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Yahoo celebrates Lockport expansion as politicians defend huge incentives

LOCKPORT – Yahoo celebrated the opening of its new call center and expanded data center in Lockport on Thursday, while state and local officials defended the gigantic incentive package that made the development possible.

There could be more development – and more incentives – in the future, as Yahoo last year bought 18 acres of adjacent land in the Town of Lockport industrial park. The sale contract gives Yahoo until 2021 to build something on that new portion of its campus, which now totals 61 acres.

The company created about 200 jobs in Lockport with its development, which began with the first data center that opened in 2009. The company received a 100 percent exemption from property taxes for 10 years and a reduced tax burden for eight years after that.

In addition, the company was exempted from having to pay sales tax on any building materials for its buildings or any equipment it places inside them for 20 years.

The latter benefit is by far the biggest of all, since Yahoo, in an effort to keep its technology up to date, turns over all its computer gear about every three years, according to Thomas A. Sy, chairman of the town industrial development agency. Most companies don’t do that, and that “inflates” the value of the incentives, he said. The sales tax break alone is worth an estimated $200 million to Yahoo over 20 years.

“This is unique to this business,” Sy said.

David Filo, Yahoo’s co-founder, said the company originally wasn’t planning to complete as many jobs in Lockport as it has. When Yahoo went looking for a site for a data center about eight years ago, it was interested in the availability of “green power,” such as that from the Niagara Power Project, and a cool climate to save money on cooling the massive banks of computers that operate Yahoo’s websites.

“I don’t think any of us envisioned so many critical functions here,” Filo said.

However, the company placed a network operations center and a “customer care center” in Lockport as well, and they account for more than half of the jobs on the Yahoo campus. The incentives were part of the attraction, Filo acknowledged.

“This is an area that’s worked very well for us. We’ve been very pleased with all aspects of it, and we’re going to continue to invest for sure, and I would expect more jobs to come here over time,” Filo said.

“The extra land we have here is really an insurance policy for us, to say, ‘What if?’ ” he added. “It gives us that ability to, in the future, look at expanding our operations here.”

A request for incentives for a future Yahoo expansion would be freshly evaluated, Sy said. “It’s not like we have a carte blanche relationship,” he told reporters.

Yahoo had to construct its own power substation to handle the data center’s electricity demand. The New York Power Authority granted the company 22.2 megawatts of electricity for the two data centers, charging half its normal price and saving Yahoo tens of millions of dollars.

“We’re very comfortable with continuing to support and do what’s necessary to enable major investment in our community,” said John Koelmel, New York Power Authority chairman.

Town Supervisor Marc R. Smith said, “We were getting no money from the fallow fields that were sitting here. All of us thought it made sense to make an investment in the future.”

Yahoo has invested $170 million in its Lockport project so far.

“It’s long-term investment. That’s what it’s all about,” Smith said. “If we had continued doing what we were, the community would have nothing.”

During a half-hour of speeches from Yahoo executives and political figures, Smith praised the “bravery” and “courage” it took for local and state officials to make the incentive deal.

Catherine Card, Yahoo’s vice president of customer experience, said the company has committed $3.5 million in donations to the Community Foundation of Greater Buffalo.

Lt. Gov. Kathy Hochul said the quality of Western New York’s workforce also made the region attractive to Yahoo. “We have the most engaged, educated, fired-up workforce that you’ll see anywhere in this country,” she said. “I know you got 200 of the best people in Western New York.”

Meanwhile, the town IDA last fall sold 10.8 acres of land for another project in the park. Sy said Thursday it’s a Western New York-based company that intends to open a smaller data center, a plan that he said would be disclosed “in the next few weeks.”

“Certainly, data centers and businesses like this are what we’d like to attract a few more of,” Sy said.