Lawmakers OK tax breaks for $5 billion Pyramid project

Posted at 11:05 PM, Dec 15, 2015
and last updated 2015-12-15 23:05:19-05

LANSING, Mich. — A major Internet data center developer will expand into Michigan under tax breaks approved by lawmakers and expected to be signed into law. The legislation passed late Tuesday exempts Las Vegas-based Switch and its clients from paying sales or use taxes on equipment at a planned mega-data center campus at the former Steelcase Pyramid in Gaines Township.

The tax breaks also will be available to existing Michigan data centers.

The bills passed included added amendments requiring the industry as a whole must add 400 jobs by 2022 and a total of 1,000 jobs by 2026 for the incentives to continue.

Switch says it will make Michigan the site of its first eastern U.S. facility, contingent on tax breaks like those 22 other states provide.

The $5 billion project is billed as a way to land jobs and "co-located" businesses that outsource data functions.

The company said it would  only make the investment in West Michigan if the state passed the tax breaks by the end of the year.

Even before final approval Tuesday evening, Switch issued the following statement thanking lawmakers for their efforts:

“We are grateful to Republican and Democratic leadership in the Michigan Legislature, Gov. Rick Snyder and Lt. Gov. Brian Calley, Birgit Klohs and The Right Place in Grand Rapids, the Grand Rapids Area Chamber, the Detroit Regional Chamber and others who worked together to make Michigan’s tax policies competitive and attractive to data centers and our clients around the nation and world. We look forward to working in partnership with Michigan to attract the largest companies in the world to the Switch ecosystem here in the Great Lakes State.”

Critics like the Michigan Chamber of Commerce opposed the bills over worries they too closely mirrored others that supported tax credits for movie companies, which had come under fire for not providing the promised return on investment.

"We don't disagree that Switch might be a magnet, but is it a magnet for actual human beings or is it a magnet for tax-free equipment?" said Tricia Kinley, spokesperson for the Chamber, during testimony on the bills.

Rep. Ken Yonker, R-Caledonia, who was integral to introducing the legislation, said Switch and other data storage companies will still pay business and incomes taxes if the bills are passed. Yonker said the breaks only apply to sales tax the company would pay on the massive equipment needed to run the operation.

"If this was corporate welfare, we’d be giving them money," Yonker said. “This is a tax structure that allows them to set up and be free of certain taxes. It's not a handout to them.”

There are currently about 40 data centers operating in Michigan that would become eligible for the exemptions, according to the report.

The bills now head to Governor Snyder for final approval.

The Associated Press contributed to this report.