Amazon plans to build at least five new data centers along the Columbia River in remote Morrow County, a nearly $12 billion project that would more than double the scale of the company’s operations in the region.
The undertaking represents one of the largest capital projects in Oregon history — in one of the state’s smallest communities. Morrow County has just about 12,000 residents.
The deal could add hundreds of jobs and fill regional tax coffers in the county, 160 miles east of Portland. Amazon is already the county’s largest taxpayer by far, accounting for a third of all property tax revenue due to four large data centers it built over the past several years.
Most of the data centers’ value is exempt from local taxation, though, so Amazon saves far more than it pays. The company secured tax breaks in Morrow County worth $161 million over the past five years – $47 million in just the last year.
And before proceeding with its next project, Amazon wants a new package of tax breaks that would save the company hundreds of millions of dollars more over the next 15 years. That’s generating fresh scrutiny in the county and its largest city, Boardman, over whether Amazon is paying its fair share.
And it leaves officials in Morrow County and Boardman with a conundrum: They would like the billions of dollars in new spending from Amazon, but how does a tiny county in eastern Oregon negotiate a fair deal with a company worth $1.3 trillion? How can they secure the new data centers without giving away too much?
“That’s going to be a tough give and take,” said Greg Sweek, a former county assessor who now manages the local enterprise zone program that governs Amazon’s local taxes. He said county has to balance how much to seek from the company against the risk that Amazon bolts for neighboring Umatilla County, where it also has data centers, or to the nearby Tri-Cities in Washington.
“There’s a monetary amount for Amazon that they’re looking at,” Sweek said, “and I don’t know what that is.”
Data centers come to rural Oregon for cheap land, ample water and relatively inexpensive electricity, essential for powering and cooling all those computers. The Umatilla Electric Cooperative reports that industrial power consumption is up 266% since 2016.
Most of all, though, the tech companies come for the low taxes.
Oregon has some of the nation’s most valuable industrial tax breaks through a program that dates to 1985, when big corporate investments were measured in the millions rather than the billions of dollars.
The state’s enterprise zone program places no limits on how much local governments can give away and provides small communities with no assistance in their negotiations with the companies seeking tax breaks.
In the internet age, Amazon and other tech giants – among them Apple, Facebook and Google – have capitalized on the programs to secure tax breaks from small towns across eastern and central Oregon.
They essentially pit small Oregon towns against one another in search of the biggest exemptions, reaping tens of millions of dollars apiece through deals that exempt their pricey computers from the local property taxes other businesses pay.
The small city of Prineville, northeast of Bend, is home to large Facebook and Apple data centers, each of which receive large tax exemptions. The community has just agreed to a new package of tax breaks for a data hosting company called EdgeConnex. The deal gives the Virginia-based company 75% off its property taxes and puts a cap on the maximum it could pay.
Data centers consist mostly of cavernous, dark chambers with rows upon rows of humming computers. They’re cared for by elaborate cooling systems and a relatively small number of employees, consisting primarily of technicians and security guards.
Still, these server farms provide an enormous windfall in small communities with few economic alternatives. Amazon says its data centers employ 461 people in Morrow County, paying an average wage around $75,000 annually. That’s $20,000 above the county’s median household income.
Amazon Web Services, the Seattle company’s data center group, said in a statement that it contributes economically to Morrow County, supports local science education and is making technical advances to reduce electricity consumption and to conserve water.
And while Amazon enjoys outsized tax breaks, some of its initial investments in Morrow County only qualified for short-term tax breaks that have now expired. The company paid $22 million in taxes and fees in 2020 alone and triple that sum over the preceding decade.
“AWS is proud of the work we are doing in Oregon,” the company said. “Since 2011, we have invested over $15 billion, contributed more than $66 million in tax and fee payments to the local community, and supported the development of 2,000 jobs.”
The job tally includes jobs indirectly supported by Amazon’s spending.
Such benefits accrue to a handful of Oregon communities, primarily in or near Boardman, Hermiston, Prineville and The Dalles. But the state has hundreds of small towns, most of which are not reaping anything from the data center industry.
Public officials in some of the communities that have secured these server farms are fierce defenders of their dealmaking. Sometimes, the local cities and counties don’t even hire an attorney to help them negotiate with the Silicon Valley tech giants.
But others are beginning to express some skepticism.
Wasco County and The Dalles negotiated a new tax break with Google last year that substantially increases what the company would pay on new data centers. And in Morrow County, public officials are discussing how a new tax deal for Amazon would play with their constituents.
Amazon opened its first data center in Morrow County about a decade ago. Its growth has accelerated in recent years and it now has four large facilities, mostly at the Port of Morrow. The port is also home to large food processor, including a massive Tillamook Creamery operation, and a major Portland General Electric gas-fired power plant.
So data centers have grown and diversified the region’s industrial economy while helping fill city and county tax coffers. But Amazon’s new proposal comes amid heated debate over a $138 million school bond on this month’s ballot in Morrow County. The money would renovate and expand local schools.
While some of Amazon’s existing data centers would be subject to taxes to finance the bond, most of the company’s property is exempt. And that’s making the school bond a tough sell among some in the community, who question why Amazon gets a discount and residents don’t.
Amazon has declined to release details of its latest tax break proposal and officials in Morrow County and Boardman haven’t responded to a public records request seeking a copy of the document.
At a meeting last week, Morrow County Commissioner Melissa Lindsay suggested local governments hire an expert to help them evaluate Amazon’s latest request. And she suggested they have a lawyer on hand at their next meeting.
“That hasn’t been past practice,” replied Sweek, the enterprise zone manager. “Attorneys are expensive.”
“Yeah, well, so are mistakes,” Lindsay replied. “And we’ve made some.”
— Mike Rogoway | email@example.com | Twitter: @rogoway | 503-294-7699