Tech Titans Squeeze Rural Towns for Data Center Incentives

The rapidly expanding data center sector is quickly wearing out its welcome in populated areas due to the non-stop noise and voracious appetite for electricity and water that huge hyperscale server farms generate with their 24/7 operations.

Locations on the periphery of established data center clusters in the US are mounting a growing NIMBY backlash that has beaten back proposals to build new facilities in bucolic rural towns and near historic preservation sites—even in the leading global data center cluster in Northern Virginia.

Perhaps anticipating this trend, tech behemoths including Amazon, Apple, Google and Meta have for several years planted their flags in remote and sparsely populated regions in the US—including eastern and central Oregon—as they continue to build out mega-platforms for their web services and burgeoning cloud-computing empires.

In small towns across eastern and central Oregon, the tech giants zeroed in on acres of cheap available land and gorged on generous industrial tax breaks offered by the state, abundant water resources and the relatively low cost of industrial electricity.

But, as the tech titans unveil larger and more ambitious expansion plans—like Amazon’s $12B plan to add five hyperscale facilities to its Columbia River cluster in Morrow County, OR, population 12,000—the locals are starting to push back.

But the widespread incursion of the tech goliaths in rural Oregon increasingly confronts them with a choice of paying up or giving up.

A recent report in The Oregonian newspaper details how the largest tech players are playing towns and counties off against each other in order to extract the largest tax breaks from locations that are chosen for data center expansions.

According to the newspaper, the state’s enterprise zone program places no limit on how much tax revenue local governments can give away to lure large projects—and the state provides no assistance to them in their negotiations with tech companies seeking tax breaks.

For example, the town of Prineville (pop. 10K), already home to Apple and Meta data center clusters, recently agreed to give EdgeConnex a 75% break on property taxes for a new data center—a deal that also puts a cap on the maximum amount of tax the company will be required to pay.

Amazon, which started building its initial cluster of four data centers in Morrow County in 2012, has reaped the benefits of tax breaks worth an estimated $161M over the past five years, including $47M in 2021, the report said.

According to the Oregonian, Amazon is demanding a new 15-year package of tax breaks for its $12B data center expansion, which would be the largest capital investment in the state’s history. 

Morrow County is trying to decide how much tax revenue they need to give away to secure the expansion, while weighing the risk that Amazon—which also has data center clusters in neighboring Umatilla County and in nearby Tri-Cities across the state border in Washington—will opt for a better deal from one of its neighbors.

“There’s a monetary amount for Amazon that they’re looking at, and I don’t know what it is,” Greg Sween, manager of the local enterprise zone program that governs Amazon’s local taxes, told the newspaper.

While Amazon’s data center jobs come with an average salary of $75K—about $20K more than Morrow County’s median salary—there aren’t a lot of them: the company’s four data centers at the Port of Morrow employ a total of about 460 people.

“Since 2011, Amazon Web Services has invested over $15 billion and contributed more than $66 million in tax and fee services to the local community,” Amazon told the newspaper, in a statement.

According to the Oregonian, some of the towns and counties have recognized that they have to bring in experienced negotiators to cut new tax deals with the tech goliaths. 

Wasco County and The Dalles negotiated a new tax deal with Google last year that substantially increased the amount of taxes the company would pay on new data centers, the newspaper reported.

Morrow County’s Board of Commissioners has been debating whether it needs to hire an experienced attorney to assist Sween in his negotiations with Amazon.

“That hasn’t been the past practice [because] attorneys are expensive,” he told the newspaper.