Google Opens $600 Million Oregon Data Center

Google, like other big data-center operators, was drawn to Oregon's relatively cheap power and extremely favorable tax climate.

(TNS) -- Google formally opens its new server farm in The Dalles on Friday, a massive, 164,000-square-foot building that will nearly double the size of the company's data center in the Columbia River Gorge community.

The company pegged the cost of the new facility at $600 million.

The Dalles was home to Google's first big custom data center, which opened in 2006. Data centers have since become a core part of the company's business, housing all manner of online data including Gmail, Google Drive and YouTube videos. Google now has data centers all over the country and around the world.

Google, like other big data-center operators including Amazon, Apple and Facebook, was drawn to Oregon by relatively cheap power and an extremely favorable tax climate.

The state has no sales tax to levy on the hundreds of millions of dollars worth of computers that runs its data centers. And special enterprise zone tax deals exempt those computers from local property taxes too, saving Google millions of dollars annually (the size of the savings will depend on how much Google spends to equip the facility).

Data centers are not big employers - the computers do nearly all the work, and many of their operations can be managed remotely from corporate headquarters. About 175 people work in Google's data center in The Dalles, according to the city, including 90 contractors.

But franchise fees from server farms' electricity use boost general fund revenue, and local governments negotiated a substantial boost in payments from Google to compensate for lost property tax revenue.

Google paid $1.2 million to the city, Wasco County and the local school district when it won its latest tax deal in 2013, making way for the new data center.

"We've already got projects going using those funds," said The Dalles city manager Nolan Young. The money helped pay for a new fire station, he said, and a new swimming pools.

And beginning next year, Google will also pay local governments $800,000 annually - up from $250,000 in its last tax deal.

Plans for Oregon data center expansion slowed considerably last fall after the state Supreme Court ruled server farms are subject to an unusual Oregon tax, which values property based in part of the value of a company's brand.

For massive companies like Google, Facebook and Apple, that could add tens of millions of dollars to their tax bill. Amazon and Apple both apparently shelved plans to expand their Oregon data centers, though Google's project was already well under way by the time of the Supreme Court ruling in October.

Last week, though, Oregon Gov. Kate Brown signed a bill that permanently exempts data centers from the tax and officials in Prineville say Apple has already indicated it plans to revive plans to expand there.

Separately, Google announced Wednesday that it has leased a new 15,000-square-foot office for a small engineering team working in downtown Portland. Google employs a little more than 20 in Portland now; the company says it has no immediate expansion plans, but the new office gives it room to add dozens.

And Google Fiber continues to contemplate bringing its hyperfast Internet service to the Portland area. Google told Oregon lawmakers the same tax that deterred data centers would have made its fiber service "extremely unlikely."

A separate bill to exempt such networks is now working its way through the Oregon Legislature; it passed the state Senate unanimously on Tuesday, and the Oregon House approved it 60-0 on Thursday. It now awaits the governor's signature.

©2015 The Oregonian (Portland, Ore.) Distributed by Tribune Content Agency, LLC