Tar Heel Tattler - March 2007

Mayor: Critics need to ogle Google deal
By Arthur O. Murray

Promising a company incentives for creating 210 jobs might seem a no-brainer — as in state and local officials must have no brains to cut a deal that gives Google Inc. $260 million over 30 years for coming to Lenoir. After all, that’s more than $1 million per job.

While it’s unquestionably a good deal for the Mountain View, Calif.-based Internet search engine, a closer look at the numbers shows it also will make money for the state, city and Caldwell County. And they don’t have to spend $600 million to build and equip a server farm — buildings housing massive banks of computers — to earn it.

The state’s portion, nearly $100 million, features a $4.8 million Job Development Investment Grant. Google doesn’t get the money until it creates and keeps the jobs. The state also is giving sales-tax breaks — foregoing money it wouldn’t collect if the company didn’t come. All told, the state anticipates it will get about $37.1 million more from Google than it will give up.

Mayor David Barlow says the city and county will be net gainers, despite agreeing to forgive all of Google’s local business-property and 80% of its real-estate taxes for 30 years. The land on which Google will build is valued at about $6.5 million, Barlow says, which generates about $35,100 apiece for the city and county. They have identical property-tax rates.

As a server farm, the property’s tax value would skyrocket, though how high is open to debate. Even if Google’s $600 million investment increases it only to $50 million, the city’s and the county’s annual take, at the current rate, would increase to $54,000 each. And that’s with Google being able to slice 80% off. Then there are the hundreds of thousands of dollars Lenoir will glean from utility franchise fees, the mayor says. Massive amounts of electricity will be needed to run and cool all those computers.

Nobody expects Google to measure up to furniture manufacturing, mainstay of the local economy before imports throttled the industry. But its wages will average about $48,300 a year, nearly 77% above the county average. And even if, as some contend, Google’s technology becomes outmoded in 10 years, forcing the company to shut its server farm, it would still have to pay the 20% levy on the property and its improvements. The tax break won’t carry over if the property is sold, the mayor says.

The incentives sound crazy, Barlow admits, but there’s method to the madness. “The larger the incentives are, the better off our local community will be because the more taxes [Google] will pay.”