Testing the Math on Data Center Incentives

What’s a data center worth to the local economy? How about a data center engineer?

As state and local economic development agencies step up their efforts to attract major data center projects with incentive packages, they should expect scrutiny from constituents. That’s certainly the case in North Carolina, where an incentive package for Google’s $600 million data center in Lenoir became a political hot potato last year. Now local officials in Research Triangle area have agreed to offer IBM $750,000 in economic development incentives if Big Blue decides to build a new data center in Research Triangle Park. An excerpt from the Right Angles blog:

The commissioners unanimously committed $750,000 over a seven-year period if IBM builds the facility here. The company is also considering locations in New York and Colorado. … The facility will be somewhat unusual in that it would only create 10 jobs but is expected to bring at least 1,000 executives a year here to visit the center. Over five years, the data center would generate $4.4 million in visitor spending, which in turn would translate into $150,000 in local tax money, Shelley Green of the DCVB said.

As we’ve noted, data centers are odd birds by economic development standards because they typically are so automated that they create very few new jobs – which has long been the standard by which incentives are developed and judged. The growth of data center incentives programs suggests that economic development officials no longer debate this point very much. But taxpayers are likely to continue to keep score.

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About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.