Recent construction on the Sabey Intergate.Quincy campus in Quincy, Washington (Photo: Sabey Corp.)

Sabey Corp. has received approval from state regulators to install up to 44 diesel generators to supply critical back-up power for its new data center campus in Quincy, Washington. The Washington Department of Ecology issued an air quality permit to Sabey on Aug. 26 for its Intergate.Quincy project.

The approval comes three weeks after the state issued a similar permit to Dell that clears the way for the computer company to install 28 generators in its planned cloud computing data center in Quincy.

Quincy, a small town in a rural section of Washington state, has developed into a major data center hub featuring several of the world’s most advanced and efficient data centers from Microsoft and Yahoo, along with a project for Intuit . Each of the data centers in Quincy uses banks of generators to provide backup power in the event of a utility outage. Diesel engine exhaust is a regulated pollutant, and can be toxic in high concentrations, so state regulators routinely review permits for generators.

Debate Over Generator Health Impact

The growing number of diesel generators in Quincy generated debate last year when Microsoft applied to add more generators for the second phase of its campus in Quincy.   The Ecology department conducted an evaluation of the health risks from diesel engine exhaust particulates, and found that the Microsoft expansion, viewed in isolation, was not likely to impact public health. But the Department of Ecology took the opportunity to seek feedback from area residents, citing the growing concentration of data centers.

After reviewing and approving the Dell and Sabey projects, the state says its is satisfied that the public’s health is not at risk from the generator density in Quincy. Over the last year, the Department of Ecology has issued permits for an additional 95 generators at the Microsoft, Yahoo, Dell and Sabey projects.

“We all generate so much data in this day and age that protecting that data has become critically important in our society,” said Karen Wood, who manages Ecology’s Air Quality Program in Spokane. “Our role is to make sure the generators are run in a way that protects the public’s health and the air we breathe.”

The Intergate.Quincy project has been in the planning stages since 2007. Plans for the Sabey campus call for three data center buildings housing more than 525,000 square feet of space. Buildings A and B will each be approximately 189,000 square feet, and Building C will be 139,000 square feet. Building C is currently permitted and scheduled for completion in the fall of 2011.

In March 2010 the Washington legislature passed a targeted tax break to allow a temporary sales tax exemption on the purchase and installation of computers and energy for new data centers in 32 rural counties. To qualify for the incentives, companies must commence construction by July 1, 2011.

Microsoft and Yahoo took advantage of the temporary incentive, building new phases on their respective facilities in the data center hub of Quincy, Washington. The projects each featured cutting-edge designs – featuring Microsoft’s modular approach and Yahoo’s “Computing Coop” – that make Quincy home to two of the world’s most efficient data centers.

Meanwhile, Sabey Corp. and Dell have each begun construction on new projects in Quincy, ensuring that they will qualify for the tax incentive.

But what about future projects?  It looks like they will need to pay a 7.9 percent tax on data center construction and equipment.

What’s less clear is why the bill never advanced in the house. Pat Boss, the Port of Quincy’s government affairs director, told the Columbia Basin Herald that “House leadership apparently decided they didn’t want it to come up for a vote.” Boss said many believed the bill would have passed had it been brought up for a vote in House.

The tax issue dates back to 2007, when the state of Washington said Yahoo was not eligible for  a state sales tax break for manufacturing enterprises in rural counties, and thus must pay a 7.9 percent tax on data center construction and equipment.  The state ruled that data centers did not qualify for the breaks, which are targeted for manufacturing facilities.

An aerial view of Quincy, Washington showing the cluster of major data centers, including a visualization of a planned site for Sabey Corp. and existing sites for Microsoft, Yahoo and Intuit. A bill would extend the tax breaks in Washington state that helped develop the Quincy cluster. (Image: Sabey Corp.).

A bill in Washington state extending a sales tax exemption deadline to spur data center construction passed with a 41-1 vote in the Senate this week, and now goes to the house. If it is approved, data centers have until April 1, 2021, to take advantage of the sales tax exemption. The original incentive is scheduled to expire on July 1.

The measure’s backers are hoping for an extension, citing the level of development activity since the passage of the incentives. Microsoft, Yahoo and Sabey have all announced new phases of data center construction, while Dell has outlined plans for a large facility in Quincy.

In March 2010 the Washington legislature passed a targeted tax break to allow a temporary sales tax exemption on the purchase and installation of computers and energy for new data centers in 32 rural counties. To qualify for the incentives, companies must commence construction by July 1, 2011.

Dave Johnson, executive secretary of the Washington State Building and Construction Trades Council, told the Columbia Basin Herald that he bill is an important one for the construction industry, based on the activity generated by the original, one-year tax exemption.

“From last year’s bill, we’ve seen over 200,000 work hours put into data center projects and our understanding is, there’s other major data center facilities that would like to move into the area if the tax exemption were extended,” Johnson said.

The tax issue dates back to 2007, when the state of Washington said Yahoo was not eligible for  a state sales tax break for manufacturing enterprises in rural counties, and thus must pay a 7.9 percent tax on data center construction and equipment.  The state ruled that data centers did not qualify for the breaks, which are targeted for manufacturing facilities.

An illustration of the what the Sabey Corp. Intergate.Quincy data center campus will look like upon completion. Construction commenced this week.

After fully leasing its data center campus in nearby Wenatchee, developer Sabey Corp. has broken ground on its new Intergate campus in Quincy, Washington, the company said this week.

The Sabey project launch is the latest in a series of data center construction jobs in Quincy, a small town in central Washington that benefits from cheap hydro-electric power and a climate that’s ideal for fresh air cooling. Microsoft and Yahoo recently completed the first phases of major expansions in Quincy, while Dell just broke ground on a 350,000 square foot data center.

In the Works for Four Years

The Intergate.Quincy project has been in the planning stages since 2007. Plans for the Sabey campus call for three data center buildings housing more than 525,000 square feet of space. Buildings A and B will each be approximately 189,000 square feet, and  Building C will be 139,000 square feet.  Building C is currently permitted and scheduled for completion in the fall of 2011.

An on-site substation will provide electrical capacity of over 50 megawatts. The data centers will be served with redundant electrical and mechanical systems and backup systems for emergency or maintenance events.

“We have owned the property for almost 4 years, but we’ve waited for the right market cues to build,” said John Sabey, President of Sabey Data Centers. “We’re also fortunate in working with knowledgeable local and state governments that are experienced in the data center construction process as well as a seasoned data center construction workforce.”

Meets Tax Break Deadline

Construction commenced in time for Sabey to capture a key tax benefit. In March 2010 the Washington legislature passed a targeted tax break to allow a temporary sales tax exemption on the purchase and installation of computers and energy for new data centers in 32 rural counties. To qualify for the incentives, companies must commence construction by July 1, 2011.

The partial sales tax exemption applies to electrical components and electrical component installation and computer or server related equipment. Other construction and essential supplies and services such as earthwork, asphalt, concrete and HVAC is still subject to Washington state sales tax which continues to benefit the area.

Sabey Data Centers recently completed leasing of its LEED Gold certified Building B at Intergate.Columbia, bringing the campus to full occupancy. Due to the leasing success of Intergate.Columbia I, plans are underway for Phase II.

A view of several IT-PAC server modules being installed at the new Microsoft data center in Quincy, Washington.

Buoyed by a surge in data center construction, backers of tax breaks for data center projects in central Washington are now pushing to extend those incentives through 2023. A bill to extend last year’s tax exemption for data center construction to 2023 was introduced in the both houses of the legislature last week  last week, and was discussed in a preliminary hearing by the Senate Ways and Means Committee in Olympia.

In March 2010 the Washington legislature passed a targeted tax break to allow a temporary sales tax exemption on the purchase and installation of computers and energy for new data centers in 32 rural counties. To qualify for the incentives, companies must commence construction by July 1, 2011. The measure’s backers are hoping for an extension, citing the level of development activity since the passage of the incentives. Microsoft, Yahoo and Sabey have all announced new phases of data center construction, while Dell has outlined plans for a large facility in Quincy.

Area a Magnet for Data Centers

Quincy has become a magnet for data centers because of its abundant supply of cheap, “green” hydro power generated by area dams, with some companies paying just 2 cents per kilowatt hour for its power in Quincy. Because of the volume of electricity used by major data centers, the price of power has an outsized role in the site selection process for these facilities. Quincy is also ideal for free cooling, in which companies use cool air from outside the building to cool the servers, rather than air conditioners.

That combination has made Quincy home to two of the most advanced and energy efficient data centers in the world, with Microsoft and Yahoo deploying new cutting-edge designs that use prefabricated construction and free cooling.

The tax issue dates back to 2007, when the state of Washington said Yahoo was not eligible for  a state sales tax break for manufacturing enterprises in rural counties, and thus must pay a 7.9 percent tax on data center construction and equipment.  The state ruled that data centers did not qualify for the breaks, which are targeted for manufacturing facilities.

Economic Benefits Cited

Terry Tillton, of the Washington State Building and Construction Trades Council, told the Senate committee that the new projects generated more than 200,000 worker hours for construction workers.

“Construction workers are now working in central Washington,” added John Sabey, President of Sabey Data Centers. “Construction unemployment in central Washington today is virtually zero.”

Local officials estimate that Grant and Douglas counties have collected $56.4 million in additional sales tax revenue from data center projects between 2006 and 2008. Grant County’s average wage increased 19 percent between 2006 and 2008, while property tax values in the city of Quincy increased by $504 million during that period, according to the Port of Quincy.

A view of several IT-PAC server modules being installed at the new Microsoft data center in Quincy, Washington.

Microsoft has completed construction on the initial phase of its new data center in Quincy, Washington, which features a plug-n-play modular infrastructure that provides extraordinary flexibility in deploying new cloud computing capacity.

The new data center features a lightweight exterior, which Microsoft  compares to a “tractor shed,” filled with highly-customizable containers packed with servers, storage and power and cooling infrastructure. The modules can be deployed as new capacity is needed, and configured with a mix-and-match approach that allows Microsoft to choose among a variety of technologies and reliability levels. (See the module assembly process in our photo feature, Inside Microsoft’s New Quincy Cloud Farm).

Dramatic Cost Reductions
The new facility is the culmination of years of design work at Microsoft Global Foundation Services, and offers dramatic reductions in cost and resources, which Microsoft officials say will make it one of the most efficient and sustainable data centers in the industry.

“This data center represents a 45 to 55 percent savings over more traditional data centers,” said Kevin Timmons, General Manager for Datacenter Services for Microsoft.

It’s the second data center Microsoft has built in Quincy, and is adjacent to a 470,000 square foot facility completed in 2007. The new project implements energy efficiency improvements that should result ina  Power Usage Effectiveness (PUE) rating below 1.2, as well as many new sustainability features.

Microsoft has been discussing its modular data centers over the past several years, during which it has been refining the design for the facility that will house the containers.

“The building will actually resemble slightly more modern versions of the tractor sheds I spent so much time around during my childhood in rural Illinois,” said Timmons. “The building’s utilitarian appearance belies its many hidden innovations. The structure is virtually transparent to ambient outdoor conditions, allowing us to essentially place our servers and storage outside in the cool air while still protecting it from the elements.”

Steel Instead of Cement
The new Quincy building is a marked departure from the dense cement structures that house most data centers, including Microsoft’s Chicago data center that marked its first effort at container-driven design. The new facility has a steel and aluminum framework, and its sides are lined with louvers to allow the entry of fresh air to cool the servers.

The interior of the building will be filled with IT PACs, which are data center containers designed to operate in all environments. Each PAC contains from 400 to 2,000 servers, depending upon the application, and has four cooling modes to maintain a server inlet temperature between 50 and 95 degrees F.

Fresh air is drawn into the enclosure through louvers in the side of the container – which effectively functions as a huge air handler with racks of servers inside. Each IT module is also equipped with an evaporative cooling system, and a mixing chamber that can mix cool fresh air with waste heat from servers to regulate temperature within the module. Air handlers atop the units then manage airflow through the servers. Waste heat exits the building through a chamber near the crest of the angled roof.

“Chunks” Instead of Phases or Pods
Timmons said Microsoft’s new design allows a rapid deployment cycle that eliminates the need for construction phases, in which a facility is built in several large stages. Instead, new capacity will be deployed in “chunks” of 2 to 2.5 megawatts, Timmons said.

“We’re able to deploy in granular chunks of capacity,” he said. “It gives the business a lot of flexibility.”

Microsoft has extended its PAC (pre-assembled component)  concept to its power distribution infrastructure. The building provides medium-voltage distribution, but containerized Power PACs house UPS equipment and additional power conversion equipment. Microsoft is using 240 volt AC power to its servers instead of the traditional 208 volt, which can provide additional power savings.

8 Megawatts – for Now
The initial deployment in Quincy will use 8 megawatts of critical power – or about four chunks. The second Quincy building has up to 27 megawatts of power available now, which can eventually be expanded to 40 megawatts.

Microsoft has been using an “all-in” approach to evaluating its total cost of operations in the new Quincy site, according to David Gauthier, a Data Center Infrastructure Architect for Microsoft GFS. That includes a vendor ecosystem developing standardized power, cooling and mechanical components that can be integrated into multiple PAC-based  designs.

“We’ve been building this supply chain over a couple of years,” said Gauthier, to the point where Microsoft has three or four vendors competing in each area of the data center.

Radical, but Also Reliable
Timmons said the new design doesn’t require tradeoffs on reliability, and can support modules with Tier IV reliability. “Just because we have a radical new design doesn’t mean we lose any reliability,” he said. “We can build this design at any reliability level that we like.”

In recent months Microsoft has stepped up its data center construction. In June it confirmed plans to move forward with the construction of a new data center in West Des Moines, Iowa, and in August announced plans for a major new data center in Boydton, Virginia. Timmons said those sites will also use the modular  design, but will vary from the Quincy facility.

“We’re continually evolving,” said Timmons. “The one thing they’ll all have in common is the modular aspect, but the design will differ by location. We really optimize for each local environment.”

Dell expects to start construction on its project in March, and plans to complete the facility in three phases, with the first phase coming online in 2012.  Phase two and phase three are estimated to be built by late 2018. “This construction date is estimated with respect to market demands and power availability,” the company said in a filing with the city of Quincy.

Dell Behind ‘Project Roosevelt’
Dell purchased 80 acres of land in Quincy last month in connection with a secretive data center project known as “Project Roosevelt.” County records indicate that Dell Marketing LP paid $3.6 million to purchase a property in the Port of Quincy.

The Sabey Intergate.Quincy campus will also be built in three phases, with a total built-out of 508,577 square feet of data center space, along with parking, infrastructure and landscaping improvements. Two buildings are 186,660 square feet each, while a third building measuring 140,000 square feet, according to filings with the city.

Yahoo, Microsoft Already Building
Both Yahoo and Microsoft have commenced construction on major expansions of their existing data center campuses in Quincy has become a magnet for data centers because of its abundant supply of cheap, “green” hydro power generated by area dams.

Last month Yahoo confirmed that it has begun building a second phase in Quincy that will feature its Yahoo Computing Coop data center design.  Just down the street from the Yahoo Computing Coop, Microsoft is building a next-generation facility based on its container-based IT PAC design.

Local officials hailed the Dell and Sabey projects as additional evidence of Quincy’s emerging status as a hub for data centers. Pat Boss, the Port of Quincy’s economic development and government affairs director, credited the restoration of  tax incentives by the state legislature earlier this year as a key step in helping the Sabey and Dell projects move forward.

“It’s making Quincy very competitive in recruiting these high-tech companies,” Boss said. “The fact is that Quincy and central Washington is back in the game again.”

In March the Washington legislature passed a targeted tax break would allow a 15-month sales tax exemption on the purchase and installation of computers and energy for new data centers in 32 rural counties. To qualify for the incentives, companies must commence construction by July 1, 20111 to qualify.

The city of Quincy has ruled that both the Dell and Sabey projects are not expected to have a significant adverse impact on the environment, and thus do not require an environmental impact statement (EIS). “This decision was made after review of a completed environmental checklist and other information on file with the lead agency,” the city found.

The exterior of the Server Farm Realty facility in Moses Lake, Washington.

Real estate firm Red Sea Group (RSG) has launched Server Farm Realty, a data center development company with projects in Washington state and Silicon Valley.  The company will be led by president and chief executive officer Avner Papouchado, who brings nearly 20 years of real estate development experience as North American CEO for Red Sea Group.

The company is currently building speculative wholesale data center space, as well as building custom solutions.

“With the global demand for data centers growing, we’re filling the need for cutting edge facilities that not only maintain the utmost reliability and security, they limit energy costs and therefore carbon emissions,” said Papouchado. “With the backing of Red Sea’s extensive building experience, we’ve been able to assemble a team of highly experienced, well known data center experts to drive us forward. In fact, we are currently developing cutting edge data centers that will be available for occupancy as early as April 2011.”

Server Farm Realty is currently developing two data centers. One is located in Moses Lake, Washington, where 10,000 square feet of space and 2 megawatts of power will be ready in May 2011. The second is in Santa Clara, Calif. where 13,750 square feet of space will be ready in April 2011.

Server Farm Realty says the Moses Lake facility will feature an energy-efficient design using a combination of direct/indirect evaporative cooling and free cooling.

“When building data centers, Server Farm Realty is obsessed with energy efficiency, high reliability and fiber connectivity,” said Robert Glavan, vice president of data center operations. “We offer full flexibility in our data center design, build, leasing options and operations options. We are focused on specific markets which provide the lowest power cost, extremely low latency fiber connectivity and locations with significant wholesale data center requirements. We have chosen prime locations where power is renewable, abundant and inexpensive and diverse low latency fiber is available.”

Construction equipment have begun work on an expansion of the Yahoo data center in Quincy, Washington (Photo by Data Center News Network).

The Yahoo Computing Coop is going west. Yahoo will deploy its innovative energy-efficient data center design in Quincy, Washington as it expands its campus in the fast-growing data center hub. The new facility will be built on land adjacent to Yahoo’s existing 180,000 square foot data center in Quincy, which was completed in 2007.

Scott Noteboom, Yahoo’s director of global data center operations, confirmed that the company has begun construction of additional data center capacity in Quincy. “We just broke ground and will be complete by end of May,” said Noteboom, who said the current phase of construction will add two  Yahoo Computing Coop modules, including one optimized for high-density workloads.

Pre-Fab, Air-Cooled Data Centers
The Yahoo Computing Coops (YCC) are prefabricated metal structures measuring about 120 feet long by 60 feet wide. Each of the coops has louvers built into the side  to allow cool air to enter the computing area. The air then flows through two rows of cabinets and into a contained center hot aisle, which is topped by a chimney on top. The chimney directs the waste heat into the upper level of the facility, where it can either be recirculated or vented through the cupola.

The YCC is an example of how standardization and the use of factory-built components can accelerate data center construction. Noteboom expects the Quincy expansion to be completed in six months, matching the deployment timetable for the latest phase at the initial YCC project in Lockport, New York.  That’s a significant improvement over the 330,000 man hours required to build the company’s first data center in Quincy.

New Tax Incentives A Factor
The expansion comes more than two years after Yahoo put its Quincy project on hold, citing a tax ruling that left the company ineligible for a key tax break on server equipment. The resumption of work on the Quincy campus appears to be a direct result of the  restoration of those tax incentives by the state legislature earlier this year.

In 2007 the state of Washington ruled that Yahoo was not eligible for  a state sales tax break for manufacturing enterprises in rural counties, and thus must pay a 7.9 percent tax on data center construction and equipment.  The state ruled that data centers did not qualify as manufacturing facilities.

In March the Washington legislature passed a targeted tax break would allow a 15-month sales tax exemption on the purchase and installation of computers and energy for new data centers in 32 rural counties. To qualify for the incentives, companies must commence construction by July 1, 20111 to qualify. The measure’s backers are hoping for an extension, citing the level of development activity since the passage of the incentives. Microsoft, Yahoo and Sabey have all announced new phases of data center construction, while Dell has purchased land in Quincy.

Tax Breaks Key to Yahoo Plans
Noteboom said any future development in Quincy beyond the current two YCC pods would hinge on the tax situation. “We are not building capacity as far into the future as we could, due to our concerns relative to the tax incentive package,” said Noteboom. ” In the event that tax incentive packages in Washington don’t go well, we are continuing to discuss future opportunities in other states that could meet our future need.”

For the moment, the Yahoo project places the small farm town of Quincy on the bleeding edge of data center development. Just down the street from the Yahoo Computing Coop, Microsoft is building a next-generation facility based on its container-based IT PAC design.

Quincy has become a magnet for data centers because of its abundant supply of cheap, “green” hydro power generated by area dams. Microsoft pays just 1.9 cents per kilowatt hour for its power in Quincy.

A view of the Intergate.Columbia data center complex built by Sabey Corp. in Wenatchee, Washington.

Sabey Data Centers (SDC) has signed a lease with a global financial firm for 36,000 square feet at its Intergate.Columbia campus in East Wenatchee, Washington, the company said this week. The tenant, which was not identified, will be consolidating its data facilities from around the world into the Intergate.Columbia campus. Sabey is currently preparing the site for the new tenant.

Sabey executives said the new lease was a enabled by a tax incentive package approved during the last legislative session. The legislation created a 15-month window in which data centers in rural Washington counties could benefit from a sales tax exemption for computer and electrical components. Several data center providers joined with the Washington Technology Industry Association and the town of Quincy to form the Washington needs Jobs coalition, which successfully lobbied to get the incentive package passed.

Sabey: Incentives = Jobs
“The sales tax exemption is working exactly as we had hoped,“ said John Sabey, President of Sabey Data Centers. “We are competitive in the global marketplace. The new projects are bringing jobs and economic activity. They are also expanding the tax base for local government.”

In the months following the passage of the tax incentives, Microsoft has begun building a second data center in Quincy, and Dell has purchased land in Quincy in connection with a data center project.

“The state has gotten a great return on its investment,” said Dave Johnson, Executive Secretary of the Washington State Building & Construction Trades Council. “The data center industry is critical for the economic future of Central Washington. It creates jobs and expands the local tax base.”

Data Center Cluster Develops
Central Washington has become a magnet for data centers because of its abundant supply of cheap, “green” hydro power generated by area dams. Microsoft pays just 1.9 cents per kilowatt hour for its power in Quincy, compared to rates of 8 cents an hour in Silicon Valley and even higher in the New York market. Yahoo, Ask.com and Intuit have also built or announced data center projects in central Washington.

Intergate.Columbia is a 430,000 square foot data center campus, which includes large data centers for T-Mobile and VMware. The new tenant is located in building B, which is a LEED Gold certified building shell. With the latest lease, Intergate.Columbia is 92 percent occupied.

Sabey said that multiple prospects are considering the remaining space at Intergate.Columbia. But he also expressed concern that the expiration of the temporary tax incentives could stymie future growth in the region. Companies must commence cosntruction by July 1, 20111 to qualify.

“The development we have seen in the last few months is just the very beginning,” Sabey said. “Central Washington has the potential to become a major data center hub, but that would require extension of the partial sales tax exemption. Extending the exemption will mean jobs and tremendous opportunity for the next generation. This temporary tax exemption should be made permanent for the health of the Central Washington economy.”

Background on the Tax Issue
NOTE: In some of our past coverage of the Washington state tax issue here at DFata Center Knowledge, we’ve stated that attorney general Rob McKenna ruled that data centers were “no longer covered by a state sales tax break for manufacturing enterprises.” The state Department of Revenue says the manufacturing tax incentive was not offered and rescinded; it simply never applied to data centers.

“I cannot explain why any company may have built a data center under the assumption that it qualified for this incentive, because the Department of Revenue has consistently denied any request for a tax exemption for data servers under the rural county deferral for manufacturers, and it has communicated its position to local economic development councils,” writes Mike Gowrylow, communications director for the Washington State Department of Revenue. “Data centers still don’t qualify under the manufacturing exemption, but the 2010 Legislature did open a separate window for data centers to qualify for a sales and use tax exemption.”

Gowrylow notes that Department of Revenue supported the 2010 bill to create the temporary tax incentive for data centers in rural counties.