Based on market capitalization, Apple is the largest U.S. corporation with $750 billion and a record $256.8 billion in reserves. And it just got nearly $213 million in incentives to create at least 50 permanent jobs in Iowa for a $1.375 billion data center.
The state will give Apple $20 million in tax credits, while the western Des Moines suburb of Waukee (pop. 13,790) will provide a 71 percent property tax abatement over 20 years amounting to $188 million and $6 million for water and sewer infrastructure on nearly 200 acres of recently annexed farmland.
The Apple jobs will pay a minimum of $29.12 per hour ($60,569 annually) — and cost about $4.26 million in incentives per position. per position. The data center will create 500 construction jobs, breaking ground next year.
It will house servers for Apple apps and Siri, its voice attendant. The servers generate considerable heat, and Apple is committed to renewable energy, which Iowa wind power will provide.
Apple will donate $100 million to a Waukee public improvement fund. Waukee is expanding rapidly. Its school district (including portions of Clive, Urbandale and West Des Moines) has quadrupled from 2,409 students in 2000. A proposed youth sports complex would have baseball and soccer fields, a playground, greenhouse and fishing pier. Apple will pick up the city’s tab, while the school district, which has approved a second high school, will pay for a new football stadium and track.
According to Good Jobs First, a nonprofit organization monitoring economic-development incentives, the data-center incentives are second to the $6.42 million per job North Carolina paid Apple in 2009 ($321 million for 50). Based on 11 recent deals, its data-center incentives averaged $1.95 million per job.
Whether it was a good deal depends on your perspective, particularly when Iowa has a budget shortfall of $350 million and counting.
“This is Apple. They chose Iowa,” said Gov. Kim Reynolds, adding, “These are (tax) credits. It’s not a check.”
Yet Iowa has 373 separate tax credits, exemptions, deductions and exclusions worth $12 billion since 2010, according to the Des Moines Register. The estimated revenue loss from tax credits alone has increased from $153 million in 2005 to an anticipated $427 million in 2018.
Among 27 states providing incentives for data centers, Iowa has offered some of the best since 2009, although Good Jobs First found Washington is the most expensive.
With a minimum of 5,000 square feet and a $200 million investment over the first six years of operation, a data center can receive a 100 percent abatement of the sales and use tax on the physical plant, cable plant, computer equipment, cooling on infrastructure and purchased electricity. Smaller data centers can apply for a 50 percent reduction. Iowa has no property tax on equipment.
Except for Amazon, the other heavyweights have located here. According to the Iowa Economic Development Authority:
Google got about $36 million in tax incentives for its Council Bluffs data center, which has expanded into a $2.5 billion, four-story facility, employing 300.
Microsoft received $45 million in incentives for its three, $4 billion West Des Moines data centers that will employ 150. The city added $65 million in infrastructure improvements.
Facebook got $18 million in tax credits for its first Altoona data center and another $8 million as it expanded to four, employing 150. The city provided a 100 percent, 20-year property tax abatement.
It’s incongruous the world’s wealthiest corporations should get any incentives.
Yet some states have offered deals that seem even worse. New Mexico gave Facebook $10 million in incentives for a data center in Las Lunas, an Albuquerque suburb, for 30-50 jobs, on public land. Facebook won’t pay property taxes.
Wisconsin committed $3 billion to Chinese flatscreen manufacturer FoxConn for 13,000 manufacturing jobs. The Milwaukee Journal-Sentinel reported FoxConn “could get up to $1.35 billion in cash for making the full investment in the plant and equipment — even if the market changes and the company is forced to abandon the plant.” If the promise is fulfilled, Wisconsin’s investment won’t be repaid until 2043.
Even with Apple’s $100 million donation and 29 percent payment of property taxes, when the Register asked Waukee Mayor Bill Peard about the impact on city revenues over the next 20 years, he responded, “This isn’t our project,” alluding to the state initiative.
Landing the data center very well may have been another “brand-name” data-center coup for Iowa. But without knowing the actual long-term financial impact, it also could be akin to Professor Harold Hill trying to huckster the good folks of River City, Iowa, on equipment for a nonexistent marching band (although that fiction turned out well).
At the very least, state and city officials owe taxpayers an accounting on these deals.