Can Facebook Save California? | Hacker News Reader

Can Facebook Save California?

paul.kedrosky.com

13 pointsmiraj23 comments

California can't be saved as long as they have pension obligations that far outstrip any potential new sources of income. http://articles.latimes.com/2010/apr/06/opinion/la-oe-crane6...

did you too not notice the /opinion/ part in the url you provide? please do not submit someone's opinion as a fact.

could you provide a link to the original studies mentioned in the article?

Building data centers in Oregon[1] and North Carolina[2] sure won't help. Why would a California based company build their first data center in Oregon?

[1]http://www.facebook.com/blog.php?post=262655797130

[2]http://www.charlotteobserver.com/2010/11/12/1831199/facebook...

Power and land. California doesn't have much spare power, and land is certainly cheaper in Oregon and NC.

I wonder why that is not a problem for example for EC2 US-West (the cheapest EC2 availability zone)?

us-west-1 is a great success. Just two weeks after its official launch its level of activity is 73% of eu-west-1, which has been around for a whole year!

http://www.jackofallclouds.com/2009/12/comparing-amazon-ec2-...

California is twice the area of Ireland AFAIK?

tax break, what else?

After officially announcing plans to build a data center in Prineville on Thursday, Facebook officials told The Bulletin that the tax incentive offered to the company through an enterprise zone was a key reason it came to Central Oregon. By locating its new data center in the zone, Facebook will be excused from paying as much as $2.8 million a year in local taxes.

http://www.bendbulletin.com/apps/pbcs.dll/article?AID=/20100...

Seriously, 50bn SecondMarket cap company looking to save $2.8 million in taxes?

Seriously, 50bn SecondMarket cap company looking to save $2.8 million in taxes?

$2 million here, $3 million there, sooner or later it adds up to real money. A $50 billion company doesn't stay a $50 billion company by blowing $2.8 million on nothing.

Sadly, that's a lesson the California gov never learned. If they had, they might not be wasting similar amounts of money on pensions for criminals.

http://www.newsoxy.com/world/disgraced-sheriff-pension-13760...

You can find examples of some public employees getting outrageous pensions but these examples are at not typical. Given that California has a huge budget shortfall are you suggesting that this shortfall is due mostly to outrageous pensions?

We presently live in a system where states often times compete with each other to offer incentives to attract factories or other operations that employ a lot of people. These tax incentives are paid for by the people of the state, that is, by the workers. It's a perverse system. Maybe companies should be willing to pay their share of national defense, roads, etc.

The shortfall itself is due mostly to decreased revenues as opposed to increased expenditures. That said, pension expenditures are a fairly good size chunk. There is a decent overview here http://reason.org/news/show/fix-california-pension-crisis but if you want to drill down through the data itself, it is available here: http://www.ebudget.ca.gov/Enacted/agencies.html

Yes, pensions are a major part of the shortfall but I specifically said outrageous pensions payouts. It remains to be shown that the shortfall comes from outrageous pensions. I've noticed that often times people mention the unfunded pension liabilities in California and then point to a few extreme examples. Are the extreme examples causing the problem?

There are structural problems with California governing system that give more plausible reasons for its present problems. To go from Facebook setting up a data center in order to save a few million dollars to an extreme pension abuse example is very weak.

Don't forget the unfunded part of the current pensions, this has been a problem building over multiple years and probably won't have and easy solution.

California is facing potentially catastrophic future problems from unfunded pension liabilities [1]. And ridiculous numbers of blue-collar state positions get six figure salaries and the generous pensions that go with them. It would be nice if we could do that, but the math just doesn't work, which is why California's problems are only going to get worse unless drastic action is taken. And it won't be until things get really bad.

1. http://articles.latimes.com/2010/apr/06/opinion/la-oe-crane6...

did you notice the /opinion/ part in the url you provide? please do not submit someone's opinion as a fact.

by blowing $2.8 million on nothing

sure, so now Oregon will loan additional $2.8M here and $3M there until it itself becomes the California and comes back to FB asking for money. Of course by then there will be plenty of bankrupt states (countries even?) willing to offer tax breaks to help wonderful companies like FB to relocate.

Or perhaps Oregon will just spend $900 per person less than California.

http://www.taxfoundation.org/research/show/287.html

This move is a win for Oregon. A small pieces of something is better than a big piece of nothing (which is all CA gets).

Wow, how did Alaska manage to outspend pretty much everyone by 100+% ? Bridges to nowhere and stuff like that?

Anyway, this is getting offtopic since this $2.8M p.a. is breadcrumbs compared to what FB employees will be paying in tax to California and Washington after the liquidity event. And it's not like THEY'll be moving from Silicon Valley any time soon.

So no, Cali is still getting plenty of it.

I believe the evaluation for large data center locations looks something like this:

1) Where can we get cheap power? 2) Of those locations, where can we save on taxes, building costs, labor, etc?

AFAIK there isn't anywhere in CA that qualifies for 1).

the thing I found most interesting in this article was the fact that facebook is now trading at a 67B valuation on the secondary market, making it almost 1/3rd of what google is today. Very impressive growth.

it was 50bn last week :)

but it's not a bubble ...

i might concur with that sentiment...but i think facebook is not the best example. their upside is still tremendous, as they haven't fully exploited their ad revenue (which is better positioned than google imo)

Facebook does have tremendous potential upside (as well as significant risks). But it's really hard for me to see any reason their valuation would increased by 30% in the last few weeks.

The first surveillance state of the union, brought to you by the national security apparatus - national infrastructure division. (facebook+cisco+your-isp=full-stack-surveillance, little brother.)

Reply on news.ycombinator.com