EAGLE MOUNTAIN — There were very few surprised faces in the room Wednesday when officials from the state and Eagle Mountain revealed Facebook as the entity behind a massive planned data center, and the recipient of an equally massive tax relief package.
Project details were made public almost two weeks ago, but even though the project's potential owner/operator had been kept under wraps, industry pundits had identified Facebook as the odds-on favorite to be the company behind the curtain.
A bevy of state and local officials were on hand in Eagle Mountain for the announcement, including Gov. Gary Herbert, Congresswoman Mia Love, R-Utah, Utah House Speaker Greg Hughes, R-Draper, Senate President Wayne Niederhauser, R-Sandy, Governor's Office of Economic Development Executive Director Val Hale, Utah Attorney General Sean Reyes and others.
Under terms ratified by five different taxing entities, Facebook will qualify for some $150 million in tax breaks over 20 years for Phase 1 of the project, a two-building, 970,000-square-foot undertaking worth $750 million.
The open-ended agreements, however, extend those benefits beyond the first phase and could land the company hundreds of millions in additional tax relief over the next four decades.
Facebook continues to be the most profitable social media company on the planet and just reported record revenues of nearly $12 billion in the first quarter of 2018. And that in spite of a slew of criticism surrounding revelations late last year that a data scientist harvested personal data, without authorization, on some 80 million Facebook users. Later, he sold the information to Cambridge Analytica, a firm that worked with various campaigns including President Donald Trump's before he was elected and the pro-Brexit movement.
Facebook boasts nearly 1.5 billion daily users and over 2 billion regular monthly users.
Eagle Mountain Mayor Tom Westmoreland said bringing the company to his "new" community, near the southwest end of Utah Lake, will help lay the groundwork for a brighter future.
"Eagle Mountain is relatively young. … We've only been around for 22 years," Westmoreland said. "We have a rare opportunity here to plan a city of the future from the ground up. So we’re very particular about who we partner with. I strongly believe we have found the right partner to help build that future."
Rachel Peters, Facebook's vice president of Data Center Strategies, told the Deseret News that although the estimate on staff size for the new facilities originally indicated 30-50 employees, the company would likely be hiring more than that, as well as putting scores to work constructing the twin buildings.
"On the construction side, there will be hundreds, up to thousands of jobs over the term of the build," Peters said. "As far as long-term operational folks, two buildings typically take a minimum of 100 to run the facilities."
Peters said the company is "committed to hiring locally. … That’s what we’re all about from construction and through operations."
Herbert offered comments at the event, noting the novelty of celebrating a tech investment outside of the Wasatch Front's Silicon Slopes area.
"It's good to see some things happening and not just along the I-15 corridor," Herbert said. "And this is happening on property that would likely not be developed until a long time into the future … and this is going to accelerate that."
Talks centered on the project go back at least a year when Herbert and others visited the company in Palo Alto, California, but the company's name was kept concealed due to "ongoing contract negotiations" according to those involved with the deal.
Phase 1 of the effort calls for the two buildings to be constructed on a roughly 500-acre parcel south of Eagle Mountain's city center. The property is currently completely undeveloped and considered part of the "greenbelt" surrounding most of the city. Theresa Foxley, president/CEO of the Economic Development Corporation of Utah, said last week that once shovels are in the ground, the expected construction term should be about 18 months.
The company will also be investing, according to Foxley, about $150 million in infrastructure improvements, including bringing power to the site from a nearby high-capacity power line corridor, extending sewer and water service, bringing in telecommunication lines and improving roads.
That infrastructure investment is expected to be equalized by the Phase 1 tax benefits of $150 million over 20 years. That tax break gives Facebook 100 percent tax relief on personal property taxes due and 80 percent relief on real property taxes due for a term of 40 years for four of the five taxing entities it's beholden to.
Only the Alpine School District Board created some caps on those benefits, with limits of $40 million per phase and $120 million total over 35 years. Alpine School District represents the biggest beneficiary of the taxes Facebook will pay — and the entity giving up the most via the tax break package — as the recipient of about 70 percent of the total taxes due. The company will also enjoy some sales tax exemptions, created specifically for data centers by the Utah Legislature.
This is a much different outcome than Facebook's first attempt at putting together a data center deal in Utah.
In 2016, Salt Lake County officials led the charge in voicing concerns that included the size of a proposed tax incentive — estimated at $250 million over 20 years — to lure a $2.5 billion Facebook data center project to West Jordan. West Jordan, which kept the negotiations secret for nearly a year before the company's name was revealed, eventually lost out to Los Lunas, New Mexico, much to the ire of West Jordan officials.
On Wednesday, Salt Lake County Mayor Ben McAdams said that the Eagle Mountain deal seemed “better for the taxpayer,” adding that it’s up to elected officials from Utah County, Eagle Mountain and the Alpine School District to weigh the data center’s benefits.
“I think this deal is very different than what was proposed (in West Jordan),” McAdams said. “Looks like there have been lessons learned all around for this deal.”
While the initial tax breaks for the Eagle Mountain redux are signficantly less than those offered to Facebook two years ago, they have the potential to dwarf the breaks offered in the West Jordan deal.
A study commissioned by Eagle Mountain on the project referenced the potential for five phases which, if executed inside the 40-year limit, would earn Facebook $750 million in tax relief.
According to Eagle Mountain officials, the property currently generates about $66 per year in tax revenues. After Phase 1 of the data center is complete, the tax revenues would shoot up to about $840,000 annually.
Westmoreland said the net benefits for Eagle Mountain and its residents cannot be understated. And he expects the Facebook project is the first of more to come.
"Having Facebook here is big deal, there’s no doubt about it," Westmoreland said. "With them coming here and making these investments, now it’s a whole new game. We just became relevant, very relevant in the eyes of other members of the industry that may join them."46 comments on this story
Foxley told the Deseret News that the Eagle Mountain mayor's prediction is already showing signs of coming to fruition.
"We had a phone call yesterday from a site selector who read about this and wanted to hear more about the infrastructure," Foxley said. "After today, and making it official, I think my phone is going to be ringing off the hook."
Contributing: Katie McKellar
Correction: An earlier version incorrectly stated Facebook reported profits of nearly $12 billion in the first quarter of 2018. The company reported revenues of nearly $12 billion.