This data center is getting a $77 million tax break to create one job

This article was originally published by New York Focus.

On a February morning in 2024, a little-known agency in Rockland County held a public hearing on a proposed subsidy for the expansion of a JPMorganChase data center in Orangeburg, near the New Jersey border. In return for nearly $77 million in tax breaks, the project promised to create exactly one permanent job.

No one showed up. After 20 minutes of silence, an agency official called the meeting to a close. Two weeks later, the subsidy deal was approved.

The kind of tax breaks JPMorganChase received, doled out by local agencies called industrial development agencies, were designed first and foremost to attract companies that bring steady jobs. Data centers — which require major investment but few workers — call that premise into question.

Perhaps no project raises the question as starkly as JPMorganChase’s data center expansion in Orangeburg. The $77 million subsidy is the largest of its kind, per job, in the country, according to watchdog groups. That figure represents sales taxes that JPMorganChase would otherwise be paying on materials and equipment for the billion-dollar project, with about half — $40 million — withheld from state coffers and the rest from localities.

“The county is giving away quite a lot of public money in exchange basically for nothing,” said Kasia Tarczynska, senior research analyst at the national subsidy watchdog group Good Jobs First.

Last month, the outlet Investigative Post reported that the per-job subsidies proposed for a massive data center in Genesee County, at more than $11 million, would be the largest in the country. The project has spurred local outrage and a bill from state lawmakers to rein in the tax breaks.

But the JPMorganChase deal quietly signed two years ago dwarfs even that amount.

The Rockland County IDA believes the deal will pay off. Executive director Steven Porath provided a cost-benefit analysis to New York Focus that found the data center would be a net gain for the county, yielding more than $100 million in local economic benefits.

Porath acknowledged that data centers — and JPMorganChase’s expansion in particular — create few permanent jobs, but said the project would generate more than 1,400 temporary construction jobs and require ongoing upgrades from skilled union electricians and other tradespeople.

“It’s a misconception to say there’s one person sitting in that data center,” he said.

Moreover, Porath said that assessing subsidies strictly in terms of cost per job is an “outdated” method that needs to evolve for today’s high-tech age.

“Anybody would look at it and say, one job does not justify $76 million in sales tax exemption,” he said. “If that is how you’re going to narrowly look at it… anybody would say that’s ridiculous. But that doesn’t take into account all the other economic factors of that data center sitting in our community.”

JPMorganChase did not respond to New York Focus’s questions.

Over the last decade, the small suburb of Orangeburg has become something of a data center hub. Straddling the Palisades Parkway, about 20 miles from Midtown Manhattan, it’s within striking distance of the world’s financial capital but less crowded than much of the New York City region. Bloomberg opened a data center there in 2014 and others soon followed, including JPMorganChase, which inked its first subsidy deal with the county IDA in 2017.

The bank came back to the IDA in early 2024 to support its expansion at the site, and construction is now underway; JPMorganChase has said it expects the facility to be complete by 2028. Like the bank’s original data center and others in the area, it will feed the heavy computing needs of the finance industry, for cybersecurity, trading, and, increasingly, artificial intelligence.

The bank’s facilities — both the existing one and the one currently under construction — sit on the sprawling site of a former psychiatric hospital. Its original subsidy deal included property tax breaks known as PILOTs with the county, municipality, and school district. (Porath said the company would likely seek an updated PILOT deal when the expansion is closer to done.) It also included about $35 million in state and county sales tax breaks, which the project had largely claimed by 2024, according to state data.

The facility last reported 25 workers, up from the five it originally promised. The tax breaks it received over its first eight years still amount to well over $1 million per job in subsidies.

The expansion deal is in another league. It makes the per-job subsidies on New York’s biggest, most controversial economic development projects — Micron’s chip fab complex near Syracuse and Tesla’s Gigafactory in Buffalo, for example — look tiny by comparison, according to a new analysis by the watchdog group Reinvent Albany.

John Kaehny, the group’s executive director, called it “totally crazy and irrational.”

“It’s hard to see this deal ever breaking even for the county,” he said.

In principle, IDAs have to carefully assess whether subsidies are needed to attract a certain project, or whether the business would likely set up shop in the area anyway. (Porath called this the “art” of economic development.) In practice, the agencies often fail to give projects the necessary scrutiny, the state comptroller has found.

JPMorganChase applied to the IDA for its expansion project in January 2024, providing only vague justification of why the nation’s largest bank needed subsidies to expand on its existing site, 25 miles from its brand-new global headquarters in Midtown Manhattan. The next month, it got the exact tax break it requested.

The data center is not a traditional IDA beneficiary. Unlike a manufacturing plant, which typically receives property tax breaks in exchange for creating a steady base of good-paying jobs, data centers are crammed full of cutting-edge computer hardware, but few people to operate it. That makes sales tax breaks — which help defray the massive cost of chips and other equipment — particularly valuable to them.

Sales tax exemptions have historically represented a small part of New York’s local economic development subsidies overall, but make up the lion’s share of recent data center deals. Two other data center complexes under development in Orangeburg are also benefiting from them. Morgan Stanley and Natixis banks are setting up shop in a facility operated by the company 1547 Critical Systems Realty, and the AI cloud company CoreWeave is leasing part of a new facility developed by the company DataBank. Each company has its own deal with the IDA.

While the Orangeburg data centers are small compared to some of the AI megaprojects being developed around the country, activists worry that they could drive up utility costs and potentially contaminate drinking water with chemicals they use for cooling. (DataBank’s site overlooks a reservoir that supplies drinking water to New Jersey.)

A late March planning board meeting about Databank’s proposal for a second facility on its site was packed with opponents, who raised concerns about water and noise pollution and the impact on electric bills.

“We are overly saturated with data centers,” one resident told the board, according to The Journal News. “There is no talk of the cost to us, the local utility ratepayers.”

Advocates with the group Food & Water Watch, which has been rallying local residents, want a halt on all data center projects until the environmental impacts can be fully assessed. (Moratoriums have been proposed at both the state and national level.)

“Doing nothing with that land is likely better than putting that data center on there, because of the infrastructure strain it puts on the people,” said Ben Murray, a researcher at Food & Water Watch who has helped coordinate the group’s work against data centers across the country.

Murray said his group has been keeping an eye on the data center subsidies, which he called a “classic race to the bottom.”

But the subsidies have gotten little notice in general. The Rockland County IDA has held one empty hearing after another on proposed tax breaks, including one just a few months ago on a $19 million data center deal with Morgan Stanley that is due to create four full-time jobs.

Porath said he wishes more people would show up.

“If the public came out in force and said they want to participate and they want more discussion about it, I’d be the first [to say], ‘Okay, what do we gotta do to accommodate that?’” he said.

A bill introduced by state Senator Rachel May and Assemblymember Anna Kelles this spring would cap IDA subsidies at $500,000 per job, and bar the agencies from giving subsidies to projects that consume more than 100 megawatts of power. It would also block data centers from getting state-subsidized power and increase environmental oversight for large facilities and those located near Indian nations.

May said the bill was inspired by the major data center proposed for the STAMP industrial park in western New York. (At 500 megawatts, it would be about 10 times the size of the largest data center under development in Rockland County, and neighbors the Tonawanda Seneca Nation.)

Kaehny, of Reinvent Albany, said it would be simpler just to ban IDAs from abating sales taxes. Giving local officials power over state revenue “doesn’t make a lot of sense,” he said. “It’s not something they’re elected to do.”

Porath, for his part, says Rockland County is just following the rules as they’ve been set out. And he maintains that deals like the one the IDA has given to JPMorganChase are paying dividends for the county, turning an asbestos-filled site that wasn’t paying any taxes into one that is pumping hundreds of thousands of dollars per year into local schools and other services.

He knows that many people don’t see it the same way.

“It’s very easy to have agencies drink their own Kool Aid,” he said. “The trick is to look back objectively and say, ‘Okay, is this in the interest of Rockland County?’”