A "top tier" Fortune 500 company is expected next month to announce plans to build a data center in Colorado Springs, a move that local business promoters hope will encourage others to follow suit.
"We're pretty excited about it," says Mike Kazmierski, CEO of the Colorado Springs Regional Economic Development Corp. He adds that although data centers usually bring only 30 to 50 new jobs, they are good-paying jobs. One advertisement for software engineers cited pay of $75 per hour, while other positions were posted at $21 to $25 per hour.
In addition, capital investment in equipment and facilities for data centers can run into the hundreds of millions of dollars.
With FedEx and Hewlett-Packard already having opened data centers here, the Springs might be in line to become a mecca for them.
"We are absolutely pushing to attract data centers," Kazmierski says in an interview, "because we've got the best location in the country for data centers."
Giving the Springs an edge, he adds, are a low disaster quotient because of little chance for business interruption due to floods, earthquakes and hurricanes; chilly nights that allow data centers to use fresh air for cooling, and, perhaps the most important, cheap power.
It's when it comes to incentives that the Springs has often rolled snake-eyes. This time, though, it might hit the jackpot.
Power is king
According to a March 2010 issue of the Global Real Estate Monitor, a newsletter for commercial real estate executives, "data centers may well be the only sector in the commercial property world to have experienced growth over the past two years, and this niche sector continues to grow rapidly as demand surges and new investors enter the segment."
Data centers, which track everything from online purchases to credit-card use in restaurants, are power-hungry, making affordable energy "the main driver for data-center expansion plans," the Monitor reports.
Based on 2010 rates, Colorado Springs Utilities was second-lowest for commercial rates and sixth-lowest for industrial rates compared to such cities as Wichita, Kan.; Boise, Idaho; Omaha, Neb.; Oklahoma City; Denver; Albuquerque, N.M.; Spokane, Wash.; Tucson, Ariz.; Austin, Texas; San Diego and Los Angeles.
In a separate comparison of Front Range power providers based on their 2011 first-quarter rates, Utilities' rates were lowest.
"One of the most important things that a utility can do to help attract jobs and businesses to a community is to ensure reliable service at reasonable rates," Utilities spokesman Dave Grossman says.
Utilities has a generation capacity of 1,091 megawatts, and its record peak demand was set in August 2007 at 863 megawatts, meaning Utilities has power to spare, although at times Utilities buys power from other sources when it's cheaper than generating.
But about two-thirds of the city's power comes from coal, which might not appeal to "cloud computing" leaders such as Amazon and Google. Cloud computing is a general term for anything that involves delivering hosted services over the Internet.
Last month, Greenpeace reported that many companies rushing to build data centers are "failing to take seriously the need to power this widespread aggregation of the world's information with clean, renewable electricity."
Still, Utilities is drafting a new five-year power blueprint called the Electric Integrated Resource Plan, which could shift some reliance from coal to other resources and also is likely to continue a heavy emphasis on conservation.
Baiting the hook
Kazmierski says the big drawback is Colorado Springs' inability to offer lavish incentives.
"We've got a few on the hook," he says of data center prospects. "The question is getting them on the boat. Oftentimes with data centers, we get in the finals, and the incentives come into play. It's like a beauty contest. Everyone looks good, and the incentive package is the tiebreaker. We've lost projects because we haven't done enough."
No one will give details of the package being offered to the Fortune 500 company, because negotiations are ongoing and local public boards have yet to publicly approve a deal.
Past incentives have included rebates on sales and use taxes on building materials and rebates on business personal property taxes; they're among perks already provided to several companies, including Hewlett-Packard and Atmel Corp. How much tax money has been sacrificed for economic development packages wasn't available, but one deal, with SkyWest Airlines, extends nearly a half-century to 2056, according to data provided by the city.
Atmel, whose incentives expired in 2009, recently requested that its business personal property tax rebate be extended, because it spent $19 million in 2010 and so far this year on capital investment, city budget manager Lisa Bigelow says.
Cash payments, used only twice in recent years — $100,000 to Western Forge in 2006, and $31.5 million for new U.S. Olympic Committee facilities in 2009 — are highly unlikely for the new data center.
In any event, the city ties the incentives to specific targets, such as expenditures on facilities or jobs created.
"These are all performance-based," Bigelow says. "If they don't qualify and meet the investment criteria, they get nothing."
Kazmierski says the Fortune 500 company deal soon will become public through action taken by public agencies — presumably City Council, the El Paso County Board of County Commissioners, and maybe even a school district. On April 25, City Council conducted a closed session to discuss "an economic development project involving the electronic industry."
Meantime, an unrelated announcement is slated for next week for a business that will bring 100 jobs to the region, Kazmierski says. He declines to comment further.