Pandora's Box Has Been Opened
Actually, no. There are at least 28 third party data centers already up and operating in Michigan. The House Fiscal Agency thinks there are 40, but didn’t specify them. None of these 28+ existing data centers required the tax breaks just reported out of the Michigan House Committee on Tax Policy to get up and running. But Switch SuperNAP does? Why?
The promoters of Switch SuperNAP’s tax break package launched their campaign back in November with a heavy emphasis on the ‘new industry’ angle. This whopper seems to have been originated by Switch’s spokesman Roger Martin:
“It is a tough issue,” Switch spokesman Roger Martin said. “There’s no question about it. We’re talking about introducing an entirely new industry to Michigan, something that is the future of this country and of this world. It’s a good, vigorous debate.”
Since the House Fiscal Agency released their 40 data center estimate, at least one Michigan media outlet scrubbed their story. Jim Harger at Mlive originally included this quote from Rick Baker in his November 30th story:
Rick Baker, CEO of the Grand Rapids Area Chamber of Commerce, said the tax breaks will help create a new industry for the state.
“This is not an industry that was top of mind for us as an opportunity. We did not have a policy in place,” he said.
Gone now. Rick Baker should have known at the time that his statement was a blatant falsehood. U.S. Signal, which operates three third party data centers [two in Grand Rapids] in Michigan, is an Executive Member of his organization. Harger undoubtedly got a tap on his shoulder from Dan Gaydou, the President of Mlive who just happens to be on the Board of Directors of The Right Place, Inc. – the major cheerleader for Switch’s tax breaks.
Speaking of The Right Place, Inc., their top cheerleader, Birgit Klohs, is still peddling the ‘new industry’ lie with a new adjective: crucial. As reported in the celebratory Detroit News article on today’s passage of the data center tax breaks by the Michigan Senate:
Birgit Klohs, head of west Michigan’s The Right Place development agency, testified Wednesday that the tax changes would open Michigan’s doors to a crucial new industry.
Unfortunately, once a lie is out there, it takes on a life of its own. This lie got regurgitated by Representative Jeff Farrington, the Chairman of the House Committee on Tax Policy just in time for yesterday’s vote:
Representative Jeff Farrington, R-Utica, chairs the House Tax Policy Committee. He says the bills set the stage to attract a new, modern industry to the state.
“We have a digital economy. We have a service-based economy, and our tax code is really one that’s set up for products from the 1930s and 40s. So trying to update it to be competitive with the other states.”
Now it is a generalization spread across the state by the Michigan Public Radio Network:
“Supporters say the incentives would help build a new industry in the state.”
You are the guest of honor at a festival of lies carefully crafted to create tax breaks for a select few, at the expense of the many. Not unique to Michigan, this charade is playing out across the country.
However the real issue with Switch’s SuperNAP Michigan is still the huge electrical load this center will place on the grid. Not shown in any of the PR images of the proposed data center. Don’t believe us? Read what Site Selection magazine has to say about data center siting issues:
By one measure, power is the most important factor. Fifty percent of respondents in the latest (Spring 2011) Jones Lang LaSalle Data Centre Barometer, issued by the firm’s London-based Data Centre Advisory Group, rank availability of power as the most important factor in choosing a new data center, followed by location and efficiency of the center
Switch’s SuperNAP Michigan will be a 300+ MW electrical load imposed on the CMS Energy grid just as they decommission 950 MW of generating capacity. There is no plan to provide SuperNAP Michigan with power just as the EPA’s Clean Power Plan puts all of America on an electrical starvation diet. CMS customers are going to pay a whole lot more for the disruption of their electrical grid than just the tax breaks.
But a really good lie can carry the day in Michigan’s Legislature, without any regard for the public’s interest. Eight to five in the House Committee on Taxation yesterday:
Five Republicans for: Farrington, Maturen, Yonker, Iden, Webber
Four Republicans against: Somerville, Howrylak, Chatfield, Glenn
Three Democrats for: Clemente, LaVoy and Byrd
One Democrat against: Townsend
The Michigan House tax breaks have now been extended to all 28+ third party data centers in Michigan, but not to the multitude of captive data centers operated by tax paying Michigan companies. Same activity, same type of employees hired, but no tax breaks. Evidently not all data centers are equal in the eyes of the Michigan House.
Never one to be outbid, the Michigan Senate fixed this little oversight. Word just came in that the Michigan Senate just approved their version of the data center tax breaks. The Senate Fiscal Agency says their SB 616/617/618 tax breaks will apply to at least 331 firms, and possibly another 1,253 firms. Now we’re talking really big money.
Remember how Democrats held that the Michigan General Fund was far too precious to tap for road funding last month? The Michigan Senate’s version of the data center tax breaks “added a [Democrat David] Knezek amendment under which the state would hold harmless, or protect, the School Aid Fund from the impact of the tax exemptions. While unspecified, it appears that money would shift from the general fund, the state’s main checkbook.” Senator Knezek was among the Democrats who voted against using the General Fund for roads last month. But now he moves to use the General Fund to back stop tax breaks for a select few businesses. It is amazing just how much a legislator can ‘evolve’ over 30 days!
Pandora’s box has been opened.