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Tech blockbuster: Switch making $2B expansion, partnering with eBay

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Courtesy Switch

Updated Thursday, Jan. 15, 2015 | 7 p.m.

Las Vegas-based Switch unveiled plans to invest $2 billion in new infrastructure that will bridge Northern and Southern Nevada and bolster the state’s growing tech industry.

The company says it will create 5,000 new jobs, partner with eBay and build 4.5 million square feet of new facilities throughout the state to house servers that will store data for its clientele, a mix of Fortune 500 companies and government entities.

The news marks the state’s growing push to be a player in the tech market and a rare case in which Northern and Southern Nevada both benefit from a big-money, economic development deal.

Gov. Brian Sandoval delivered the news Thursday in front of elected officials, bureaucrats and media at his State of the State speech.

"This will make Nevada the most digitally connected state in the United States of America," Sandoval said.

The announcement underlines the governor’s commitment to wooing high-profile companies with tax incentives as a way to grow Nevada’s economy. He’s used past State of the State speeches to tout the arrival of companies such as Apple and Urban Outfitters. But the Switch deal is the largest investment he’s publicized during a State of the State address.

For Switch, the expansion solidifies its role as the long-standing company willing to pin Las Vegas on the tech industry’s map. The company, led by CEO and founder Rob Roy, set roots in Las Vegas in 2000 and has invested hundreds of millions of dollars into the economy ever since. The company operates two data center facilities in Las Vegas, providing security, power and cooling for thousands of server-stuffed racks owned by clients such as eBay, Zappos, Amazon and the U.S. government.

Its new Las Vegas facility will give the company an additional 1.5 million square feet of space in the region. Switch has not announced the location of the facility.

Switch’s expansion to Northern Nevada means the company will be neighbors with Tesla Motors, the high-tech car company building a battery factory at the Tahoe-Reno Industrial Center, which is 17 miles east of Sparks in Storey County.

Switch will build a 3 million-square-foot campus at TRIC. Its first phase will be done by 2016 and its anchor tenant will be eBay, a company that’s worked with Switch for five years. Construction will begin immediately.

When state lawmakers fervently passed a series of tax breaks for Tesla in September, Southern Nevada lawmakers also attempted to carve out something for Switch. Nothing came of their efforts. Though it doesn’t meet the $3.5 billion threshold to access the same package as Tesla, Switch will be eligible for tax breaks due to its multibillion-dollar investment.

Switch will pay 2 percent sales tax on the items it purchases and receive a 75 percent reduction of its personal property tax for 15 years, said Steve Hill, director of the Governor’s Office of Economic Development. Clark County’s sales tax rate is 8.1 percent. Storey County’s is 7.6 percent.

The Governor’s Office of Economic Development hasn’t formally approved the tax breaks, but Hill implied it would.

“The project is big enough that they will qualify,” Hill said.

The Switch deal also sets up what’s likely to be a hot topic in the upcoming legislative session. The company debated building a facility in Arizona, a state known for offering data companies friendly tax breaks.

Adam Kramer, vice president of government and public affairs at Switch, said 15 states had better tax structures for data centers — Oregon, Iowa, North Carolina and Wyoming among them.

Kramer signaled the company would ask legislators to change laws in the upcoming session.

“We hope they take a chance to look at this,” Kramer said.

Nevada’s north-south debate rekindled during the Tesla deal. While the north landed the glitzy automaker, members of the Southern Nevada legislative delegation felt slighted. The Tesla tax package, full of abatements and other incentives, forced lawmakers to chop funding to a film tax credit popular in Las Vegas.

But the Switch deal transcends Nevada’s geographic divide and connects the two regions.

Switch will build a 500-mile fiber line that will connect its north and south operations and give its customers faster access to data stored at all of its Nevada facilities. Tagged by Switch as the Superloop, it will also branch into Los Angeles and Northern California.

“We want to see ourselves as the bridge for the state in bringing different regions together,” Kramer said.

Clark County Commissioner Steve Sisolak worked with Switch on the deal. He said the company would bring new six-figure jobs, a highly skilled workforce and attention to the Las Vegas tech sector.

“This will raise the awareness and realization that we have the business climate, we provide the tax structure and we provide the stability,” he said. “It will open up some of their competitors’ eyes and suppliers’ eyes in an ancillary way.”

Many of the key players in the Tesla deal were involved in the Switch negotiations. Along with Sandoval and Hill was Lance Gilman, developer of TRIC.

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