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Midco data centre gets tax break prior to regulatory change

Tue 10 Jan 2017

Midcontinental Communications (Midco), a regional provider of cable, internet and phone services for the Midwest, has received a substantial tax alleviation for its proposed Fargo, North Dakota data center.

However, regulatory changes are currently under review by the city’s Tax Exempt Review Committee that would put a higher emphasis on the number of jobs created by capital investments, making it more difficult for projects like data centers to get tax breaks in the future.

Midco was granted a five year, $500,000 USD tax exemption for its proposed data center, which is set to begin construction this spring and open in early 2018. The proposed Tier-3 facility has a budget of $12 million USD and when complete, will offer over 16,000 square feet of data center space. However, it will only require two or three full-time employees to operate.

Opponents to massive tax incentives like these that have been provided to data center projects say that not enough long-term jobs are created to warrant the types of tax breaks that have been granted.

Similar debates have broken out across the nation, including Hillsboro, Oregon. Despite the large capital expenditure required to build a data center, once construction is completed critics argue that long-term tax incentives are an unnecessary burden on local tax payers, as very few employees are required to run a data center.

Midco’s other location received a 100% property tax abatement when the facility was built in 2008, and received a Renaissance Zone incentive for a $1.9 million addition in 2015.

The company has also applied for tax incentives from the state of North Dakota for the proposed data center facility, but has not yet received a determination.

Changes to the existing tax policy for the city are expected to be presented to the committee for approval as soon as next week. One of the major changes proposed will weigh the number of jobs to be created more heavily when making a decision about whether or not a tax break will be granted.

Currently, the total amount of tax exemptions for the city of Fargo have been appraised at $200 million according to the city’s assessment department. City Commissioner Tony Gehrig, an outspoken opponent to tax incentives for businesses and the only person to vote against the Midco tax exemption, says that incentives are increasing the taxes of city residents directly.

An estimate by the City Assessor’s office shows that up to 7% of resident tax bills are applied to support tax incentives such as those granted to the Midco data center.

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