12/05/2008

By EMERY P. DALESIO  / Associated Press

Tough economic conditions could slow expansion at Google Inc.'s server farm in the state's foothills, the company said Thursday in a letter declining a sliver of a $260 million government incentive package.

The Silicon Valley Internet giant never finalized a deal by which it would recoup up to $4.8 million in state taxes if it met job-creation and other targets at the Lenoir facility. In the letter, a company attorney told a state incentives committee that it no longer wants the money or the commitments that would go with it.

Google never received any of the money under the 12-year Job Development Investment Grant.

While Google "remains pleased and committed to its Lenoir operations," economic conditions make it too difficult to be sure the $600 million data center complex will expand as fast as previously thought, the letter said.

"Yet the company fully expects to achieve employment and capital investment levels that are consistent with those that the state announced in 2007," Charlotte attorney John N. Hunter wrote on behalf of Google.

Google's Lenoir site spreads out across about 220 acres near the Blue Ridge Mountains. When the facility was announced, it was forecast to eventually employ about 210 people.

Google would not discuss its current employment, spokesman Eitan Bencuya said.

Including incentives offered by local leaders, Google could receive more than $260 million over 30 years. North Carolina's legislature in 2006 passed sales tax exemptions that would save Google up to $90 million over three decades if it built the facility in Caldwell County.

"We have and will continue to utilize the other components of the economic incentives package," Mountain View, Calif.-based Google said in a prepared statement.

Technology giants such as Google and Microsoft are responding to booming Internet use by building huge, climate-controlled computer warehouses. Also called server farms, these centers can store enormous amounts of information and process vast flows of data. They are heavy users of power and water and are usually spread out over large spaces.

Google also opened a 520-acre data center northwest of Charleston, S.C., earlier this year.

The Google incentives are being challenged in state court by the North Carolina Institute for Constitutional Law, which alleges that special breaks for the company violate the state constitution's requirement of fair and equitable tax treatment.

The group's executive director, former state Supreme Court justice Bob Orr, said Thursday that Google's decision does not effect the lawsuit.