Apple’s billion-dollar data center ‘puts Iowa on world stage’

Source: By Kevin Hardy,Kim Norvell and Patt Johnson, Des Moines Register • Posted: Friday, August 25, 2017

State and local officials awarded Apple Inc. more than $213 million in incentives to build a proposed data center in Waukee. Ben Yoder/The Register

Apple Inc. CEO Tim Cook joined Gov. Kim Reynolds Thursday afternoon at the foot of the Iowa Capitol to announce the tech giant’s plan to build a $1.375 billion data center on the western edge of Waukee.

Earlier in the day, state and local officials awarded Apple Inc. more than $213 million in incentives to build the 400,000-square-foot project. That includes $194 million from Waukee and $20 million from the state.

“This puts Iowa on the world stage,” Reynolds said. “This gives us an opportunity with a global company like Apple to say ‘we are the place to be, this is where your business should locate.'”

Asked if cash-strapped Iowa could afford to hand over that much in new tax breaks, Reynolds pointed to the optics of landing one of the world’s most ubiquitous companies.

“This is Apple,” she told reporters. “They chose Iowa.”

Pressed further, Reynolds said the tax breaks won’t come directly out of state coffers. “These are (tax) credits. It’s not a check,” she said.

Critics were quick to admonish the Republican administration for handing over millions for a project that is expected to create a minimum of 50 jobs. But Reynolds focused on the clout that will follow the country’s most profitable company to Iowa.

Apple plans to build two “state-of-the-art” data centers on 2,000 acres of farm land recent annexed into Waukee.

The city will provide Apple with 71 percent property tax abatement over 20 years — an incentive worth $188 million. The company will pay about $76 million in property taxes during that time, Waukee City Administrator Tim Moerman said.

Waukee also will invest about $6 million to extend its water and sewer infrastructure to Apple’s site.

Apple in turn has pledged to contribute up to $100 million to a public improvement fund that will be used for infrastructure improvements and quality-of-life projects throughout Waukee.

In an exclusive interview with The Des Moines Register, Cook said tax incentives matter, but are not his main focus of bringing the project to Iowa.

“We’re the largest taxpayer in the United States. Not by a little, by a lot,” he said. “But the thing I hope that we bring more than tax revenues ―  it’s important ― but I hope we bring something to the community that helps in a broader way.”

The data center will create 50 full-time jobs, which must pay a minimum of $29.12 per hour, per the state incentive program. Apple anticipates more than 500 construction workers will be hired to build the data centers.

Apple plans to begin construction in early 2018 and have the data center online in 2020.

Cook said Thursday’s announcement is just the first phase of Apple’s investment in Waukee and Iowa.

“This new data center will play a very important role in the App Store’s continued success,” he said. “And as the App Store grows, we look forward to growing in Iowa.”

Apple is the fourth tech giant to establish roots in Iowa, following Google in Council Bluffs, Facebook in Altoona and Microsoft in West Des Moines. The state attracts massive data centers because of its available crop land, access to high-speed fiber optics and low risk for natural disasters.

Cook said Iowa’s commitments to education in science, technology, engineering and math fields (STEM) and to renewable energy, including a growing portfolio of power derived from wind energy, is admirable.

“And we want to be a part of it,” he said.

This file video from 2014 has Principal Financial Group CIO Gary Scholten talking about how data centers encourage job growth and help the economic climate in Iowa.

The company plans to power the buildings with 100 percent renewable energy.

The data center will sit on 2,000 acres near the intersection of Hickman Road and S Avenue. The land is part of 3,500 acres annexed by the city in June. Waukee had previously planned to expand west of its city limits, but Apple’s project accelerated that timeline.

The city sold 200 acres for the Apple project to a company called Bravo Real Estate LLC, city documents show. The council purchased the land in 2004 for $7,000 per acre. It voted to sell the land at $25,000 per acre Thursday for a total of $5 million.

Waukee Economic Development Director Dan Dutcher said that in turn will open up the remaining 1,500 acres annexed by the city for commercial and residential development. Mayor Bill Peard declined to comment on Waukee’s incentives for Apple, other than to say it’s “pretty important for our economic development.”

“We look forward to the great benefits of this partnership and what it will bring to our community as the project develops over the next two decades,” he said.

Apple’s announcement was attended by city and state officials who touted the partnerships that Iowa put forward to attract the tech giant.

But not everyone is excited about the state’s plan to provide significant tax breaks to Apple while the state undergoes a budget crisis. State analysts have predicted a total budget shortfall of about $350 million for the year.

Apple had $256.8 billion cash-on-hand at the end of its the most recent quarter, which is a new record for non-financial companies, CNN Money reported.

Broken down, the state and city’s incentive package for Apple is equal to $4.26 million per permanent full-time position created.

That makes it the second costliest per job in the U.S., said Greg LeRoy, executive director of Good Jobs First, an organization that advocates for more accountability in economic-development incentives.

The only package more lucrative was Apple’s 2009 data center deal in North Carolina, which racked up $6.42 million in incentives per job, LeRoy said.

The Waukee deal is a “guaranteed loser for Iowa taxpayers,” he said. People in those jobs will “never ever pay” $4.26 million in state and local taxes, he said. “This is essentially a transfer from Iowa taxpayers to Apple shareholders.”

A lack of major economic development deals the size of data centers combined with local leaders wanting to appear aggressive on job growth have pushed incentives higher, he said.

“With Apple’s fame, what mayor doesn’t want to issue a press release with Tim Cook or the head of Facebook at their side? It’s guaranteed high profile media coverage,” he said. “It’s great bragging rights at re-election time.”

Apple CEO Tim Cook announces the companies plans for

Photos: Apple CEO Tim Cook in Des Moines

He also noted that Apple’s total subsidy package of $213 million would be the sixth highest recorded, although that some states don’t disclose those figures.

Debi Durham, director of the Iowa Economic Development Authority, said focusing solely on the number of jobs created is misguided. As the state board prepared to vote on its share of incentives, she told a packed board room that data centers are “really raising the profile in Iowa for tech and knowledge workers.”

“All eyes are on Iowa for building this technology ecosystem,” she said. “So it’s always unfortunate that we always focus on, ‘well, it’s just 50 jobs.'”

“We think this is a great banner day for Iowa,” Durham said. “It’s a great day to celebrate.”