Yahoo! Decision to build here may attract others
State and local government leaders are betting that their aggressive efforts to capture Yahoo!’s new $150 million data center for Niagara County will convince other high-tech firms to consider Western New York, bringing investments and jobs to the struggling region.
“One of the problems we’ve had in Western New York is getting people to pay attention,” said Sen. Charles E. Schumer, D-N. Y., who was here Tuesday for the announcement of the Internet giant’s decision to locate in the Town of Lockport. “This is a beacon. The high-tech world pays attention to what Yahoo! does.”
Government officials and Yahoo! executives said the region already has a strong, educated, skilled work force, a cadre of colleges and universities, a diversity of possible sites, a fiber-optic network and appropriate infrastructure, and competitive low-cost hydropower — all of which played a role in landing Yahoo!.
“Lockport and the Greater Buffalo area have all the resources to build and run a world-class data center operation,” said David Dibble, Yahoo! executive vice president of service engineering and operations, and a Chautauqua County native.
“There are literally thousands of factors that go into running a data center operation that supports a half a billion Internet users around the world, and New York state and Greater Buffalo hit the mark on almost all of them.”
Now experts say the region has to take advantage of them, and of the cache that Yahoo! is bringing, while following through on promises officials made Tuesday to pursue other companies with the same speed and cooperation as Yahoo!.
“The Yahoo! announcement can serve as a beacon for other high-tech companies. But that depends entirely how the relevant economic development agencies capitalize on that announcement,” said Blaine Berger, president of the technology and site selection consulting firm E-Oasis in Longmont, Colo. “Sadly, most agencies do little beyond the initial announcement of a name-brand arrival and expect the press coverage alone to carry the water.”
“We have people and we have power, and we need to take advantage of those. We have these lock, stock and barrel,” said U. S. Rep. Chris Lee, RClarence. “We have to focus on the model to make sure we can bring more jobs to Western New York.”
State, local and company officials on Tuesday formally announced that Yahoo! has selected a Town of Lockport industrial park for its newest global computer hub, investing $150 million and bringing up to 125 jobs.
The Sunnyvale, Calif.-based technology firm, the world’s No. 2 search engine, will build its new East Coast regional data center on about 30 acres in the Town of Lockport Industrial Park, just west of the Delphi Corp. plant.
Yahoo! will buy the land from the Lockport Industrial Development Agency for $450,000.
Plans call for a two-phase construction project and computer equipment “fit-out,” using what Yahoo! executive Dibble called a “brand new design and engineering approach” to create an environmentally friendly, “green” facility, with about 191,000 square feet on one floor. Plans submitted to the town show the facility as a grouping of prefabricated metal pods packed with computer servers and other hardware.
The first phase will create 75 jobs in exchange for 10 megawatts of low-cost hydropower from the New York Power Authority. Construction on that portion of the project, consisting of office and data center space, is expected to begin in August, and the facility should be operational by May 2010.
The second phase, expected to start in spring 2012, would focus on the data center space and would receive 15 megawatts of power, with Yahoo! investing “tens of millions” in additional dollars and creating another 50 jobs.
The jobs will pay between $65,000 and $75,000, plus benefits, and include a variety of engineering and other technical positions, some of which are entry-level, but most of which are skilled, experienced jobs. The jobs include other functions not related to the data center, such as global help desk and highly skilled “network optimization” positions, Dibble said.
The jobs are highly subsidized by the discounted power. For every $65,000 job created, Yahoo! would get $330,000 to $810,000 in power discounts over the life of the subsidy, depending on the market price of the energy and the program’s duration, according to Buffalo Niagara Enterprise and Buffalo News calculations. That’s $33,000 to $54,000 per job per year.
About 250 short-term construction jobs will also be created, according to the Lockport IDA.
No other state aid will be provided. But the Lockport IDA is giving Yahoo! a 20-year abatement of county and state sales taxes on construction materials and equipment, and a 20-year phased payment-in-lieu-of-taxes (PILOT) to replace property taxes. The sales tax break saves $12 million. On the PILOT, Yahoo! will pay nothing for the first 10 years, then increase payments by 20 percent every two years until it reaches full value in year 18.
Both the IDA and the town Planning Board unanimously approved the project Tuesday afternoon following separate public hearings.
North Carolina also paid heavily in the form of property tax refunds over 30 years to capture Google’s $600 million data center in 2007 for the manufacturing city of Lenoir.
As with Yahoo!, the Google facility yielded just over 100 jobs. The facility is environmentally friendly, doesn’t generate significant trash and doesn’t require more policing. The property is worth three times what it was.
“It has been a tremendous advantage to the city of Lenoir,” said Patricia Kaye Reynolds, economic development director for the city. “If people were expecting this area to become a new Silicon Valley, it certainly isn’t that. But it’s a whole new type of diverse industry for our area, and that’s opened some horizons, too.”
Dibble and others stressed that it wasn’t just the incentives that won the day here but also other factors. Even the weather helped. Western New York’s cooler temperatures means Yahoo! won’t spend as much to cool the facility. “There’s a sliver lining in every snow cloud,” Schumer joked.
The announcement culminated a flurry of activity in recent weeks as state and local officials teamed up in what they called “record time” to land Yahoo! after talks began in early May.
Efforts included a meeting with Yahoo! co-founder David Philo, as well as personal telephone calls and letters from Schumer and Gov. David A. Paterson to Yahoo! CEO Carol Bartz. State leaders drew in the Power Authority and negotiated with Verizon Communications, while local officials from different towns worked together.
“This type of collaboration is absolutely a mandate,” said Empire State Development Corp. Chairman and CEO Dennis Mullen. “That will give us the competitive advantage to move forward on a national stage.”
Western New York beat out competing offers and incentives from Virginia, Nebraska, Ohio, Pennsylvania and Illinois. “Today, all our hard work has paid off,” Paterson said, speaking by video conference from Albany. “Western New York has all the resources to thrive in the new economy.”
But what officials are really counting on is the spinoff benefit down the road. “Word is getting out there,” Schumer said. “If we all work together . . . we can get things done. We can swoop in like other states do and get them to come here.”
While New York “doesn’t have a good reputation within the United States” because of the cost of doing business in the state, the Yahoo! deal could boost its already strong image globally, especially in Europe, said Robert E. DeRocker, senior counselor for Development Counsellors International, a New York consulting firm.
“I think this is a home run, if not a grand slam,” he said. “This is exactly the direction that New York state and Western New York want to go in. This is champagne time and also time to build on it.”
