Was Iowa’s data center success due to wind energy?

Source: By Paul Hammel and Andrew J. Nelson, Omaha WORLD-HERALD BUREAU • Posted: Wednesday, April 24, 2013

LINCOLN — Nebraskans looking for a reason why Facebook chose Iowa over the Cornhusker State for a $300 million data center might want to glance at the horizon.

In Iowa, you’re much more likely to see a row of wind turbines spinning away.

One of the factors cited Tuesday in steering the much sought-after project to Altoona, Iowa, instead of Kearney, Neb., is that renewable energy is a big deal for Facebook.

The social networking giant’s goal is to obtain 25 percent of the power for its data centers from renewable sources, like wind, by 2015.

And Iowa has it, ranking No. 3 nationally last year in the generation of wind energy, according to the American Wind Energy Association. Nebraska was No. 26.

“That surely made some difference,” said Debi Durham, director of the Iowa Economic Development Authority.

That, and possibly other reasons — such as a generous property tax exemption offered in Iowa and a top Facebook executive’s familiarity with the Hawkeye State.

While Iowans celebrated the landing of an economic big fish in a Des Moines suburb, Nebraskans wondered how the big one got away.

Facebook officials, during press events in Iowa, offered few clues.

Officials in Nebraska said they didn’t get any word on why Iowa won out, but there was speculation that it was a factor outside of their control.

Sheryl Sandberg, the chief operating officer of Facebook, had, in a former job, helped Google pick Council Bluffs for its data center.

Darren Robinson, president of the Economic Development Council of Buffalo County in Nebraska, said he sensed that Sandberg’s history with Iowa was a bigger factor than Kearney not meeting any requirement sought by Facebook.

“I can honestly say I don’t know what we could have done differently,” Robinson said.

In Altoona, Facebook officials said they looked at objective data in choosing the Altoona site. Sandberg’s past efforts on behalf of Google in Iowa had nothing to do with it, said Jay Parikh, Facebook vice president of infrastructure engineering.

By all accounts, it was a contest between Iowa and Nebraska for the Facebook project, which was known as “Project Edge” in Nebraska and “Project Catalyst” in Iowa.

Both states have passed laws in recent years to sweeten economic incentives for data centers. Such facilities don’t provide a lot of jobs — the Altoona project will create only about 30 — though they represent big investments.

The total value of the Facebook investment is expected to exceed $1 billion when the project is completed, Durham said.

The data centers require amenities found in the Midlands, such as available land, cheap electricity and no earthquakes or hurricanes.

For Iowa, it was another successful recruitment of a data center. It already had Google, which on Tuesday won approval of state tax breaks for a $400 million expansion of its Council Bluffs facility.

“High-tech. High-profile. This is really going to put Iowa on the world map,” Gov. Terry Branstad said before the groundbreaking for Facebook in Altoona. “This is a big deal.”

Altoona, population 15,000, is an eastern suburb of Des Moines, about 150 miles east of Omaha. It is home to the Adventureland Amusement Park and Prairie Meadows casino.

A Facebook official largely sidestepped the reasons the company chose Iowa, but he did say that tax incentives are just one factor, along with workforce, ease of physical access to the site and network connectivity.

“There (are) dozens of factors that go into deciding where and what type of location would be right for us,” said Parikh. “Usually you come down to a couple of really good choices and … we decided to come here.”

Iowa’s package of state incentives, approved Tuesday by the Iowa Economic Development Authority board, included up to $8 million in sales tax refunds on construction purchases and $10 million in state tax credits on its investment. The City of Altoona also agreed to waive property taxes for 20 years.

While Nebraska cannot offer such waivers of property taxes, its law to attract large data centers, passed a year ago because of Facebook’s interest, offered a variety of other incentives. Officials labeled them as “in the ballpark” with Iowa’s.

The package included refunds on all sales and use taxes paid for construction materials and any personal property purchased; a 10 percent investment tax credit; personal property tax exemptions for up to 10 years; and reduced electric rates.

Nebraska has scored a couple of data center victories. In 2009, Yahoo picked La Vista for a $140 million data center.

Last year, Fidelity Investments chose Papillion for a $200 million computer hub. That city provided a $260,000 break on sewer connection fees, and Sarpy County approved $2.9 million in road construction around the project.

Kearney, a central Nebraska university town of 31,000 people, offered a “shovel-ready” 169-acre site, equipped with utility lines and fiber-optic connections, next to its airport. Officials there said other companies have already looked at the location.

City Manager Michael Morgan said the site offered good potential for geothermal cooling of the data center. He and others, though, said they heard that a lack of wind energy and access to a major airport, plus the threat of tornadoes, might have been concerns.

“We did the very best job possible,” Morgan said. “We’re pretty proud that we were a small city in a small state and we competed on a national level” for Facebook.

Cathy Lang, head of the Nebraska Department of Economic Development, said Nebraska’s incentives and the effort of cities like Kearney make the state competitive for data centers.

Other officials said a large firm is scouting potential locations in Omaha.

A former state economic development director, Richard Baier, now of the Nebraska Chamber of Commerce and Industry, also said Nebraska’s tax incentives for data centers are competitive.

One weakness, Baier said, is that Nebraska provides sales tax rebates on purchases of data center equipment, rather than a simpler tax exemption, which would provide a tax break immediately.

But he said such business decisions often come down to unusual factors outside a community’s control. He recalled one Nebraska town that lost out on a company, after being told it had the best site, because an executive wanted to locate near a mountain ski resort.

“There are things that factor in that people don’t understand,” he said.