Media needs to learn how to calculate tax breaks for data centers

I saw this article on Salon about technology companies getting subsidies for building things like data centers in a city. Apple's data center in Ohio is the example in this article.

For agreeing to build a data center in Waukee, Apple received $213 million in tax breaks for 50 permanent jobs — that’s $4.3 million per worker — and even bigger subsidies are on offer for factories. Tesla received $1.25 billion in assistance to build its gigafactory in Nevada, and Foxconn is poised to get a $3 billion incentive for its proposed Wisconsin factory, despite a legislative analysis showing the state won’t break even for at least 25 years.

Having worked with tax teams who negotiate details like property tax let's review what the media doesn't cover. What is property tax?

The property tax is the main tax supporting local education, police/fire protection, local governments, some free medical services and most of other local infrastructure.

Let's do a simple number 1% property tax on a small data center. :) $250 million. So the annual tax bill is $2.5 mil. One of the main use of the property tax is for education. With 50 employees that is $50,000 per employee. What is out of whack is the assumption that the cost of the property equates to a tax burden. This leads to a discussion of what is reasonable amount of property tax to support 50 employees.

Let's jump to sales tax. It is easy for a $250 million data center spend $250 million on IT equipment that it replaces every 3 years. Let's use a low sales tax rate of 5% for $12.5 million sales tax. Almost every capital equipment intensive industry gets exemptions on sales tax to equip a facility. Yet, IT equipment all too often is not considered capital equipment to be exempt from sales tax and special legislation is required.

If there was no data center in an area there would be no property and sales tax on a data center. With a data center with 50 people and $250million of IT equipment in $250 million building what are fair taxes?  A $213 million tax break enrages people, but without these breaks there is no way a data center would be built. What few cover is the incremental taxes that do come in from a data center. Property taxes will be paid and sales taxes on other items.

This is why the government's are willing to change tax structures for data centers in their location. To be fair based on the impact the data center with its few employees.

Amazon iterates its physical bookstore with 10th opening in San Jose and Bellevue

When I joined Microsoft there were many millionaires who had the idea of retiring and opening a bookstore with coffee shop. Their names were not Jeff Bezos or Howard Schultz. Luckily I don't know of anyone who followed through on their dream which would have turned into a nightmare competing against Amazon and Starbucks.

Amazon is reinventing retail and on Aug 24th it opened its 10th stores in San Jose and Bellevue. I have been to Amazon bookstore in University Village (Seattle) and I want to go to the Bellevue store in Bellevue Square.  Next week I should have time to go to the San Jose store. Why go to the physical store? Because Amazon is using data to reinvent retail and I curious to see the spaces.

San Francisco Chronicle covered the San Jose store as an irritant to the local independent book sellers.

“I think it’s ironic — Amazon has been so predatory to brick-and-mortars in general,” said Calvin Crosby, executive director of the Northern California Independent Booksellers Association.

“There’s always a new way for Amazon to take a percentage of our sales,” he said.

Crosby has visited Amazon Books’ New York City location, and said he wasn’t impressed, calling it “a kiosk” and “showroom-y.” He said the growth of Amazon bookstores detracts from local businesses, which offer a deeper experience for customers. “You get much more than a book put in your hand when you go to an independent bookstore.”

Typically, a small bookstore would stock 8,000 to 10,000 titles, substantially more than San Jose’s Amazon Books, he said.

The South Bay has a rich history of independent bookstores, Crosby said. Books Inc., which has locations around the Bay Area, traces its history back to the California Gold Rush. Family bookstore Hicklebee’s has been in San Jose since 1979, and Kepler’s Books in Menlo Park opened more than 60 years ago.

I like Geekwire's article which focuses on how the bookstore concept has evolved.

“We got a lot of feedback from customers saying they were having a hard time, both because the aisles weren’t as wide, but also because it was just harder to see down to the bottom shelf,” Garavaglia said.

The Bellevue store is smaller than the University Village one — 4,600 square feet versus 5,500 — but the more spacious aisles and a bigger area dedicated to demos of Amazon devices like the Echo and Echo Show, make the space feel bigger than it is.

Garavaglia calls the stores a “mecca of discovery” that take advantage of 20-plus years of selling books online. It uses data from customer purchases, as well nearly endless reviews, to decide which books to put in stores. What’s changed is the variety of ways Amazon has instituted to display books.

For example, in Bellevue, a technology hub all its own, the store has an endcap related to coding books. Customers at other stores have told Amazon they want more subsets of larger categories, hence the presence of a “historical fiction” section at the new store.

“We keep trying different features that allow us to bring that data to facilitate discovery for our customers,” Garavaglia said.

Equinix expands its use of Fuel Cells in CA and NY

Equinix has a press release on its use of Bloom Energy fuel cells.

12 Additional North American Data Centers to be Powered with State of the Art Fuel Cell Technology

REDWOOD CITY, Calif., Aug. 16, 2017 /PRNewswire/ — Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today announced the signing of a 15-year Power Purchase Agreement (PPA) between a subsidiary of Southern Company and Equinix in which Bloom Energy fuel cells will be installed at 12 International Business ExchangeTM (IBX®) data centers in the U.S. The project will provide a total capacity of more than 37 megawatts of power with a phased installation that begins in late 2017 through 2019.

What is a key fact is where the Fuel Cells are going. California and New York.  Where the price of power is high and the rebate incentives work out.  If you are looking a Fuel Cells CA and NY are some of the areas where the numbers work out.

The new project will install fuel cells at seven Equinix IBX data centers in the Silicon Valley (SV1, SV2, SV3, SV4, SV5, SV6, SV10), three in the New York area (NY2, NY4, NY5) and two in the Los Angeles area (LA3, LA4). It builds on the pilot program at Equinix’s Silicon Valley SV5 IBX data center that began in 2015.

7x24 Exchange Fall 2017, Oct 15-18 Registration is Open

Registration is open for 7x24 Exchange Fall 2017 conference.

For those of you have not attended a 7x24 Exchange conference you can check out James Coe's keynote from the spring conference where he presents a perspective on how the data center industry has changed over the years and what the future will be like.

Keynote: The Future of the Enterprise Data Center
James Coe, PD, RCDD
Senior Principal, Director of Critical Facilities, Syska Hennessy Group

7x24 Exchange Spring 2017 Keynote - Creative Problem Solving The Mars Lander Challenge

It has been 5 years since Curiosity landed on Mars and NASA is celebrating sharing videos like this one.

For the Spring 2017 7x24 Exchange Conference Adam Steltzner presented

Conference Keynote

The Right Kind of Crazy: A True Story of Teamwork, Leadership and High Stakes Innovation

I've been staring at my notes and thinking about the keynote for months and it just wasn't coming together. Adam's keynote was one of the highest rated keynotes given and I agree. Part of the reason why the presentation worked is because Adam was not super polished the way some presenters can be. He came across as an engineer who had a passion to solve the tough problem of landing a one ton vehicle on Mars.

After months of trying to write. Yes I kept on trying for months, but it didn't work and the words didn't flow. The story Adam was telling is of being creative in problem solving. How to land Curiosity on the Mars surface. What the team knew is trying to use what had worked in the past was not going to work for a 900kg payload.

Going over my notes here are some pointsAdam made which is why his presentation was so popular.

Adam described leadership as a service. In comparison to a project management approach which doesn't necessarily focus on leadership skills to rally the team to solve a difficult problem.

Adam would wake 2:30a. Run the risks is his head. Then figure out how it impacts the project.

Much of the data came from failure analysis of past efforts which may not of compromised past missions, but could be catastrophic for Curiosity.

To innovate and rise to the challenge in a mission critical environment Adam stressed to "separate the ideas from the people who hold them." Getting his team to accept the intense review of ideas was key to be creative.

Why did it all work?

Adam switched to "Hold on to the doubt!" Constantly accept that they may not be right.

"Planning is everything. The plan means nothing."

"The process of planning is preparation for the future."

"Falling in love with the plan bypasses the truth."

"Why do we do this?" Adam says this while staring at the image of Curiosity on Mars.

Adam's keynote is one of those that sticks with you and I know others will refer to his presentation. These are the type of keynotes that have lasting value and help all of us be better.