Is West Jordan’s Discus deal a sound investment in the future or corporate welfare?

The City of West Jordan is currently negotiating an Economic Development Area (EDA) in the Southwest corner of the city to attract a large technology company to build a number of data centers within that area. The area is called the Pioneer Technology District EDA.

The deal is essentially a property tax break to the currently unnamed technology company.

Here’s the breakdown, as detailed by West Jordan officials in a recent meeting of a State Board of Education committee. If the company builds two buildings, it receives a 75% property tax break. If it builds four buildings, it then receives an 85% discount on the two new buildings’ taxes. If it builds six buildings in the final phase, then it receives a 100% break on those last two buildings’ property taxes. These thresholds apply for a whopping 20 years from the beginning of the project. After 20 years, the company would be required to pay its property taxes like other businesses.

Proponents of the EDA say the deal is about economic development. They argue that currently the annual tax revenue on the parcel on where the data center will be built is $321. Their projections say if this project is built out that the tax revenue will total out to be $33.85 million over 20 years, as their still will be taxes collected on the property until the sixth building is completed. That totals out to be around $1.69 million per year for 20 years in new revenue that wasn’t previously being collected by the taxing entities.

In the meantime, the data center owner, according to Zions Public Finance Inc. will receive more than $183 million over a 20 year period. The taxing entities involved in the proposal include: Jordan School District, which could lose out on $93,960,427 in collected property taxes; West Jordan, which could lose out on $30,777,782 in property taxes; Salt Lake County, losing $38,544,011; Salt Lake County Library, losing $9,338,616; Central Utah Water Conservancy District, losing $5,537,540; Jordan Valley Water Conservancy District, losing $5,469,175; and the South Salt Lake Mosquito Abatement District, losing $259,786.

If Project Discus, as this project is publicly called, is approved, all of these entities will be giving up potential property tax revenue to the owner of the data centers.

The Utah Taxpayers Association has long supported efforts to bring data centers to the state of Utah. The Association has supported legislation to remove sales tax on inputs for these centers in the past, as these centers are beneficial to funding our education system. The centers traditionally produce large property tax revenue, but since they employ a small number of employees they do not add a significant load of students on our education system.

Project Discus undermines that philosophy. Putting a deal in place that will eventually lead to the giving away of all of the property taxes for a period of years is not creating a benefit for the education system. To make matters worse the project uses up valuable electrical grid capacity, water, and land area that could ultimately be used for tax generating projects.

An additional issue with this proposal is the question of whether this becomes the new negotiating point for businesses that want tax increment financing. Does this deal become the new blueprint that companies will use when they want to expand in Utah but need a tax incentive to do so? It is not out of the realm of possibility that other companies will expect similar sweetheart deals what Utah is offering to bring them to the state. If approved, this will become the new floor of future requests, not only for West Jordan, but all cities, including the current prison property. After all, how can state and local schools boards say no to future requests if they approve this generous one? Except in rare instances, tax increments from state and district school property taxes should not be granted at all.

This proposal needs to go back to the drawing board. A deal that is fair to Utah’s taxpayers and to the data center company can be found but that is not what is currently on the table. If a company wants to come to Utah and be a part of the continuing expansion of Silicon Slopes with a tax incentive, then they need to be willing to have more skin in the game.

Government should not be getting in the way of business and should do whatever it can to ensure that business can succeed, but giving away the farm is a step too far.

If state and local school boards are not willing to stand up in defense of their property tax base, who will? School boards should be arguing that if there is a 75% tax increment, that 100% comes from non-school taxing entities and that only 50% comes from schools. Cities and counties in Utah are not underfunded.

The Utah Taxpayers Association urges all of the taxing entities involved in Project Discus to reject the current proposal and task the city of West Jordan to go back to the company and work towards a deal that is beneficial to the company and fair to Utah’s taxpayers and education system.



One Response to “Is West Jordan’s Discus deal a sound investment in the future or corporate welfare?”

  1. Zach Jacob says:

    I fully support the rights of the Taxpayers Association to take a stand on the issue. However, please use correct information.

    The project is to be built in three passes, if two buildings each. It is anticipated that it will take 12 years for construction to be completed. The owners will receive 75% of the property tax rebated on the first two buildings for the entire 20 years. They will receive 85% rebated on buildings 3 & 4, and 100% on the last two buildings. It is important to note that after full buildout, they will still be paying 25% of the tax on the first two buildings and 15% on the second two buildings. At no time will the project become completely property tax-free.

    Also, the way the project is presented is a false dichotomy. The choice is not whether we can collect the full amount of the tax or not. The question is whether we collect ANY additional tax or not, for if the incentives are not provided, the development will NOT occur. Yes, other development MAY occur with our without an incentive. But a bird in the hand is worth two in the bush. This deal is in the table. We can take it and make $33.8 million that will go to our communities, our schools, and will help pay for roads and infrastructure and police and fire. Or we can say “no thanks” and pray that a better deal comes along. For me, it’s a no brainer.

    Zach Jacob
    West Jordan City Council

Leave a Reply

Tax Resources