Microsoft and Facebook Arm Themselves for a Billion Dollar Iowa Data Center Gamble

1 May 2014 by Technology

"In the past month, both Microsoft and Facebook announced that they would be building new billion-dollar data centers in central Iowa. Facebook noted that it was adding a second facility to its Altoona data center campus, while Microsoft revealed that it was the company behind plans dubbed ""Project Alluvion"" to build a data center on 154 acres of land in West Des Moines. So what's driving the sudden wave of interest in Iowa?

Facebook's Altoona 2 Data Center
Facebook first announced plans to build a data center in the central Iowa town of Altoona a little more than a year ago. In a post on Facebook, the company explained that the project - a 476,000-square-foot facility - is progressing steadily. Now the company is planning to add a second facility to the same campus, pending local government approval. The Altoona 2 facility is expected to be approximately the same size and layout as the first Altoona data center.

The Des Moines Register noted that this building will be the second of three in what is, overall, a $1 billion project. To sweeten the deal for the social networking company, the state handed out $18 million in tax credits, while the city of Altoona will forgo all property taxes on the building for 20 years.

However, beyond tax incentives, there were other reasons - some financial - attracting Facebook to the region, the Business Record reported last year. A nearby power substation, fiber optic cable infrastructure and relatively low water and electrical rates were all incentives, according to Altoona City Administrator Jeff Mark. The city council agreed to a special discount water rate for customers using more than 9 million gallons of water a month. Additionally, Mark explained, the fact that a tornado has never touched down in Altoona made the location a good choice from a weather perspective.

""We are thrilled to see you move forward on the construction of another data center in Altoona,"" the Greater Des Moines Partnership commented on the Facebook announcement. ""The momentum from the first project has made a huge impact on development in our region and we celebrate the business opportunities it has created.""

Microsoft's West Des Moines Data Center
Microsoft recently revealed, upon approval of promised incentives, that it was behind the mysteriously named Project Alluvion, which is comprised of a 1.16 million-square-foot facility on 154 acres in West Des Moines. This month, the Iowa Economic Development Authority Board approved a $20.3 million sales tax rebate, available through 2021, for Microsoft's $1.1 billion project, the Des Moines Register reported. Additionally, Microsoft has been promised $18 million in incentives from West Des Moines.

To earn those incentives on the state level, the company agreed to create 84 jobs by the full build out, with 66 that have a wage of $24.32 an hour. At the city level, Microsoft agreed to add at least $255 million in taxable value to the city, which would translate to around $8 million annually in property taxes once the facility is completed, West Des Moines officials told the Register.

""This is a staggering amount of property tax dollars,"" said West Des Moines Mayor Steve Gaer.
Microsoft Announces its Plan To Open a Billion Dollar Facility in Iowa
Moving To The Midwest
In addition to these projects, which show the state's and local communities' willingness to work with companies to attract data center investments, Iowa has a number of features that make it attractive as a data center location. In the heart of the Midwest, it's isolated from coastal weather incidents, centrally located to provide low latency connections to either coast and in a region with relatively cool weather much of the year. With clear incentives prompting projects from market leaders like Facebook and Microsoft, Iowa will likely be a place to watch in the data center industry in the months ahead."

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