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HB 5305: Attracting Hyperscale Data Centers to Benefit Michigan — Barbara Comstock and Steve DelBianco

Summary

HB 5305: Attracting Hyperscale Data Centers to Benefit Michigan is material naming Barbara Comstock, former Congresswoman and Virginia Legislator, advisor to NetChoice, and Steve DelBianco, president of NetChoice. It states the goal as attracting a large-scale, enterprise data center to Michigan, with the new Facebook data center in New Albany, Ohio as an example: $750 million cost over a 2-year construction period, $244 million in local construction spend, and 1,200 construction workers who earned $78 million in wages. It states that the current sales tax exemption in Michigan only applies to co-location data centers, and it proposes a sales tax exemption targeted to incremental, large-scale data center investments.

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“HB 5305: Attracting Hyperscale Data Centers to Benefit Michigan — Barbara Comstock and Steve DelBianco.” Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2021-10-19-testimony-comm-2021-steve-delbianco-45818-61d0df7dda/, SHA-256 9982dd6bb933ab47ffa517105c47c16abac58753bcdb996d94f3cefb252efc68.

Full text

   HB 5305: Attracting
 Hyperscale Data Centers
   to Benefit Michigan
Barbara Comstock former Congresswoman and Virginia
            Legislator, advisor to NetChoice
 Steve DelBianco former Director of Virginia Economic
 Development Partnership, and president of NetChoice
The Goal: Attract a large-scale, enterprise data center to Michigan
   example: Facebook’s new data center in New Albany, Ohio

                                                                        About 1 million SF

                                                                        $ 750 million cost over 2-year
                                                                        construction period

                                                                        $ 244 million in local
                                                                        construction spend

                                                                        1,200 construction workers
                                                                        earned $ 78 million in wages




 Across the street, Google is planning a $ 600 million, 275,000 SF data center on 440 acres.


                                                                                                         3
Actual experience for Six Google Data Centers




                                                5
The Challenge: To attract a billion-dollar data center, Michigan
needs a targeted sales tax exemption

No hyperscale data centers
have located in Michigan.

Michigan’s current sales tax
exemption only applies to
co-location data centers.



                             Minimal or No Exemption (19)
                             Long-term Sales Tax Exemption (29)
                                                                   5
The Response: Enact a sales tax exemption targeted to incremental,
large-scale data center investments, using incremental analysis:

              90 percent of data center investment by companies receiving
              the tax exemption would not have occurred in Virginia without
              the incentive.
              Over ten years, 75% of the sales tax exemption was recovered
              by the state.


              Mangum’s 2020 Study: “the ‘cost’ of the State data center
              incentive is only 10 percent of the amount of State sales tax
              revenue exempted.”
                                                                              6
                                              MARCH 23, 2020




                                                                     The Economic Impact in Kalamazoo County, Michigan
                                                                     Kalamazoo County in Western Michigan is part of the Kalamazoo-Battle Creek-Portage, Michigan
                                                                     Combined Statistical Area. The operational workforce, connectivity, accessibility, and power in the
                                                                     county would be sufficient to support the operation of a hyperscale data center. Construction of a
                                                                     hyperscale data center as well as its ongoing operation would potentially create a direct impact of
POTENTIAL IMPACT OF HYPERSCALE DATA                                  approximately:
   CENTER DEVELOPMENT IN MICHIGAN                                        x 1,200 total construction jobs over the two-year construction period,
                                                                         x 100 full-time new operational jobs,
                                                                         x $136.3 million in associated pay and benefits for construction workers,
                                                                         x $15 million in associated pay and benefits annually for operating employees,
                                                                         x $341 million in economic output in the Kalamazoo County economy over the two-year
                                                                            construction period, and
                        PREPARED FOR NETCHOICE                           x $100 million in economic output annually in the Kalamazoo County economy once operations
                                                                            begin.

                                                                     After accounting for all of the additional effects that the project would cause as the new investment
                                                                     ripples through the economy of Kalamazoo County, a new hyperscale data center would have a
                                                                     potential total economic impact on the Kalamazoo County economy of approximately:
                                                                         x 3,461 jobs supported during the two-year construction period,
                                                                         x 100 data center jobs created and 337 additional jobs supported once data center operations
                                                                              begin,
                                                                         x $320.4 million over the two-year construction period in total pay and benefits,
                               4201 DOMINION BOULEVARD, SUITE 114        x $34.1 million in annual pay and benefits once operations begin,
                                        GLEN ALLEN, VIRGINIA 23060
                                                                         x $562.9 million during the construction period in total economic output, and
                                                      804-346-8446
                                         MANGUMECONOMICS.COM             x $189 million annually once operations begin.

           © 2020 Mangum Economics                                   In addition to the impact on the Kalamazoo County economy, the impact of the hypothetical data center
Data Centers bring Incremental Economic Benefits
         Incremental economic benefits of data centers               Here   Not here


Income & spending by construction workers & contractors               +        0

Income & spending by data center employees                            +        0

Revenue for local suppliers, contractors, lodging, and restaurants    +        0

High-tech training and experience for workforce                       +        0

Make the state more attractive for tech business and education        +        0

Diversify local economies                                             +        0

                                                                                       7
Data Centers bring Incremental Tax Benefits
            Incremental tax revenue from data centers              Here   Not here

 Income taxes paid by employees and contractors                     +        0

 Corporate income taxes from data center operators & contractors    +        0

 Gross Receipts taxes on electricity & telecommunications           +        0

 Sales taxes on electricity                                         +        0

 Sales taxes on non-exempt equipment and supplies                   +        0

 Lodging taxes for visits by contractors and workers                +        0

 Local real estate & personal property taxes                        +        0

 Education Property Tax & Personal Property Tax                     +        0

                                                                                     8
Data Centers may locate Here, or Not here
  at least 17 other states offer the sales tax exemption for server
  equipment, and if Idaho does not offer an equivalent exemption, these
  businesses will very likely locate in states other than Idaho that do
  provide the exemption.

  Accordingly, there is no loss of tax revenue from businesses that
  would not locate in Idaho without the exemption, and there is likely an
  increase in revenue from taxes related to the growth these
  businesses would promote.
                           Fiscal Note for HB 279, Idaho Legislative Services

                                                                                9


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