West Jordan pulls plug on Facebook data center deal

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SALT LAKE CITY — The $250 million tax break deal to lure a massive Facebook data center to West Jordan collapsed Tuesday.

After working with Facebook for more than a year on the secretive Project Discus, West Jordan city officials killed the deal immediately after the Utah State Board of Education voted to approve only the first phase of the 20-year deal, capping the total tax incentive at $100 million.

"Effective immediately, all negotiations between the company known as Discus and the city of West Jordan are hereby terminated," West Jordan officials said in a news release issued minutes after the State School Board's vote. "Any and all incentives and inducements preliminary offered the company to locate in West Jordan are hereby rescinded in whole without prejudice."

West Jordan City Manager Mark Palesh said the deal-breaker was the State School Board's decision to not support the terms of the deal as-is.

"They knew no multibillion dollar company was going to negotiate part of the deal and then hope that they'd fall under the good graces of the (Salt Lake) County mayor and council at a later date," Palesh said. "They already know how they've treated them, so why would they ever do that?"

But State School Board member Stan Lockhart expressed disappointment after West Jordan's termination of the deal, saying the board was hoping its proposal would act as a compromise.

"It's unfortunate. (West Jordan) could have tried to continue negotiations," Lockhart said. "We actually approved what we were requested to approve. We just decided to do it in phases. We didn't kill this deal."

For the project to move forward, West Jordan needed two-thirds approval of a committee made up of representatives from various taxing entities, including the county, State School Board and Jordan School District.

Jordan School District and West Jordan City Council supported Discus, arguing it was worthwhile investment to spur economic development on the longtime vacant land producing little tax revenue.

Salt Lake County Mayor Ben McAdams and the County Council unanimously opposed the deal, ripping the project for rebating too much in taxpayer money for a facility that would only attract 70 to 130 jobs.

If Facebook had built a data center on the 230-acre plot, it would have generated more than $217 million in new property taxes over 20 years. Of that, local taxing entities would only have received $33 million because the deal would have allowed more than $183 million in property tax breaks.

The tax rebates could have exceed projections, however, potentially up to $250 million, after energy sales tax and state sales tax incentives were factored in.

McAdams said he was "satisfied" with Tuesday's outcome.

"I thought this was a bad deal for the kids of the Jordan School District and taxpayers in West Jordan and Salt Lake County," he said. "This was something we needed to walk away from."

Billy Hesterman, vice president of the Utah Taxpayers Association, agreed.

"This was definitely a win for Utah's schoolchildren today," Hesterman said. "This was a deal that was going to give away so much in a state where schools are clearly underfunded."

Lockhart said he and several other board members met with Facebook representatives earlier Tuesday morning, and he felt "embarrassed" about how they've been treated.

"All I could do was apologize," he said. "We've managed to trip over ourselves so many times and had so much bad publicity, now they're wondering if they really want to come. It's not so much this deal, but it is do we have our act together as a state?"

Palesh said he knew the terms under the State School Board's proposal wouldn't be negotiable with Facebook officials. He blamed most of its failure, however, on McAdams' vocal opposition to the project.

"We've been trying to negotiate for six months and trying to negate all the damage that the county mayor has done," he said. "Discus has a corporate image to uphold, and so why would they go to a state that has been pretty antagonistic toward them?"

Palesh said the potential $250 million, 20-year incentive package was not competitive enough when compared with incentives offered in New Mexico, which also has been courting the data center.

Facebook has not announced it has chosen to locate in Los Lunas, New Mexico, but Jon Barela, New Mexico economic development secretary, called West Jordan's termination "a good sign," the Albuquerque Journal reported.

Los Lunas officials have approved $30 billion in revenue bonds for the project, offering a 100 percent property tax rebate over 30 years, the Journal reported.

"New Mexico rolled out the red carpet," Palesh said. "Every entity they have offered an incentive we couldn't even begin to meet. Our state was the antithesis of that. The city welcomed them with open arms, but virtually no one else did."

Vale Hale, executive director of the Governor's Office of Economic Development, said: "After a robust debate and public discussion, ultimately local officials could not agree to the terms of a potential deal. Our work on these projects has always been as a facilitator for local government leaders. (We) will continue working to help local businesses expand and succeed in our state."

Contributing: Ladd Egan

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