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Utah County approves deal to lure mystery data center to Eagle Mountain

Tax breaks could far exceed $150 million, depending on how many buildings are built in 40 years

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Eagle Mountain City officials as well as representatives of Utah state agencies, say they can't reveal the name of the company looking to build a data center on 500 acres of "green fields" near this Utah County community due to ongoing contract talks. on

Eagle Mountain City officials as well as representatives of Utah state agencies, say they can’t reveal the name of the company looking to build a data center on 500 acres of “green fields” near this Utah County community due to ongoing contract talks. on Monday, May 21, 2018.

Scott G Winterton

PROVO — Utah County Commissioners on Tuesday gave their thumbs up to a deal to lure a data center to Eagle Mountain shrouded in secrecy — but not without first grappling with some concerns.

That included implementing a 40-year cap in the interlocal agreement that would start out with an estimated $150 million in tax breaks for the data center's first two-building phase, with taxes to be waived for up to 20 years per phase.

But the deal could include tax breaks of hundreds of millions of dollars more, depending on how many buildings the company completes over the next 40 years — with no cap on tax revenue waived or number of buildings built, the Deseret News learned Tuesday.

Theresa Foxley, president of the Economic Development Corporation of Utah, said in an interview it was too early to say how many more phases or buildings the company might build, but she did say the tax break for each phase would likely be "similar in terms of scope and scale" as the initial phase.

The "constraint," Foxley said, would be "space" — or whatever can fit on the roughly 480-acre parcel just south of the city's center.

That means if the company builds, for example, two more phases (or four more buildings) on the parcel, that could equate to $300 million more in tax breaks for 20 years each phase, on top of the initial $150 million, 20-year tax break, as long as the phases are completed in the 40-year time frame.

The deal for the mystery company — which may be one of the Fortune 100 companies Google, Apple or Facebook — still needs approval from two other tax districts, slated to vote this week: Alpine School District and the Central Utah Water Conservancy District. Eagle Mountain and Unified Fire Authority have already signed off.

Utah County's approval was also contingent on passage from the school and water districts.

Officials have declined to disclose the company's name, citing a possible competitive disadvantage.

The deal, given the code name Project Steeplechase, is estimated to bring about 30 to 50 jobs. City officials hope the project area will act as a "data center capital" with the mystery company serving as an "anchor tenant" to attract other data centers, said Rob Sant, senior analyst with Lewis Young Robertson and Burningham, the public finance group that drafted the project area projections.

Data centers have been controversial in Utah. In 2016, a West Jordan bid for a Facebook data center — code-named Project Discus — faltered after Salt Lake County Mayor Ben McAdams voiced concerns over the proposed tax incentive estimated at $250 million over 20 years for a facility that would only employ between 70 to 130.

Project Steeplechase, like West Jordan's Project Discus, is also being driven by the Governor's Office of Economic Development. Foxley on Tuesday hand-delivered the Utah County commissioners a letter from Gov. Gary Herbert in support of the project.

Utah County Commission Chairman Nathan Ivie only budged from his initial opposition to the deal after hashing out language in the contract to spell out a 40-year cap, and guarantee the company will only get its tax break after holding up its end of the deal.

"I hear a 1,000 percent return on investment — phenomenal," Ivie said, referring to Eagle Mountain's projections for the project. "I hear hundreds of millions of dollars (for infrastructure) — phenomenal. I hear better electrical grids — phenomenal for the state, all very good things," Ivie said.

"But put your money where your mouth is," Ivie continued. "This contract doesn't have a performance guarantee. Without a performance guarantee, I'm a 'no.'"

Eagle Mountain City Administrator Ifo Pili said the company would be "putting their money where their mouth is, but not necessarily their mouth," because while they couldn't commit to a set schedule for all of the project's phases on paper, it would have to invest "millions" in the infrastructure before the tax increment deal would trigger.

"We believe the agreements with sewer and water and Rocky Mountain Power hold their feet to the fire," Pili said.

But Ivie and fellow commissioners Bill Lee and Greg Graves pushed for additional language to bind the deal to end at 40 years, noting each 20-year tax increment deal could potentially trigger years later, depending on when the company starts each phase.

"In 40 years from now, who's paying to fix the roads they brought in?" Ivie questioned. "Who's paying to fix the water lines they brought in? The taxpayers are."

"I'm looking at this from a long-term perspective in the interest of my taxpayers," Ivie continued, adding that he needs a "guarantee" the company won't "pull up shop and leave before they have to pay a dime in taxes."

"I'm not saying that's what they're after, but that does happen with these things," Ivie said. "And I don't like them. I'll be blunt — I don't like them."

But Ivie said the reason he's "entertaining" the deal is because of the opportunities for the county — including the potential of increasing the county's power grid by an anticipated 48 percent. Utah County currently functions on about 1,055 megawatts of power, Lee said, while the data center would increase the grid by an estimated 500 megawatts.

A study commissioned by Eagle Mountain projected returns of 1,000 percent on the city's investment and noted the project's land, classified a greenbelt land, currently only generates $66 annually in property taxes. If the data center is built, the city estimates tax revenues would jump to nearly $840,000 for the first phase annually for 20 years.

The agreement would suspend 100 percent of taxes on the company's personal property investment and an 80 percent break real property for each 20-year phase. For the first phase, personal and real property combined is estimated to be valued at $750 million.

"One-hundred percent of personal property tax? Holy smokes, that's hard for me to chew," Lee said. "But still, the benefits that I see if this project goes forward ... I think it outweighs some of the (discomfort) I have."

During the discussion, Foxley told commissioners she was communicating with the company's officials and they were willing to make the commitments the commissioners wanted.

Eagle Mountain officials proposed including language to say taxes would no longer be waived after 2059, the 40th year of the project area, and the tax increment would be conditional upon the company completing the infrastructure as outlined in the development agreement.

Ivie, Graves and Lee then voted to support the project, on the condition the school and water district also approve the deal.

The Alpine School Board is scheduled to vote on the data center proposal during a special meeting at 8 a.m. Wednesday. The Central Utah Water Conservancy District board is scheduled to meet the same day at 1 p.m.