Google gives up 2008 incentives

Caldwell and the City of Lenoir will receive $2 million in unanticipated tax revenue this summer because Google has delayed its requests for tax rebates. However, the windfall will be a one-time boost as the Internet search and applications giant is expected to cash in its incentives beginning next year.

Also, Google has not signed the Community Economic Development Agreement to receive payments as part of the North Carolina Jobs Development Investment Grant (JDIG). The potential $4.76 million agreement - which was approved in December 2006 by the state's Economic Investment Committee that included N.C. Secretary of Commerce Jim Fain - is tied to specified job creation and investment targets.

The extra money for both the county and Lenoir is based on the 30-year economic incentives Google received to build its data center on 215 acres of property in Lenoir between Harrisburg Road and Virginia Street off Morganton Boulevard. The incentives include an 80-percent refund of real estate property taxes and a 100-percent rebate of business property taxes for 30 years. As part of the agreement, Google has the option to stipulate when that period begins.

With construction of the second building on the data center campus in full swing, it might make more economic sense to wait until the massive “server farm” is completed in order to maximize the dollar value of the tax benefits.

“We are constantly evaluating our agreements to ensure our decisions benefit both the local communities and Google,” said Matt Dunne, Google's community affairs consultant. “We decided earlier that we will not seek partial refunds on property taxes that we will pay in 2008. At this point, we do plan to seek partial refunds of 2009 property taxes.”

Based on tax records and estimates from both county and Lenoir officials, Caldwell County is set to receive approximately $1.13 million and Lenoir $929,000 from Google in 2008, which is listed as Tapaha Dynamics on the tax books. Tapaha Dynamics is the name Google used to purchase parcels of property for the data center through the Caldwell County Economic Development Commission in 2006.

Though pleased to have the extra money, Caldwell County interim County Manager Bobby White has raised a yellow flag of caution.

“I'm working on the budget message to deliver to the county commissioners Monday,” White said. “(The extra dollars) obviously would be of great benefit to the county. But next year it could not be there to that scope.”

Lenoir City Manager Lane Bailey said he is taking a cautious approach in spending the additional revenue.

“One of the things I have done as far as reoccurring items is pretend like this Google money doesn't exist,” Bailey said. “We'll be using the Google funds to obtain some capital items. We think it would be a huge mistake to use (the money) if it's not going to be there next year.”

Bailey added that he is looking to use the money to cover current Lenoir Public Works and Lenoir Parks and Recreation needs.

As of Jan. 1, 2008, the county lists Tapaha Dynamics with $53,889,600 in real estate property at 80 percent completion, while that the total of business property, termed construction in progress, is $118.2 million. With the development of the Google site expected to continue throughout the year, along with the county conducting its four-year revaluation to take effect in 2009, the present $172 million project could begin approaching Google's initial $600 million investment target.

Aside from local incentives, Google also received a sales-tax exemption on electrical power usage. The company also negotiated an undisclosed separate deal with Lenoir for water rates and consumption.

Meanwhile, Google has not opted to utilize the JDIG grant that company and state officials lobbied hard to receive. The resolution approving the incentive was passed three weeks before Google officially announced its intention to locate in Lenoir.

Unlike the deals struck with the county and Lenoir, the JDIG specified that Google must have created 19 jobs paying an average annual salary of $43,479 per year in 2007 to receive a $51,000 payment from the state. The jobs total increases to 65 this year, 112 in 2009 and 168 in 2010. Also, the grant says Google must invest at least $240 million toward the project by the end of this year and $480 million by Dec. 31, 2010.

The grant proposal also stipulates that if the company misses the specified targets during two consecutive years, the deal is terminated.

Furthermore, the JDIG does not provide wiggle room as to when the incentives period begins and ends. The incentive was to take effect this year and last through 2018.

“They haven't signed the agreement, and they aren't available for payment until they do,” N.C. Commerce Department spokeswoman Deborah Barnes said. “It still has to be signed for it to go into effect.”

In a statement concerning Google's non-participation in the state incentive, Dunn said, “We are still in the process of evaluating the JDIG agreement.”

Dunne did reaffirm Google's initial job estimate commitment once the project is completed. He also stressed the company's goal of seeking employees who are from the area.

“Google intends to hire approximately 200 people over a five-year period at the Lenoir data center,” he said. “We are looking to hire as many people from the local area as possible and continue to work with Caldwell Community College and Technical Institute on a program - supported by other businesses as well - that retrains interested members of the community in IT skills.”

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