DES MOINES, Iowa – Microsoft announced plans Friday to build another massive data center in Iowa, which has attracted some of the biggest names in computer technology by exempting crucial ingredients for processing and storage from sales taxes as well as offering cheap electricity.
The Iowa Economic Development Authority approved $20 million in job creation tax incentives for Microsoft, which plans to spend more than $677 million to build the first phase of a project in West Des Moines, near its existing data center. More phases could be added. The company plans to hire 29 workers.
It’s the third major information technology company to invest more than $1 billion in Iowa in recent years. Facebook and Google also have chosen Iowa for data centers — large buildings that house thousands of refrigerator-sized racks of computer servers, processors, hard drives and other equipment.
The developments are being spurred by a 2009 law specifically covering data centers that exempts electricity, computers and other equipment from sales taxes, and another law from the same year that exempts computers and related equipment — cooling systems, cooling towers and equipment related to electricity distribution or management — from property taxes.
Typically, cities and counties offer property tax breaks in addition to building streets to the sites.
“Right now we’re seeing data centers at this level continuing to scale up across the globe,” said Iowa Economic Development director Debi Durham. “Legislation Iowa put in place many years ago is creating this business climate.”
Sales tax breaks are important for these companies because they equip data centers with costly computer servers and other equipment that must be replaced every three years, said Mark Bramfitt, an industry consultant who focuses on data center energy use. A server can cost $2,000 and a data center can have 20,000 or 30,000 of them – sometimes more.
Microsoft has spent about $200 million on its existing data center on 40 acres in West Des Moines, which opened last year and employs about 50 workers. Construction on the new one nearby will begin late this year and is expected to be done by the end of 2015.
Microsoft’s total spending is expected to reach about $1.2 billion when finished, Durham said. Elsewhere in the state, Google has a $600 million data center in Council Bluffs and recently committed to a second $700 million center. Facebook is building a $300 million center near Altoona but says it could triple the size of the project to exceed $1 billion.
Each company received additional state tax breaks for creating jobs, including $20 million for Microsoft’s latest project.
Far from threats of earthquakes and hurricanes, Iowa is also considered a prime location because it offers abundant electricity at a reasonable cost, Bramfitt said.