June 4, 2014
Boy, one minute you’re the state of Washington, the data center destination de jour, and the next, you’re losing business to Iowa. Nothing against Iowa or Iowans, but if asked, most people would describe it with a question, “isn’t it one of those square ones”, rather than a declarative sentence. Up until now geographic proximity has had a disproportionate effect on our perception, and those of prospective businesses of our 50 states. If you didn’t have beaches, movie stars or an easily recognizable shape, you were relegated to the “which one is that” category for generations of US geography students. However, as the good citizens of Washington just learned, the data center business has become the great equalizer to allow virtually any one—sorry Hawaii and Alaska– of the 50 stars on the flag to slug it out with any other.
Of course, it’s not necessarily the physical state itself—look I’m a big fan of Iowa, but I’m not planning to pick up stakes and move there any time soon—but the economic incentives that they offer to entice the Microsofts of the world to locate there. As Microsoft’s state government affairs director, DeLee Shoemaker, has said, “States such as Iowa and others have come on board with very attractive tax incentive packages to get data centers to locate in their communities”. Apparently this whole Washington versus Iowa thing started when the boys from Redmond were deciding where to locate their newest gargantuan facility. Although their original desire was to put it in their own backyard of Quincy, when the can do folks from the nation’s corn capital swept in with a better offer they blew off their home town pride faster than you can say “Altoona”.
Although we all know that data centers don’t directly create massive numbers of jobs, as pointed out in economic studies like the one recently conducted by Facebook, they can have a very positive impact on their surrounding communities. While this may not be a big deal to states with large concentrations of businesses, this is music to the ears of their more “prairie oriented” counterparts. Wheat fields may be nice to look at but nothing says “new fire station” like 100,000 square feet of computing capacity, and since the ability to offer tax abatements lets anybody play, “the game”, as Holmes used to say, “is afoot”.
Interestingly this desire to welcome the Googles, Facebooks and Microsofts to a pasture near you hasn’t led to vicious interstate feuds. Washington hasn’t begun a campaign of Iowa bashing, and that’s a good thing since we can get that just by watching C-Span. However, since someone always has to take the blame for any defeat, Washingtonians are pointing the figure at their own state legislature for failing to extend the tax breaks that would have kept Microsoft in Quincy. I don’t know if this will lead to an epidemic of “Tax-break shaming”, but it does look like the opening salvos of a data center race between the states. Isn’t this a good thing for all involved?
Certainly, as a data center provider, the ability to more cost effectively build new facilities is highly desirable, but I think this new level of interstate competition presents a win/win for all involved. The ability for any location to potentially become a new high technology center reflects the continuing evolution of our information economy while providing opportunities that simply weren’t available in many areas. Since this economic incentives arms race isn’t confined to just Washington and Iowa, future years will find data centers being located in areas that no one would have predicted even five (5) years ago. If economic opportunity and growth are to be the new battlefield for the coming war between the states, I say “have at it”.