Amazon plans on building two new data centers near Hermiston that provide almost $10 million in annual revenue through large fees rather than full property taxes.

The Hermiston City Council at its meeting Monday, Sept. 26, approved Amazon Data Services’ application for long-term tax abatement to build the new campuses within the Greater Hermiston Enterprise Zone. Assistant City Manager Mark Morgan said this deal is similar to the one now with Amazon Data Services.

“What they are paying are fees to the Greater Hermiston Enterprise Zone, which will be distributed to various taxing entities according to the terms of the agreement,” he said.

According to the staff report from Morgan, Amazon meets the minimum criteria to qualify for the tax abatement, which requires at least $200 million in new investment, creation of at least 10 new permanent jobs and average compensation that is at least 130% of the average wage in Umatilla County.

Under the terms of the deal, Amazon starting in 2023 will pay an Additional Annual Fee equal to what the property tax would be on a valuation of $27,318,175, far less than a $200 million investment. The company also will pay an annual Public Safety Impact Fee of $54,636 and a Student Success Fee of the same amount.

“These fees will index up annually to offset inflation,” Morgan said.

He also said Amazon agreed to pays $5 million for a Community Development Contribution within 60 days of beginning of construction and $120,000 as an application processing fee within 14 days of execution of the agreement.

Additionally, value of the facilities shall be made available for taxation on bonds issued for financing public utilities, public educational services, fire services, or other public safety services, Morgan said.

“ADS will then make a contribution toward the bond payments equal to what its tax obligation would have been. This will have the effect of making bond obligations more affordable for other taxpayers in the community,” he said.

Jackie Linton, incoming Hermiston city councilor, questioned the reason why Amazon is paying only 40% equivalent of taxes. She asked how much Amazon’s tax bill would be if it paid full taxes on the actual assessed value.

City Manager Byron Smith said the city does not know the total value of what Amazon will build. Morgan added the deal is based on a minimum investment of $200 million.

“With that agreement other companies will request the same kind of deal,” Linton said.

Morgan also estimated each campus would employ 120 permanent full time employees, and that means the amount Amazon is paying in the deal for local government services is disproportionately high.

“Although each site is anticipated to employ 120 permanent full time employees, that is significantly lower then some of our other large industrial employers, who’s employees often require educational services for their kids, make calls for service to emergency response agencies, etc.”

Amazon in this deal ends up paying about $41,463 per employee, per the staff report.

“Shearer’s, which recently announced that it won’t rebuild its plant in the Hermiston area, paid only $393 per employee,” Morgan said.

The city helped extensively in the search for appropriate sites for these developments, he also said.

“The agreements approved on Sept. 26 are tied specifically to those two properties,” Morgan explained. “The properties covered by these two agreements are vacant industrially zoned land with no homes or other structures on them and are close to Stanfield, whose school district will be especially benefited by the fees paid by ADS.”

Amazon Web Services announced the opening of the U.S. West Cloud Region in 2011. The region consists of clusters of data centers in Morrow and Umatilla counties. In 2020, their property taxes and fees amounted to $35 million: $22 million in Morrow County and $13 million in Umatilla County.

Morgan said at full build out, each campus will generate approximately $5 million a year in revenue for local governments.

“This would make each campus the single largest financial contributor to local government services by far,” Morgan said.

Umatilla County is the co-sponsor on the Greater Hermiston Enterprise Zone. The county board of commissioners still needs to agree to the deal. The board’s next meeting is Wednesday, Oct. 9, at

the county courthouse

in Pendleton.