Economic Development, Government, and Technology

Lawmakers remove property tax break from data center campus bills

December 11, 2015
TAGS Switch
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Switch Steelcase Pyramid data center campus rendering
A partial rendering of the $5 billion, 2-million-square-foot data center campus planned by Switch for the former Steelcase Pyramid property. Courtesy Switch

LANSING — State lawmakers said yesterday they plan to scale back tax breaks designed to entice a large Internet data center to Caledonia, citing too much disagreement between local governments and existing data centers over exempting property taxes owed on business equipment.

The plan is still to free data centers and their "co-located" clients from paying sales and use taxes on equipment such as servers and computers.

"Take out the thing of consternation and move the (bills) that pretty much everyone agrees on," said House Tax Policy Chairman Jeff Farrington, R-Utica.

Legislators are trying to ensure that Las Vegas-based data center developer Switch follows through on locating a mega-campus south of Grand Rapids.

The project is billed as a way to land not only Switch's foray into the eastern U.S., but big co-located clients, such as eBay, Shutterfly and PayPal — the high-tech industry that auto-centric Michigan so desperately wants.

The House adjourned Thursday without voting on the Senate-passed legislation, but Farrington was optimistic that two bills would be enacted next week before the Legislature adjourns until January.

An alliance of existing Michigan data centers had raised concerns with the personal property tax exemption bill, because municipalities could reject the incentive to avoid budget repercussions. That could have led to unfair disparities across jurisdictions, while out-of-state Switch would likely be assured the tax break under a deal to expand into Michigan, according to the centers.

A spokesman for House Speaker Kevin Cotter, R-Mount Pleasant, said current law would let any data center continue to ask the local taxing unit for an abatement of half its taxes on new equipment. A data center in a "distressed" community could be given a full personal property tax break.

"We're not touching that ability at all in either direction," Gideon D'Assandro said.

Farrington said Switch was okay with dropping the third bill. A Switch spokesman declined to comment.

The legislation has come under scrutiny, including from the Michigan Chamber of Commerce and Gov. Rick Snyder, for having no requirement that Switch meet minimum spending or hiring levels to qualify for tax breaks.

Switch estimates the campus will employ about 1,000 workers and spend $5 billion over 10 years.

The non-partisan House Fiscal Agency has projected a $20 million to $30 million annual loss in revenue from current data centers under the three-bill package. Passing only the sales and use tax incentives could reduce revenue by $15 million a year instead, D'Assandro said.

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