Top American technology companies like Google, Microsoft, Amazon, Apple and Facebook are reaping subsidies of US$1.95 million per job by obtaining funds from states and localities to build data centres.
A detailed report titled Money Lost to the Cloud by research analyst Kasia Tarczynska found that though these tech outfits reported nearly US$120 billion in pre-tax profits, they always told states and localities that they needed subsidies to build data centres which are needed for their businesses.
But, Tarczynska found, the data centres did not result in sufficient jobs to justify the money forked out by the states and localities.
Efforts by the five companies named resulted in more than US$2 billion in public support to build 11 new data centres. In job terms, this meant 1174 long-term jobs, amounting to a massive per job subsidy of US$1.95 million, Tarczynska wrote in her report which was done for an organisation named Good Jobs First.
{loadposition sam08}"At that price, taxpayers would always lose, because a worker would never pay US$1.95 million more in state and local taxes than public services he/she and his/her dependents consume," the report said.
Data centres had enormous footprints, the report said, citing the case of Apple's data centre in Maiden, North Carolina, which had more than 150,000 metres of floor space.
The Apple data centre in Maiden, North Carolina.
This data centre, which is valued at US$1 billion, was the most expensive that Tarczynska listed; it employed less than 50 permanent workers meaning a per job subsidy of US$6.4 million.
When Apple threatened to take the deal to the neighbouring state of Virginia, officials in North Carolina changed the tax rules so only Apple could win the deal.
Tarczynska wrote that Maiden was a city that had struggled with high unemployment after its thriving furniture industry closed its last plant. It agreed to partial property tax abatements.
Economic development officials put forward the argument that having an Apple data centre would create new jobs and make the local economy more diverse.
But, she wrote, the data centre jobs were all for high-tech computer maintenance and they did not suit blue-collar workers in Maiden who were adept at furniture construction. As a result, very few locals ended up as Apple employees.
But the company would save US$300 million in taxes over the next three decades.
"In addition to providing traditional subsidies such as local property tax abatements and investment tax credits, 27 states have established incentive programmes specifically for data centres," the report noted.
"Many of these programmes are not sufficiently transparent, even when it comes to aggregate cost figures. Indeed, 10 states don’t disclose aggregate or deal-specific costs. Only 15 states provide easily available online reporting of costs for data centre-specific programmes. Washington State's, at US$57.4 million in fiscal year 2016, is the most expensive."
Official video of the Google data centre in Oregon. The company has been the biggest beneficiary of state and local subsidies.
The report pointed out that data centres in the US used 70 billion kilowatt-hours of electricity in 2014, nearly 2% of the total energy consumption in the country and equal to the energy used by 6.4 million typical American homes annually. There are about 1370 large data centres in the US.
While tax credits and local incentives are not the prime factors deciding where a data centre will be located — every company avoids a site on a hurricane path or where power costs are high — the report said that tech companies had become aggressive in seeking such subsidies.
The report said when it came to megadeals - deals of more than US$50 million - to set up data centres, Google had been the biggest beneficiary with subsidies in Oregon, North Carolina and Alabama totalling almost US$700 million.
Apple got US$410 million from two megadeals in North Carolina and Nevada while a Yahoo! megadeal from New York State would cost taxpayers US$258 million, it said.