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Friday, 18 December 2015 09:50

Snyder to examine fiscal impact of data center legislation

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Despite a supportive state legislature and much excitement from the West Michigan area that Las Vegas-based Switch Communications Group LLC could soon move into the Steelcase Pyramid building, Gov. Rick Snyder says he needs time to examine the legislation closely.

The reason: The exemption of sales and use taxes for Switch, its colocated clients and other qualified data centers would result in an annual decline in state revenue of about $13 million. That would require “the legislature to annually appropriate sufficient funds from the state’s General Fund to the State School Aid Fund to fully compensate for any loss of revenue to the SAF from the tax exemptions,” according to a Dec. 16 report from the House Fiscal Agency.

Moreover, it’s nearly impossible to estimate the full impact the legislation could have because the agency can’t predict the amount of new investment qualifying data centers would make should the legislation pass, deepening the impact to the state’s general fund, according to the House report.

Also, the $13 million estimate does not take into account qualifying companies co-locating their equipment in Michigan data centers, such as the one proposed by Switch.

Snyder told MiBiz that one of his top priorities as he reviews the legislation will be ensuring fiscal responsibility and sound tax policy.

While the legislation provides no upfront incentives to the company or to existing data centers, several sources have compared the tax abatements to the the Engler- and Granholm-era MEGA tax credits that have created general fund shortfalls as recently as this year.

Supporters of the legislation say that without making these kinds of changes to the state’s tax policy — 17 other states have policies in place for the growing data center industry — companies like Switch won’t locate here.

Switch executives have been vocal in House and Senate testimony that they would not come to Michigan without the changes because their clients were unreceptive to the state’s unfavorable tax climate.

Read 1365 times Last modified on Friday, 18 December 2015 11:37