TD City, County to take Testimony on Google Investment
The location for possible future Google data center on the former aluminum plant site is just beyond this barbed wire fence between River Road and West 2nd Street in the Port of The Dalles.
By Tom Peterson
Public comment is set to open for Google’s latest tax reduction at a joint meeting between The Dalles City Council and Wasco County Commissioners on Wednesday, Feb. 17 at 2:30 p.m.
The 20-year deal would require Google to pay 50 percent and 60 percent of assessed property taxes on two new data centers respectively.
The deal is potentially worth $90 million to start.
Increased tax revenue to the county and the city and local tax districts can lower the overall tax burden on property owners and bring new money into taxing districts.
The proposal aims at building two data plants and accompanying warehouses worth up to an estimated $1.2 billion on former aluminum plant property.
The joint meeting will be held via Zoom. Here’s the link.
You can also dial 1-253-215-8782 Meeting ID: 3957734524#
Those unable to attend can send comments by clicking this Link to the County Commissioners.
How this sizes up
Some local residents are unsatisfied with tax reduction deals on the three Google data centers built thus far in the Port of The Dalles under enterprise zone agreements.
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.
So what changed?
This deal, while also allowing for abatements, falls under state laws governing a strategic investment program, and negotiators from the City and County came up with higher tax rates through the life of the deal.
What’s the Deal?
This specific strategic investment program sets a minimum payment of $3 million per year per data center for each 15-year contract.
So, there is a guarantee of $90 million if both data centers are built - $45 million in tax payments on each data center.
However, that property tax amount could be exceeded depending on the amount of investment. Figured at the $1.2 billion total investment, the deal could total up to $121 million over the lifetimes of each 15-year deal, according to one hypothetical in the County agenda and packet.
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.
Initial Payment
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 is $6 million.
20-year-window
Both projects must be completed and tax abatements expended within a 20-year time frame. After each 15-year abatement ends, Google will pay property taxes in full.
Cash Distribution
County, City, and non-school districts (accounting for at least 75% of such district tax levy at the site) 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, a scenario locals want to avoid.
The City and County must also decide how initial payments of $3 -$6 million as well as guaranteed annual payments worth Millions of dollars will be distributed in the community.
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 tax Community Service Fee and 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 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.
Location of proposed data center sites on the former aluminum plant grounds.
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.
Property buyback
The City and County will also be given the first right of refusal to purchase the properties on which the data centers would be located if the property is sold. In the event the property is sold after data centers are built, the City and County will receive $500,000 credit toward the purchase price for each project for demolition and removal costs.
Additional Time for Testimony
Additional testimony is also expected at a joint meeting of The Dalles City Council and the County Commissioners set for Feb. 22 at 5:30 p.m.
Decisions to ink the deal could happen as early as joint City-County meetings set for March 3 and March 8.
