Facebook to Add Two More Data Centers to Former Oregon Timber Town

The new facilities will mean hundreds of temporary construction jobs for Prineville, Ore., a town still recovering from declines in the timber industry.

by Mike Rogoway, The Oregonian / December 13, 2017
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(TNS) — Facebook is growing again in Prineville, Ore.

The social networking company said Tuesday it will build two more massive data centers on its Prineville campus, where it has already spent more than $1 billion building three huge structures and a smaller, "cold storage" facility.

Prineville said Facebook signed a new agreement for property tax exemptions for the facilities. Prior deals have already saved the company more than $70 million.

Tuesday's news means there will be a continued influx of hundreds of temporary construction workers into the small, central Oregon community that is still recovering from the loss of timber mills and Les Schwab's corporate headquarters.

"We're celebrating here at the city," said Steve Forrester, Prineville's city manager. He said the city spent years improving infrastructure to make the community attractive to large industry, and it's paid off with Facebook and large data centers Apple has built nearby.

Former mill workers, Les Schwab employees and recent high school graduates have all found jobs in the data centers, Forrester said, helping bring Crook County's jobless rate down from a peak near 20 percent during the Great Recession to 6.5 percent currently.

"That's what this is about," Forrester said.

Along with the surge of economic activity, the data centers have also brought strains in the small, high-desert town of 9,200. At times, as many as 500 construction workers have squeezed into Prineville to work on projects for Facebook and Apple, which has its own campus just up the road.

That has swamped the local housing supply. A study by LendingTree found average rents in Prineville increased at an annual rate of 7.8 percent from 2011 to 2016, the second-fastest in the nation after Bend.

Rents across Central Oregon have been rising rapidly in the years since the Great Recession. Home construction nearly ground to a halt during the downturn, and hasn't been able to catch up amid the subsequent economic boom in Bend and surrounding communities.

After adding fewer than 14 single-family homes in each year from 2011 to 2014, Forrester said Prineville added 48 homes in 2016 and expects another 62 this year. He said the city has expanded local RV parking, dorm housing for construction workers and approved sites for additional developments.

"The city's been very proactive," Forrester said. "We've learned some lessons with the construction folks."

Crook County said Facebook paid $5.4 million for 240 acres to make room for the new data centers, and Prineville annexed the land. The company already owned 140 adjacent acres, home to its existing facilities.

It's been almost eight years since Facebook began construction of its first corporate data center on the spare bluffs above Prineville, drawn by property tax exemptions that saved the company $17 million last year alone on its buildings and high-end computers.

Apple, which has a large complex of data centers up the road from Facebook, has saved $30.3 million since 2013, including $16.4 million this past year.

The value of the exemptions will grow as more data centers open, stocked with thousands of computers that would otherwise be subject to the local property taxes other businesses pay.

A new enterprise zone agreement extends the property tax breaks to the new buildings, offset by a new, $250,000 annual fee. Altogether, Facebook will pay local governments $550,000 to offset its tax breaks.

Prineville receives additional revenue from franchise fees generated by the Facebook and Apple's electricity use. Those fees were worth $600,000 a year in 2015, boosting public coffers by 12 percent.

It's "unfortunate," Forrester said, that local communities find themselves competing against one another to win large industrial operations with tax breaks.

"We have to play this tax incentive game, and the reason we do is everyone else is doing it," Forrester said. "I think these businesses should stand on their own and I know they could."

When the Prineville facility opened in 2012, Facebook came under fire from environmentalists because its electricity came from PacifiCorp, which generates much of its energy from coal. Facebook said Tuesday it "is actively working to find a renewable energy solution" for the new facilities under Oregon's direct access electricity program.

Meanwhile, Google is expanding its complex of data centers in The Dalles and Amazon is building more facilities in eastern Oregon. All benefit from the same kinds of tax breaks that attracted Facebook.

Despite their mammoth size -- Facebook said the two new data centers will take up 900,000 square feet altogether -- the existing facilities employ just about 200 combined, many of them security contractors. In a small city, though, those jobs have an outsized impact.

Facebook said the new data centers will cost "hundreds of millions of dollars," most of which will go to the powerful, high-end computers that run the social network and store social media updates, photos and videos.

Construction on the fourth full-size data center begins this month, and Facebook said it will be up and running in 2020. Work begins on the fifth facility next year.

This article has been updated with comment from Prineville and more information about the value of Facebook's tax breaks.

©2017 The Oregonian (Portland, Ore.) Distributed by Tribune Content Agency, LLC.