Lawmakers hope to spark a renewed building boom in Eastern Washington by giving technology companies a pass on taxes when they build vast data centers full of computer servers, and Pierce County wants a piece of the action.
The tax-break proposal would apply only to rural counties. Pierce County lawmakers say that if the proposal included this region, a server farm under development in South Hill could benefit.
Benaroya Cos. expects to spend more than $100 million to build there, but executive Marc Nemirow said the company will have to rethink its plans if state government hands out what he calls a multimillion-dollar subsidy to data centers in another part of the state. It would hurt Benaroya’s efforts to lure companies to its space, he said.
“I really only want a level playing field,” Nemirow said. “If we have to pay the sales tax, we don’t think it’s fair that someone else doesn’t.”
With five days left before the scheduled end of the legislative session, the request complicates the cause of a coalition that includes technology companies Microsoft and Yahoo.
“It’s kind of thrown a monkey wrench into the situation, late,” said Lewis McMurran, a lobbyist for the Washington Technology Industry Association.
There is broad and bipartisan support for the original tax exemption. Both Senate and House Democrats placed it in their budget proposals, even though they are pruning the tax code of other exemptions and loopholes to increase state revenue.
Lawmakers see it as encouraging jobs at a time of high unemployment, especially in the construction sector. Although the servers require few employees to operate, the coalition says a typical data center brings 500 to 1,000 temporary construction jobs to town.
Washington attracted six major data centers between 2004 and 2007, legislators say, but none since the economic downturn and a November 2007 ruling by the state attorney general that the centers don’t qualify for a rural sales tax exemption. The coalition said Washington missed out, for example, on a potential Facebook data center.
Benaroya bought three buildings at the South Hill Business and Technology Center that once were used to make semiconductors, and it has begun installing infrastructure, Nemirow said. He promises that hundreds of construction workers will be on the site.
As it stands, the exemption would apply to data centers in 32 of 39 counties, but only if they are ready to obtain a permit by June 2011. At least 35 permanent jobs would be required.
Rep. Dawn Morrell, a Democrat from Puyallup, has proposed expanding the break to data centers in Pierce County that hire 70 permanent workers, as Benaroya hopes to do.
Morrell said, though, that she’s now hearing that other communities are looking to get in on what she worried could turn into a “Christmas tree” of tax breaks.
The technology coalition does not object to expanding the break to other communities – unless it puts the measure in jeopardy, said an adviser to the coalition, Jim Kneeland.
Central Washington provides ideal sites for data centers, Kneeland said. For one thing, its hydroelectric plants guarantee plenty of the power needed to keep the servers humming.
The one thing it doesn’t have anymore is a tax break.
“It made us uncompetitive against states like Oregon and Utah and others who were winning all the business,” Kneeland said. “This bill is simply designed to level the playing field so we can make sure that Washington doesn’t get left behind in the effort to capture this business.”
Jordan Schrader: 360-786-1826