New Data on Data Center Subsidies, Same Old Problems

July 25, 2023

In Good Jobs First’s 2022 report evaluating state economic development transparency, we spotlighted the particularly opaque and expensive practice of awarding special tax treatment to large data centers—server farms where companies house their critical computing and network infrastructure.

This work built on an earlier 2016 report that profiled 11 subsidized data centers and found total support averaging $1.95 million per job.

Now, new Subsidy Tracker data further reinforces our previous findings: Data center subsidies are astronomical and too many states are still failing to disclose their true cost.

Of the six states for which we added new data center entries, only three provided the value of the subsidy: Illinois, Nevada, and Ohio.

Since mid-2019, Illinois has granted $468 million worth of sales tax exemptions and tax credits. $91.5 million has gone to Microsoft for three data centers in the Chicago suburbs. Facebook, under the guise of Goldframe, LLC, received the single largest award, $80 million, for its $800 million data center in DeKalb.

Source: Chad Davis (2019), WikiMedia Commons.

These facilities are highly capital-intensive. Subsidized companies have invested upwards of $5.4 billion in Illinois server farms but created just 339 new jobs. That means the state and local governments have collectively spent roughly $1.4 million per new data center job.

Digital Realty Trust, a global real estate investment trust focused on data centers, received over $2 million per job at its Franklin Park facility. This per job subsidy is especially high because Franklin Park is designated an “underserved area,” which qualifies Digital Realty Trust for a bonus tax credit equal to 20% of construction worker wages.

Data center operators in Nevada have received $66 million in sales and property taxes abatements since 2019, with Design, LLC, owned by Google-parent, Alphabet, reaping $50 million for its two facilities in Reno and Las Vegas.

In Ohio sales tax exemptions for data centers have been less costly, saving companies $19.8 million over the last four years. But this comes on top of other forms of public support like discounted electricity rates and hefty local property tax breaks.

For instance, in 2021, Columbus approved a $54.3 million property tax abatement for a new data center with an undisclosed owner on the city’s far south side, equivalent to $2.7 million for each of the center’s 20 jobs. The recipient was later revealed to be Google, which will be eligible for the state’s sales tax exemption on data center equipment once the facility is completed sometime in the next two years.

Big tech companies are clearly squeamish about the public getting wind of their data center plans, but Amazon takes the cake when it comes to corporate duplicity.

In Frederick County, Maryland, a judge ordered the state and county release records to a local conservation group that ultimately revealed the company had been secretly working with government officials to carve out a new Amazon Web Services data center from protected lands around Sugarloaf Mountain, a Registered National Landmark.

Amazon nixed the project once its involvement was made public and the proposed tract was ultimately retained as part of the preservation area. (Maryland offers a sales tax exemption for data center equipment as well).

Arizona, Texas, and Minnesota are the remaining three states for which we have new information on data center subsidy recipients, though little more than company names.

In last year’s disclosure “report card,” we called out Minnesota as one of a handful of states that disclosed nothing about its data center subsidy program. It has since started reporting the owners of server farms certified for a sales tax refund, which includes a host of big names like Target, Wells Fargo, and General Mills.

Minnesota’s failure to disclose these programs’ foregone revenue costs—much less benefits like total capital investment and job creation—ranks it, along with Arizona and Texas, a pseudo-disclosure state with barely an edge over remaining states withholding recipient names.

However, the data we do have is clear: Such subsidies are indefensible in any state, given spiraling costs and paltry job creation.

Transparency is necessary, but insufficient when it comes to accountability. Merely disclosing costs and benefits is not evidence enough that a program is “effective.” Ultimately, we’d rather see states scrap their data center subsidies altogether.

Read more about data center subsidies here.