The two large-scale data center projects slated for southwest Cedar Rapids are moving ahead, after the Cedar Rapids City Council, at its regular meeting Jan. 28, approved the first reading of an ordinance setting an urban renewal area for the Google data center development and authorized a formal development agreement for the Quality Technology Services (QTS) data center project.
Both the $576 million Google project and the $750 million QTS project are to be built in the Big Cedar Industrial Center, a 1,391-acre commercial park owned by Alliant Energy northwest of the intersection of 76th Avenue and Edgewood Road SW.
City manager Jeff Pomeranz discussed, at length, the benefits of the two-phase QTS project for Cedar Rapids. While acknowledging the project will only bring 15 long-term employees per phase, it will bring 500 or more construction jobs in its 10-year construction timeframe.
He also noted that during his time as West Des Moines city manager, “we started the Microsoft data center, and that has grown exponentially as a resource for the Des Moines metropolitan area.”
In Cedar Rapids’ case, the QTS data center will return an estimated $18 million in community betterment payments to the city over a 20-year period, to be used for city improvement projects and nonprofit agencies, he said.
“This is going to be a billion dollar project,” I think the actual agreement says $750 million, but I’m always optimistic. So say it’s $750 million. Well, that is a tremendous number for our tax base in Cedar Rapids. But to have a company say we’re going to spend $750 in your community, it’s the largest, maybe top two economic development projects in the history of Cedar Rapids, and one of the largest in the state of Iowa. So that is absolutely significant.”
Under the development agreement, QTS will construct a data center campus with a minimum of two phases. Construction of the first phase will begin within three years of the effective date of the development agreement, with the second phase beginning within three years of the completion of the first phase. Both are expected to be completed within six years.
Any additional phases, if pursued, will be completed within 25 years of the development agreement.
Under the agreement, the city agrees to provide 20 annual rebate payments per project phase at 70% of the tax increment created from the value added by the minimum improvements from each project phase. Based upon the estimated increased value generated by the first two phases, city officials estimate that $1 billion in total property taxes could be generated over the applicable rebate periods with an estimated $529 million being rebated back to QTS.
The agreement also provides a 20-year, 75% economic development rebate of franchise fees collected by the city through Alliant Energy for each data center constructed as part of the project
QTS, in turn, will make up to twenty annual payments for each project phase into a community betterment fund established by the city, in an amount equal to $300,000 annually for each of the first two phases. The total amount of payments into the fund for all project phases will not exceed $18 million, according to the agreement.
Every council member in attendance expressed strong support for the QTS project.
Council member Ashley Vanorny noted that large projects like this help support the community at a time when the Iowa Legislature is considering property tax reform.
“With that, we have to be innovative in how we are generating (and) funding quality of life programming that ends up making Cedar Rapids a continued space to be very attractive for businesses, for people to move to,” Ms. Vanorny said.
She also noted that the high-paying jobs associated with the data center projects can help address the state’s longstanding “brain drain” issue, under which many highly-educated Iowans end up moving elsewhere for high-tech jobs.
“A lot of people are trained here, and then they get recruited elsewhere, because we don’t have that capacity,” she said. “So what we’re doing is creating exactly that. We’ve got really great high-tech jobs here. We’re just creating that density and that capacity that will continue for us to be competitive in the recruitment and retention of this talent that we have here.”
Council member Scott Overland put the data center projects in Cedar Rapids historical terms.
“If we go back well over 100 years ago into the 19th century, the city has always been able to generally grow on new economic development projects,” he said. “If you go back to the 19th century, we were a big meatpacking center, employing thousands and thousands of people. We’re not anymore. You go into all kinds of diversified manufacturing.”
He mentioned local entrepreneurs, including Howard Hall and Arthur Collins.
“What did Howard do? Well, he had Iowa Manufacturing and Iowa Steel and things of that nature,” Mr. Overland said. “You go back to Link Belt, Harnischfeger, and a little company that started here called Collins Radio, which is now Collins Aerospace. Over our history, we have evolved and gotten into new businesses and new industries that we’ve never thought of 20 or 30 years before that time. And here we are today, being a leading city with food processing. We’ve got foreign companies that own huge processing facilities here, like Lesaffre from France. With the data center, it’s just an evolution of the same thing that we’ve experienced for well over 100 years. Data centers are very important, but they also tend to lead to communities having additional technology-related organizations and companies wanting to locate here. I look at data centers as the core. It’s just another chapter in Cedar Rapids’ long evolutionary history of providing high-quality jobs, growth in the tech space and all the things that go from there.”
Cedar Rapids Mayor Tiffany O’Donnell said she doesn’t view the tax incentives for the data center project as a cost, but rather as an investment in the city’s future.
“Here’s the simple truth,” she said. “If we don’t take this project – and I say this to anybody who questioned this – you want it to go someplace else? Because if we don’t take it, somebody else will, and all that comes with it. A billion dollar data center isn’t just knocking on our door. They’re knocking on a lot of doors across the country. So we have the chance to say yes and open the door wide open, or we could just step aside and watch others reap the benefits we’ve already discussed here.”
Ms. O’Donnell also discussed the ancillary benefits of data center projects, from construction jobs to a long-term expansion of the city’s tax base.
“Let me be clear,” she said. “I don’t believe we can sit on the sidelines and watch others reap all of these benefits. It’s more than a tax deal. It’s about positioning our city as a leader in technology, innovation and opportunity. It’s about creating a city that businesses want to call home, families are going to want to build their futures in – and by the way, investors are going to want to see a sure bet … We do have a proud history of seizing opportunities and adapting and turning them into huge success stories. So I, like my colleague Scott Overland, view this as the next chapter.”
