Tuesday, June 7, 2016

Switch Pyramid Agreement

That's Switch the company, the West Michigan pyramid they're buying, and the tax agreement made with Michigan governments. (Not to be confused with willingness to swap geometric objects.) The pyramid in question is the old Steelcase building in Gaines Township, MI.
Late last year, there was some question as to whether the pyramid would be sold at all. There was a legal challenge from a non-profit education group seeking to block the sale, but that was denied by a judge back in January. That group could still try to get some money out of Steelcase (though that seems unlikely) but the actual building sale will go ahead regardless.

There was also a matter of taxes - Switch wanted tax breaks before they'd agree to move business into Michigan. Their stance was basically this: if Michigan wouldn't play along, there are other states that would. Getting this done meant that our state government would have to set ideology aside in favor of pragmatism. That's a tall order for our famously dysfunctional state government, but they managed it. The state legislature passed bills in December to grant the tax breaks, and they were signed by the governor. Those bills even included a bit of forward thinking to make sure promises were kept: the data center industry has to create 400 new jobs in Michigan by 2022 and 1000 new jobs by 2026, or the tax breaks will end. Nothing is perfect, but as government action goes, this seems to be properly crafted and well-thought-out. Nice to be pleasantly surprised by something out of our state government, for a change.

I was reminded of all this by a news story recently about Switch taking steps to have their data center declared a "Renaissance Zone". Those zones are areas designated for various kinds of tax breaks by the state. Sometimes they apply for everyone in the area, but more commonly just for a specific project. This particular Renaissance Zone would allow Switch to avoid paying taxes on the equipment they purchase for the new data center, which would easily go above the million dollar mark.

Some of that money would normally go to local governments to provide services to the area, so the exemption isn't too popular with them. Approval from Kent County and Gaines Township is needed, though, so part of the whole package is a "payment in lieu of taxes" from Switch to the local governments. It's a lot less than the full tax bill would have been, of course, but it means the local governments still get support for local services.

All in all, I'd say this agreement is a good example of how I'd like to see government make things happen. It's not perfect, but it takes into account the reality of the situation for everyone involved and makes a reasonable compromise. And it includes some metrics to make sure promises are kept. Now, if some of that thinking could just be applied to paying for infrastructure maintenance...

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