by Robert Lemos

Wine, Roses & Tax Breaks: States Woo Data Centers

Jun 17, 20093 mins
Data Center

As cash-strapped states court tech giants building data centers, companies find that moving away from the West coast and the Northeast pays dividends. In this dating game, Iowa's hot, and California's not.

Hit hard by the recession, several states are looking to server farms and cloud computing facilities to help them keep jobs in their territories. The thinking: There’s nothing like a data center to boost a state’s economy.

Earlier this month, Gov. Bev Perdue, the governor of North Carolina, announced that Apple had agreed to locate its next data center in the state. Perdue’s office estimates that the project could bring in $1 billion in revenue for construction companies and other services over the next decade, creating 3,000 jobs.

Why North Carolina as a data center hotspot?

“We think it is a combination of things,” said David Kochman, a spokesman for the governor’s office. “North Carolina has a well-trained work force for technology jobs, a high quality of life, and we have quality infrastructure to support growing business. And, in some case there are (tax) incentives.”

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States have shown they’re willing to give significant tax breaks to companies that bring technology jobs to their regions. Just prior to the Apple win, North Carolina’s General Assembly passed a law to give income-tax adjustments to companies, such as Apple, that establish capital-intensive industries in the state. In 2007, North Carolina allowed some high-tech businesses to escape taxes on electricity and on the property used for the data center. Such incentives convinced Google to sign on to put a server farm in the foothills of the Blue Ridge Mountains, according to a New York Times article written at the time.

The reward for the states is clear: Technology jobs and their trickle-down effect.

“Technology-driven projects like this may bring fewer overall jobs than traditional industry, but they have a tremendous economic impact through locally purchased goods and services,” Commerce Secretary Keith Crisco said in a June 3 statement announcing the Apple win.

Yet, the price can be dear: In 2007, critics estimated that North Carolina gave Google a bye of more than $1 million per job, according to the New York Times.

Data centers are particularly attractive for states between the coasts. For some people, the mid-western states are “fly-over country,” not typically seen as technology meccas. Yet, states such as Iowa are increasingly attracting the attention of high-tech companies looking for a place to put their data centers. Iowa has relatively inexpensive land, plentiful wind to power green data centers, and inexpensive living costs. The state is also not above giving good tax breaks to key companies.

In 2007, Google announced plans to develop two data centers in Iowa. A year later, Microsoft announced plans for its own data center; though it has delayed its plans for the time being, the governor’s office says it’s a question of when not if for the Microsoft project. Others will likely follow, says Michael Keen, senior solutions architect, of Alliance Technologies’ enterprise architecture group.

“The fly-over country is not something that people on either coast really think about, but now we are seeing a lot of companies looking at moving their cloud services and data centers here,” he says. “Google saw it. Microsoft saw it. Other companies are looking as well.”

Alliance Technologies—which offers services around applications, storage and virtualization—runs a huge data center in Des Moines. The company aims to lure talented high-tech workers from other states, Keen says.

“There is 150,000 person gap in talent,” he says. “These data centers and call centers that are coming here are definitely working to keep talent in the state.”

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