Anatomy of a Deal: How WNY Landed Yahoo!

July 17, 2009

Anyone who uses a personal computer is familiar with Yahoo!, which provides Internet search engine and web directory services worldwide and is the second most visited website in the U.S. and in the world. An American corporation headquartered in California’s Silicon Valley, Yahoo! Inc. was founded by two graduate students in 1994 during the early stages of the “dot-com” information technology boom. The domain attracted at least 1.575 billion visitors annually by 2008 according to Web traffic analysts.

Yahoo! has been siting more and more of its regional data centers, which use large amounts of electricity, around the country and the globe to support its Web operations. The company contacted state officials last fall about possibly locating such a facility somewhere in the state, and Empire State Development Corporation, our state’s economic development arm, quickly put Yahoo! in contact with Buffalo Niagara Enterprise. A private sector-driven entity, the BNE is the eight-county Western New York region’s lead economic development, business and marketing agency. Although BNE officials initially did not know they were dealing with representatives from Yahoo!, they knew that a $150 million project with up to 125 high-paying jobs was on the table. They also knew they had to respond within five business days or lose any hope of landing the deal. Initially, they could only come up with two locations, but Yahoo! revised its criteria and the BNE was then able to propose six locations throughout the region that were all certified by the state as being “shovel-ready,” with most of the preliminary environmental and utility work already completed.

By this spring, the BNE knew they were dealing with Yahoo!, which on several occasions sent teams to Western New York to visit all the sites and speak with local officials, property owners, utility companies and others who might be involved in the project. After multiple visits, Yahoo!’s site selection team focused on two sites, one in the Town of Lockport Industrial Park adjacent to the sprawling Delphi Automotive Systems plant and another in a Genesee County high-tech business park that had been added to the mix.

The Lockport site in Niagara County was chosen when the Town of Lockport, through its local Industrial Development Agency, committed to sell a 30-acre parcel in the IDA-owned industrial park to Yahoo! and to provide both a 20-year abatement of county and state sales taxes on construction materials and equipment and a 20-year phased payment-in-lieu-of-taxes or PILOT to replace property taxes. The state will provide discounted hydropower from our New York Power Authority geared to the number and type of jobs created.

While attracting this significant investment and 125 well-paying jobs is certainly good news in today’s challenging economy, perhaps the most important aspect of this win is the positive message that it sends to other companies around the nation and the world: New York State and Western New York in particular are poised to play a big part in the global new economy.