About Those Property Taxes ⇥ thenarwhal.ca
There are some curious subplots in the data centre boom happening now in Alberta that I think go a long way toward explaining why people hate these things. First, even though developers tout their clean electricity bonafides, the fact is the actual power will come from fossil fuels. That is in part because our province requires it. It turns out that our government appears to be using this wave of new projects as one reason to grow our robust oil-and-gas industry.
Drew Anderson, the Narwhal:
A leaked document, labelled a cabinet report and outlining possible plans to overhaul Alberta’s natural gas pipeline system to spur AI data centre construction, caused an uproar last week.
[…]
The plans for natural gas expansion are not just about data centres, there is also reference to expanding oil and gas production, including access to natural gas for oilsands operations.
But the expansion of AI data centres are front and centre throughout the document, which notes “the Government of Alberta is actively courting hyperscale data centre capital and other investors.”
Former UCP staffer Mackenzie Blyth noted in the Alberta Counsel News that polling showed just “13 per cent of Albertans surveyed would support a nearby data centre, compared with 71 per cent who would oppose one”. These data centres are promoted as an economic boon in their own right and the knock-on effects of burning a whole bunch of stuff we dig out of the ground is what money sounds like around here. Even so, opposition to these projects cuts across political lines.
Meta’s gigawatt centre is among the largest of the new projects and surely the highest-profile one — well, of the proposals I think will actually exist. But aside from what has been released through official channels, not much is known about it yet.
Howard Chai, the Realist, dug up the relevant property records:
As is commonplace now with data centre developments, there is little transparency on even simple details such as the address and ownership structure — by the owner, developer, and even the government. All that has been stated in the public announcements is that the data centre will be located somewhere north of Edmonton.
According to Data Center Map, however, the location is 56111 Range Road 223. Using that address, The Realist was then able to identify the exact legal parcels that make up the site and confirmed details of the land sale with transaction info shared with The Realist by Alberta-based commercial real estate data firm The Network.
These parcels were sold in February for just over $300 million to a shell company.
Data centres are not inherently evil. But the companies developing them seem surprised by public criticism even as they have been less than honest about their effect on the environment, have hidden behind shell companies, and have goaded local politicians into doing their bidding. I keep thinking about an exchange I quoted comparing public contempt for fracking to the reception of data centres:
Whether Sharp realizes it or not, the fracking public relations playbook is exactly what people like asset manager Dan Clifton argues data centre developers and A.I. companies ought to be pulling from. Josh Brown, the host and another finance guy, says this was a relatively easy argument for the fracking industry to make because “the answer is obvious: two-dollar natural gas”. Clifton responds by admitting that “one of the problems [with data centres] is they don’t create a lot of jobs. There’s not a lot of construction jobs, and there’s definitely not jobs inside the data centre itself. So you’ve got to make it about property taxes”. Even these boosters recognize the favourable arguments are pretty limited. “You know what would be a good argument?”, Brown asks, “hey, it’s this or a nuclear power plant”.
About those property taxes…
It turns out that if you do a little searching for key phrases like Meta and, perhaps, data centre and, say, property taxes, you find some fascinating things. Like this article from Andy Larsen, reporting for the Salt Lake Tribune:
Eagle Mountain has given data center development tax breaks in the form of property tax relief through the city’s Redevelopment Agency four times. All are through Sweetwater Industrial Park Community Reinvestment Areas, on the south end of the city’s boundaries.
That means that when this new data center development is taxed, rather than those funds going into the city coffers like usual, most or all of that money goes back to the Redevelopment Agency and, to some extent, the companies creating the data centers.
Two of the four data centres are Meta’s. Instead of a huge property tax windfall for Eagle Mountain, it is foregoing $2.5 million annually and raising residents’ taxes to try to make up the difference.
What about Meta’s giant Hyperion project in Louisiana? Roshan Abraham, Wired:
The state’s agreement with Meta makes clear that as public land, the property Meta is leasing is exempt from traditional taxes. It creates a menu of options for what the company would potentially owe in “payment in lieu of taxes” (PILOT), a common agreement that lets local governments offer tax breaks with provisions attached. The agreement offers Meta qualified exemptions from both sales tax and property tax.
Depending on how many full-time equivalent staff Meta hires, the company could get tax breaks up to 80%. True, local teachers got a huge windfall, but this was on a tax bill that was substantially discounted and it will decline when construction winds down and the data centre becomes operational.
In fairness, per the Alberta Counsel’s Blyth, Alberta premier Danielle Smith promised “[n]o subsidies, no grants, no discounted power, no taxpayer backstop”. But she is not being honest. Shiza Wasi at Public Interest Alberta:
[…] The UCP has also confirmed a 2% hardware levy on grid-connected data centres drawing at least 75 MW, but this levy is fully creditable against provincial corporate income tax, meaning taxpayers will see little to no benefit.
I do not think anyone needs to be opposed to massive data centres to find this proposal and construction process objectionable. These ugly buildings can consume as much power as a large city, and we are being rushed into building them because Meta needs to run a bunch of Ubuntu virtual machines to power its A.I. gadget. These companies are going to dump something like $10 trillion over the next six years into this infrastructure buildout. And, somehow, they still expect tax breaks and secrecy.