data center in California running on 15 megawatts (half the initial usage of the Los Lunas data center), relies on 130 million gallons of water annually, according to industry estimates, roughly the same usage as three hospitals or a 100-acre almond orchard. In its first year, the Los Lunas data center could use 700,000 gallons of water each day, and if it reaches its 100-megawatt capacity, that number could spike to 1.4 million gallons daily.

The coal-fired San Juan Generating Station, in contrast, uses 7 billion gallons per year, twice the consumption of the city of Santa Fe, while Intel uses approximately 2.5 million gallons daily.

Los Lunas Mayor Charles Griego said the numbers cited by The Wall Street Journal sounded “about right,” but he didn’t provide details. He said the company would take water from the village’s public wells at the same cost as other users.

“We have the infrastructure and the ability to deliver,” he said. “I do not see any negative impacts at all.”

The village launched a 10-year plan to expand and rebrand Los Lunas in 2013, and water was a central element of that development proposal. The community pumps some 750 million gallons of groundwater a year from its four public wells, serving more than 6,300 taps.

Eleanor Bravo, an organizer for Food & Water Watch New Mexico, said she supports development of a clean energy industry, but “there are so many unknowns” about the Facebook project.

“We really would like to see what the water use is going to be and what they intend to do with it,” she said.

Mona Blaber, a spokeswoman for the Sierra Club, said water use is always a crucial question regarding development in New Mexico.

“We must ask these questions [about water use] whenever we look at development and take into account whether the benefits of the development are worth the water consumption,” she said, adding that renewable energy tends to use less water than conventional industries.

But Regina Wheeler, CEO of Positive Energy Solar, said Facebook’s model for solar creates a blueprint never before used in the state, allowing an industry to use solar nearly independent from the electric grid. And this could be applied to other industries’ use of solar in the future.

“There were huge hurdles” before this, she said. “It seems like the administration is acknowledging that solar power is important in attracting big … businesses to New Mexico.”

“This is a total game-changer for solar in New Mexico,” she added.

Contact Rebecca Moss at 505-986-3011 or rmoss@sfnewmexican.com.

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