Google Will Finally Pay Taxes On Its First Data Centre In Oregon After 15 Years

Google Will Finally Pay Taxes: This fall, Google will receive a large Oregon property tax bill in the mail. Since Google opened its first data centre in The Dalles in 2006, the company’s data centres have been exempt from most property taxes. The Silicon Valley firm took advantage of significant Oregon tax breaks, saving Google at least $240 million to date.

For years, Wasco County and state officials have been waiting to see what would happen when Google’s initial 15-year tax exemptions expired.

Will the company close the ageing data centre? Would it switch to older, less valuable equipment to mitigate the tax impact? Or will Google begin to pay full freight?

For the time being, Google appears content to continue operating and paying its bills. The tax break expired last year, and the facility’s taxable land, property, and equipment were valued at $335 million by state and county assessors.

How Much Tax Will Google Pay?

“They got a $5.2 million tax bill in the mail,” county assessor Jill Amery said.

That’s great news in Wasco County, where the fire district, community college, city, and county governments are all considering how to spend the extra money, which increases total property tax collections by about 12%.

Google’s Dalles facility was one of the first of its kind built anywhere in the world. It was never clear how long a large tech company’s data centre could be useful.

So Google’s decision to keep operating its first one is encouraging for officials in Prineville, Morrow County, and Umatilla County, all of which have large data centres owned by other tech giants that will be taxed in the coming years.

However, Google’s new tax-exempt status in The Dalles raises additional concerns.

Was the massive tax breaks ever really necessary if Google is willing to pay its full tax bill โ€” even on an old-model data centre like the one in The Dalles? Could smaller incentives have enticed these companies to relocate to Oregon?

And how long does Google intend to keep running the data centre now that it’s taxable? The notoriously secretive company refused to comment on its plans. However, the possibility of shutting down a specific data centre at any time makes it difficult for local governments to plan for future revenue.

“That weighs into part of the conversation when you’re making decisions about how to use an increase in a revenue source sustainably,” The Dalles city manager Matthew Klebes said.

Back in 2006, when one of the world’s largest tech companies arrived in small-town Oregon, it caused quite a stir. Data centres aren’t big employers โ€” Google employs about 200 people in The Dalles, population 16,000 โ€” but the Columbia River data centres quickly became a local landmark and a symbol of a changing community.

Cloud computing was still in its early stages, and most individuals and businesses kept their electronic records on their own computers. In the years since, server farms have sprouted up all over the world, hosting photos, videos, emails, and reams of corporate data.

Oregon was a particularly popular location for data centres because it provided relatively cheap electricity, water to cool the computers, plenty of land in rural communities, and, most importantly, some of the nation’s most valuable tax breaks.

Google Will Finally Pay Taxes
Google Will Finally Pay Taxes

Following in Google’s footsteps, Amazon, Apple, and Facebook all rushed to capitalise on the incentives. They spent billions of dollars on data centres ranging from Prineville to Hermiston. Google built a second and then a third data centre in The Dalles, and the company negotiated new tax breaks and water rights agreements for two more last year, though it hasn’t committed to building them.

Big tech companies have saved more than $650 million by taking advantage of the enterprise zone tax breaks Oregon created for small factories in the 1980s. Oregon, like the majority of states, taxes businesses on their equipment as well as their land and buildings.

The tax breaks are especially valuable for data centres because they exempt high-end computers and there is no cap on the size of the giveaways. The enterprise zone programme is up for renewal, and state lawmakers have stated that they intend to investigate it during the upcoming legislative session.

The data centres made a big impact in small-town Oregon because even a few hundred jobs have a big impact in communities of only a few thousand people. And the small payments they made in lieu of taxes, as well as the government franchise fees generated by the server farms’ electricity consumption, helped to boost local budgets.

Each of Oregon’s enterprise zone tax breaks is valid for 15 years. Google’s is the first to expire, but tax breaks in other parts of the state will begin to expire in the coming years, potentially adding millions of dollars to local tax revenue.

Wasco County distributes property tax revenue to several government agencies, including the county, city, library, and fire district, which expects to receive more than $500,000 in annual revenue from Google’s new tax payments this year.

Mid-Columbia Fire & Rescue Chief Robert Palmer said he had hoped to add three more positions this fall but hadn’t committed until Google’s funding came through.

“We were waiting to see if we were going to be able to afford it,” Palmer explained. “So it’s definitely a huge benefit for us.”

He said the fire district had recently paid for a fleet upgrade with a bond and was considering another. However, he now claims that Google’s funding may relieve him of the need to ask voters to open their own wallets.

“It definitely gives us the opportunity to, hopefully, not have to go out for a bond in the future and actually have the funding needed to replace our equipment, our apparatus and equipment, more consistently,” Palmer said.

Because Oregon compensates districts for money lost due to enterprise zone incentives, Google’s addition to the county tax base will have no direct benefit to The Dalles schools. However, it could have a significant impact on who pays for a bond that the North Wasco County School District plans to seek next year.

“Having Google on the tax rolls would be beneficial for that purpose.” Otherwise, that $5 million is spread across all taxpayers,” Kara Flath, the district’s chief financial officer, explained.

The payments made this year may only be the beginning. Two other Google data centres, which received exemptions totalling more than $26 million last year, are set to be taxed over the next dozen years. This could result in a significant increase in local revenue.

Google may decide at any time to replace its older data centres with brand-new, tax-free facilities, or to stock the taxable facilities with less advanced equipment with a lower tax value.

This could result in a sudden reduction or elimination of tax payments.

“It’s difficult to plan. “It’s almost like looking into a crystal ball,” Palmer explained.

Google appears to be carefully managing its tax liability. The $5 million it now owes on its original data centre is less than a third of the value of the exemptions on its newer one, implying that the computers inside are far less valuable โ€” and thus less taxable.

In some ways, data centres are similar to other industries on which small communities rely. The closure of a lumber mill or an aluminium smelter can devastate a county or city’s budget.

Data centres, on the other hand, stand out due to the extraordinary tax value of their computers and the fact that the companies that run them refuse to reveal their long-term plans. And, unlike timber or metals, where market conditions may provide a hint as to their future, the fate of a data centre is entirely dependent on one company’s technological requirements and financial calculations.

“We just have to make our projections based on what we have right now and hope for the best,” Palmer said.

This year, the Dalles City Council will begin its annual goal-setting process, as well as consider how to spend the new Google tax money and plan for the future. The uncertainty of future Google revenue, according to Klebes, will be central to that discussion.

“What are we going to do with it?” “How much risk are we willing to take?” Klebes stated.

The Dalles anticipates that Google’s taxes will generate approximately $800,000 in new revenue. Some of it, according to Klebes, could go into a contingency fund or into capital projects that do not require future spending commitments.

For the time being, Klebes believes the city will proceed cautiously in order to ensure that its new revenue is used sustainably.

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