economics

March 15, 2010

New Gold Rush: Data Centers Oregon Town Is Latest in Northwest to Use Cheap Power to Lure Storage Firms

Filed under: Uncategorized — ktetaichinh @ 10:25 pm
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PRINEVILLE, ORE.—The rumble of backhoes and bulldozers on the outskirts of this city of 10,000 is sweet music to a municipality that has lost hundreds of blue- and white-collar jobs in the recession. With a combination of cheap power and favorable climate, Prineville is joining the region’s latest boom: housing electronic data….

Prineville prevailed over its rivals thanks to its generous package of tax breaks, plus proximity to trendy Bend, Ore., whose ski slopes and upscale resorts and restaurants were an added bonus.

“It was a combination of things: Low-cost land, high-voltage power lines nearby,” says Steve Forrester, Prineville’s city manager. “The critical thing was our climate: low humidity and cool nights.”

Facebook says it intends to use evaporative cooling technology to keep banks of humming computers from overheating, obviating the need to construct the costly water-cooling towers it uses at the data centers it’s leasing in Virginia and the San Francisco Bay Area

Five sawmills closed in Prineville between the early 1980s and 2002, cutting hundreds of jobs and depriving the local economy of any ripple effect from a housing boom that lifted other logging centers.

At the same time, expectations that Prineville could become a bedroom community for pricier Bend led to overbuilding in some new housing developments; today 2,000 to 2,500 properties there remain unsold.

As a result, Prineville was staring at a future all too common in these parts: the rapid abandonment of a once-thriving rural community. Driving east and south from Prineville, residents here pass dozens of near ghost towns, places marked by abandoned gas stations and boarded-up downtowns.

“We bottomed out,” says Steve Uffelman, a city councilman, who explains the city has tried to recruit a prison, a trade school, “even a Nascar track” to increase employment.

Bringing in Facebook gives Prineville a chance to catch a wave that has lifted other small towns in the region. Quincy, Wash., with a population of 5,000, lured Intuit Inc. to build a 240,000-square-foot data center, not far from similar operations run by Yahoo Inc. and Microsoft Corp. Other Oregon cities, Boardman and The Dalles, have welcomed Amazon.com Inc. and Google Inc., respectively.

Like those cities, Prineville had to offer generous property-tax incentives, in this case on 124 acres of land Facebook acquired for some $3 million last year. Facebook will be taxed for the next 15 years only at the current assessed value of the unimproved parcel, around $25,000 a year, with the county forgoing as much as $3 million annually on the value of any new structures on the property.

In exchange, Prineville will receive an annual $110,000 “community fee” from Facebook, and it stands to reap $50,000 in user fees for every $1 million worth of power Facebook buys from local provider Pacific Power Inc.

Prineville officials say the real value to the city is permanent jobs—35 engineering, maintenance and information-technology positions the city calculates will have a combined annual payroll of $1.75 million.

Prineville is also counting on contractors flocking to the region to service Facebook’s installation. Now the uptick is coming from construction jobs—around 150 just to clear and level the land.

Steve Forrester, Prineville’s city manager, has already seen the impact on at least one local retailer—the Subway sandwich franchise he and his wife operate. Lunch sales are up 5% over last year, he says. “That’s 75 to 100 more sandwiches a week.”

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