This is the fourth and final part of a special DCK series looking at Opportunity Zones and data center developers’ experience with them to date. Be sure to also read part one, which explains what Opportunity Zones are; part two, about an Opportunity Zone that's being leveraged to lure more data center investment to Reno, Nevada; and part three, about how a mothballed military base is being converted into data centers with the help of Opportunity Zones.
Like Sacramento’s McClellan Business Park, located on the site of a former Air Force base, the Long Ridge Data Center campus is located on reclaimed land as well --- in this case, a former aluminum plant in rural Ohio. A wide partnership of industry and government is looking at turning it into a home for data centers.
The Ormet Aluminum Plant, founded in 1957, closed in 2013. At its peak, it had more than 2,000 workers and was said to be one of the most significant employers in the multistate region, producing 270,000 tons of aluminum per year. At the time it shut down, it put 700 people out of work. The company blamed the shutdown on rising electricity costs --- a significant factor in producing aluminum, as the single plant used as much electricity as the nearby major city of Pittsburgh itself --- as well as low aluminum prices.
Consequently, Monroe County is looking to take advantage of Opportunity Zones to attract data centers. The county is finishing a power plant in the unincorporated town of Hannibal that it hopes to use, in conjunction with Opportunity Zones, to attract data centers to the site when it is completed by November 2021, said Bo Wholey, president of Long Ridge Energy. The project broke ground in May, 2019.
Benefits of the site include a 485MW combined cycle power plant under development, more than 125 acres of flat land, fiber-based access to major cloud providers, and natural cooling resources, Wholey said. More than 250 workers are on-site constructing the project, he said.
In the meantime, the site offers existing 138kV transmission lines (500MW capacity) connected to the Kammer substation located 10 miles away in West Virginia. And for organizations that are looking for data centers powered by renewable energy, the site features a 40-acre parcel suitable for solar energy, with eight to 10MW of solar power under development, Wholey said.
Long Ridge is developing its own data center on the site as it approaches other investors. The company’s initial 15-acre phase, dubbed "LR-1", will deliver a 170,000-square foot powered shell with 24MW of IT capacity, the company said in January. It is currently in the process of design review and clearing the site, Wholey said.
“The data center campus development efforts are well underway now and have been very well received by the industry,” Wholey said. “Long Ridge works very well for hyperscalers and wholesale colocation developers who, in addition to gaining large capital spend tax benefits, require greenfield land, inexpensive diverse power, and superior design flexibility, as there are very light zoning requirements in Monroe County as they pertain to the Long Ridge property.”
Long Ridge isn’t alone. DP Facilities, based in Ashburn, Virginia, announced in June, 2019, that it was also intending to build a data center on the site. The project is expected to bring 300 construction jobs to the area and once completed, the data center campus will train and employ approximately 40 to 50 local people.
The site is just over the Pennsylvania border, 90 minutes southwest of Pittsburgh and also outside the 150-mile radius of Washington, D.C. and Ashburn’s data center cluster, meaning it is far enough away to be a good site for disaster recovery and survivability, the company said. Data centers on the site can also take advantage of a nearby river for water cooling, Long Ridge noted.
Other Ohio Resources
There’s more financial benefits to leverage than just Opportunity Zones. “Ohio has long been a very positive environment for data center development with highly favorable tax abatement and PILOT [payment in lieu of taxes] programs for both developers and tenants,” Wholey said. The sales tax abatement program, implemented in 2011, reduces tax by up to 100% for data centers investing at least $100 million in the state. The PILOT program, first implemented in 2010 and now extended to at least the end of 2022, offers tax benefits to renewable energy projects. In addition, Ohio has no personal property tax.
JobsOhio, a nonprofit corporation specifically dedicated to drive capital investment in Ohio, has played a significant role working with Long Ridge as it invests to accelerate growth, create more jobs, bring more industry, and increase payrolls in Monroe County, Wholey said. DP Facilities, for example, noted that at its Mineral Gap data center in Wise, Virginia, it hired former coal mine workers and trained them to be data center technicians.
That’s a big factor. According to the Columbus Dispatch, Monroe County had the highest unemployment rate in the state as of a year ago.
Other Ohio-based economic development programs that data center projects could leverage include the following, some of which are associated with the PILOT programs, Wholey said:
- Community Reinvestment Area, which provide up to a 15-year, 100% real property tax exemption for the assessed value of structures constructed or remodeled.
- Enterprise Zone Tax Exemptions, which provide up to a 15-year, 100% exemption for the increase in assessed value of real and tangible personal property resulting from the project.
- Tax Increment Financing, which captures the increase in assessed value of real property and diverts the tax revenues into a special fund to be used for public infrastructure improvements or, in some limited cases, private improvements and can provide up to a 30-year, 100% exemption for the increase in assessed value of real property from the base amount.
- Job Creation Tax Credit, which is a refundable credit for companies creating at least 10 jobs (within three years) with a minimum annual payroll of $660,000 and that pay at least 150% of the federal minimum wage.
- Port Authority Financing, which means port authorities lease ground from businesses for at least five years, construct and own the real property improvements on the land for at least five years (using funds provided by the business or its lenders), and lease the improvements to the business during the term of the ground lease, with the improvements being owned by the business at the end of the ground lease.
And it’s those benefits, more than being in an Opportunity Zone per se, that could help Hannibal, said Steve DelBianco, president of NetChoice, a Washington, DC-based tech industry trade association.
"Hannibal’s biggest asset is that it’s in the state of Ohio, where economic development can give 50-year sales tax exemption certificates for qualified data centers," he said. “To compete for enterprise data centers, it will need to check the other boxes, too,” including adequate and affordable plots of land, an educated labor force and cheap and reliable electricity. In particular, it will need to supply renewable energy because companies such as Facebook and Google often require new renewable energy sources for data center siting, he said.
Hannibal’s biggest competition is not necessarily Northern Virginia, but other parts of Ohio itself, DelBianco said, noting that both Facebook and Google are siting new data centers in New Albany, outside Columbus. “It’s relatively flat land, abundant water, cheap land and a highly educated workforce,” he said. “Hannibal should focus more on being attractive to enterprise data centers and build upon its inherent advantage of being in a state that gets it.”
Wholey agreed that there’s more to consider with data centers and Opportunity Zones than the tax benefits. “Be certain that the location is not just financially advantageous,” he said. “Power availability and costs, site constructibility, availability of abundant and diverse fiber and other natural resources play even larger roles in successful site selection. Your location has to check all the boxes.”