Thursday, June 28, 2012

Reno Agrees to Tax Breaks to Attract Apple Project

Sometimes you just have to give a company a tax break.  Regardless of size.  On Wednesday, the Reno City Council approved major tax breaks to coax Apple to open two facilities in northern Nevada as part of a $1 billion investment over 10 years.  In exchange for this, Apple will be building a 350-acre data center just east of Sparks for its cloud computing service.  The negotiations were done under the name “Project Jonathan” for the apple. 

Reno officials agreed to the city's portion of a deal that includes $89 million in county, city and state tax abatements.  Analysts say that's a 79 percent reduction in Apple's tax burden.  They predict the project will create about 500 temporary construction jobs and, once completed, generate $343 million in economic activity over the next decade.

The data center will eventually employ up to 41 full-time employees and 200 long-term contract employees.  Construction will create 580 temporary jobs, according to the Reno Gazette-Journal.

According to the Las Vegas Sun, of the $105 million in tax revenue the project is expected to produce during a ten-year period, state, and local governments will see just $16 million.  First, the state can waive all but 2 percent of the sales tax rate for the server equipment Apple purchases for the data center.   

Then,by opening a second location in a special tourism improvement district in downtown Reno (Primarily to receive the servers. These  will then get trucked out to the actual data center) Apple will be eligible to be reimbursed 75 percent of the 2 percent sales tax it still owes.  The overall sales tax for the expected $1 billion in servers Apples buys will be   0.5% rather  than 7.5%.

This isn’t Apple’s only foray into Nevada.  By managing its investments through a subsidiary in Reno, Apple avoids California’s 8.84% tax rate.  In Nevada, there is neither state corporate income tax nor capital gains tax.  Major tax savings versus having this done in California. 
Sometimes you have to wonder who does the numbers on these deals.  Probably the same people who do justifications for cities and states to pay much of the cost of new sports  facilities.  The county commission’s endorsement in a hearing in a hearing that lasted   20 minutes, with no one testifying in opposition.  Overall, a sweet iDeal for Apple. 

Average daily high during the summer around Sparks.  90 degrees F. Average daily low during the winter. About 20 degrees F. There will  be some major power used for  at this facility, just for  heating and cooling.


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