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Verizon cancels Niagara County data center; Up To 200 Jobs Were Forecast
Lawsuit, AES delay lead to pullout from Somerset

State and local politicians were quick to blaze a trail toward construction when Verizon Communications expressed a desire last year to build a $4 billion data center in the Niagara County town of Somerset.

Other key players? Not so much, the company said Thursday as it announced that it was scrapping plans for the data center that would have created up to 200 jobs.

"This project is done," Verizon Regional President James J. Gerace said. "We're accommodating [our needs] with our current facilities."

Gerace gave three main reasons:

*A lawsuit. Amherst resident Mary Ann Rizzo, who owns property across the road from the Somerset site, filed suit Nov. 15 arguing that government officials gave short shrift to environmental issues and other factors in approving such a giant project.

*The land seller. AES Corp., which owns a coal-fired electricity plant next door to the site, has been touched by recent financial instability, and, in Verizon's eyes, was dragging its feet in finalizing the sale of 178 acres to Verizon for the data center.

*A new acquisition. Besides working at its own facilities, Verizon is about to complete the $1.4 billion purchase of Terremark Worldwide, a Florida-based computing company whose data centers are in Virginia.

Verizon will need to build future data centers -- and Western New York will be considered, said Gerace, a University at Buffalo graduate -- but the company's immediate data capacity needs "may be accommodated" by the acquisition, which was announced in late January.

In addition, Verizon will not build a $4 billion facility in Laramie, Wyo., where it has an option on 160 acres of land, nor anyplace else, Gerace said.

The Wyoming site had been considered Somerset's main competition for the megaproject.

Reaction to Verizon's decision was swift -- and negative.

"We see once again why our children are forced to move away in search of jobs," said State Sen. George D. Maziarz, R-Newfane, a strong backer of the project. "One disgruntled property owner hires one lawyer with a reputation of opposing everything to stall this project until Verizon gets fed up waiting and goes elsewhere.

"Our broken bureaucracy and snaillike judiciary, which refused to expedite this case despite its huge importance to the region, are complicit in this failure," Maziarz added.

Maziarz noted that the Appellate Division of State Supreme Court in Rochester refused to fast-track Rizzo's appeal of Verizon's lower-court victory.

Rizzo had sought to overturn the Jan. 14 ruling in favor of Verizon by Niagara County Judge Matthew J. Murphy III. Last Friday, the appellate court ruled that Verizon's request to speed things up was premature, leaving the appeal on a normal track that might have delayed oral arguments until the fall.

Gerace said that once Rizzo's attorney, Arthur J. Giacalone, announced on Jan. 25 that he would appeal Murphy's ruling, there were internal talks at Verizon about whether to proceed with the project. "It certainly started that discussion," Gerace said.

"Everyone has a right to their day in court," Maziarz said, "but there should be consequences when that right is abused, as it was so egregiously in the Rizzo case."

When it first presented the project publicly in September during meetings in Somerset, Verizon said that it wanted to start construction by Nov. 15. "That would have put, we hoped, some of our data online this spring," Gerace said.

Verizon needed more data capacity urgently, he said, and in order to accomplish that, the company has been "restacking" servers and other equipment in some of the more than 200 data centers that it already owns.

The lawsuit was a factor in the decision to pull the plug on Somerset, Gerace said, but it wasn't the only one. Another, he said, was AES Corp.'s delay in signing the deal to sell a piece of its land on Lake Road to Verizon.

"We had some hang-ups with the seller," Gerace said. "We wanted to close weeks ago, but they were unable to do so."

Gerace wouldn't elaborate, and AES Somerset President Peter Bajc wrote in an e-mail to The Buffalo News that he doesn't know why Verizon opted out.

"We have been working diligently with Verizon since last fall, when we executed the option agreement," Bajc wrote. "Despite those efforts, Verizon elected to terminate the option agreement. AES was prepared to fulfill our obligations to the agreement, provided we were able to finalize an acceptable arrangement to both parties."

Gerace said AES' decision to put its Somerset power plant up for sale also played a part in Verizon's decision.

"We didn't know who our neighbor was going to be," he said. " We didn't get any reassurances that it was still going to be a power plant."

He said that most of the electricity for the project was to come from the New York Power Authority, which had allocated 25 megawatts of discounted hydroelectric power to the project.

The decision to buy Terremark for $1.4 billion was far cheaper than investing $4 billion in Somerset, Gerace said, but "it's not likely" that the data capacity Terremark has today "will take us into the future."

Gerace praised the cooperation of state and local officials in trying to assist the project. "There were concerns inside our company that New York might not be the best place to put this because of the business climate," he said. "That turned out not to be the case. Local and state governments did everything they could."

The data center would have been the biggest project in Niagara County since the Niagara Power Project was built in Lewiston a half-century ago.

The subsidy package offered by local and state officials to attract Verizon would have been worth $3.1 million per job. Allison K. Duwe, executive director of the Coalition for Economic Justice, a nonprofit research and advocacy organization, called the package "a colossal misuse of resources."

One source of those benefits was a property tax break approved by the Niagara County Industrial Development Agency. Its chairman, Henry M. Sloma, was disappointed by the news that the project is dead.

"This decision," Sloma said in a statement, "casts a dark cloud over Niagara County and has cost the region significant economic benefits in terms of high-paying jobs and vast new revenues to the community."

Giacalone, Rizzo's lawyer, noted that Verizon would never publicly commit to Somerset.

"When they came to Somerset," Giacalone said, "they said, 'You have to rush because we are considering other sites in both upstate New York and out of state.' In Wyoming, similarly, they were playing one community against another.

"As someone who has been doing land use and development law for 20 years, I saw signals throughout that Verizon was not truly interested in the Somerset site."

e-mail: tprohaska@buffnews.com and lmichel@buffnews.com

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