Proposed bill could help data centers

OLYMPIA — The state Senate Ways and Means Committee held a hearing on a bill to spur expansion and construction of data centers in Central Washington.

A representative of the Port of Quincy like the move to help the Columbia Basin business sector.

“This was a good one because no one showed up in opposition,” said Patrick Boss, spokesperson for the port.

Boss said about six parties, including a representative of Yahoo!, spoke in favor of Senate Bill 6789, which calls for sales and use tax exemptions for equipment and infrastructure in data centers. One of the bill sponsors is Sen. janéa Holmquist, R-Moses Lake.

He said no one on the committee spoke except to ask one question that was answered satisfactorily.

“You have to go by body language, and I saw a lot of heads nodding as if they were in favor,” Boss said. “It was promising.”

Boss has been a prime force behind the creation of this bill. He testified at the hearing, speaking on behalf of the Port of Quincy.

“From 2006 until 2008, the Port of Quincy had a great deal of success recruiting high-tech data centers such as Microsoft, Yahoo! and Intuit to locate in Quincy because of competitive electrical power rates and state-of-the-art fiber optic connections,” he said. “However, more recently other states have enacted certain types of sales tax exemptions for data centers which have caused several high-tech companies to recently locate data center facilities in other states.”

Boss said that globally recognized high-tech companies have acquired land in Quincy or have wanted to locate in Quincy. They postponed building or located elsewhere because of favorable tax climates. He cited Amazon, Facebook, Oracle and Costco financial administration.

“In some cases, data centers that have located in Oregon have ended up purchasing electrical power produced in Washington,” Boss said. “It is critical the … Legislature pass Senate Bill 6789 so that Quincy and other rural communities will be able to more competitively recruit and locate high-tech data centers.”

In a letter of support for the bill, the Washigton State Rural Technology Development Coalition noted that data centers contribute considerable real and personal property taxes, payroll taxes, public utility taxes and privilege tax revenues for the support of schools and other units of local government.

In Quincy, the coalition stated the retail sales tax revenue from 1997 through 2005 averaged $600,000 a year. In 2006, after the data centers began construction, retail sales tax revenue for Quincy jumped to $1.4 million.

In 2007, the coalition stated Quincy’s retail sales tax revenue increased to $4.3 million as a result of further construction and development by data centers.

The coalition stated construction of data centers in Grant, Douglas and Chelan counties in 2006-2008 added $55 million to real property tax revenues. The purchase and installation of data center equipment by data centers in those same counties generated $35 million in personal property tax revenues.

The development of data centers in rural Washington has created hundreds of construction-related jobs, according to the coalition. The average construction employment to build one data center is 500 people working an estimated 300,000 man hours.

Total wages paid for construction of various data centers in Central Washington between 2006 and the present is nearly $200 million, according to the coalition. The total value of data center investment in rural Washington from 2006-2008 was nearly $2 billion.

Boss said the committee took no action on the bill, but will discuss the bill again soon to determine if it passes to the legislature.

Boss said the House will have a hearing Friday in front of the Finance Committee on its companion bill, House Bill 3147, which is written exactly like the Senate bill. He expects a favorable reception, noting the bills have 13 sponsors.

Both Rep. Judy Warnick, R-Moses Lake, and Rep. Bill Hinkle, R-Cle Elum, sponsored the house bill.

If the legislature passes the bills, they could remove an obstacle created for data centers in 2007 with Gov. Chris Gregoire’s approval. The state determined data centers were not manufacturers and had to pay sales tax on the cost of equipment and the cost of installation. There have been no applications to build new data centers in the state since the decision.

“The data-center business in Washington was brisk until November 2007,” says Washington Needs Jobs. “Since then, data centers have been built across the country, including by several companies that had been strongly looking at Washington.”

Michael Buchanan, of the Big Bend Economic Development Council, said data centers in Quincy are, indeed, manufacturers.

“I’ve bought CDs they produce and people can download programs they produce,” he said.