Ohio Friends Facebook With $37 Million in Tax Incentives

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By Alex Ebert

Facebook Inc. and Ohio have announced that the social networking giant was the secretive company that received $37 million in tax credits from Ohio to build a data center outside Columbus.

At a news conference Aug. 15, Facebook representatives and Gov. John Kasich (R) announced Facebook is behind the $750 million investment in the town of New Albany, which houses a data center for several Fortune 500 companies, including Amazon.com Inc.

Kasich said the development was indicative of the state’s push to “diversify” the businesses that call the Buckeye State “home.” He also said landing large projects like this is key to the state’s fiscal future.

“If we don’t get the business leaders, we’re dead,” he said to a room of press and state legislators.

For weeks, state and local officials refused to say who was actually behind Sidecat LLC, the company that the state was courting to invest in the New Albany data center. The company was created in spring 2017. Despite the lack of public recognition, the state had promised Sidecat and the development a 40-year sales and use tax exemption, and the city also passed resolutions supporting the development.

Conservative and liberal tax reform advocates criticized the state’s failure to name the recipient of the incentives. But economic developers said confidentiality is part of a necessary process so the company can protect its business plans and the state can analyze the company’s financials to judge whether the incentives will pay off.

Confidentiality Important

A Facebook representative, as well as local and state officials, confirmed that a deal has been in the works for three to four years—and all said confidentiality was important.

Rachel Peterson, director of data center strategy and development at Facebook, told Bloomberg BNA that confidentiality behind the Sidecat name helped the project move faster and was necessary to help the company develop its strategy without informing competitors.

“Confidentiality is important because it helps create long-term relationships with our clients,” John Minor, president and chief investment officer of the state’s private-nonprofit development group JobsOhio, told Bloomberg BNA. Sometimes that requires keeping the company name secret, he said.

The name was also kept from local voters. New Albany Mayor Sloan Spalding told Bloomberg BNA that the deal was discussed in executive session so that information could be kept confidential per the terms of nondisclosure agreements.

Spalding said the city tries to be as transparent as possible, but that he understands concerns over secretive deals and that officials should be kept accountable.

“If the people start to believe the incentives aren’t working out, then they can vote in new leaders,” he said.

Future Expansion?

But the center, and the industrial park where it sits, has been a boon to the community. Roughly 80 percent of the city’s budget comes from business taxes in the industrial park.

Despite a 30-year property tax abatement deal from the city, estimates say the Facebook data center will bring in $1.4 million to the city annually by 2023.

Peterson also said that Facebook bought a larger plot than necessary, and there may be expansion plans for additional centers in the future. The New Albany center will be Facebook’s 10th data center and will employ about 100 people when fully running.

To contact the reporter on this story: Alex Ebert in Columbus, Ohio at aebert@bna.com

To contact the editor responsible for this story: Jennifer McLoughlin at jmcloughlin@bna.com

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