El Paso’s top city officials said the municipal government cannot back out of a tax break agreement it granted Meta Platforms, Inc. in exchange for the company developing a data center in Northeast.
City Manager Dionne Mack and City Attorney Karla Nieman issued the statement Wednesday, a day after city Rep Josh Acevedo said he was placing an item on City Council’s June 9 meeting calling for a vote to break the contract with Meta.
“Many residents have asked whether the city can simply cancel the Meta agreement. The answer is no,” Mack and Niemen said in the joint statement. “The project was approved through legally binding agreements adopted by the City Council in 2023.”
Attempting to terminate the tax break agreement that council voted to approve during an open meeting in December 2023 would “likely result in significant legal challenges, and there is little reason to believe (Meta) would voluntarily abandon a project after investing substantial resources in El Paso,” the statement read.
Acevedo – whose district comprises portions of South and Central El Paso – is calling for a vote to direct the city manager and city attorney to “initiate negotiations to terminate the Chapter 380 Economic Development Program Agreement and any related incentive agreements with Wurldwide LLC and Meta Platforms, Inc.,” according to a draft of the agenda item obtained by El Paso Matters.
The move by Acevedo comes after months of increasingly intense public backlash to the data center project. Opponents argue Meta’s facility will consume unsustainable levels of groundwater, produce air pollution as a result of the data center’s dedicated gas-fired power plant and create too-few jobs to justify the tax breaks and resource usage.
Acevedo said in a press release that he was motivated to cancel the deal by “significant public concern regarding utility affordability, water resources, environmental impacts, infrastructure burdens, transparency concerns, questions regarding contractual enforceability and governmental immunity, and the adequacy of projected public benefits associated with the project.”
The economic development agreement the city executed with Meta in late 2023 grants the company an 80% break on city property taxes for decades, and the city also provided $12.5 million to improve road infrastructure near the data center site.
The set of tax break agreements between the city and Meta include performance-based clauses that require Meta to invest at least $800 million, hire at least 50 workers and meet construction timeline requirements.
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The agreement doesn’t appear to give the city much room to unilaterally cancel the incentive agreement without cause so long as Meta hits the hiring, construction and investment requirements. Since the deal was executed, Meta has said it will invest $10 billion and hire 300 workers. The first portion of the data center campus is expected to begin operating next month.
“Attempting to terminate a legally executed agreement without contractual basis exposes El Paso taxpayers to significant legal liability, years of litigation, and potentially substantial financial damages,” Mayor Renard Johnson said in a statement posted Wednesday on social media.
“It could also harm El Paso’s reputation as a place where businesses, employers and investors can trust that agreements approved through a public process will be honored,” Johnson said.
His opposition is significant because he has veto power over City Council actions, which would require the votes of at least six of eight council members to override.
City Council unanimously approved the tax break agreements with Meta on December 5, 2023, under former Mayor Oscar Leeser. The only city representatives currently serving who voted on the deal are District 8 Rep. Chris Canales and District 6 Rep. Art Fierro.
City-owned El Paso Water is supplying water for cooling to the data center through a water supply agreement that permits average usage up to 1.5 million gallons per day. The utility has estimated the facility’s actual usage will average 400,000 gallons per day. Last year, El Paso Water supplied an average of 108 million gallons of water to customers per day.
Meta has said it will replenish twice as much water as its data center uses, but the company hasn’t said how that will work in practice.
El Paso Electric is building an almost $500 million, 366-megawatt natural gas plant dedicated to Meta’s facility in partnership with a Houston-based generator company called Enchanted Rock. El Paso Electric is charging Meta for the cost of the facility through a special data center rate. However, it’s possible the utility after five years will shift the plant from serving only Meta to providing power to all its Texas customers and bake the cost of the facility into customer rates.
The power plant El Paso Electric is building for Meta is permitted by the state’s environmental regulator to emit a certain amount of pollution annually, including 47 tons of particulate matter, 98 tons of carbon monoxide, as well as 68 tons of nitrogen oxides and 19 tons of volatile organic compounds, which react with NOx to produce to ozone pollution.
El Paso regularly exceeds safe levels of particulate matter pollution set by the Environmental Protection Agency. Ozone pollution also often exceeds safe thresholds in parts of El Paso. Carbon monoxide levels in the city last year were well within the safe threshold set by the EPA.
The amount of greenhouse gases the Meta power plant will emit is not clear, but staffers with the city’s climate office have said the proposed data centers in El Paso city limits – Meta as well as a data center planned on Fort Bliss property – would increase the city’s greenhouse gas emissions significantly. The climate action plan the city adopted this year instead calls for reducing greenhouse gas emissions in the city.
“The outcome for the regional (greenhouse gas) emissions and co-pollutants can be devastating, directly impacting the goals set in the CAP,” reads the city’s draft policy framework on data center projects.
READ MORE: Proposal: No tax breaks, incentives for future data centers within city
Mack and Nieman said attempting to cancel the contract could force costly litigation without necessarily blocking the data center project from advancing to operation. The city has previously said backing out of the agreement with Meta could lead the city to face liability of $1 billion, although how the city arrived at that figure isn’t clear.
“The city could find itself spending millions of taxpayer dollars on years of litigation while the project continues to move through the legal process,” the statement from Mack and Neiman read. “The practical question is whether taxpayers should be asked to absorb potentially significant unbudgeted legal costs in an effort to undo agreements that were lawfully approved and relied upon by a company that has already invested millions of dollars in our community.”
The post El Paso officials say city can’t cancel Meta data center deal appeared first on El Paso Matters.
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