Facebook recently announced that they will build a new data center in Los Lunas, New Mexico, just outside of Albuquerque. They beat out West Jordan, Utah as a competitor by offering better incentives. Nearly every power broker in New Mexico is praising the move, but it reveals another example of neoliberal economics in a poor state.
The new Facebook center will be located 1/2 mile west of I-25, south of Route 6 in Los Lunas. This new center claims it will be the most energy efficient data center in the world, running on 100 percent renewable energy, by services to be built by state utility company PNM. This one is nice, as data centers, farms for servers and the like, use vast amounts of electricity. As the modern world depends more in information technology and the internet, it helps to know what the real costs are in terms of electricity and the environmental costs from it.
The company and state politicians state it will bring hundreds of construction jobs, dozens of long term operations jobs, and hundreds of millions of dollars of new investment. The mayor of Los Lunas said more precisely it would bring up to 300 temporary construction jobs and at least 50 long term operations jobs. Construction was scheduled to begin October 2016 and the center will be operational in 2018. The big story was the generous incentives given by both competing sites, and ultimately by Los Lunas.
Los Lunas passed an IRB, or Industrial Revenue Bond, measure of up to $30 billion. Another $10 million was from a Local Economic Development Act (LEDA) measure, and up to $3 million in Job Training Incentive Program funding. They also got their property taxes waived for the next 30 years in exchange for annual payments of between $50,000 and $100,000 a year. Facebook would also get 75 percent reimbursement of the gross tax revenues they receive, capped at $1.6 million. No one knows exactly if this will pay off, but it is typical in the age of neoliberalism, where the public pays for private gain.
West Jordon, Utah also offered Facebook big tax incentives to locate their, but it was ultimately rejected. They offered a $250 million, 20 year tax incentive, but the taxing entities rejected it, and local officials protested that it was too generous.
The governor of New Mexico, Susana Martinez, began courting Facebook back in August 2015. In the neoliberal economy, the state competes with others to bring in industry.
Another giveaway was the water. West Jordon debated the request for 5 million gallons of water per day required by Facebook to be held in reserve for the then 230 acre, 3.3 million square foot project. The water is used for the evaporative coolers to keep the servers from overheating. The LEDA funds in New Mexico are allocated to purchase water rights. Los Lunas also approved an agreement that would allow Facebook to have access of up to 4.5 million gallons a day. Both Utah and New Mexico have desert climates, with water a scarce resource, and in their bid to attract industry they will give away this resource for them.
Another argument they gave is that the project would help local contractors. But the main contractor is Fortis Construction, based in Portland, Oregon.
Another important aspect of this deal is the amount of secrecy involved. As the Albuquerque Journal reported, “At Facebook’s request, only certain public officials were authorized to speak about any aspect of the project, and dozens of government employees signed nondisclosure agreements. One Utah media outlet delayed breaking the Facebook story for months so as not to jeopardize the state’s chances of securing the data center.” Both projects went under shell companies and code names. In Los Lunas the IRB was first approved for a parent company Greater Kudu LLC, the name in its request. It was named Project Antelope, which a Greater Kudu is. Utah went under Project Discus, and conversations with Facebook and state officials were kept private under their request. These deals are more common, but they don’t want them to come under the light.
Deseret News quoted Dave Swenson, an economist at Iowa State University, saying “the only winner here is Facebook.”
“Two cities were pitted one against each other, offering massive subsidies for an extraordinarily profitable company,” Swenson said. “Honestly, West Jordan dodged a bullet, and the state of Utah dodged a bullet. They would have committed to spending an extraordinary amount of money for a negligible increase of productivity in their regional economy.”
New Mexico is a poor state, often ranking near the bottom, if not at the bottom, in poverty. The economy is dependent on government jobs and extractive industries, the latter taking a hit lately with the decline of oil and gas jobs. Thus it is susceptible to giving away these public subsidies for private investment. Many compared the deal to the one with Intel, which the state and Rio Rancho gave away billions in tax breaks for the company to locate in the growing suburb. Now it may reduce its operations if not close altogether due to decreased demand for their computer chips as mobile devices become the preferred computer. I have written about other IRB’s given to Phillips and Eclipse, which did not perform as expected. A website gives data on nearly $4 billion in subsidies to private industry in New Mexico. Public subsidy for private gain.
The example of Facebook of how economies of neoliberal capitalism work would be an argument for a more socialist economy. Where the resources would be owned by the people, where communities would have say in what resources are given to industry, and companies could not just up and leave a community, devastating it. But as long as capitalism plays out, the economy will be at the mercy of these concentrated entities of corporations. After all, in a theoretical capitalist economy, companies would make it on their own without any assistance. But that is not the way it works, and economics should be more democratic to benefit the many over the few.
Baca, Marie C. “It’s official: Facebook breaks ground in New Mexico next month.” Albuquerque Journal. September 15, 2016. https://www.abqjournal.com/844876/facebook-picks-los-lunas-for-its-data-center.html
McKeller, Kate. “West Jordan falls to New Mexico’s sweetheart deal for Facebook data center.” Deseret News. September 14, 2016. http://www.deseretnews.com/article/865662425/Facebook-chooses-New-Mexico-over-West-Jordan-for-data-center.html
“Facebook chooses New Mexico over Utah for its newest data center.” https://www.theguardian.com/technology/2016/sep/14/facebook-data-center-new-mexico-utah?cmp=oth_b-aplnews_d-1
Reichbach, Matthew. “Facebook announces data center coming to New Mexico.” NM Political Report. September 14, 2016. http://nmpoliticalreport.com/93449/facebook-announces-data-center-coming-to-new-mexico/