Facebook windfall to be shared with Menlo Park city

SAN FRANCISCO Fri May 18, 2012 3:32pm EDT

SAN FRANCISCO May 18 (Reuters) - It's not just employees of Facebook Inc and its original investors who are expecting a big payday from the No. 1 social network's much-anticipated initial public offering.

Some of Facebook's wealth is also slated to help fill the cash-strapped coffers of California and the smaller but still needy ones of Menlo Park, the Silicon Valley city where the company is located, although not in the form of taxes.

In a voluntary agreement with the city's government, Facebook will soon pay a lump sum of $1.1 million, a move Mayor Kirsten Keith hopes will be followed by another $500,000.

The initial outlay to help fund capital projects for the city will be followed by additional annual payments of $800,000 for five years, $900,000 for the following four years and $1 million in subsequent years.

The payments will help Menlo Park respond to Facebook's expansion and its traffic. The company currently has 3,500-plus employees and plans to develop a new campus - and there is an expectation the growth will lure more business to Menlo Park.

"Whenever you hear Facebook, you'll hear Menlo Park. That's just priceless," Keith told Reuters in an interview. "Other companies will want to be around that."

Keith says a future "ecosystem" of high-tech firms could establish itself in Menlo Park to develop products and services complementing the social network, providing more revenue to the city.

Menlo Park faces a budget gap of about $1 million for the 2013 fiscal year beginning on July 1 and money slated to arrive from Facebook next January will help close the shortfall, said City Manager Alex McIntyre.

Facebook's payments to Menlo Park will help replace revenue that was generated on the company's campus when it housed a Sun Microsystems facility that generated about $800,000 a year in sales tax revenue for the city.

Earlier this week, California's Legislative Analyst's Office estimated that California will see $2.1 billion in revenue linked to Facebook's IPO through its next fiscal year. The estimate was based on the expectation the company's shares will rise to $45 a share in six months from the initial public offering price of $38.

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