Tax breaks put Columbia back in the race for data centers
MDN Menu
MDN.ORG Mo. Digital News Missouri Digital News MDN.ORG: Mo. Digital News MDN.ORG: Missouri Digital News

Tax breaks put Columbia back in the race for data centers

Date: September 16, 2011
By: Stephanie Ebbs
State Capitol Bureau
Links: Impact of State Tax Policy, Information Technology Competency Model, SB 868

JEFFERSON CITY - Although the St. Louis air cargo hub has been the center of attention during legislature's special session, another part of the bill seeks to boost economic development by putting Missouri on the map as center for digital data storage.

These data centers are warehouses of computer serves storing digital information.

The national technology industry is expected to invest $12 billion in the next three years — and these tax breaks could give Missouri a slice of that $12-billion pie by luring in investors, said Karen Buschmann, spokeswoman for the Missouri Chamber of Commerce.

The data center bill would create tax breaks for new server storage facilities in Missouri, similar to breaks neighboring states such as Kansas, Nebraska, Oklahoma and Iowa already have. The bill, first introduced in January 2010 and currently up for debate again during the special session, would exempt these data centers from paying state and local taxes on utilities, property and some sales taxes.

"The potential tax revenue from that site is literally mind-boggling, if we should be lucky enough in our wildest dreams to land one of these sites," said Dave Griggs, chair of Regional Economic Development Inc. Griggs said Columbia's exact revenue from a data center can't be determined until they know the size of the investment.

The legislation's supporters say the state is an ideal location for data storage facilities and that it would better equip Missouri to compete with surrounding states in the emerging technology industry. Tax breaks could be the deciding factor in luring major Internet companies to develop in cities such as Columbia.

"We have a very rigorous process that we use to select data center sites, which includes, among other factors, a combination of location, workforce, reasonable business regulations and cost," said Google spokeswoman Jenna Wandres.

The bill is meant to attract companies such as Google Inc. as well as encourage projects such as the IBM's recent commitment to employ 800 professionals with an expected $1 million to be generated in tax revenue. However, technology corporations looking for new locations are often secretive and will not release their names publicly until after a deal is made.

Senate Budget Chairman Kurt Schaefer, R-Columbia, said he knew of talks between multiple entities considering Columbia, but no decision has been made.

"I think when you're looking at capital investment in a project like that, they're very capital intensive because there's so much commitment that goes in, that if we can put something together that makes Columbia more attractive nationally, then that's a good idea," said Schaefer.

Economists say that although tax credits play a role in companies' decision-making, other factors such as availability of power, power costs and environmental risk are equally important. Missouri meets many of these criteria, and the reduced cost from the tax credits is hoped to bring a data center to Columbia.

"All those things will help, even if we don't take advantage of the new stuff," said Griggs. "It simply sends a message to the corporations that Missouri wants to be competitive in the data center market."

Ewing Industrial Park in Columbia is being promoted as an ideal location for a data center because of its access to multiple sources of power and green energy at the site, Griggs said.

"It's just that piece of property and the infrastructure that's been developed over the last 30 years that make that a perfect site," Griggs said.

The industrial park has access to power sources such as the city landfill and Callaway nuclear power plant, which would still be able to produce electricity during severe power outages — ideal for a data center that could use almost half the amount of power the entire city of Columbia currently uses, said Griggs. The city has passed a number of incentives since 2007, including offering power at a reduced price.

"Depending on what you do, whether it's Chapter 100 bonds or tax credits, you potentially forego bringing in taxes, for example, on property taxes or on equipment," Schaefer said. "But you do bring in taxes on the jobs created, on the items that are purchased through sales tax and things like that. Again, you always have to be vigilant that you're getting a good return on investment."

On the state level, the project is expected to create $600 million in revenue after 25 years, based on a $2.5 billion investment prediction used by Stafford Consulting Associated. It also predicts thousands of construction jobs would be created if the hypothetical investment took place. In Columbia, commercial sites are taxed at 33 percent, meaning $100,000 of capital investment would give $33,000 to services like public schools.

Missouri Digital News is produced by Missouri Digital News, Inc. -- a non profit organization of current and former journalists.