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Amazon already has four data centers at the Port of Morrow near Boardman. It says it planned to build at least six more, and possibly as many as 11.
(Port of Morrow photo)
Testifying before state lawmakers last week, an official from Amazon.com said the online giant could build as many as 11 more Oregon data centers if the state addresses a thorny tax issue.
Amazon already operates four data centers on 100 acres it owns at the Port of Morrow in eastern Oregon. It has broken ground on a fifth, but state officials say construction is being held up while the company evaluates the tax situation.
Addressing that issue is among lawmakers' top priorities in the legislative session now under way in Salem, but last Tuesday's hearing on possible fixes suggest it may be difficult to get industry interests aligned and to overcome a projected loss of revenue to Oregon counties.
The issue, known as "central assessment," relates to how the state values telecommunications companies and utilities when it comes to levying property taxes. Under a 1973 law initially intended to apply to microwave towers, the state values a company's "intangibles" as well as its physical property. That includes non-physical assets such as the value of a company's brand.
Comcast fought in court for several years to overturn central assessment, but last fall the Oregon Supreme Court ruled in favor of Oregon counties who were fighting to hold onto $17 million in taxes paid by Comcast.
The ruling unsettled data-center operators and telecom companies, who fear the tax could reach even more broadly. To date, it hasn't been applied to data centers but companies fear it could.
Public officials say the tax may be scaring off Google Fiber, which has indefinitely delayed a decision on building a hyperfast Internet service in the Portland area. And last month, state Sen. Mark Hass, D-Beaverton, said the uncertainty is also threatening expansion of Apple's server farm in Prineville.
Amazon Web Services is a major arm of the Seattle company, largely separate from its online retail business. It contracts with other companies to provide data-hosting services.
Amazon began operating its first Oregon data center in 2011 near Boardman, later adding three others. Last week in Salem, Amazon state public policy manager Eileen Sullivan testified before the Senate Committee on Finance and Revenue to encourage it to exempt data centers from the tax.
"Eliminating the threat of central assessment will permit Amazon to continue to invest in Oregon," she said.
Amazon already has four data centers, she said, and "The plan was to go north of 10, to 12 or 15." The company did not respond to an inquiry seeking additional detail.
Data centers are the second-largest segment of Oregon's tech industry in terms of capital investment, trailing only the state's huge semiconductor industry. But they're not a major employer - even a large facility may need only a few dozen employees.
Amazon, Apple, Facebook and Google have all been drawn to Oregon by a favorable tax climate: The state has no sales tax on the expensive computers that run server farms and it exempts data centers in "enterprise zones" from the property taxes that other businesses pay. That can save a large data center tens of millions of dollars annually.
But uncertainty over central assessment could undermine that attraction, according to industry representatives.
At Tuesday's hearing, lawmakers and members of the state revenue office discussed various ways to cap or constrain central assessment without undermining county revenues. Representatives from the phone and cable TV industries fired back that they want central assessment repealed entirely.
Another hearing Monday will consider two bills:
- SB 570, which establishes a mechanism to cap or constrain central assessment
- SB 571, which would exempt data centers from central assessment.
Oregon Rep. Mike McLane, R-Powell Butte, represents a broad swath of central Oregon including Crook County, which is home to Apple and Facebook data centers. At Tuesday's hearing, he testified that his region needs a fix for central assessment, even if it's one that doesn't satisfy everyone.
"This is not an area where I think perfection can be achieved," McLane said. "Let's bring certainty now and keep moving forward in a very reasonable way."
-- Mike Rogoway
mrogoway@oregonian.com
503-294-7699
@rogoway