Spokespersons from Microsoft have declined comment today on news that broke from the city of West Des Moines last week that the company would be building a tremendous new facility in the city. It may still be a secret in Redmond, but in Iowa, the governor has already rolled out the red carpet.
“Nothing makes me more proud,” said Gov. Terry Branstad (R) during a press conference in West Des Moines last week, “than when a company with an existing presence in our state makes another significant investment in Iowa — especially one of this significance, and a company of this quality.”
What Gov. Branstad was referring to was an agreement reached between his state and Microsoft to build a third major data center in West Des Moines in a tract spanning two counties adjacent to where its other two facilities there are located. The project would represent an estimated $3.5 billion capital investment from Azure’s parent, and according to Mayor Steven Gaer (R), a source of revenue for the city in the form of $23 million annually in collective tax payments, including $12 million per year in property taxes.
The state did agree to grant Microsoft what Mayor Gaer described as “modest” tax benefits, though the company did commit to funding 100 percent of its infrastructure buildout without tax abatement.
The word “Azure” was not uttered during the mayor’s press conference last week, though it can certainly be inferred.
According to the mayor, Phase I of the four-phase project is scheduled to begin next year to build a 1.7 million square foot complex just south of the Dale Maffitt Reservoir, on 200 acres spanning the border between Warren and Madison counties. Completion is scheduled for 2022. The governor said Phase I would bring in some $417 million in capital investment to the state.
“Companies look for locations that are safe from hurricanes, earthquakes, and rolling blackouts,” Gov. Branstad remarked. “But it’s also important that they have access to renewable energy. And Iowa just happens to lead the nation in the percentage of our electricity generated by wind.”
The governor cited figures from MidAmerican Energy Co. last April stating that the state of Iowa currently generates some 31 percent of its total annual power production from wind — reportedly the highest percentage of any state. With the aid of federal renewable energy tax credits, the producer plans to boost that percentage to 40 percent by 2018, by way of a $3.6 billion investment toward building a 1,000-turbine, 2-gigawatt wind farm.
MidAmerican’s parent company, by the way, is Berkshire Hathaway, having acquired the producer in 1999. Its CEO, Warren Buffett, is a personal friend of Microsoft founder Bill Gates.
When Microsoft committed to building its second data center in the West Des Moines area in May 2014, its $2 billion commitment to Iowa represented the single largest outlay by a private company in the state’s history at that time. But it almost didn’t happen, until the state legislature in Microsoft’s home state of Washington suspended its debate over whether to continue extending tax breaks to a corporation that evidently didn’t feel like building data centers in Washington State.
The big draw for Iowa at that time was cheap energy with costs per kilowatt-hour falling as much as 24 percent below the national average. But literally a perfect storm of climate change-triggered temperature extremes in the state (including a record low-temperature summer), coupled with the costs of building out the state’s renewable power, have threatened to make Iowa less attractive. Doug Shull, chairman of the Warren County Board of Supervisors, admitted that Microsoft’s big build came shortly after his county came in second in the race to attract another major data center builder — whose identity Shull refrained from revealing.
The latest power data for May 2016 from the U.S. Energy Information Association shows that the price for commercial power in Iowa has risen almost 16 percent since Microsoft’s 2014 announcement, to 9.44¢ / kWh — still below the national average of 10.7¢ / kWh, but only by 8.1 percent.