State OKs low-cost power for Yahoo! facility

George D. Maziarz

May 20, 2009



Gov. David A. Paterson announced Tuesday that Yahoo! would bring a new data center and more than 100 jobs to Western New York, but the Internet company said it is still considering other states.

Paterson said Tuesday that Yahoo!, one of the world’s best-known Web sites and search engines, will spend $150 million to set up a new East Coast regional data center here, with at least 125 new high-tech jobs. As an inducement, the company will receive low-cost hydroelectric power from New York State.

Paterson announced the plans in a morning news teleconference, right after the New York Power Authority board of trustees unanimously voted to provide 15 megawatts of low-cost power to Sunnyvale, Calif.-based Yahoo!. No other state taxpayer dollars will be spent on the project, officials said.

The company has not chosen a site, but it is looking at two locations, one in Niagara County and one in Genesee County, Paterson said. He would not specify the addresses, one of which he said he did not know.

But State Sen. George Maziarz identified one Niagara site as Saunders Settlement and Comstock roads in Cambria and said the Genesee site is on Route 77 near Thruway Exit 48A in Pembroke.

The Cambria site had originally been slated for a data center for HSBC Bank USA, but that plan has been abandoned by the bank. HSBC is consolidating data functions in Illinois.

An additional Niagara County site being considered by Yahoo! is in the Town of Lockport Industrial Park on Junction Road, Maziarz said. Both Niagara locations are “shovel-ready.”

However, an earlier proposal for a site in Medina, in Orleans County, is no longer at the top of the list, Paterson said.

A decision is expected shortly, he said. Plans call for construction to begin this fall and for the site to be up and running by January 2011, so “we don’t want to waste time choosing between sites,” he said.

“We’re just delighted that the [Power Authority] board approves of our idea to bring facilities from Yahoo!, the largest Internet provider, to New York,” Paterson said. It “really is the catalyst, the tip of the iceberg.”

The Power Authority proposal calls for Yahoo! to get 10 megawatts for the first phase of construction, which could start in the fall. A second phase, slated for spring 2012, could mean tens of millions of dollars in additional investments by Yahoo!, and another 5 megawatts of power.

That’s a significant amount but will pay off as the state begins to form a high-tech cluster that will draw in other companies in the future for a lot less, Paterson said. “We plan on continuing to work with Yahoo! and other companies, and you create an interest in an area. That’s what we’re trying to do in Western New York,” he said. “I think it’ll have an impact and its impact will grow over time.”

But some area politicians and economic development officials said Paterson is jumping the gun, since Yahoo! hasn’t even committed to the project. Its board of directors will now consider the state’s offer, and its new CEO must also sign off.

Company spokeswoman Kim Rubey confirmed it hasn’t made a commitment, and “we do not disclose information related to ongoing discussions.”

“We are continuously evaluating new ways to best support our business needs and we are in a dialogue with various state officials about our potential options,” she said in a statement. “New York State officials and the governor’s office have been very supportive in helping us evaluate our options in New York State, and we’re pleased to learn of the New York Power Authority’s vote.

“However, we are continuing to evaluate proposals from a number of states and have not made a final decision about where to locate the new facility.”

Still, a Paterson spokesman said that approval is likely, and the governor’s release said the state “expects to secure Yahoo!’ s commitment to invest in Western New York rather than in competing sites in other states.”

“It would be quite a surprise if it didn’t work out,” Paterson said. He said Yahoo! also is looking at Southern states, including North Carolina.

“We’re very happy about it. We don’t anticipate any problems,” he said. “Whether you live in Niagara County or Genesee it will be a real shot in the arm, and I think a prelude to greater technological advances.”

The center would host properties, advertisements and content on Yahoo!’s Web portal.

Paterson said the jobs would be in technology, advanced computerization and some forms of engineering, and would pay an average of $50,000 a year, or $65,000 including benefits.

“These are very good jobs,” he said. “A lot of people who have relocated to other states are going to realize that some great jobs in Internet provision are going to be located right here.”

Paterson also stressed that the initial job commitment by Yahoo! “is a floor, not a ceiling, and a catalyst for other development in the technology area.”

The discussions between New York and regional officials and Yahoo! have been ongoing since last June. More than 20 sites have been explored across the region, and officials had a “moving target” list of about six locations that were being considered, including the two finalists, said one local official familiar with the talks.

Part of the challenge, this official said, is that many of the large office parks or parcels of land that are ideal for office or light assembly projects may not have the infrastructure in place to handle a power-intensive data center. That means they may have to be enhanced further, and zoning may have to be changed, the official said.

The action by the Power Authority came at Paterson’s urging, following more than six weeks of negotiations between Yahoo! and the governor’s office. Indeed, Paterson even held up his news conference until immediately after the Power Authority had finished voting.

It also followed what Maziarz called “intense pressure” on the Power Authority by various officials, including himself and Sen. Charles E. Schumer.

“It is hard to imagine NYPA making this kind of commitment to Western New York absent the much-deserved public criticism they have received,” Maziarz said in a release. “This may be a sign that we have finally gotten NYPA’s attention.”

Maziarz noted that Yahoo! rival Google walked away from a proposed project here after a failure by the Power Authority to allocate power. Paterson admitted that he regrets that loss, but “we’re not done talking to Google.”

“I’m going to be meeting with them in about a month, and we’re just going to keep fighting to have more successful outcomes,” Paterson said.