Commissioners likely to Vote on Google Tax breaks on Wednesday, Oct. 20

Plans to break ground on a new Google Data Center sat in wait in The Port of The Dalles last Spring. It appeared negotiations faltered, and the equipment was removed. The deal is back on as both County and City leaders will debate $147 million in tax abatements as the worlds fourth-largest company prepares to take advantage of inexpensive power and billions of gallons of water on former aluminum plant property.

By Tom Peterson

Wasco County Commissioners are set to consider a deal on Wednesday, October 20, to abate some $147 million in taxes on two new Google data plants.

The meeting is slated for 2 p.m. and can be viewed via ZOOM by clicking here. 

Ultimately, the question is do local leaders believe the taxes and fees set against Google will be enough for the community good. Will they give as much as they take in community resources?

Wasco County Commissioner Scott Hege

Some in the community are saying no, believing Google, valued by some as the fourth wealthiest company in the world, should stand up and build The Dalles a new high school or put a massive amount of cash into some community good. Or, just pay their taxes in full.

On Tuesday evening, Wasco County Commissioner Scott Hege said “the pros seen from Google well outnumber the cons.”

When the deal was last discussed in February, Hege said the deal was looked upon favorably by the City and County. “Provisions in the agreements are relatively lucrative compared to past deals,” he said referring to the three enterprise zone agreements for three Google data centers already built in the Port of The Dalles.

The new proposal aims at building two data plants and accompanying warehouses worth up to an estimated $1.2 billion on former aluminum plant property. 

Brass Tacks

Google would have its taxes cut by $147 million over two 15-year tax abatements if the City and County cut this deal. 

Without the tax break, two data plants built at a cost of $1.2 billion would create $327 million in tax revenue over 15 years at current tax rates. This amount was found utilizing the current tax rate 97, which is $18.1802 per $1,000 of assessed value. This rate was taken from an abutting property lot owned by Hydro -  Extrusions North America). 

Under this agreement, Google would pay $179.8 million.

Signing Bonus

Google’s company Design LLC will pay a one-time $3 million initial payment for each data center, payable within 60 days of submission of each data center building construction-in-process form for each project. If both are built, the total payment would be $6 million. The City and County will decide how the money money will be spent.

‘It’s a better deal’

Negotiators used property taxes, a community service fee and a guaranteed annual payment to ensure 50 percent of property taxes are paid on the first data center, and 60 percent of property taxes are paid on the second data center - far more than was negotiated in the original enterprise zone deals for the three existing data plants in the Port of The Dalles.

Under this proposal, property taxes raised from a single data center has the potential to exceed all three abatement deals made in 2005, 2013, and 2015 combined.

20-year-window changes to 25-year window

Both projects must be completed and tax abatements expended within a 25-year window. Five additional years have been added to the window since the initial deal was made public in February. After each 15-year abatement ends, Google will pay property taxes in full.

Cash Distribution 

County, City, and non-school districts ( 75% of districts must agree) must agree on how to distribute Community Service Fee within 3 months. This amount could be as high as $2.5 million annually per data center. This agreement may be mutually amended or revised at a later time.

If no agreement occurs between districts within 90 days of the data center agreements, the state’s economic development agency - Business Oregon - will set the distribution formula. It’s a scenario locals want to avoid.

35 Acres to sweeten the pot

Google’s Design LLC will deed at least 35 contiguous acres of property adjacent to NORCOR at no cost to the City and County upon completion of the agreement, and with approvals from the state and receipt of a building permit. The company valued the land at $2.4 million.

Design LLC will also provide due diligence on the property, including an environmental assessment.

Example of taxes and fees under this proposal 

• This example is based on one data center at the suggested investment of $600 million. 

• Calculation of taxes assumes no devaluation of property or taxable business property:

A.  Property tax rates are applied to $1,000 of assessed value. So, the $600 million of assessed value is divided by $1,000 to get the taxable value. So, in this case, the number is 600,000.

B. 600,000 X tax rate - in this case, Tax Rate 97 = $18.1802 (taken from adjoining lot owned by Hydro -  Extrusions North America)

C. 600,000X $18.1802 tax rate = $10.9 million.

D. The guaranteed percentage of taxes to be paid according to the negotiated strategic investment program on the first data center is 50 percent. $10.9 Million X 50 percent = $5.45 million annually or $81.75 million over 15 years.

Break down of that $5.45 million into property taxes, Community Service Fee, and the Guaranteed Annual Payment

This matters because the tax districts must decide and agree on how to use the Community Service Fee. 

Property tax - The state strategic investment program reduces the assessed value of Google property to $50 million for 15 years on investments between $500 million and $1billion.

A. Property tax rates are applied to $1,000 of assessed value. So, the $50 million assessed value is divided by $1,000 to get the taxable value. So in this case the number is 50,000

B. So, 50,0000 x $18.1802 = $909,000 in property taxes.

C. The community service fee is set at 25 percent of total property tax savings ($2.725 million in this case) or capped at $2.5 million. So in this case it’s capped at $2.5 million.

D. Thus, the Guaranteed Annual Payment would be $2.041 million. 

Conclusion: $909,000 Property Taxes + $2.5 million Com. Serv. Fee +  $2.041 million Guaranteed Annual Payment = $5.45 million.