In the Hermiston and Boardman area, there are more than seven active data centers owned and operated by Amazon Web Services. Last year, the city of Hermiston annexed 800 acres of land to AWS, paving the way for more in the future. And while some have shared concerns about the environmental impact these data centers have, they have brought their communities millions of dollars. For the city of Hermiston, Amazon’s operations have funded renovations to the library, a new city hall and most recently, a water treatment facility for Umatilla County.
Mark Morgan is the assistant city manager of Hermiston. He joins us to share the impact Amazon dollars have had on the community.
Note: The following transcript was transcribed using AI and validated for accuracy, readability and formatting by an OPB volunteer.
Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller, closing out our week in Hermiston from the Hermiston Public Library. It is a beautifully renovated library that had its grand reopening less than a year ago. We are right across the street from Hermiston’s new city hall. These buildings share something in common. Both of them were funded with money from Amazon, which has a huge presence in this region, including data centers in Hermiston itself.
Mark Morgan is the assistant city manager. He joins me now to talk about the benefits and the trade-offs of data center dollars. Mark, it’s great to have you here.
Mark Morgan: Glad to be here.
Miller: Can you give us a sense for the scale of Amazon’s current operations in Hermiston?
Morgan: Yeah, so in the region they have a handful of hyperscale data center campuses operating from Hermiston to Boardman. I think they’re always building new ones. But I think operationally, right now they’re up to seven or eight operating campuses, two of which are inside of Hermiston itself.
Miller: Two inside Hermiston now, but 800 acres of land were annexed last year. And is there yet a data center on that land?
Morgan: No, not yet.
Miller: OK, what are the plans for that land?
Morgan: That actually was brought into our urban growth boundary. It expanded our UGB by about 20%, and that actually came in with a hyperscale data center overlay. So it’s specifically zoned to accommodate for future hyperscale data center development.
Miller: Future. What’s the potential timeline for that?
Morgan: Well, that’s the billion dollar question, right? It always depends. I’m sure we’ll be seeing dirt turning on at least some of those sites probably within the next couple of years.
Miller: I’m curious because I’ve heard about NDAs, nondisclosure agreements. Are there NDAs for these on paper right now preventing you from telling your residents or members of the media about plans that you do know about?
Morgan: No, the city of Hermiston does have an NDA with Amazon, but that is specific to any site considerations. So whenever a company’s coming to look for potential sites, whether it’s data centers or anything, they have to trust that we’re gonna accept some of their information that may be sensitive and may not be ready for disclosure. We treat those site consideration discussions confidentially, but it doesn’t cover other things like water consumption or any of those types of things.
Miller: I mentioned that this renovated library and your city hall right across the street were paid for partly, in the case of this library and then I think maybe largely in the case of city hall, with Amazon money. What has Amazon funded in Hermiston over the last decade?
Morgan: That is a tough number to ascertain because it’s been a lot. So the funding for the library and city hall, as well as our public safety center, ultimately came through our long-term rural enterprise zone exemption program. The enterprise zone program is one where we grant them full property tax exemption for a period of time, in exchange for fees in lieu of taxes, essentially. This building, city hall and the public safety center, Amazon didn’t have any say in where those dollars went. This is just what we’ve chosen to spend those dollars on.
Miller: How do you decide that a deal like that is a good one for the city – foregoing property taxes for 15 years in return for fees of various kinds? Obviously, the fees turned into real money. But property taxes are real money, too. How do you decide that it’s a good deal for your city?
Morgan: Yeah, well, I think with regard to data centers specifically, Hermiston’s just in a really good position in that data centers thread the needle really nicely for what the community wants and expects in terms of economic development. We do a lot of community outreach over many years, and we do a lot of community outreach about every 10 years around the decennial census. We have reports dating back to the 1990s, and the feedback from the community in that 1990s report was growth at all costs. We want economic development, we want growth, growth, growth, growth. In the 2000s iteration, similar type of feedback that we saw: We want to see growth at all costs, and grow the economy.
Miller: People don’t really say that, do they? Growth at all costs? Because the costs could be severe. I mean, if we’re talking about changes in traffic, in a sense of place, in your identity, in housing costs … When you say people say that, it’s actually a pretty profound statement.
Morgan: Yeah, that that’s really what it was in the 1990s and 2000s version. By the time we get to the 2010 version, still definitely economic development was a major priority, but you started to see the beginnings of feedback along the lines of, well, we really value the small town feel. You started to see that come into the conversation. And then with our iteration around 2020-2021 time frame, when we’re asking what do you value the most about Hermiston – our Hermiston 2040 Vision is what we call it – what do you want to see Hermiston like in the next 20 years, we see that the thing that people value the most about Hermiston, by far and away, is having a strong and growing local economy. And then coming in fairly close after that is people value the small town feel.
So, as an economic developer, that’s a really tough nut to crack. We have relatively limited options out here in the rural parts of Eastern Oregon. When you’re trying to balance those two things, you think, well, if we were to bring in something like a meat slaughter facility, which we’ve had potential prospective developments look around before, if they were to come in and bring 4,000 jobs or something and drop them on the community overnight, or something like an Intel chip fabrication factory – which we could never get otherwise – [that] dropped 10,000 jobs on the community overnight, that doesn’t really square with maintaining that small town feel. And that’s why I say the data center industry really kind of threads that needle fairly nicely for us, where, in terms of the permanent, ongoing operational jobs, we’re looking at somewhere in the range of around 200 employees per campus. So, when they’re building in the region, one campus a year, maybe two campuses a year, it allows us, as a community of around 40,000 people within 10 miles of this library, to absorb that type of economic development and maintain that economic growth without overwhelming the community.
Miller: That’s a fascinating way to think about it because you’re saying that one of the benefits of data centers is that there’s a relatively limited number of jobs for the enormous footprints. I mean, you’re talking about hyperscale. There’s also exascale coming, which is even bigger [and] has as much electricity needs as a mid-sized city, just 1,400 acres I think – a kind of mind-boggling space. But it’s a benefit to you that you’re talking about hundreds of jobs coming here as opposed to thousands? That’s not the way, I suppose, city managers of larger areas … that’s not their calculation. They may say the more jobs, the better.
Morgan: Yeah, and that’s kind of where with economic development, it’s the old real estate adage of location, location, location. And something like a hyperscale data center might not make sense in Beaverton, but it fits really nicely in Hermiston. And even on the other end of the spectrum, a place like Burns or somewhere like that, a hyperscale data center may overwhelm that community. But for a community of our size, they fit really well.
Miller: I’m curious about this question of public sentiment. You were talking about the ‘90s to the 2000s, into 2020. It seems to me that there has been a growing national and surprisingly bipartisan backlash against data centers much more recently than that, in just the last, I don’t know, year, 18 months, two years. Have you seen that here? We’re talking about everywhere from Texas to the Midwest, Pennsylvania, obviously in Oregon as well, in Hillsboro. There’s statewide questions now about the future of data centers and concern from a lot of different quarters. Have you seen that here more recently?
Morgan: The short answer is no. The long answer is we’ve certainly seen that, just kind of nationally coming up. But I think you have to, again, kind of keep the context of our community in mind. So, our best estimates, trying to triangulate all the different employment numbers that we can get from our own data, that we have some good data on – being able to figure out how many people work there and those types of things – as well as triangulating it with the state employment office [and] the numbers that the company themselves will give, you kind of have to take all of them together. We estimate that there’s currently somewhere around 2,000 to 2,400 people working permanent full-time operational jobs in the data center industry here in the region.
Miller: Twenty-four hundred?
Morgan: Yeah.
Miller: How many people are growing watermelons?
Morgan: Very few.
Miller: It sounds like a silly question, but obviously, I suppose [it] gets at the question of community identity. Watermelons are everywhere. They’re in the city logo. They’re on posters and t-shirts. Watermelon Fest is coming up just this weekend, in a couple of days. I don’t suppose you wanna call yourself a data center city, but way more people work in data centers now in this region than growing watermelons. What does that mean in terms of a community identity?
Morgan: Well, I think Hermiston’s sort of an interesting outlier in the Eastern Oregon region in the sense that we’re actually a growing community and have been for a number of decades, whereas a lot of the other communities in Eastern Oregon aren’t. And a lot of the ones that aren’t, they rely on government jobs, essentially working for the Forest Service or others. So we’re much more heavily focused on private-sector employment.
One of our single largest employers here when I came to town was the Umatilla Army Depot, when they were demilitarizing the Army Depot, and that had over 1,000 jobs that went away since they finished their mission. We’ve had other large private employers that have ceased operations. They come and go, and they ebb and flow, but generally they tend to be in manufacturing, warehousing and those types of operations. So, the community is used to seeing these types of private sector jobs.
Miller: Amazon is worth close to $3 trillion – that’s their market cap right now. How much leverage do you feel like you have, as the assistant city manager of a relatively small city in a relatively small state, going up against literally one of the biggest, most powerful, richest companies in the history of the earth?
Morgan: Yeah. I think we have plenty of leverage.
Miller: But where does it come from?
Morgan: Well, we understand our place in the market. So exactly to your point about a growing sentiment backlash against data centers nationally, we recognize that, and we understand where we sit in the market as far as where else they could go. We understand what we have here locally, so we leverage that to our own benefit.
Miller: In what ways? I mean, obviously you have access to water, which we’ve heard a lot about this week. It’s one of the reasons that some people are very much against data centers here and elsewhere. There’s electricity. There are cool evenings, often which is better for the hot servers.
Morgan: And good for watermelons, too.
Miller: Right? That’s what I’ve heard. And there’s also land. But you’re not the only place in the U.S. that has all four of those things or most of those things.
Morgan: Yeah.
Miller: You’re saying that part of your leverage comes from the fact that you have a populace that is amenable to data centers.
Morgan: Absolutely.
Miller: But they can still say, you know what, if you’re not going to give us a sweet enough deal, there is some other place somewhere that we can go to. I mean, when they say that, I guess I’m just still wondering, in the end, how much bargaining power you have.
Morgan: I suppose they’re welcome to go somewhere else and we’ll see what they do. So, no, I don’t think we’re concerned much at all about that currently, heading into our future developments that we have coming down the pike.
Miller: You had a meeting earlier this week, I understand, with Amazon talking about workforce housing. What came of that?
Morgan: They’ve been a great partner, to your point about investments in the region. They pay fees through the enterprise zone program. But they have also made significant contributions to the community elsewhere. One of those is they contributed $10 million to the city to develop an RV park at essentially our county fairgrounds that’s here in Hermiston. So that’s adding about 200 RV spaces. They had an interest in making that donation so that their construction workforce would have a place to go, and we see that as a major benefit to alleviating some of the housing issues here in the region.
The conversation that we had this week was very preliminary. So it’s part of their outfit that goes into some of the areas where they have their major employment bases such as Seattle, Washington DC and one other location. But it was a really preliminary discussion this week.
Miller: What’s been happening with water? That’s another place where they have been making investments in, as I understand it, underground water storage. Where does that stand?
Morgan: We’re actually really proud of the work that we’ve done with Amazon, and frankly, I think they do a good job of managing their water resources here. I think whatever your listeners might think a data center campus utilizes in terms of water, I can tell you that here in the Hermiston area, the amount of water that gets utilized in the data centers here is exponentially less than whatever that number is. Obviously, we see numbers like, oh well, a data center campus uses as much water as a city of 50,000 people or something like that. I can tell you that’s not the case here. I can tell you that an entire hyperscale data center campus in the Hermiston region uses about 22 million gallons of water a year. And that sounds like a large number because I can’t drink 22 million gallons of water even in a year, right? So what does that mean? We kind of have to stop and contextualize it a little bit.
We’re the water utility, we supply the water to multiple hyperscale campuses here in Hermiston, so we know exactly how much water we send them. So when we look at our other customers, we have 6,000 utility accounts, about 5,500 are residential accounts. Our median residential water customer in Hermiston, over the course of an entire year, uses about 170,000 gallons of water. The vast majority of which is used for just watering their lawns and landscaping, those types of things. So, one entire hyperscale data center campus in Hermiston uses about as much as 129 homes in Hermiston. So, that’s the total amount of input water that they’re taking into their campus.
But the portion that I mentioned that we’re really proud of is they worked with us to fund what we call our aquifer storage and recovery project. That’s a project where they had to come in and pay to develop the infrastructure to bring water to some of their campuses – so pumps, motors, pipes, all those types of things. And it has to be sized enough to cover the hottest day of the year. So covering that June 2021 Pacific Northwest heat dome when it’s 118 degrees in Hermiston, they have to be able to cool their servers then. But the other 99.9% of the time, there’s excess capacity there, essentially.
What the aquifer storage and recovery program does is we drill a well just like any other drinking water well down in the basalt aquifer, and then we utilize the infrastructure that pulls water from the Columbia River that we treat to a potable drinking water standard. So we take that infrastructure, pull water from the Columbia River all winter long, and just pour it down that well. It builds a large bubble underground. Then our plan for all of those future campuses in that 800-acre UGB expansion that you mentioned, [is that] we will never send them a single drop of water to those campuses south of Feedville Road that we pulled from the Columbia River in the summertime. It will be supplied entirely with water that we pulled from the Columbia River in the wintertime, when it’s, I don’t want to say not needed, but less needed by farmers, fish and those types of uses.
Miller: How do you think about the number of eggs you’re putting into the data center basket? Broadly, your work is in economic development. We’ve been focused solely in this conversation on data centers because they’ve become such a huge component of economic development here and in many other places, but a lot of folks talk about the possibility of a bubble bursting. How much do you think about diversification of your own sort of city portfolio?
Morgan: I think that’s, again, why it works out well for a community of our size and maybe not for a place like Burns or somewhere like that, because I see the data centers, frankly, as diversifying themselves. That’s one of our primary drivers. As an economic developer, you hit the nail on the head. I’m always concerned about diversifying the local economy. Prior to the data centers showing up, we had food processing, logistics, and frankly, state employment at the prison. Those were kind of the three main drivers of our local economy. So, adding a completely separate sector helps us to actually diversify.
Miller: But at what point does what began as diversification become over-reliance? What percentage right now of city coffers, in terms of either proper corporate property tax revenue or fees in lieu of those, what percentage of that right now is from data centers?
Morgan: Boy, I don’t have a number off the top of my head, but I can tell you this past year they paid about $2.6 million to our enterprise zone. The entire city of Hermiston’s annual budget is around $130 million. So it’s a couple percent right now. It’s probably going to grow, we know that it’s going to grow. But that’s just where we have to be judicious and make sure that we’re making those investments in things that can withstand future shocks in the economy.
Miller: We focused obviously on data centers for this conversation, but in the time we have left, before we say goodbye, I’m just curious what you want Oregonians to know about the other big issues that Hermiston is facing right now.
Morgan: Well, you’ve been hitting the nail on the head. Data centers have been all encompassing in my world these days. The growth associated with data centers is really one of our single largest issues because it touches so many different components of the community, from housing to infrastructure to all of those different things. So, it’s been a good thing in the sense that we have a growing local economy and it’s stimulating a lot of growth and activity in the community, but it’s challenging that we have to work through those.
Miller: Mark, thanks very much.
Morgan: Thank you.
Miller: Mark Morgan is the assistant city manager of Hermiston.
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