SALT LAKE CITY — As Facebook prepares to break ground next month in New Mexico on its newest data center, Utah is left to reflect on the flurry of events that doomed the deal to bring the social media giant to West Jordan.

West Jordan Mayor Kim Rolfe has blamed the project's loudest critic — Salt Lake County Mayor Ben McAdams — for derailing the deal with "political theatrics," but economic leaders say miscommunication and infighting among stakeholders ultimately led to the demise of so-called Project Discus.

Now, state economic officials say they're going through a process of "self-reflection" to mull what went wrong, and lawmakers are in the early stages of re-evaluating how Utah municipalities negotiate economic incentives.

In the meantime, West Jordan is starting from scratch, seeking a replacement for what city officials say Facebook would have meant to the city: an impetus for an ultimately thriving, 1,700-acre high-tech business corridor.

Until then, Vicky Jones' property on West Jordan's west side will remain farmland, continuing to produce minimal revenue for the city's tax base.

And according to Jones' family, there's no telling when the next offer will come along.

Incentive policies

Addressing the Utah Legislature's Revenue and Taxation Interim Committee on Wednesday, McAdams criticized the current process for corporate tax incentives, saying it throws "cities into a mosh pit to see who's going to fight the hardest and give up the most" to attract corporations to Utah.

McAdams says the state should consider moving away from the taxing entity committee — the body formed to ultimately approve incentive deals — because the process "undermines" local entities' stewardship of taxpayer dollars. Currently, a taxing entity's control over tax revenue could be lost based on the votes of other entities, he said.

"It's time for us to re-evaluate. I think we need to be more sophisticated," McAdams said, rather than leaving it up to competing cities to negotiate on behalf of counties, school districts and the state.

Sen. Howard Stephenson, an outspoken critic of Project Discus as president of the Utah Taxpayers Association, spoke in support of evaluating Utah's current policies. The Draper Republican said he intends to propose a bill to prohibit tax incentives from taking more than 50 percent from a school district's property tax.

Rep. Daniel McCay, R-Riverton, said he plans to request more time from the Legislative Management Committee to let his colleagues study the state's existing policies on tax incentives. He said the Facebook negotiations have given rise to legitimate questions about the process.

"(Revenue and Taxation Interim Committee) members are asking me and each other, 'Are we doing this the right way?'" said McCay, chairman of the committee. "I think those conversations will be extremely valuable to have."

But Val Hale, director of the Governor's Office of Economic Development, said while the office is supportive of evaluating such policies, lawmakers should proceed with caution.

"Utah has the best economy in the country for a reason," Hale said after Wednesday's meeting. "We've done really well with what we have. So as we move forward, we need to make sure we do so without throwing out the baby with the bathwater."

Discus' demise

While Mayor Rolfe and City Manager Mark Palesh have blamed McAdams for ruining what they say would have pumped billions into West Jordan's economy, state economic leaders say it's more complicated than singling out a single culprit.

To Derek Miller, president of World Trade Center Utah and former deputy director of the Governor's Office of Economic Development, it appears two fundamental things weren't accomplished before negotiations with Facebook began: agreement from all parties on a maximum offer, and clear understanding of those terms.

"You have to make sure everybody on your side is on the same page, and I think it's pretty clear that wasn't the case," Miller said, noting that West Jordan made an offer that was not only unpalatable to Salt Lake County but one the Utah State Board of Education was only willing to partially support.

"It's OK to lose some deals," Miller said, especially if competing offers — such as the 30-year, 100 percent tax rebate from Los Lunas, New Mexico — is just too steep to match.

"But if you're losing deals because you don't have your act together, than that's a problem," he said. "I think that's the unfortunate part of what happened in this situation."

City-county conflict

According to emails obtained through an open records request, conflict between Salt Lake County and West Jordan began to flare when the county balked at the fact that West Jordan's 1,700-acre project area was created right before a new law went into effect requiring 10 percent of the development's value be set aside for affordable housing.

Stuart Clason, McAdams' director of economic development, emailed West Jordan's city manager on June 21, asking that the city include the affordable housing set-aside in the deal, and that the county would receive a portion of the $3.6 million administrative fee. But Palesh responded with a fuming email to Erin Laney, with the Economic Development Corporation of Utah.

"When I read this missive from (Clason), I about came out of my chair," Palesh wrote. "There will be no affordable housing set-aside, and any administrative fee will be to the city (economic development area), not the county. If (Clason) wants to nix this deal, he is doing a great job."

Tensions between West Jordan and Salt Lake County heightened when fights over meeting schedules continued through June and into July, and it became apparent to county leaders that the city intended to proceed with the deal without county support.

On June 29, David Delquadro, who represented the Salt Lake County Council in discussions with West Jordan, sent an email to the council stating Palesh "has apparently lined up the votes of the Jordan School District to help ensure the successful passage of this (deal) without regard to Salt Lake County input."

In August, Gov. Gary Herbert held a meeting with all stakeholders, urging them to reach common ground on the deal, but days later McAdams sent the governor a letter reiterating his concerns, including project area size, water usage and tax incentive scope.

Soon after, McAdams shared his concerns with the Deseret News.

Later that month, the Jordan School Board voted to support the deal, despite expressing misgivings about the incentives. Salt Lake County then voted unanimously against the deal, leaving the swing vote to the State School Board, which voted to support only the first phase of the project.

Minutes after the State School Board vote, West Jordan terminated negotiations with Facebook. The next morning, city officials announced that they had been scrambling through the night to find a path forward.

But it didn't take long before Facebook decided to go with Los Lunas' sweetened offer.

"We learned a lot from this deal," said Theresa Foxley, deputy director of the Governor's Office of Economic Development, adding that her office is "going through a process of self-reflection on how the process could have been better."

"I think we'll expand that examination to include stakeholders from this project so that we can all understand each others' goals better and work toward a mutually beneficial outcome in the future," Foxley said.

Economic implications

Stan Lockhart, a member of the Utah State Board of Education, was frank when he told his colleagues the night of their vote that he felt "embarrassed" for how Facebook was treated — and Palesh even expressed doubts Facebook would want to consider going to a county that has been so "antagonistic toward them."

So despite Utah's reputation as a business-friendly state, could the Facebook debacle impact future opportunities with other large companies?

"We just need to make sure it doesn't happen again," Miller said. "Utah is still the best place to do business. I don't see this having a negative impact moving forward."

Foxley agrees, though she added that Utah does have "a little bit of brand repair" to do.

According to county emails, Hale — upset with McAdams over his opposition to Project Discus — threatened to send all economic development projects to Utah County instead of Salt Lake County.

But when McAdams was asked about that comment, the mayor wrote it off as "a moment of frustration," noting that Salt Lake County is still working with the office on several projects.

"Recruiting business in Utah is a competitive process, and companies locate where their investment and employees are welcome," Hale said in a statement, in response to questions about his comment this week. "Conversations I had with Mayor McAdams and his administration were to ensure Salt Lake County's commitment to maintaining an environment that is attractive to business growth."

West Jordan's plight

As for West Jordan, Rolfe said two companies that had expressed interest in following Facebook to the city have not reached out since Los Lunas landed the data center.

When asked whether he worries that the failed Facebook deal could have a negative influence on companies considering locating in West Jordan, Rolfe said: "I certainly hope not, but I am concerned."

"Most businesses rely on their public relations and don't want to be classified as a bad business," he said.

But now, the mayor said West Jordan is moving forward and city officials are interested in working with any company eyeing the 1,700-acre area.

So far, however, there are no new offers in the pipeline, Rolfe said.

Michael Jones, the nephew of Vicky Jones, who owns 1,600 acres in West Jordan's project area, said there's no telling how long it will take for the next company to come along.

"She's not going to actively try to sell it," Michael Jones said, noting that his aunt is only interested in selling land to a company that would help her city grow.

The property was initially considered for the relocation of the Utah State Prison, but the Joneses removed it from consideration when city officials and residents protested the site.

"It's too bad West Jordan missed out on this opportunity," Michael Jones said.

But McAdams said he looks forward to working with West Jordan to find a new company — one that won't require record-setting tax incentives to attract.

"I think we set a good precedent that we're not willing to give up everything in order to attract a name, that there is a level of which we will say no," he said. "We as a state still have a lot to offer."


Twitter: KatieMcKellar1