- Associated Press - Wednesday, September 30, 2015

OLYMPIA, Wash. (AP) - Until about a decade ago, the rural central Washington town of Quincy was perhaps best known for its apples and potatoes.

Then Microsoft and Yahoo began building computer data centers there, drawn partly by the affordable hydropower from the Columbia River. They came, even though the local government provided no property tax breaks.

Soon, other states began trying to lure large data centers, offering to waive sales taxes on the expensive computer equipment and exempt them from property taxes. To keep pace with the competition, Washington lawmakers responded by passing a sales tax exemption for data centers, which it extended again this year.

Quincy, a town of roughly 7,300 people, now also hosts data centers for technology firms Dell and Intuit as well as developers Sabey and Vantage.

Washington is among several states that declined to disclose to The Associated Press how much tax revenue it has forgone because of its incentives to data centers, but local officials are tracking their gains.

Quincy’s property tax collections have quadrupled in the past decade, with more than 70 percent of such revenue coming from data centers. Its sales tax revenue has risen from $665,000 to about $5 million, even with the state tax break.

The surge has helped build a new library, animal shelter and justice center. Schools and utilities also have been improved. That boom might not have occurred if officials had waived local taxes, as their counterparts in many other communities across the nation have done.

“On a per capita basis, these data centers are paying just such an immensely, enormous, gigantic proportion of property tax and sales tax already that it completely dwarfs what we would collect if a manufacturing company or distribution center or something were to come in,” said Jonathan Smith, executive director of the Grant County Economic Development Council, which includes Quincy.

State Rep. Reuven Carlyle, a Democrat from Seattle who is chairman of the House Finance Committee, said that while there are clear benefits to Grant County, “that in no way even pretends to capture the true cost to the taxpayer at the statewide level.”

“You have to look at the fact that picking winners and losers is almost always bad economic policy,” he said.

Earlier this year, Carlyle voted against a bill that had more than a dozen tax exemptions in it, including an extension of the data center one.

“The state taxpayer is better served by investing in education and public infrastructure that enables high value economic activity,” he said. “Data centers are a commodity, and the political race to the bottom of chasing a handful of jobs for millions of dollars is questionable.”

Employment in Grant County has risen from 36,100 in 2006 to 41,230 last year. It’s unclear exactly how many of those jobs are connected to data centers, but local officials are convinced that the state tax breaks are essential to keeping their economy growing.

When Washington’s tax breaks for data centers temporarily expired in mid-2011, “the building just stopped,” said Curt Morris, a commissioner for the Quincy Port District. “And then we re-established the tax incentives, and it started again.”

___

Lieb reported from Jefferson City, Missouri.


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