Print 23 comment(s) - last by Ringold.. on Jan 22 at 3:33 PM

North Carolina is home to a new massive server farm facility for Google

Google announced this week that it will be investing roughly $600 million USD in building a new data center facility in North Carolina. The new facility will hold server farms that Google will use in its next generation of search and database-intensive applications, particularly its new "Similarity Engine," which removes redundancy in its crawls and results delivery.

Officials at Google indicated that the new facility will hold slightly over 200 employees, most of whom will be network and server specialists. Google's primary research and development facility will still remain in California. Google also has another facility in Arizona, which it had been working on last year.

The state of North Carolina is definitely pleased with Google's announcement, but Google did not just decide to open its doors in North Carolina on a whim. Earlier this year the state put forward roughly $4.8 million as part of an incentives package for Google. The incentives package can grow up to $100 million if Google decides to stay in the region.

According to North Carolina state governor Mike Easley, the state is jumping at the opportunity to work with Google because there have been lots of employment layoffs in the state this past year. "This company will provide hundreds of good-paying, knowledge-based jobs that North Carolinas citizens want. It will help reinvigorate an area hard hit by the loss of furniture and textile jobs with 21st century opportunities," said Easley.

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By boffo on 1/20/2007 7:42:26 PM , Rating: 4
Not so much. There is more than a decade's worth of research in economics and public finance showing that states and localities consistently overbid in attracting industry, sometimes to the point of sacrificing most of the expected revenue in tax breaks and other incentives. In the same way, predictions of the fiscal benefits of publicly financed stadiums are routinely overstated. That's not to say there is never a net benefit from using incentives to attract business (or sports teams), but firms often get a much better deal than is needed. Just another form of corporate welfare, at taxpayers' expense.

By thomaspurves on 1/20/2007 9:04:37 PM , Rating: 2
There is also the winner's curse effect that can arise in these situations:

basically, the propensity that the winning bidder of any auction is the one that most over-bid for the item at stake
(e.g. possibly with all good intentions but nonetheless the city/state that most overestimated benefits and underestimates the liabilities is most likely to put in the highest bid)

By Ringold on 1/20/2007 9:20:53 PM , Rating: 2
I don't see how any of this applies here though.

If they hadn't bid what they did, Google could've taken its datacenter elsewhere. Indiana, perhaps, or Toronto or Taipei or Hong Kong or Bangalore. In that case, their revenue would've been zero from idle land, no additional jobs created.

Even if they exempted Google from all taxes, these servers don't install themselves, they don't maintain themselves, and all the insanely expensive equipment in a datacenter that supports the servers don't either. All these people take home good pay. They won't be ordering their pizza from California, they'll be ordering it from down the street from their new homes (which will have property taxes). They'll eat, shop, and recreate in the vicinity, spawning more jobs, supporting local business, driving more prosperity. Meanwhile, while the government could've given Google a free ride (which SC didn't do), they'd be making dough hand over fist with all the OTHER activity going on that wouldn't have otherwise.

It's win/win! It's a win for the USA, too, for keeping a datacenter like that on home turf. And a win for Google; keeps us enthusiasts happy thinking its a more American company. It's a win/win/win/win, then, I think?

By Oregonian2 on 1/22/2007 3:04:42 PM , Rating: 2
Assuming they connect the server farm to the world through a network, there may also be a bit of money being made by the local telecom infrastructure companies too. Having it sit there unconnected would seem like a shame. :-)

By Ringold on 1/20/2007 9:13:31 PM , Rating: 2
I think I covered my self when I said I'd support dropping the corporate taxes, and all taxes companies pay. Such things get passed on down the line anyway and are just masked taxes on the public (with a large amount of research revealing an average of 20% of the cost of products being embedded taxes -- it varies wildly, with some prices being half taxes and others very little. (Corporate) Taxes just eat profit and raise prices with the end result being we get paid less and pay more at the register. I guess that means I'm of the mind that the concept of corporate welfare is bunk; those taxes exist just so politicians can have their hands on the levers of industry. Besides, so what if tax revenue goes down? Orlando a few years ago put up several thousand dollar lizard statues all around the city. They just waste it when they get revenue anyway.

I also think the free market is at work. There might be some overbidding, but some counties are so devastated with structural unemployment that even if they can't raise a ton of tax revenue directly any economic activity -- especially of this high-paying variety -- is better than none at all. That datacenter I imagine could've just as easily been located anywhere from Jakarta to Taiwan. Instead, Google was able to keep it on "the homeland".

By Christopher1 on 1/22/2007 11:13:28 AM , Rating: 2
Sorry, but no. Corporate taxes go towards things like education, health care, Social Security, etc.

They are not raising the prices of goods really, because the corporations know that there is only a certain highest price that consumers will pay, and competition in most industries is so cut-throat today.

The money would NOT get passed down the line. It would just go into the hands of the rich, making the rich richer and the poor poorer.

What we really need to do is have a 50% income tax for anyone making more than 1 million dollars a year! That would solve all our problems, along with cutting military spending down to half or less of what it is right now.

By Ringold on 1/22/2007 3:09:45 PM , Rating: 2
Then you've never taken a principles of Microeconomics course, or if you did, you've decided to disregard large swaths of fundamentals that everything on up to the PhD level is based on. A corporate tax, or any tax, will partly be absorbed by the company and partly pushed on in the form of higher prices (and in the long run, less supply).

If you're refuting that much, then you've just left capitalism and socialism and just created.. Christopherism Economics. :)

By Oregonian2 on 1/22/2007 3:22:55 PM , Rating: 2
Cutting the Military by 50% wouldn't help much. Their spending (other than "special projects" in the Middle east) is a very tiny portion of the total budget. Used to be a good scape goat for spending cuts, but that age is very long past. Also sticking it to the rich won't help as much as one might think either. If 100% of Bill Gate's wealth were given to the government tomorrow, it'd be just a tiny blip in the budget cycle.

By Ringold on 1/22/2007 3:33:01 PM , Rating: 2
Two more things, too. It'd be but a tiny blip, (sorta; the top 5 percent of income earners shoulder 35% of the tax burden, but Gates would pay for about two seconds in Iraq), but the sort of image that sends to the masses (and behavioral economics proves this) is that success is not worth it because the Government just takes it from you no matter how hard you work. Better to maximize leisure and minimize effort by settling with some much lower level of achievement instead.

But it "feels good" to the masses to think they're "sticking it to the man", and hence, politicians like using it. That, and campaign contributions.

By Oregonian2 on 1/22/2007 3:17:52 PM , Rating: 2
Just a comment that every cry about how horrible it is to give tax breaks by local communities (they are here, near Hillsboro Oregon a lot) are all are based on the assumption that if the tax breaks are NOT given, that the incoming company would do so anyway or that some other company would come in and build an equivalent facility w/o the breaks. This is because the breaks are based on lowering tax income that doesn't exist UNLESS the facility is made. IOW - not building means even lower tax revenue. Of course those who make these crys are blindingly impressed how their area of the country is the utmost best in the world for business to locate and that the whole world is flocking to them and will beg to build there w/o incentives. Kind of like a parent talking about their children. Most of the time it's ... uh... not quite true I think (even if it's true here :-).

One of these cries recently came out of upper New York State (a planned AMD fab location). Probably a good example of what I say above, I think.

"Nowadays you can buy a CPU cheaper than the CPU fan." -- Unnamed AMD executive
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