Preliminary NC House vote favors $1 billion Apple server farm

[AppleInsider]

North Carolina's House on Tuesday took the first step towards approving changes to the state's corporate tax laws that some local lawmakers believe will help recruit Apple to one of its communities where the company has shown interest in building a sprawling $1 billion data center.

The House tentatively voted 81-31 in favor of the bill which offers to give a single company a tax break of up to $46 million over the next 10 years, assuming that company reaches its $1 billion investment target within nine years, the Associated Press is reporting.

That company, which the media outlet identified as Apple over the weekend, would qualify only if it positions its project in one of North Carolina's poorest counties, provides health insurance, meets a wage standard, and foregoes other state grants or tax breaks.

The preliminary vote followed heated discussion amongst lawmakers, some of which are adamantly opposed to rewriting the law just because a big business dangles the promise of more jobs and money for local communities.

House Minority Leader Rep. Paul Stam said local lawmaker's were being suckered by corporations that he believes would be just as likely to set up shop North Carolina without any special concessions. He pointed to earlier efforts by the state where it overbid by offering Dell a $280 million tax break and Google $260 million in relief to build big facilities locally.

"What this bill says is if somebody brings us enough money we'll change the law for them," added Rep. Johnathan Rhyne. "This kind of legislation is unseemly at a minimum and in a worst-case scenario amounts to selling ourselves."

On the other hand, proponents of the bill like Rep. Pryor Gibson signaled a state of urgency and motioned towards North Carolina's double-digit unemployment rate, which last month was as high as 16% in four rural counties. "We want the jobs," he said. "As long as we have to do this, let's try to do this the best way we can."

State official have said that Catawba and Cleveland counties are potential sites for the Apple server farm, which would create hundreds of construction jobs while its being built during the first year and employ roughly 100 full-time workers when it initially opens for business.

North Carolina's House is expected to debate the issue once again before waging a final vote on the matter sometime later today.

[ View this article at AppleInsider.com ]

[hmurchison]

That's a whole lot of Xserves

[Maestro64]

Do you think apple will do business in a state that just told the competition what apple might be up to.

[Maestro64]

Originally Posted by hmurchison

That's a whole lot of Xserves

I wonder is Apple is its own largest customer for Xserves.... It like the google model build your own servers so the competition has not idea how big your servers farms are.

[anantksundaram]

If we assume, reasonably, that Apple would not invest $1B unless it saves at least $1B in present value after-tax, we are talking about (I'll spare you my assumptions on cost of capital, growth rates etc) somewhere between $100M and $130M in annual after-tax income.

In that scheme of things, for them to submit their investment decision to the vagaries of a political vote for a $4.6M annual tax saving seems somewhat silly.

[hmurchison]

I'd love to have 4.6 million dollars.

[paxman]

Originally Posted by hmurchison

I'd love to have 4.6 million dollars.

You're not alone. I'll split it with you and won't mention it to anybody.

[shubidua]

Originally Posted by anantksundaram

If we assume, reasonably, that Apple would not invest $1B unless it saves at least $1B in present value after-tax, we are talking about (I'll spare you my assumptions on cost of capital, growth rates etc) somewhere between $100M and $130M in annual after-tax income.

In that scheme of things, for them to submit their investment decision to the vagaries of a political vote for a $4.6M annual tax saving seems somewhat silly.

That bothers me too. Why all that fuzz for such a "small" gain ? I suppose there are other things in that location making it attractive for Apple.

[Roos24]

Originally Posted by AppleInsider

...while its being built...

[ View this article at AppleInsider.com ]

Guys, please check your articles for spelling errors before you post them. I know, it's just a small thing but every error makes a story less readable. Sadly, too many of the articles on this site contain spelling errors.

So it should be "...while it's being built..."

(From someone whose native language was not English ;-))

[Lisamacnewton]

Not only would Apple frown at the "local community" giving away their secrets, but do those lawmakers REALLY THINK that Apple will employ a lot of the local gentry? There won't be nearly the amount of jobs available that N.C. legislators wish for. How many of those poor folks have a BS or MS in Engineering or Computer Science or Electronics? Sorry to spew the negatives, but it's the cold hard truth.

[hmurchison]

Originally Posted by Lisamacnewton

Not only would Apple frown at the "local community" giving away their secrets, but do those lawmakers REALLY THINK that Apple will employ a lot of the local gentry? There won't be nearly the amount of jobs available that N.C. legislators wish for. How many of those poor folks have a BS or MS in Engineering or Computer Science or Electronics? Sorry to spew the negatives, but it's the cold hard truth.

True but in earnest it's a "cap in the feather" for NC and further entrenches NC as the "Silicon Valley" of the South.

http://www.rtp.org/main/index.php?pid=178&sec=1

and

http://en.wikipedia.org/wiki/Researc...ajor_employers

I hope people haven't automatically assumed that North Cackalackey was all bumpkins and brutes.

[jmay]

Originally Posted by hmurchison

True but in earnest it's a "cap in the feather" for NC and further entrenches NC as the "Silicon Valley" of the South.

http://www.rtp.org/main/index.php?pid=178&sec=1

and

http://en.wikipedia.org/wiki/Researc...ajor_employers

I hope people haven't automatically assumed that North Cackalackey was all bumpkins and brutes.

That's North Cackalacky - not North CackalackEy. We can spell too

[dapple]

Dell got $280 million and Google got $260 million, but Apple getting $46 million in tax breaks only if it invests $1 billion over the next 9 years in either or both of these North Carolina counties is controversial?

How much did Dell and Google invest in North Carolina to get their tax breaks?

[hmurchison]

Originally Posted by jmay

That's North Cackalacky - not North CackalackEy. We can spell too

OK ..who put that "e" in theree. I neever have a problem with stray "e" geeting into my postings.

My apologies sir

[quinney]

Originally Posted by anantksundaram

If we assume, reasonably, that Apple would not invest $1B unless it saves at least $1B in present value after-tax, we are talking about (I'll spare you my assumptions on cost of capital, growth rates etc) somewhere between $100M and $130M in annual after-tax income.

In that scheme of things, for them to submit their investment decision to the vagaries of a political vote for a $4.6M annual tax saving seems somewhat silly.

It could be, like that one lawmaker said, that Apple plans to build there, tax breaks or not. In that case $4.6M is better than a poke in the eye with a sharp stick. I doubt if it is costing Apple much, if anything, for N.C. legislators to pursue this tax break. The return
of $4.6M for no investment would be good ROI, wouldn't it?

[solipsism]

Originally Posted by shubidua

That bothers me too. Why all that fuzz for such a "small" gain ? I suppose there are other things in that location making it attractive for Apple.

The tax break may just be the icing on the cake. From what I read in the previous thread the land and construction will be relatively inexpensive while being close to a major power and data lines. This might just be Apple trying to squeeze just a little more cost savings despite having pretty much made up their mind.

[vinea]

Originally Posted by anantksundaram

If we assume, reasonably, that Apple would not invest $1B unless it saves at least $1B in present value after-tax, we are talking about (I'll spare you my assumptions on cost of capital, growth rates etc) somewhere between $100M and $130M in annual after-tax income.

In that scheme of things, for them to submit their investment decision to the vagaries of a political vote for a $4.6M annual tax saving seems somewhat silly.

This is incorrect. Apple doesn't need to save $1B somewhere as long as the revenue stream justifies the expense.

The $46M is to make sure it doesn't get built somewhere else.

FYI: Dell only invested $100M but generated 700-1500 jobs. The data center will be more capital intensive but generate fewer jobs than a manufacturing center.

I would have looked at a cold climate area for a data center but perhaps the offsetting costs of running the pipe in there is more than the energy costs...maybe I'd a picked Washington State and hooked to the IXP in seattle.

That's probably worth $46M for NC to avoid and possibly worth it for Apple to put their east coast data center in NC vs say...VA, NY or MA.