It was easy to tell with a glance of the bonding bill the Legislature passed last week who is supposed to benefit from $20.5 million earmarked for a business park in Becker. It’s Google.
A new sewer line and other infrastructure will hopefully attract Google to build a massive data center next to Xcel Energy’s coal-fired electric power station in Becker, on the northern edge of the Twin Cities metro area in Sherburne County.
Anyone applying a strict definition would have to rule this taxpayer support for a company, Google parent Alphabet, that generated about $14 billion in operating cash flow in its most recent announced quarter.
Yet this hoped-for deal — there’s no contract yet — raises the interesting question of what municipalities are supposed to do when the big driver of the local economy, an employer and taxpayer, seems to be going away. Are they not supposed to find a way to replace that, using whatever tools of economic development they can get their hands on?
As much as people hate taxpayer assistance for big businesses like Google, doing nothing won’t be popular, either.
The economic engine winding down here is the power station itself, called Sherco. With two skyscraper-sized chimneys, it’s clearly visible to anyone passing on nearby Interstate 94. Xcel and its partner in one of the units plan to shut it down, unit by unit, over the next decade.
You could think of this as responding to technological change, as dirty fossil fuels like coal are dropped, but Xcel’s plan to be done emitting carbon to generate electricity within 30 years is also a case of a business responding to what its customers want.
The impact on a town like Becker of closing this plant brings to mind an economic lesson about small towns taught by the Nobel Prize-winning economist Paul Krugman, writing some years ago in his New York Times blog. It’s the problem of gambler’s ruin.
The idea is that a gambler playing long enough against another player with much deeper pockets will eventually go broke. And that’s even with a fair game, such as flipping coins.
In a rural town dominated by one big company, there’s no real alternative to the jobs it provides or the taxes its pays. Diversify? There’s likely no good reason for a second big employer to set up shop there.
In competition with big and economically diverse areas, it means flipping coins with someone who starts with 10 times as many quarters. Even a streak of losses doesn’t sink their regional economies. But eventually your luck runs out.
What happens when a big local operation shuts down can be devastating to the town and its people, like what happened in the central Iowa town of Newton. Within a few years of Maytag leaving in 2007, Newton was being described as maybe the most broken town in the country, as even the local Optimists Club chapter closed.
Becker, with just under 5,000 people as of the last census estimate, can’t fairly be described as a struggling small town. It’s about a 60-mile drive to Minneapolis-St. Paul International Airport, so it’s within commuting range of the Twin Cities. Its median household income of $87,000 is about 25% higher than the state’s.
The value of Sherco to Becker goes beyond payroll, though. It pays taxes that fund the city and public schools.
Xcel Energy represents nearly 55% of the city of Becker’s adjusted net property tax capacity and Southern Minnesota Municipal Power Agency, part owner of Sherco Unit 3, represents an additional 23% of the tax capacity, as of the latest annual statement filed for Becker’s bond issues.
The remaining eight taxpayers of Becker’s Top 10 together account for roughly 3%.
The Google project would be a little like another Sherco, a hugely valuable industrial facility, even though it may have only 50 permanent jobs.
So-called hyperscale data centers like those that Google builds are remarkable places, filled with thousands of computers.
They are big consumers of electric power, one reason why Xcel Energy has good reason to want Google next door, although Google won’t buy power generated from fossil fuels even if that coal-fired plant continued to operate. Xcel’s plan is to power the facility with additional wind and solar generation.
One reason to build it in Becker is to take advantage of all the electricity transmission infrastructure already in place.
The bonding request from Becker was meant to help fund infrastructure needed by the business park, said Marie Pflipsen, community development director for Becker. Most of the cost is for water and sewer lines that have to run under Hwy. 10 to the site, although she said the planned upgrade isn’t just to take care of Google.
“We are still working with Google, that project is still alive, and this is that next step forward in hopefully getting them to eventually choose us,” she said, adding a lot of work still needs to happen.
One odd aspect of this is that the project that would help fill the hole left by Sherco in the tax base was already granted a 20-year tax abatement by the city and Sherburne County.
Yet this project would help taxpayers, Pflipsen responded, because the school district has granted no such abatement. But her bigger point is that the city and the county are thinking long-term.
As currently envisioned, a new gas-fired plant would go on the Xcel site and Sherco 3 unit wouldn’t shut down until 2030. If the parties involved hustle, the Google facility would be well through the tax abatement term by the time Sherco 3 goes off the grid forever.
On the other hand, the city will have switched Xcel’s coal-fired plant for a Google data center, another similarly valued asset. It’ll still have a version of the same problem, as someday Google, too, will shut down.