KRWG

Data Centers For Economic Development?

Sep 10, 2018

Credit Dowd Muska

Commentary: Zero.

That’s the number of data centers that have been built in New Mexico since Facebook picked Los Lunas to host “one of the cornerstones of our global infrastructure.”

The tech behemoth made its announcement on September 14, 2016, and it was no surprise that state and local government delivered a dump truck’s worth of “incentives” to the company’s front door. In exchange for a promise of a few dozen permanent jobs, New Mexico’s taxpayers were committed to “$30 billion in industrial revenue bonds that provide a 30-year property tax break, $10 million Local Economic Development Act funding, up to $1.6 million in gross receipts tax reimbursement annually and access to the $3 million Job Incentive Training Program.” (In 2017, Facebook decided to double the size of its facility, and told the Albuquerque Journal that more “than 100 employees could be employed at the two buildings once they are opened.” (Emphasis added.)

Two years ago, Governor Martinez “talked about the long term goal of building a data center cluster and bringing more high tech companies to New Mexico,” and predicted that once Facebook’s infrastructure was in place, Silicon Valley will “be able to say, ‘Let’s go to this location. Let’s make this a technology center that is going to be top-notch.'”

A few months later, Gary Tonjes, the reliably clueless president of Albuquerque Economic Developmentclaimed that on September 14, “We received emails and calls throughout the day from businesses and site selection consultants, and several of those are now a little bit more than casual engagements. The general message was, ‘If Facebook is going there, we want to be there, too.’ It’s really going to be significant.”

National “experts” fell for the hype, too. Nine months after Facebook made its pick, Michael Rareshide, an executive with Site Selection Grouplabeled Albuquerque “a sleeper poised for growth” in the data-center world. He touted the region’s “low risk profile and other attractive factors,” including a “low cost of infrastructure.”

Well, it’s been two years, and … zilch.

As “public investments,” giveaways to data centers are close to worthless. Never mind the fundamental unfairness of pledging taxpayer dollars to deep-pocketed tech firms. (Facebook has a current market cap of $470 billion, and in 2017, its revenue was $40 billion, with net income of nearly $16 billion.) As job-creators, the facilities don’t deliver. And the future, as The New York Times reported before the Los Lunas announcement, is bleak:

Local people, along with many economists and officials, often think these data centers are a key to an industrial revival. But the reality is less impressive. … [C]ompanies come to places like Boydton [Virginia] for basics like land, water and electricity. Even with low local wages, people are a high-cost item. As small as the staffs at these mammoth facilities are, companies say, perhaps a third of the company jobs will eventually be filled by robots.

That’s not to say that taxpayers and elected officials should oppose data centers in their communities, of course. The principles of property rights and voluntary exchange aside, the buildings support the construction industry, have minimal impact on traffic congestion, procure goods and services from local providers, and don’t impose much of a burden on law enforcement. What they don’t do is spark “high-tech clusters” and lots of jobs. It’s one more reason to oppose their subsidization.

Rest assured, the “business” press in New Mexico won’t hold pols and bureaucrats accountable for the promises they made two years ago. As for “economic development,” as a fad-driven phenomenon, it’s moved on to other things. (“Cybersecurity” is very hip these days.) Corporate-welfarism means never having to say you’re sorry.