Economic and Fiscal Impacts of Sarpy County Data Centers
Date of this Version
Bureau of Business Research, 2019
Economic and Fiscal Impacts of Sarpy County Data Centers: Final Report.
Prepared for the Sarpy County Economic Development Corporation
Large data centers have been locating in Sarpy County, Nebraska over the last decade, especially in the Highway 50 region. The pace of center locations has accelerated in recent year given the ongoing construction of a large Facebook data center in the county. The number and pace of projects represents the formation of an industry cluster in Sarpy County, where data centers continue to be drawn by the competitive advantages of the Highway 50 corridor, including competitive electricity rates, a high-quality workforce, the presence of developable land in a growing urban environment, and incentive packages. The significant developments which have already occurred, and the potential for additional data center projects, suggest a need for an analysis of the economic and fiscal impact of Sarpy County data center projects.
This study examines the economic and fiscal impacts of Sarpy County data center projects during both the construction phase and during annual operations. The study considers the local impact on Sarpy County, the impact on the Omaha Metropolitan Area (Nebraska portion), and the impact on the State of Nebraska. The study also examines the net fiscal impact of data centers and compares those net impacts to an alternative economic development project for Sarpy County, using the example of a manufacturing plant.
Data on construction period impacts are presented below in Table ES.1. Impacts are presented per 10,000 square feet of data center building construction. This is done because construction activities and impacts depend on the size of the project. As seen in Table ES.1, the statewide economic impact from construction is $10.6 million and 53 job-years for each 10,000 square feet of construction. Most of this impact occurs in Sarpy County. The Sarpy County economic impact during the construction period is $9.2 million and 46 jobs for each 10,000 square feet of construction.
Table ES.2 shows the expected annual economic impact on Nebraska from the operation of the four largest Sarpy County data centers which are currently in operation or under construction. These are the Facebook, Fidelity, Travelers and Yahoo data centers. The annual economic impact on Nebraska is $522.05 million in output (business sales). Just under half of this amount, $238.16 million, is value-added, including $115.72 million in labor income each year. The employment impact is 1,899 jobs.
Table ES.3 again displays the statewide economic impact during the operations period but also displays the impact on Sarpy County and the Omaha Metropolitan Area (Nebraska portion). Most of the economic impact occurs within Sarpy County. The annual economic impact in Sarpy County is $332.10 million in output, including $66.96 million in labor income earned in 1,203 jobs. There are 526 jobs in other parts of the Omaha Metropolitan Area (Nebraska portion) in addition to the jobs in Sarpy County. Table ES.4 shows the net fiscal impact of Sarpy County data centers on Nebraska state government each year. The net fiscal impact reflects both new tax revenue due to new business activity and households in Nebraska and new expenditures for providing state public services to these business and households. New tax revenue is negative for state government during the incentive period, that is, the period when data centers receive incentives under the Nebraska Advantage program. This is because data centers can receive a tax credit for real property tax payments to local governments. There is a net fiscal loss of $10.02 million per year during the incentive period but a net fiscal gain of $3.59 per year after incentives have ended. The fiscal impact for local government is positive both during and after the incentive period, in part because data centers require a significant investment in real property (buildings) but have not pursued tax increment financing, and in part because most incentives in the Nebraska Advantage program are offered by state government. During the incentive period, there is a net fiscal gain of $3.79 million each year for local governments. After the incentive period, there is a net fiscal gain of $6.26 million each year.