Michigan-Based Data Center Opposes Special Treatment for New Competitor

One issue Michigan legislators are focused on this month is whether to grant tax exemptions to lure a data center project to a vacant building in the Grand Rapids area. But questions remain on whether the same treatment would apply to all data centers in the state, or to just the Grand Rapids project.

A Las Vegas company called Switch wants to place a data center in the former Steelcase Pyramid building in Gaines Township. Proponents of giving the company tax breaks say the project won’t happen without them. Gov. Rick Snyder supports the idea, and legislation has been drafted to accommodate it.

Initially lawmakers aimed the legislation at data centers in general. House Speaker Kevin Cotter, R-Mt. Pleasant, said exemptions should be “broad-based” and not limited to just one company. But well-placed sources say versions of the legislation have been drafted that grant the exemptions solely to Switch.

The debate now unfolding is whether officials would accept the loss of potential tax revenue if exemptions were granted to all data centers, not just to Switch alone.

The debate takes place just months after the Michigan Department of Treasury disclosed the costs of some earlier tax and subsidy deals: Michigan taxpayers have $9.38 billion in liabilities from tax credits given to the Big 3 automakers and other firms during Gov. Jennifer Granholm’s tenure.

There are also fairness issues. Liquid Web Inc. is a data center company that operates three facilities in Lansing; it also has locations in Ann Arbor; Phoenix, Arizona; and Amsterdam, the Netherlands. Jim Geiger, the company's CEO, says the state should not limit the exemptions to the Switch project alone.

One of the enticements Switch has used to promote its Pyramid project is the claim that it could create as many as 1,000 jobs. However, data centers are not generally considered a labor intensive business.

In Liquid Web’s case, the total work force at all its locations combined is roughly 450 people, a large proportion of whom do customer service work at the company’s headquarters. And in the case of Switch, its headquarters is in Nevada.

“We are a company that’s been here 18 years and we’d like to know why they’d want to give that to another company for just moving into the state,” Geiger said. “We don’t believe the state should be in the business of picking winners and losers. ... We strongly oppose doing this for just one company.”

A House Fiscal Agency analysis estimates the state would lose $20 million to $30 million in revenue from the bill, meaning other businesses and taxpayers would pay more. The legislation is House bills 5074, 5075, 5076 and Senate bills 616, 617 and 618.