Data centers bringing big numbers to Iowa

Cedar Rapids area development leaders and policymakers have hailed the pending construction of a Google data center on the city’s southwest side, terming the project a “game changer” that promises to forever change the city’s economic fortunes.

Indeed, Iowa has become a hotbed of sorts for data center development, including large-scale projects by Google in Council Bluffs, Meta in Altoona, Microsoft in West Des Moines and Apple in Waukee.

But what has been the experience of those communities with data center developments? Has the impact of these developments been generally positive, or have there been drawbacks with these massive projects and their resource-intensive requirements?

And how will the proposed Google project in Cedar Rapids change the course of the city’s economic development efforts into the future?

Details still emerging on Cedar Rapids project

While the Google data center in Cedar Rapids remains a proposal and specific plans are not yet available, Cedar Rapids council members have already been eager to tout the potential project’s historic impact on the city’s economic development legacy.

“We have never done a development like this,” council member Dale Todd said in February, as the council finalized a development agreement with Heaviside LLC, the company set to develop the data center project. “I would suggest that you could take 30 years worth of development agreements and it still wouldn’t add up to what we’re doing here. So it’s a historic moment for (city manager) Jeff (Pomeranz) and your team.”

Under the development agreement, Heaviside LLC plans to develop “one or more” data centers in the Big Cedar Industrial Center, near the intersection of 76th Avenue and Edgewood Road SW.

The project would comprise a minimum capital investment of $576 million, according to the proposal.

The project would also include the addition of at least 31 full-time employment positions, all at or above the high-quality wage rate, which was $24.20 per hour in Linn County as of 2022.

Google was identified as the company behind the proposal in March, as part of an application for financial incentives from the Iowa Economic Development Authority board meeting. The board voted to approve the incentives March 22 as part of Iowa’s High-Quality Jobs program, comprising a 20-year, 70% tax exemption, subject to meeting minimum employment thresholds.

“We’ve been working on this project for a significant period of time. I’ve personally been involved in it for five years plus, and we’re very excited,” Cedar Rapids manager Jeff Pomeranz said during the IEDA meeting’s public comment period. “We think it’s going to make a real contribution to the city of Cedar Rapids, to the region, and state.”

In a statement, a Google spokesperson said the Cedar Rapids data center project remains under consideration.

“As demand for Google’s services increases, our capacity must grow to meet this demand,” the spokesperson said. “We are always planning for future capacity needs and are currently evaluating the potential for a data center site in the Cedar Rapids area. These are complex projects and development of the site is subject to a variety of factors, including but not limited to competitive energy rates along with a sustainable and sufficient energy supply.”

Cedar Rapids mayor Tiffany O’Donnell said the proposed Google project makes an important statement about the city’s capacity for large-scale tech developments.

“It’s an exciting moment for Cedar Rapids, in that we are able to provide the environment for a data center,” she said. “It's not every location that has the infrastructure that could support data centers like the one that Google is proposing and others are frankly interested in locating in Cedar Rapids. It's a real indicator of the health of our economy here, and it really will be, I believe, a linchpin for further growth.”

Iowa has become popular data center destination

A number of data centers have come to Iowa in recent years, developed by large-scale e-commerce and technology companies such as Google, Meta, Microsoft and Apple.

Google traces its Iowa history back to 2007, when the tech behemoth announced plans to build its first data center in Council Bluffs. Expansions were announced in 2012 and 2015, and the latest expansion, announced in 2022 and expected to be completed by 2025, will bring another $600 million addition to Google’s data center complex.

“Now a fully operational site, we've created jobs for over 900 people in a variety of full-time and external supplier roles, including computer technicians, engineers, various food services, maintenance, and security,” a Google spokesperson said.

State officials said Google’s capital investment in Iowa totals $2.3 billion to date, but Google itself says it’s invested more than $5 billion in its Council Bluffs data centers.

The Council Bluffs center ranks as one of Google’s largest data facilities globally and helps power popular digital services, such as Google Cloud, Workspace, Search and Maps.

“Iowa is building the infrastructure for American innovation,” said Allie Hopkins, Google’s global server operations area lead for Iowa and Nebraska, in a 2023 release. “It’s home to one of Google’s largest data centers, providing the infrastructure for digital services and AI innovations that serve people and businesses around the world.”

With 29 years of Council Bluffs city service, including the last 11 as mayor, Matt Walsh has witnessed Google’s developments in western Iowa from the ground up. He said the first data center, then a $600 million project, was established in a spec building near Council Bluffs’ downtown area, and subsequent facilities have been constructed along Interstate 29 on the city’s south side.

Aside from the significant site investment,Mr. Walsh noted that Google has donated hundreds of Chromebooks to the Council Bluffs School District, helping the district to establish a 1:1 relationship between students and laptop computers, and in 2011, Google partnered with several other community partners to launch BLink-Bluffs Free Community WiFi program, which provides internet access to more than 40,000 households in the community. Overall, Google says it has invested more than $3 million in community projects since 2009.

Another data center project is currently in the permitting process in Council Bluffs, Mr. Walsh said, and yet another has been proposed.

“As long as the electrical supplier can come up with enough electricity,” Mr. Walsh said, “there seems to be a strong appetite for data centers here.”

Just across the Missouri River in Nebraska, Google has announced $1.2 billion in data center investments, including a $600 million project in Omaha.

In West Des Moines, software giant Microsoft has built five data centers since 2008, with such catchy monikers as Mountain, Alluvion, Osmium, Ginger East and Ginger West. A site plan for a sixth center, dubbed Ruthenium, was just approved by the city council in February, and Microsoft has purchased land in Van Meter, a smaller community just west of the Des Moines metro area, for yet another data center project.

West Des Moines community and economic development director Ryan Moffatt said the city’s connection with Microsoft has become perpetual.

“At this point, we've got a relationship that goes back 12 to 14 years,” Mr. Moffatt said. “Every two to four years, we've seen a new announcement, and when they build, there are anywhere from four to six buildings on a campus. They'll finish one and roll on to the next one. So it's been a steady stream of projects for the electricians, the HVAC contractors —everyone who works on them.”

In 2022, Apple announced updated plans to build a $1.3 billion data center in the Des Moines suburb of Waukee. That project is now expected to be completed in 2027.

Meanwhile, Facebook and its corporate parent, Meta, has established its own data center footprint in Altoona. From its first data center project in 2013, Meta has expanded its operations in this Des Moines suburb seven times, and its current data centers cover more than 5 million square feet. According to Meta, more than 400 people work daily on-site in data operations.

Since 2013, Meta has poured 400,000 yards of concrete, erected 26,000 tons of steel, and accumulated 8.7 million work hours.

Chad Quick, economic development director for the city of Altoona, said the Meta data center projects have largely been constructed on land unsuitable for other types of development. Since then, Meta development projects have continued virtually unabated, he said.

“For the most part of a decade, they've had 1,000 construction workers on site every day,” Mr. Quick said. “They built huge parking lots to house the construction workers. They built a 30,000-square-foot temporary construction building for the contractors, as well as other ancillary buildings. They have a bus system that runs employees to the different sites. That's a lot of extra people in town — people that are spending money in restaurants and hotels, people that have moved to the region for inspection jobs. They’ve definitely had a big impact.”

Economic impact includes higher property valuation, ancillary development

While many of the Iowa communities with data centers have seen separate developments — and in many cases, population growth — the data center projects have, first and foremost, significantly boosted their communities’ tax base.

Mr. Moffatt noted that while West Des Moines is the seventh-largest city in the state in population, it has the third-highest assessed property value, behind only Des Moines and Cedar Rapids.

“They've been property tax cash cows,” he said of the Microsoft data centers. “That's been the biggest incentive for us. There's certainly all kinds of ancillary benefits, when it comes to the well-paying job base that it brings. Obviously, that’s been one of the knocks on these projects, that they usually don't generate a ton of jobs once the facilities are constructed. That's true relative to the capital investment that's made, but the jobs that they do bring, they’re technicians, electricians and contractors that need to continuously service and operate these projects.”

Substantial improvements in road improvements have also come to pass thanks to the Microsoft projects, Mr. Moffatt said.

“My predecessor would say that we were doing road projects that he didn't contemplate would ever happen in his lifetime, let alone his career here,” he said. “The increment that's coming off these data centers is allowing us to accomplish that. And what that's done for us now is it’s allowed us to open up over 4,500 acres for new development.”

According to Meta, when its latest expansion in Altoona is complete, an average of 1,000 construction workers will have been consistently on-site in Altoona for more than 12 years.

Mr. Quick said Meta has also helped with significant infrastructure improvements in the area, from sanitary sewer and water lines, water booster stations, and a new water tower, all helping to spur additional industrial development in the area.

“That has helped put the area on the map,” he said. “And we now have either built, or plans for, about 5 million square feet of warehouse space in that area. Meta has provided some infrastructure in an area where we didn’t have it already, and it's just made everybody a little more conscious of the area and its access to the interstate.”

Tech companies invest heavily in communities

Large tech companies have also become known as strong community supporters in the areas where they’ve established a significant infrastructure presence.

According to Mr. Moffatt, Microsoft has contributed to over 70 nonprofit organizations in West Des Moines through their charitable division.

“When they put down roots in a community like this, they like to give,” he said. “They've helped us build an amphitheater. They’ve helped with enhancing our bike trail network. They've provided WiFi in our historic Valley Junction neighborhood. And that's just the shortlist.”

Google says its community investment program “supports organizations and initiatives that focus on issues we’re passionate about, including education, sustainability, access to the internet and technology, economic growth, health and science, and the arts.”

And through grant programs and sponsorships, Meta says it has invested more than $2.6 million in the Altoona community.

“We’ve helped build STEM education curriculums at the Southeast Polk and Bondurant-Farrar Community School Districts,” a Meta representative said. “During the COVID lockdowns, we infused funds into small businesses, schools, and nonprofits to create safety nets for community members and students. And we look for opportunities to assist with special projects, like supporting the buildout of the Altoona and Bondurant access points to the ICON Water Trails project, which will improve 150 miles of waterways for Iowans.”

Mr. Quick said Meta has a Community Action Grants program focused primarily on school districts and nonprofit organizations. "Their focus is usually around technology,” he said, “using technology to either better students, the community, or whoever the nonprofits are serving. They're members of the Chamber of Commerce. They participate in charity golf tournaments and events like that. They're definitely good community partners.”

Resources largely not an issue

While some concerns have arisen about data centers’ heavy use of electricity and water resources, the issue hasn’t been particularly prevalent in Iowa so far.

In Council Bluffs, Mr. Walsh attributed Council Bluffs’ success in attracting data centers to an abundant water supply, courtesy of the neighboring Missouri River, and the availability of substantial renewable energy.

Mr. Moffatt said Microsoft hasn’t used as much water as initially expected in their data centers, due in part to Iowa’s relatively moderate climate.

“These data centers so far have been evaporatively cooled, which means that they're big users of water, but only seasonally,” he said. “There’s been a lot of scrutiny as we've had multi-year droughts, but they've been a partner on that front, knowing that they are one of our largest water consumers. They've basically agreed to pay for an entire water tower for the city. And then most recently, they're doing a big aquifer well as well. So that's almost $30 million that they've just given to us, basically, to enhance our water system.”

Meta says it has a company-wide goal to continue to build and operate the most energy efficient data centers in the world.

“The Meta Altoona Data Center will continue to be supported by 100% renewable wind energy,” the company says. “We recently reached our goal of net zero emissions in our global operations, and we intend to reach net zero emissions in our value chain by 2030."

Google, meanwhile, claims to be the first major company to set a 2030 target to run its business on carbon-free energy in all of its data centers and campuses worldwide.

Ms. O’Donnell said Google’s support of sustainability is welcome, as the company grows closer to building a Cedar Rapids data center.

“I’m excited about the prospect of having an organization like Google that is committed to sustainability, alongside the powerful work that they do,” Ms. O’Donnell said. “Google’s sustainability goals are well aligned with Cedar Rapids’ community climate action plan, and that's something that the city takes into account when entertaining any organization that wants to set up shop in Cedar Rapids.”

The city is also pursuing other environmentally-friendly development projects, Ms. O’Donnell said.

“These conversations are happening all the time, understanding that we have a unique opportunity,” she said. “And it sounds like we have a willing partner in Google, in terms of a company that's open to looking for new ways to be responsible with the environment.”

Will data center developments continue to grow?

Through the High-Quality Jobs program, tax abatements and other economic incentives, state and local development officials have focused on data centers as a primary opportunity over the past two decades.

And with affordable and ample wind energy, a stable electrical grid, a high density of telecommunications infrastructure and low construction costs, coupled with industrial parks and other designated development areas, Iowa appears to be well-positioned for even more data center development as the world continues its data-driven revolution.

“I think a lot of other states are starting to replicate Iowa’s approach now,” Mr. Moffatt said. “And there are more conversations going on at the state about perhaps even pulling back on some of those programs, because the need for these centers is speeding up so much with AI right now that these projects are going to come whether incentives are offered or not.”

Past performance is likely an indication of future intentions, Mr. Moffatt said.

“When these companies buy these big chunks of property, they don't just do it to put one or two buildings on,” he said. “They're making an investment for the long term. That's been our experience, anyway. Even if the companies can't commit, from a public standpoint, to their ultimate plans, they buy these big properties for a reason.”

With so many Microsoft expansions in recent years, new announcements have almost become commonplace, Mr. Moffatt said.

“It’s kind of lost a little bit of the luster that maybe it initially had, when we talk about ‘here's another billion dollar investment,’” he said. “They’re not so much of a game changer anymore, since they've become so common.”

Ms. O’Donnell hinted, not so subtly, that another significant development could be on the horizon in the not-so-distant future — a project that could move even faster than Google’s proposal as Cedar Rapids looks to set a new economic development course.

“We are blessed here,” she said, “not just with our unique geographic location and our natural resources, but with leadership that understands the value of all of that.”