Iowa's New Top Crop Is Server Farms 111
1sockchuck writes "Microsoft just confirmed that it will build a $500M data center in Iowa, following the lead of Google, which is nearing completion of a $600M facility in the state. Boosted by generous tax incentives and affordable power, Iowa is prevailing in a fierce competition with other states for these huge data center projects for tech titans. Iowa officials say they intend to leverage that track record to attract even more projects in a bid to transform the state into a mecca for server farms." The Economist covers this trend more broadly, focusing on Washington state and Iceland angling to become server-farm destinations.
Iowa takes lead in corporate welfare (Score:3, Insightful)
Discuss.
Re:Iowa takes lead in corporate welfare (Score:4, Insightful)
Tax cuts are not welfare.
If you decide not to hold up a liquor store, that's not a generous gift you've given the liquor store owner.
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Sure it is. You do not know how many liquor stores I've been generous to today.
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Assuming the state runs on an ab out balanced budget it does mean citizens are taking a larger percentage of the taxes. It could still be better for them though. The fact that Corporate taxes are essentially a tax on customers of that corporation, and that most Google and MS customers are not from Iowa, would mean that the citizens of Iowa are paying taxes that in a normal (for that state) structure would be paid by people world wide.
If the power is really so cheap why the need for tax breaks?
This is real
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Assuming the state runs on an ab out balanced budget it does mean citizens are taking a larger percentage of the taxes.
Or they can just cut the budget and shrink the government.
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Now that's just crazy talk!
Shrink the government, why that's un-american.
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I didn't say they were paying more. I said they were paying a larger percentage. That would be true with a smaller government too (what did ab out mean, probably that I am too stupid to proof read).
Giving benefits to a type of company you want while not extending them to other companies you apparently don't want (small businesses I guess?) is affirmative action, weather you approve or not.
I will say that taxing corporate profits is kind of silly for most companies. If a company is in a competitive market
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A large percentage of a small number is still a small number. Cutting the size of the government is the only way to decrease the burden on everyone.
Also, this seems poorly thought out:
I also think there is an argument to tax large profits for the sake of encouraging re-investment (for example a 50% tax on all profit over 15% of gross would encourage some of that extra profit to be spent on R&D (or salaries, probably for those who need it least). You could even allow years where profits ate 10% to allow the extra 5% to be deducted from future years.
The only reason to invest is to earn profits. You can't tax profits to provide an incentive to invest. If I ran a company under your rules, I wouldn't invest just for the opportunity to lose it all in tax payments when the investments pay off. I'd use cash to buy back the stock to increase investors' capital gains and save
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It is poorly thought out. It is not my job, nor will it ever be, to think these things through.
It will only eliminate one type of investment though. It will eliminate investment in creating efficiencies in a non-competitive market.
There will still be incentive to come out with new products, or getting existing ones into new markets (growing overall gross, allowing for more profit in raw numbers, for example Exxon's 9% is a huge number, and would be 100% tax free under that proposal).
In a competitive marke
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I didn't say they were paying more. I said they were paying a larger percentage. That would be true with a smaller government too (what did ab out mean, probably that I am too stupid to proof read).
Hmm... that assumes the tax revenue won't grow at all.
If there was not a business there before, and I offer 50% off the taxes, I am still growing my tax revenue.
Say taxes before were 100 million dollars. 80% paid by citizens. With no break the comany would pay 2 million, with a 50% break 1 million.
Tax revenue is now 101million. Citizens are still paying the same in taxes, and their percentage of the taxes has gone down some. Instead of 80% of the taxes they are paying 79.2%.
It might come back up to 80%
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The real problem is where politicians notice this and offer "sweetheart deals" to a specific company to get them to come in. Then they can claim "bringing in those jobs."
But if the "sweetheart deal" was the policy for *every* company, how many more companies would immigrate. Unfortunately, in a way that the politician cannot claim individual, direct credit for.
So, instead, the policy is to be slightly (or heavily) hostile to businesses in general, and use specific high-profile cases to bring them back in.
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Actually, that's backward - only in a NON-competitive market can companies directly pass on the cost of additional taxes to their customers.
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In a competitive market companies fail until the supply goes down enough to adjust the price upwards, it can take time, but it happens.
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That's hardly the same argument as companies directly passing on their expenses to their customers.
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I am also curious, in a non-competitive market, why does a company keep the price below the highest one with large sales volume?
I would think that without competition you set the price to maximize profit, and cost of manufacturing has less of an impact. If your costs go up a few percent, you keep the same price, since your customers are already paying as much as they can.
It is competition that brings price below that magic maximum price point and down to a barely profitable amount. It is this same competi
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That's a lot more complicated than it sounds, and everybody feels that their favorite department isn't the cone that needs to be cut back. In fact, they could use a few of the $$$s you free up from somewhere else.
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A lot of time tax incentives does not mean the abscence of all taxes.
If a state agrees to tax a server farm 50% less than another state, the state giving the incentive still receives taxes.
Further, those are taxes they would not have received if the company had not taken the incentives.
Then you have the secondary tax effects. If the server farms adds jobs for everything from janitors and managers to network admins. Those then pay state income tax (if applicable), and make purchases in that state and pa
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Then you have the secondary tax effects. If the server farms adds jobs for everything from janitors and managers to network admins. Those then pay state income tax (if applicable), and make purchases in that state and pay state sales tax.
What do you want to bet that at least half of the high paying jobs (managers, network admins) and up living out of state and just telecommuting in? Once constructed and populated, all these facilities really need on site are a janitor, some rent-a-cops and manual labor trained in how to replace blades.
Usually tax incentives are done to promote business with the understanding is there will still be a net gain in tax revenue.
Replace "understanding" with "hope and prayer" and I'll agree. As far as I know, such benefits have never been realized as measured by any formal, after-the-fact, study. However, all the studies I have seen
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Since google/ms/etc are building new facilities there, it could actually increase the amount and percent of tax revenue coming from corporations (and therefore decrease the percentage from individuals). Even if they're paying a discounted tax rate, it's than if they were located elsewhere.
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exactly.
not only that, but the cost for land, electricity, easy access to major telcom backbones from SEVERAL carriers (I-35 and I-80 cross in the middle of the state), makes the location also ideal.
I live in Iowa and the ability to easily deploy datacenters here, along with several local universities with decent MIS/CIS programs also means easy access to talent.
Now through in that the cost of living here is SIGNIFICANTLY lower than many places where data centers are traditionally located, and the lack of n
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and the lack of natural disaster opportunities (no hurricanes or seismic activity is a bonus)
Which state is that I recently read about which recently had massive destructive floods and deadly tornadoes cutting through boy scout camps?
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Businesses expect to pay taxes. A liquor store has no reason to believe that it will be held up, unless so threatened. In such a case, retraction of such threat would represent welfare.
In any case, Iowa may believe that tax cuts to businesses that may bring work beyond corn to its state are in its best interest. The jury is out on whether this works.
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Spoken like a person who has never paid protection money... though I suppose you could argue it's a form of taxation.
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Difference between protection money and taxes - whether or not the collectors use baseball bats and guns or handcuffs and guns.
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Not even close.
The difference is who benefits (in theory) from the money collected. Protection money goes to the individual threatening the business, and only to him. Nobody has a say in how that money is used.
Taxes by the state are spent for the benefit of the people, and the decisions are made by their representatives and those hired by the state.
Complaining that tax money is inefficiently spent (it is) or that there is corruption (there is) does not negate the fundamental difference between protection
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Nah, he's just joking. Though, in some cases, the "protection money" people do provide some limited services, from what I understand. But only from a self interest point of view (ie, keeping the goose a-laying)
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From the point of view of the person getting "taxed", he's completely correct.
I'm guessing that he is like me. I pay a huge amount in taxes. I see very little benefit -- and in many cases, I see the money being used to make things objectively worse for me.
I know that if I could keep my tax money, my life would be better. But there are people out there who don't work as hard who have empowered themselves to take my earnings from me. They are the government class -- they receive the benefits of my work.
An
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I also pay huge amounts in taxes. I think that some of it is wasted, some of it is spent on things I disagree with. But, when I actually look at the budget (and I do) I just don't see the huge amounts that are being wasted or misspent, especially at the local and state level. When there is waste in my area, I raise hell, and so should you. But, where are the huge amounts being spent that you think are being unfairly spent? Can you name even 25% that you think are just plain wrong? Take a look at any s
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Easy, from each project cut 25%. This is what large companies do, except their depts are required to cut their budget by 10% each year.
Sorry, but there is no column in the budget specifically for waste.
Waste in gov't happens like this:
It's the end of year, I'm a manager and I have money left over in my budget. If I don't spend it next year I will get less. Lets get new chairs and some new printers. Companies that sell to the gov't know this and phone around end of year to sell things to waste money. Hopeful
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Tax cuts are not welfare.
If you decide not to hold up a liquor store, that's not a generous gift you've given the liquor store owner.
Welfare is taking from one group to support another group.
If you do not pay taxes, but you consume government provided resources, then the government is taking from one group to support you.
Ergo, tax breaks (which is what we are talking about here, not actual cuts) are welfare.
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If you do not pay taxes, but you consume government provided resources...
This is not the case, in general, for ordinary working people that engage in business in the US. In general, the people who consume government are not the tax payers. Government has become a wealth re-distribution scheme from people who produce to people who don't.
No one involved in a data center project is likely to be a large consumer of government services. They are going to be net tax-payers. The only question is whether how much damage the government can do to them. This deal limits that damage so
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No one involved in a data center project is likely to be a large consumer of government services.
Sure they will be large consumers of government services. They will drive on the roads, they will receive protection from the police, they will sent their kids to school, they will visit the parks, they will use the state courts, they will eat the food inspected by the government. A person with a decent job will use as much of these particular services than people without jobs.
They are going to be net tax-payers. The only question is whether how much damage the government can do to them. This deal limits that damage somewhat.
The state government (in this case anyway) is the not enemy. It's providing necessary services used by everyone and begrudging th
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They will drive on the roads...
Gas taxes pay for the roads. They are not exempt from gas taxes. This "roads" nonsense is always brought up as something generic taxes pay for, but they don't. Roads are self-funded by their users' gas tax payments. We'd have them even if income and sales taxes were both zero.
...they will receive protection from the police...
Property taxes pay for police. But I bet they'll hire private security because the police service they get is inadequate for them.
...they will sent their kids to school...
Corporate entities don't have kids. Their workers' property taxes and income taxes will pay for t
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They will drive on the roads...
Gas taxes pay for the roads. They are not exempt from gas taxes. This "roads" nonsense is always brought up as something generic taxes pay for, but they don't. Roads are self-funded by their users' gas tax payments. We'd have them even if income and sales taxes were both zero.
You didn't look at the web sites that I referenced, did you? Where is the gas tax? It's part of the Transportation revenue, making up 13% of the nongeneral revenue which is itself 54.7%. So, at most 7% of revenue is gas tax, although much of that is other taxes (look at the link for an actual list). Transportation expenditures are 13 percent of the budget. So, you're just plain wrong (by 50%). Half of the "roads" is from general revenue; you can call it 'nonsense' if you want, but the rest of us can
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"Transportation" is a trick. It's a code word. Gas taxes pay for roads. "Transportation" includes transit and transit is a subsidized benefit. Transit users pay about 10% of the bill for their transportation. The rest is taken from everyone else. "Transportation" also includes rest stops, art projects, bike trails, employee diversity programs at the DOT, and lots of other things that are not roads. Also, roads could be built and maintained for a lot less if they'd allow non-union contractors to work
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Excellent list. Not a place that I'd like to live, but thanks for letting me know where you stand.
I think that the place that you are envisioning would be a horrible place. Without public schools, libraries, universities, almost no health system support, truly horrible government employees, it would be a nasty, darwinian existence. While I don't want to live in a purely socialist, coddled society, I don't want to live in the wild west either. Best of luck, but I'll move to someplace else if this ever ca
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All the same services would be available to everyone. Life would be almost exactly the same, except everyone would be more prosperous.
The libraries would still be open if people wanted them enough to donate a tiny bit of money. The universities would all still be there but people would have to pay out of their own pocket if they wanted a gender studies or art history degree. Health services would be as good or better. Crime would be much lower. Education would be much better for the children but not as
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It would be cheaper for the amount of work that gets done. Salaries tend the be a function of productivity. If that's not the case in some specific instance, then more expensive is reasonable and just.
There's also the question of benefits and retirement plans. Government workers tend to have benefits that seem a little better than the private sector but they tend to be much more expensive. Government retirement plans are notoriously lavish.
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If you do not pay taxes, but you consume government provided resources, then the government is taking from one group to support you. Ergo, tax breaks (which is what we are talking about here, not actual cuts) are welfare.
10 bucks says people will mod you up because you used the word "ergo". But your conclusion doesn't actually follow from your premise in this case. Microsoft is not consuming government resources tax-free, they're still paying to move there, paying to build their buildings, etc. An ince
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Microsoft is not consuming government resources tax-free, they're still paying to move there, paying to build their buildings, etc.
Your conclusion does not actually follow from your premise in this case.
Moving, building, etc are not government services, the fact that anyone is paying for them is irrelevant.
Ergo your conclusion is false.
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Iowa Values Fund (IVF) [iowalifechanging.com]
It is pretty much a sellers market when it comes to big industrial/commercial development. The data center guys can afford to shop around for the best set of tax breaks, tax credits and other sweetheart deals.
Re:Iowa takes lead in corporate welfare (Score:5, Insightful)
Now I'm thinking like a business person on this. I have a deep cynicism that tells me that your average scum sucking low-rent politician isn't doing this kind of analysis. They're likely just handing over the tax breaks to generate a larger pool of benevolent corporations that give to their re-election coffers, and to stamp their campaign signs with "I created ### jobs for Iowa" pandering.
I get the feeling my ranting is going to burn some Karma. Oh well, it's election season, anything goes!!!
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tangible results are measurable
Sure, but correlation is not causation. Let's assume that Iowa were not handing out tax breaks. What might happen instead? It's quite possible that the server farms would still go there (it's centrally located, cheap power, and low wages). Then they'd have all the current benefits plus higher tax revenues.
You can only measure results if you know what would happen without intervention. Without that, all that you are measuring is current state. You don't know if the current state is because of your chan
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Ahh but since competing areas in the same basic geography also could be chosen, why not make your offer more enticing?
Thats what the state did to compare with South Dakota and Nebraska.
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Nebraska? Competitive? Sheee-it. This state has its collective heads up its ass when it comes to competing with Iowa.
Especially with most of the population living in Omaha, which sits along the state line. Iowa has cheaper gas by nearly 20 cents at times, due to Nebraska's extortionate gas taxes, which just went up three cents a few weeks ago, just as gas was crossing the $4 mark. Iowa has casinos, Omaha doesn't. Millions of dollars flow across the river from Nebraska all the time. It's fuckin stupid.
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Yeah, well the project is going to bring only 75 jobs [informationweek.com] to Iowa. I suspect most of the employees will be transferred in from out of state. If BillG had his way, they'd all be hired from India on H-1B visas for $15k per year.
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and when those 75 jobs begin, their families will be local consumers that spend money for other jobs that will be needed. Their kids will need schooling... The power company will need people to upgrade and maintain their infrastructure.
It's not just 75 jobs, the list goes on and on.
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You might be overestimating the construction jobs, since Microsoft is experimenting with server farms in shipping containers [datacenterknowledge.com], like those Sun Modular Datacenters. Des Moines already has massive IT infrastructure since it's the world's biggest centers for insurance data processing. They're going to use infrastructure that is already there.
No, I don't see many local jobs coming out of this. I see more strain on our local infrastructure. I see more power consumption and more pollution from coal-fired power plan
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i disagree.
I think that there will be many additional jobs KEPT because of this.
Every construction project going on currently in Iowa of this magnitude has been on the books for at least 4 years.
Want to know how many new ones are coming up the pipeline?
Here's a hint.
There aren't that many.
So if you have no big projects, then people leave the area to go to other places and work, and take all of their wage tax dollars, their consumption tax dollars, and their discretionary spending tax dollars to otehr places
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You haven't been reading the news. Iowa was recently devastated by floods, the damage to the University of Iowa campus alone is estimated at over $230 million. Massive repair projects will take a decade to complete. This is not a time when Iowans can afford to give Corporate Welfare to Bill Gates.
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Yes, but once there they will pay state income and sales taxes. Either directly or indirectly they will pay property tax. If they buy property they pay it directly, if they rent, their landlord pays it.
Given relative cost of living, that $15k goes further for the one spending it.
If they transfer people in, those people transferring in experience something similar to a pay raise - same pay, reduced cost of living.
75 jobs probably doesn't count secondary employment.
75 more people employed means a few more r
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Just read the article.
Those jobs are expected to pay $70,000 per year.
Using CNNMoney's calculator $70,000 in Iowa is equivalent to $92,000 is Seattle.
Iowa Corporate Welfare: the specifics (Score:2)
I found the exact description of the tax exemptions [state.ia.us] Microsoft is getting. They pay no taxes on:
Computers, cooling systems, electric power wiring, backup power systems (including fuel to run them), electricity (!!!!!), cabling and racks, and batteries. And there's a weasely clause "..including but not limited to.." that seems to give them a blanket waiver on just about anything they can bury in the budget.
In return, MSFT agrees to make $200mil in investments in the site within 6 years.
This is definitely corp
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they pay no taxes to the state on the electricity.
they pay for the electricity.
there is a substantial difference.
comprehension is huge.
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I just checked my bill, I'm paying about a 15% tax rate on electricity and about 13% on natural gas. I'm using the same gas & electric company that the new server farm will. That is one hell of a tax break, considering it is going to be the single largest operating expense once the server farm is built. My utilities taxes pay for Microsoft's corporate welfare.
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It might not even be a matter of corporate donations. A politician who brings a "high tech" or otherwise easy to spin as prestigious job site to an out of the way locale will never stop patting himself on the back for it.
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Except that Iowa has, for years, been leaking good jobs to other places, and that for many years now, the best and brightest have left the state to seek better jobs elsewhere.
by enticing them to stay (by having good tech jobs located in the state) they are also ensuring that they are keeping the state moving toward a younger demographic which will spend more money becuase they have more money.
it's called economics, and as much as I hate the local poli's, they are actually thinking about this in this instanc
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But bringing jobs is a good thing.
I mean think about it you give a tax break to a company to move to your state. That is a gain in tax base and jobs.
The problem comes with giving tax breaks to keep a company. Frankly in the mid-west there is a real shortage of jobs. Heck there are towns in Kansas that will give you house and pay you per child to move there. They are closing schools left and right not to save money but because they don't have the bodies to put in them!
Iowa is working hard to attract companie
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With the increasing popularity of Lights Out Management, attracting data centers seems like a poor use of corporate welfare, since only the lowest paid workers (rack and stack, junior technicians to push power buttons) will actually need to work on-site.
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...since only the lowest paid workers (rack and stack, junior technicians to push power buttons) will actually need to work on-site.
And they are so lowly that no one should give a crap about them?
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My point is that giving a corporation millions in tax breaks in exchange for a very small number of low-paid jobs is not the best way to go about attracting employers to your area.
Hell, even a call center would offer more work opportunities to the local citizenry.
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Although if the local government owns the power utility, they might make up their money there. I have no idea if this is the case in Iowa, of course, but it may very well be.
And keep in mind that data center techs typically make anywhere from $20 to $30 per hour; that's a pretty good wage in Iowa.
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No, Iowa is mostly rural co-op electric companies, the co-ops even own 30% of the Duane Arnold nuclear power plant. And its operating license is set to expire in 2014.
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They will most likely be connected to Alliant energy which is a consortium of several smaller companies (Intersate power, IES, etc)
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I still don't understand. Why are "a very small number of low-paid jobs" not a good thing again? Any small number is larger than zero.
It would seem to be clear that offering large tax breaks to every (and also "any") employer, regardless of how big, would be a good way to increase employment.
The only way this is not a good thing is if you think that increased government revenue ought to be the goal of everyone's life.
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Opportunity cost. The money could have been spent to bring in more jobs that pay better.
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Jobs count, but they're not the _only_ thing that counts. A tiny number of jobs doesn't make a big difference to anything, no matter how good they are... that 75 jobs number is reminiscent of a larger grocery store or a Walmart's staffing levels... albeit with maybe three times the average salary of such places.
On the other hand, giving a corporation millions in tax breaks in order for them to build a half a billion dollars worth of assessable commercial facility on what was maybe a hundred thousand dollar
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Not even close.
MEth production is much higher than MJ, and both are pretty low down the totem pole.
Stop believing the hyped up bullshit.
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Oh, come on. Dozens of jobs, not hundreds, with little or no extra community impact. And all of this for the low, low price of tax abatements and taxpayers money to provide the infrastructure for a huge ol' company to continue making enormous amounts of money which they will keep to themselves.
Frankly, if I'm going to decide to use my super-powers for evil, I'll choose the kind of evil that might actually make me some money. I'll take a pass on Microsoft in Iowa, thanks.
Cheap power? (Score:3, Informative)
There is more than just that. Washington state has about the lowest electricity rates in the world from all the hydro-electric generation.
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Re:Cheap power? (Score:4, Funny)
s/generous\ tax\ incentives/bribes
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http://www.midwestsites.com/stellent2/groups/public/documents/pub/mws_am_ed_000924.hcsp [midwestsites.com]
The Midwest is also trying to keep it's college graduates from leaving the area. Good paying, high-tech jobs are one way to that end. So tax incentives are probably not too difficult to get. Land is cheap. Salaries can
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i live in an area whose power is supplied by TVA (Tennessee Valley Authority) hydro-electric ... who just announced a 20% increase in rates. Apparently they felt left out of the energy-crunch-customer-price-gouging... either that or it's taking them a LOT more gas to truck in the electricity after their water turbines produce it ... *blink*.
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Other factors? (Score:1, Interesting)
Now I had heard that stable geology was an important factor for large server farms. That's a minus point for Iceland, how does Iowa fare on that front?
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http://www.cosentry.com/post/news/The%20Best%20And%20Worst%20Cities%20For%20Data%20Centers%20Boyd%20Study%2008.pdf [cosentry.com]
At least they're not outsourcing (Score:1)
Iowa's New Top Crop Is Server Farms (Score:2)
I RTFA, but I *still* don't know what Microsoft's and Google's server farms used for seeds! ;)
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I RTFA, but I *still* don't know what Microsoft's and Google's server farms used for seeds! ;)
i think they used USB thumb drives ...
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If you can plant a 300$ mac mini and get a 4500$ xServe, I'd say that's a cash crop. *goes to do that with mine*
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Mac Minis grow up to be Xserves. ;)
You mean eee PCs, I think. ;)
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definitely some sorta micro kernel
Really? (Score:3, Funny)
they must have done an INSERT INTO ground.
I wonder how far away from the Mississippi river.. (Score:1)
I wonder how far away from the Mississippi river, these data centers are in Iowa. I would hate to see all these data centers flooded some day.
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Well, google's data center is in Council Bluffs (or counciltucky as we Omahogs call it) so Iowa would have some troubles on their hands if the Mississippi flooded it. They may have some more trouble with the Missouri river. Then again, they're on the bluffs, so unless they specifically built it in the floodplain, they're probably fine.
Bloody hell, they hear about some flooding in the news and suddenly the entire state is at risk...
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There are many, many factors in selecting locations for data centers. In the end, you need to compromise on some things and tax incentives certainly influence the decision.
The online service oriented data centers tend to be "lights out" in that they'll run for an extended period of time without humans coming in and screwing things up. While it's doubtful that any of these data centers are in a 100 year flood plane, the "lights out" functionality means they need not worry as much about their employees bein
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Actually both are in the 1000 year flood plain.
but so is all of Iowa.
and most of the great plains as well.
Re:I wonder how far away from the Mississippi rive (Score:2)
West Des Moines is on some significant bluffs. It is a place people flee to when there is flooding.
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based upon the locations already selected (and in use for the Google DC)if they are underwater, so is most of the great plains.
Both are statistically damn near impossible to flood.
there are many "High" areas in Iowa as it is bordered on both sides by two rather large river systems with rather large bluffs on both sides.
the center of the state also has some serious river systems which also have created large bluffs (though not as tall).