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Data Centers in Iowa: Are the Incentives Worth It?

Google, Facebook and Microsoft have all made large investments to build large data center facilities in the state of Iowa. All three have also received multi-million dollar tax exemptions, rebates, and grants to entice them to come. In Part One of Iowa Public Radio’s data center series, we talked about why our state appeals to these Silicon Valley titans. Today, reporter Durrie Bouscaren visits Council Bluffs to ask, what’s in it for our state? 

In an old computer lab at Abraham Lincoln High School, 8-foot high computer servers crank away at medical data for three separate research universities. 17-year-old Jacob Higgins gives a tour.

“Basically what we’re doing is loaning the server’s processing power to do complicated calculations so they can get their research done quicker,” Higgins said. The research is testing for proteins that could help cure illnesses including HIV, Alzheimer’s, and cancer.

Higgins and five of his classmates have built and maintained the small-scale data center with donated equipment and a grant from Google—whose 100,000 square foot server farm is only a few miles down the road.

Higgins says that someday, he wants to be a computer technician. And he’s not alone in the Council Bluffs school district, where technology instruction has increased dramatically since Google came to town.  In the 6th grade, every student gets a small, Google-manufactured laptop that they’ll use until they graduate. Students staff a computer repair station in the school, and Business Technology teacher Deborah Robinson says there’s a huge demand for classes in coding and cybersecurity.

“What we know today is going to be totally different five years from now,” Robinson said. “You have to know how to learn, read for information and how to apply it, and adapt.”

But despite the perks, school districts are one of the largest recipients of property taxes, and it’s property tax exemptions that bring in companies like Google, Microsoft and Facebook.

In 2007, the Iowa legislature passed a law offering data centers a graduated, partial property tax exemption over a period of time. That same year, Google announced it would spend 300-million to put a center in Council Bluffs.

The city offered Google 33-million dollars in local property tax exemptions over twenty years. A few years later, Google built a second, larger data center south of town. Council Bluffs annexed about a thousand acres of farmland to accommodate it.

Data center operations manager Chris Russell says Google’s here to stay—and demand for data is going up.

“If you look at the phones in your pocket, or the computer on your desk, certainly they’re faster, but what has made them more powerful is being connected to the internet. Because sitting behind it in the data center, are thousands of computers that are at your beck and call,” Russell said.

Because a data center is essentially a giant warehouse of computer servers, they don’t bring too many jobs in proportion to their size. Google has 130 employees in Council Bluffs.

City planning director Don Gross says the real money for the community is in the property taxes data centers pay. Even including the exemption, Google paid almost $900,000 dollars in property taxes to Pottawatamie County last year.

“They also have contracts for grounds maintenance, security,” Gross said. “It is about property taxes, as opposed to, perhaps jobs. And we would consider both.”

Data centers are also high users of electricity, and water for their cooling systems in the summer. Gross says the city makes money there, too—through franchise fees. And he says there’s a certain cachet, to having a name like Google in your city.

“Within this metro area, I think people think, how did Council Bluffs pull that off? Why couldn’t we have done that?”