Switch CEO: Michigan Data Center Build is a Go

State legislature passes data center tax breaks, Vegas firm greenlights Steelcase Pyramid build

Yevgeniy Sverdlik

December 16, 2015

2 Min Read
Switch CEO: Michigan Data Center Build is a Go
Switch’s plans in Michigan include turning the basement of the Steelcase pyramid into a data center, and building additional facilities around the Pyramid (Rendering courtesy of Switch)

Now that the state legislature has approved tax breaks for data center owners and users in Michigan, the project to convert the pyramid-shaped office building outside of Grand Rapids is a go. Future of the project by Las Vegas-based data center provider Switch hinged on the bill’s passage, and lawmakers rushed it through the legislative process to get it approved before the holidays.

The bill, passed by the state House Tuesday, now heads to Governor Rick Snyder’s desk for signing. In a phone interview, Switch CEO Rob Roy said the company has decided to go ahead with its Michigan data center construction plans “100 percent.”

Those plans call for 2 million square feet of building space, including the Steelcase Pyramid and several additional buildings Switch plans to erect around it. The full build-out could take up to 10 years and include six buildings, the company’s spokesman Adam Kramer told us earlier.

The pyramid takes its name from its former occupant, the big office furniture supplier Steelcase.

Michigan was up against numerous other states in competing for the big construction project. Without the tax incentives, “Switch couldn’t build in Michigan,” Roy said. “None of the clients would ever come.”

They wouldn’t come because there are more than 20 other states that have data center tax breaks that slash taxes on expensive IT equipment purchases completely or by 50 percent, he explained. “The states competing with each other have created that.”

State lawmakers made several amendments to the bill to break a legislative stalemate over it, according to MLive. One of them, made Tuesday, was a sunset on the sales and use tax breaks if the data center industry in the state doesn’t create 400 new jobs minimum by 2022 and 1,000 new jobs by 2026.

The final version of the bill also did not include personal property tax breaks which were in a previous draft. While sales tax exemptions are important for data center tenants who spend millions of dollars on IT gear they house in those facilities, personal property tax on that same equipment can add up to a lot of money, and some states, such as North Carolina, offer that exemption as well.

Local governments in Michigan still have the option to exempt individual data center users from personal property tax.

Switch is likely to bring major technology companies as its tenants to the state. The company’s client list in Las Vegas includes eBay, Google, Amazon, Intel, HP, Intuit, and Boeing, among others, and data center providers’ decisions to expand are often driven by existing major customers. eBay, for example, will also be the anchor tenant in the new data center Switch is building in Reno, Nevada – a project the online auction company said this week it would invest $230 million in.

Switch also announced earlier this year its first project overseas, a 450,000-square-foot data center build outside of Milan.

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