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/
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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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