LOCKPORT – For the second time in four years, state agencies and the Town of Lockport are teaming up to produce a giant incentive package for another data center to be built by Internet giant Yahoo in May.
The $168 million project will bring 115 jobs to the town’s industrial park, on top of the 77 jobs in the first data center that opened in 2010. One hundred of the new jobs will be in the call center.
The town plans to give the company an 18-year property tax break, including no property taxes at all for the first 10 years, and a sales tax exemption for 20 years on building materials and equipment used to furnish the buildings in the town’s industrial park.
The New York Power Authority is providing 7.2 megawatts of electricity to run the facilities, under a seven-year contract that the authority’s documents acknowledge falls slightly below its average for jobs per megawatt.
Empire State Development is helping out with up to $200,000 a year in tax credits, Yahoo spokeswoman Suzanne Philion said.
The package is similar to the one Yahoo obtained in 2009, when it won approval for the current 190,000-square-foot data center off Junction Road.
“With many states and municipalities competing for data center projects, these kind of large breaks on property and sales taxes have become the table stakes for competing for major technology players like Yahoo,” said Rich Miller, editor in chief of the trade publication Data Center Knowledge.
“If NYPA doesn’t provide the power, the project is dead. If local officials in Lockport don’t offer tax breaks, there are plenty of governments and economic development bodies in other states that will,” he said.
And since Yahoo received a handsome incentive package the first time around, Miller said, it’s hard to stuff that genie back into the bottle if Western New York wants to compete for these projects.
“An expansion by Yahoo probably doesn’t significantly change the Buffalo region’s prospects as a data center hub,” Miller said.
“The Yahoo project has been up and running for several years and is extraordinarily energy-efficient. However, we’ve yet to see other large companies follow and create data center clusters, as seen in emerging hubs like Quincy, Wash., and western North Carolina. The flip side is that if Yahoo is unable to get the power and incentives it needs to expand, it could be a showstopper for additional data center development.”
The new 150,000-square-foot data center is to be constructed just east of the current one, on 13 acres that Yahoo bought from the town last year. Yahoo bought 30 acres for the first project.
The exact site of the call center, expected to operate around the clock, has not been determined, but it will be on Yahoo’s land in the industrial park, said Paul Bonaro, data center facilities manager at Lockport.
Town Economic Development Director David R. Kinyon said the tax savings for Yahoo from the breaks haven’t been calculated but will be by the time the town Industrial Development Agency holds a public hearing on the plan at 9 a.m. April 25 in Town Hall. Kinyon said he wasn’t certain if the IDA would vote on the breaks that day.
Since Lockport doesn’t have a townwide property tax, most of the tax benefits will come from the Lockport City School District and Niagara County.
Bonaro said Yahoo executives “are excited about the opportunity to come here. They’re excited about the opportunity to establish a campus. They’re buying all the way into this project. Yahoo is going to see it through. The pump is primed for future growth here.”
Lockport IDA Chairman Thomas A. Sy said Yahoo’s application includes a $15 million construction cost estimate for the call center.
Bonaro said the expansion project will have three pods that will look about the same as the existing five 40-foot-high pods – Sy likened them to “chicken coops” – but will be “longer and larger.”
“The architecture works very well. It’s very efficient,” Bonaro said.
Half of the middle pod will be devoted to an administrative facility that will be larger than the 25,000-square-foot administrative center in the existing facility, Bonaro said.
The Power Authority calculates that the 7.2-megawatt power allocation will produce 16 jobs per megawatt, which is below the historic average of 18 jobs per megawatt for NYPA allocation deals.
Data centers have a strong allure for regions with struggling economies, Miller said.
“In a time when many businesses are stagnant, the market for data centers continues to grow, making them attractive. They’ve become symbols of the digital economy and can often thrive in regions once rich with factories, building the new economy atop the footprints of the old.”