Iowa to give Microsoft millions in exchange for 86 jobs4/24/2014
DES MOINES, Iowa— The Iowa Economic Development Authority has unmasked Project Alluvion, awarding $18 million in sales tax rebates for Microsoft to build a data center in West Des Moines.
Project Alluvion, you might recall, is the code name the city of West Des Moines used for a mystery company promising to create 86 jobs in exchange for funding help from the city and the state.
The West Des Moines City Council on March 24 approved asking the IEDA to award Project Alluvion $18 million in sales tax rebates, the maximum amount possible under the IEDA’s High Quality Jobs Program.
Neither the city nor the IEDA questioned why Microsoft, which had $24.5 billion in revenue and $8 billion in profits in the most recent fiscal quarter, needed taxpayers’ support to build its data center.
By the time the new data center opens for business, Microsoft will have received from the state and the city more than $418,000 for each of the 86 jobs it says it will create.
That’s not surprising, according to Iowa State University economist David Swenson.
“Starting back at the economic collapse in the 1980s, a belief has grown in Iowa that the free market won’t function here on its own,” Swenson told Iowa Watchdog, “that the market requires the helpful hand of government at all levels.”
There’s a certain irony to Microsoft receiving its state tax rebates as part of the High Quality Jobs Program, according to Swenson.
“Data centers are notoriously poor job creators. When business increases at the center, it doesn’t add new employees. It adds new servers instead,” Swenson said.
“That’s why those companies and their supporters don’t stress the number of jobs created by data centers. They stress the size of the investment instead.”
Last year, the state awarded Microsoft more than $20 million in tax incentives to expand a smaller data center in West Des Moines. In that case, the company only promised to add 29 jobs.
According to the information Microsoft provided to the IEDA, the company will invest $1.1 billion in a new data center that will generate an extra $8 million in property taxes, according to city estimates.
West Des Moines has pledged to spend $18 million on infrastructure improvements for the data center, paid for through tax increment financing. Any increase in the property taxes on the property initially will be used to pay off the bonds the city will issue to pay for construction costs.