by Steve Timmer

May 25, 2025, 2:00 PM

Comes now Wally in sackcloth

Sometimes, the social media musing of the more excitable and voluble denizens of the right wing, some even in the Minnesota Legislature, come my way, mostly unbidden, really. For example:

Wally lets it all out

Wally is a sputtering ideologue. Let’s unpack Wally’s fatuous tweet.

Wally has no idea how much might be invested in Minnesota by tech giants building data centers. Certainly, the one proposed by Amazon in Becker won’t cost billions and billions.

In the Strib article that Rep. Hudson refers to, reporter Walker Orenstein says that the project, now on hold by Amazon in what seems like a naked act of extortion, would likely cost “billions.” There is no source for the statement, though, and as you’ll see if you read the article, persons involved in the project, including Xcel, are being tight-lipped about it.

Data center buildings are open spaces clad in curtain walls: they’re essentially pole barns or warehouses. Square foot construction costs are undoubtedly low, compared to say, the Wells Fargo Tower. They are filled with racks and racks of computer equipment. The racks and equipment are probably not real estate improvements, and you can bet that the data center owners will argue they are not part of the assessed value of the building.

After providing construction jobs, data centers produce little employment; the equipment hums away while minded by a small cadre of technicians. Some employment would be created for the mechanics who’d maintain and run the 250 diesel backup generators that would be needed in case Xcel’s Sherco coal-fired power plant next door went down.

Wally moans about the loss of property tax revenue. They would indeed produce property tax revenue in the jurisdictions in which they are located, but the social cost of the data centers would be spread over the entire state. We’ll get to the social costs in a moment.

But first note that Rep. Hudson doesn’t talk about loss of state tax revenue. That’s because Amazon and the other data center operators don’t want to pay any. They want a continuing sales tax exemption — meaning not just for the initial purchases — for the equipment purchased to populate the data center and sales tax on the electricity they consume, which is considerable. According to the linked article, the Legislature is balking on the sales-tax-free electricity.

Moreover, data centers, owned by tech giants who hire battalions of lawyers and accountants, are unlikely to pay much in the way of income taxes. A company like Amazon undoubtedly has a tax structure, a warren, really, of tax avoidance involving intercompany transactions and places like Bermuda, the Dutch Antilles, Panama, and the list goes on. Really, it goes on. (The Dept. of Revenue can try to impute some income to an entity if the shenanigans are bad enough, but guess who has the upper hand in those negotiations?)

Without sales taxes, the state will get very little from the “billions and billions” that Wally says will be invested. The state would provide public infrastructure and get nothing in return. It’s a modern form of colonization.

The state would also bear significant environmental costs associated with data centers. They use large amounts of electricity with the attendant emissions created by producing it. Sherco is a coal-fired power plant, remember. Sherco is to be phased out for that reason, but perhaps Sherco’s biggest customer will dictate another result, with predictable damage to the state’s climate goals.

Data centers consume large amounts of water for cooling; water that will be drawn from the same aquifers and surface waters that all residents of the state, agriculture, and other businesses use. They are also noisy, producing an omnipresent, 24-hour-a-day hum, like “billions and billions” of buzzy fluorescent lights. Did I mention the 250 diesel generators and the need to run them for testing and maintenance, even when the power is on? Swell.

Wally’s canard about virtue signaling DFLers is just dead wrong. They just want to make sure that if we allow data centers to be built, they’ll be built by taxpaying citizens, not colonizers. You’d expect Wally to be supine for big business here, but I’m glad some legislators are not.