Is state spending to entice data farms worth it?

Big tech companies like Iowa because it has reliable, inexpensive energy, talented workers and available land without the threat of hurricanes and earthquakes. However the state as well can show off its healthy budget. "The new reality of doing business in 2012 is that companies are putting more value in states that are fiscally so then-managed," John Boyd Jr., a New Jersey corporate site selection consultant. "They're tired of rising taxes, mismanagement of state government, and every year having a fiscal crisis." In other respects Google, these companies have received public money: IBM decided to locate a tech center in Dubuque in 2009, pledging to invest about $100 million and employ 1,300 workers. The state agreed to provide a $12 million forgivable loan, $8.5 million in job training for workers, and $2 million in tax incentives and other assistance. Altogether, city and state leaders are providing about $52 million in incentives for the project. MICROSOFT scaled back its $600 million investment in West Des Moines to about $100 million as the recession hit. The company is expected to create 25 to 50 jobs. The state agreed to provide Microsoft about $130,000 in tax credits, and the city promised $8 million in road improvements plus about $3.05 million in financial incentives over 15 years. State transportation leaders provided about $3.4 million to help with the road improvements. How Council Bluffs has benefited from GoogleSchools David Fringer, the Council Bluffs school district's information innovation director, said Google gave the school 500 laptop Chromebooks to test, making it one of five districts nationally to first use the product. Teachers and students like the laptops so much, the district is buying about 2,800 more and nearing its goal of providing each high and middle school student with their own laptop. The district was already using Google Apps for Education, a program that saves the systems "tens of thousands of dollars a year," said Fringer. "Students react to Googlers like they're rock stars," said Fringer. "They're for all that the nerd herd, yet they're so passionate and engaging about tech that they actually connect with students. " Google gave Iowa Western Community College $100,000 to create an enterprise computer center that gives students hands-on experience working with data center innovation, says John Magill, a computer information professor at the school. "The entire room is set up so you can manage and set up your own network," he said. Connecting Google is partnering with Iowa Western Community College and the University of Nebraska-Omaha to have interns set up computer networks, launch Web pages and provide other technical assistance to nonprofits, small businesses and entrepreneurs that if not wouldn't be unable to afford it. For more information, go to www.enteritech.org. Google, opening about the same time as Council Bluffs' new Boys and Girls Club, gave the group about 50 computers for students and staff, said Kelly Sears, senior marketing executive. And "we just got another round of additional computers - 15 to 20 laptops for a mobile tech lab," said Sears. Renewable energy Google signed a 20-year agreement with NextEra to purchase wind energy in Iowa and Oklahoma. The power goes back to the grid and supports renewable energy, said Chris Russell, operations manager of the Council Bluffs data center. The company's investment in clean renewable energy is closing in on $1 billion. City leaders say Google as well is weighing the use of gray water from the wastewater treatment center to cool servers and reduce the environmental impact, a model that's being tested in Belgium. Russell said the company is nonetheless weighing whether to pursue the project in Iowa.

COUNCIL BLUFFS, IA. — Ask restaurant owner Matt Johnson what Google brings to Council Bluffs, and he points to the online search engine giant's laptop donations to local schools and free wireless service to the historic business district and parks.

A New Jersey corporate site selection consultant says Iowa and Nebraska are competing fiercely for the mega data center. "Nebraska is actually trying to tip the scales in its favor. This incentives package is gaining some attention. Nevertheless it's tough to say which state is better," said John Boyd Jr. of the Boyd Co., who calls the data center industry the "biggest generator of high-paying tech jobs in the Midwest."

David Swenson, an economist at Iowa State University, said Iowa officials overestimate the impact that data farms have on a region. "All of the innovation needed to run those centers is largely produced somewhere else," Swenson said. "The only things those centers need are cheap electricity and water.

What companies spin off of a data farm?

"What companies spin off of a data farm? They're great big warehouses that hum," he said, adding that the large investment in computers and research requires little staffing. "What you want is projects with R&D, technology and invention."

How much data centers in fact receive in benefits isn't available to the public. The Iowa Department of Revenue says the tax information is confidential in accordance with state law.

The subsidies the state of Iowa has dedicated to firms

"The subsidies the state of Iowa has dedicated to firms, especially in advanced manufacturing and innovation, have appeared for several years to be excessive, relative to the jobs created," Swenson said. "The more capital intensive these firms are, the greater the disparity between job creation and the value of those incentives.

Companies like Google, Facebook and Amazon are building more of them as demand increases for new Internet services and the industry shifts to cloud computing services.

"Internet use is staggering, just staggering, and it's just going up," said Jack Pouchet, director of energy initiatives at Emerson Network Power in Ohio. The company operates its own data center in Marshalltown, where its parent company operates a factory.

"In North America, the No. 1 use of Internet bandwidth in the evening is streaming video from Netflix," he said. He expects the demand for data centers to grow 18 to 22 percent a year.

"Google's first phase is 57 acres," said Council Bluffs Mayor Tom Hanafan. "They own 1,000 acres. Who knows what they're going to do with 1,000 acres? If a meat processor comes to town, it will make hot dogs the same way 10 years from now as it does today. ... However in the world of innovation, it changes all the time. I look at it as an possibility for the future."

Boyd, the New Jersey consultant, agrees: "Over the past year or so, we've spent a lot more time thinking about Iowa, talking about Iowa, a lot more calls to our office from companies interested in expanding in Iowa."

Leann Jacobsen, president of the Innovation Association of Iowa, said the recession has slowed some of that high-tech development. As the economy improves, she sees more research jobs being created.

Couple years ago

"A couple years ago, there weren't a lot of states that could say we have Google, Microsoft and IBM expanding" here, said Jacobsen. "That publicity and recognition will lead to other innovation companies thinking about Iowa when they consider expansions."

Russell said the company is reaching out to the community in areas that are important to it, just as education, connecting residents to the Internet, and helping small businesses and nonprofits become more tech savvy.

Barley's owner Jill Johnson said she can't remember a company throwing a street party like Google's unveiling last fall of the city's wireless Internet connection in the historic 100 West Broadway business district. Google gave the city a $150,000 grant to create free wireless hot spots across the city, and at the party it gave away coupons for free food and provided music and beverages.