— The proposed development would be the largest economic development project in Cedar Rapids' history.
— The proposed development would create a minimum of 30 new full-time jobs that pay at or above the high-quality wage rate.
— The rapid development of artificial intelligence and high demand for cloud services have led to a 70 percent increase in data center construction throughout North America in the past six months.
CEDAR RAPIDS — Back in February, Cedar Rapids city officials lauded plans by Google to build a $576 million data center in the Big Cedar Industrial Center — the largest development project in the city's history.
Now, months later, city officials are eyeing yet another data center campus that would rival Google's planned investment, to the tune of $174 million more.
"Really exciting project, and I don't know. I mean, I don't know, do we launch confetti or what?" Council member Tyler Olson said during Tuesday's meeting. "But a billion dollar project is pretty important, you know, it just, I don't know. Maybe we're just getting used to it."
An unnamed company is seeking financial incentives from the city of Cedar Rapids to build a massive $750 million data campus in the Big Cedar Industrial Center near Google's planned data center.
Cedar Rapids City Council members on Tuesday unanimously approved a term sheet with tentative deal points for a development agreement with SNA LLC for the construction of two or more data center buildings on approximately 560 acres along 76th Avenue SW that would create at least 30 new high-paying jobs.
While the term sheet lists the Delaware limited liability company, it does not name the company that would occupy the development. A city official confirmed Google is not behind the new proposed development.
A similarly named Delaware limited liability company — SNA NE LLC — has been connected with QTS Data Centers. The Kansas -based company builds, owns and operates data centers cross the United States and Northern Netherlands , providing data storage and management to three of the world's largest banks and dozens of financial firms, companies, enterprises and government entities.
The company's largest operating areas are: Northern Virginia , Dallas/Fort Worth , Chicago , Hillsboro, Oregon and New Jersey .
A company representative did not return a message seeking comment.
Why are data centers looking to Iowa ?
The data center project, if approved, would be the largest economic development project in Cedar Rapids' history.
The new jobs created by the development would pay at or above the high-quality wage rate, which starts at $26.20 per hour.
Iowa has 30 data centers, but only a few are as large as the one proposed in Cedar Rapids . Google has a site in Council Bluffs , Meta has a complex in Altoona and is considering building another data center in Davenport , Apple is building in Waukee and Microsoft has six buildings in West Des Moines .
The rapid development of artificial intelligence, combined with high demand for cloud services, has led to a 70 percent increase in data center construction throughout North America in the past six months, according to study by CBRE Group, Inc. , a Dallas -based commercial real estate services and investment firm.
It found that in the first half of 2024, more than 500 megawatts of new data centers were installed in the biggest markets across the United States and Canada . The top five data markets in the U.S. — Northern Virginia , Dallas-Ft. Worth , Chicago , Phoenix , and Silicon Valley — have seen the most growth, according to the research.
However, a shortage of available power and longer lead times for electrical infrastructure have delayed construction completions, according to the firm.
"They see Iowa as a stable (electrical) grid network in addition to competitive land costs compared to other places across the country like Texas and California , where they are having issues with strain on their electric grid," Bill Micheel , Cedar Rapids economic development and development services director, said. "Available land paired with available power has started to decrease and they're in a bit of rush to control property that has available power."
The Iowa Economic Development Authority pitches Iowa on its website as having "affordable and ample wind energy, a stable grid, a high density of telecommunications infrastructure and low costs for construction projects."
Prior to 2023, companies were attracted to low energy costs, a large amount of renewable energy, and favorable Iowa tax laws, an IEDA spokesperson told The Gazette. To date, Meta ( Facebook ), Microsoft, Google and Apple have invested a combined $16.9 billion in data center construction in Iowa , according to IEDA.
Council member Ashley Vanorny said city officials "knew with Google coming that there would be other data centers, and I suspect that there will be even more after this."
The likelihood of another data center soon announcing plans to build in Cedar Rapids , though, seems remote, Micheel said.
Google and the newly proposed data center campus would take up most of the development-ready land in the Big Cedar Industrial Center. All 1,391 acres are controlled by Alliant Energy .
"Combined, these two projects fill out the property in the mega park," Micheel said.
Jobs
Construction is anticipated to start within three years of the development agreement taking effect, and include two initial phases with the possibility of a third. Each phase would include the construction of one or more data centers between 300,000 and 1.4 million square feet, and a minimum investment of at least $250 million per phase.
All phases would be completed within 25 years of the agreement taking effect.
Heaviside LLC , the development entity behind the proposed Google data center in Cedar Rapids , recently closed on land slated for the project for $16.573 million and grading is underway on the site.
Micheel said construction on the Google data center is likely to begin in the spring.
The project's advancement adds to the bustling growth in southwest Cedar Rapids in recent years, where the city has awarded incentives to the likes of kitchen appliance company SubZero's $140.6 million light manufacturing building, FedEx's new $108.6 million distribution center and BAE Systems' $139 million classified defense aerospace facility.
While the data center campus would not create a large number of permanent jobs, Micheel said construction is likely to span roughly a decade or more and support likely hundreds of construction jobs.
"That certainly is going to help the local economy," he said, by pumping money into Cedar Rapids to support the hiring of local skilled trades workers, as well as bringing in workers from outside the area to spend money at hotels, restaurants and other businesses.
Council members echoed Micheel.
"I think one thing that we kind of pass over is that we say there's going to be 15 to 30 (permanent) jobs created, but ... the amount of trades that are going to be working out there for the next three to six years is not something to pass over lightly," Council member Marty Hoeger said.
Incentives
Under the tentative terms outlined in council documents, the company could receive a 20-year, 70 percent tax rebate on the estimated incremental assessed value of the property so long as it meets employment and wage thresholds.
City officials estimate the development would generate $1 billion in total property taxes over the contract term, with an estimated $529 million being rebated back to the company.
Other financial incentives include:
— A 20-year, 75 percent economic development rebate of franchise fees collected by Cedar Rapids through the electrical provider for each data center constructed.
— The company would make annual payments into a community betterment fund established by the city "to assist with initiatives and projects which support the growth of amenities to benefit the community, including the company and its employees." The company would make yearly payment of $300,000 per data center for 20 years with a maximum of $18 million total.
— The city agrees to extend utilities to the development and make necessary off-site traffic improvements.
— The company and developer must cooperate with the city in applying for supplementary state grants to finance off-site improvements, including the Revitalize Iowa's Sound Economy (RISE) funds
While the number of permanent jobs created is not extremely high, Mayor Tiffany O'Donnell said the other benefits, including the community betterment fund and expansion of the city's tax base, are significant.
"In terms of what it does for us, from a property tax standpoint, from a labor standpoint, from a community betterment" standpoint should not be overlooked, O'Donnell said.
Water and energy usage
The proposed Google data center in Cedar Rapids would be among the city's largest water and energy users. Officials estimate it could use from 200,000 gallons of water per day to more than 1 million gallons, on average. And other Iowa cities with data centers are drawing more water from aquifers and rivers to meet demand, The Gazette previously reported.
City officials, however, say the newly proposed data center campus would use much less water.
Micheel said the unnamed company plans to use a closed-loop cooling system to reduce water consumption and increase efficiency.
Cedar Rapids Utilities Director Roy Hesemann said the company has indicated it does not plan on using water for cooling, just for drinking and other "domestic purposes."
Hesemann said more information about the project's use of water and energy will emerge as the company goes through the design process.
QTS Data Centers uses closed-loop cooling systems in many of its data centers. The systems use a low-pressure refrigerant system that can remove heat from outside air without using water. They system also employs an "economization" when the outside temperature is lower than the return air temperature. The system is initially charged with water or refrigerant, and only needs more water if maintenance requires a recharge, Micheel said.
The company says its cooling systems can save millions of gallons of water annually. In one Georgia -based data center alone, the company claims it saves more than 248 million gallons of water annually — the equivalent of water used in more than 2,200 U.S. homes per year.
Hesemann said the city has surplus water capacity and could drill more wells along the Cedar River to increase the supply.
The Cedar Rapids Google data center likely would use at least 25 megawatts of electricity, equivalent to powering about 12,000 homes.
An Alliant Energy spokesman said the utility is "in the exploratory and due diligence phases for potential data center sites," and more information would be forthcoming.
The utility has said luring Google would allow it to spread future costs over more customers, and that a coming rate increase was not related to the data center. The Iowa Utility Commission's order includes a conditional five-year moratorium on any Alliant base rate increases until October 2029 , excluding transmission costs.
"As a utility it is our responsibility and obligation to serve the energy needs of all customers — both current and new customers," Alliant Energy spokesman Morgan Hawk responded to The Gazette in an email. "As an essential service provider in hundreds of communities and businesses, we are acting now to best manage costs and meet customers' energy supply needs for decades to come. This is something we are continually focused on."
Council member Dale Todd said the public needs to "reimagine" data centers as vital infrastructure.
"Providing the data storage element is now just as much a part of city infrastructure as anything else," Todd said. "... The public, they are the ones that are driving this."
Micheel added when city officials host potential candidates that are thinking about moving their business to Cedar Rapids , one question popping up more often is: "Where is data storage? Where's backup data storage? Where do these things exist? We're starting to see that on a more regular basis."
© 2024 The Gazette (Cedar Rapids, Iowa). Distributed by Tribune Content Agency, LLC.
