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Tax breaks entice Apple to build a data center in Iowa

Facebook data center in Oregon Facebook data center in Oregon
Facebook data center in Oregon Facebook data center in Oregon

Apple announced plans Thursday to build a $1.3 billion data storage center in Waukee, IA, a suburb of Des Moines. Construction will begin early next year, and the facility will be operational by 2020.

According to the AP’s David Pitt, the Iowa Economic Development Authority has given Apple $208 million worth of state and local government tax breaks to facilitate the project, which will bring 500 short-term construction jobs and 50 permanent positions to the area.

The subsidies include a $188 million in property tax breaks and $19.6 million in sales tax waivers.

Apple will purchase 2,000 acres (87.1 million square feet or 3.12 square miles) worth of land for the 400,000-foot facility, leaving plenty of room for future expansion. The center will operate entirely on renewable energy, like all of Apple’s data centers, the company’s press release says.

“Apple will be working with local partners to invest in renewable energy projects from wind and other sources to power the data center,” according to the press release.

The company will donate $100 million to Waukee’s Public Improvement Fund, which is dedicated to revitalizing streets, parks, and libraries, and building new community facilities. The Fund’s first project will be the construction of a youth sports complex.

Iowa governor Kim Reynolds, Waukee Mayor Bill Peard, and Apple CEO Tim Cook joined together in front of Iowa’s capitol building to make the announcement, Bloomberg reports.

Cook said Apple had chosen Iowa as the site of the data center because of the state’s “world class power grid,” as well as its thriving community of computer developers.

Microsoft, Google, and Facebook all have data centers of their own in Iowa. In some circles, the state is known as the Silicon Prairie. State and local governments in the area enticed those companies with tax breaks similar to the ones it gave Apple.

“If we want to grow this economy and provide more revenue, then we should be doing what we can to bring jobs and businesses to the state of Iowa,” she said. “This puts Iowa on the world stage. This gives us the opportunity with a global company like Apple to say we are the place to be.”

But critics of the subsidies warn that data centers are not economic catalysts so much as they are big, cement buildings staffed mostly by machines. The facilities are, more or less, exactly what they sound like: giant warehouses containing servers that store data. Apple’s Iowa facility center house information concerning Siri, the App Store, and iMessage, per the company’s press release.

Once the computer systems at data centers are operational, says Michael Hiltzik of The LA Times, such facilities need only limited human oversight and maintenance. That is to say, companies don’t hand out a ton of paychecks at data centers.

Iowa is spending $208 million to bring 50 permanent jobs to the state—each such job, in other words, will cost taxpayers $4.16 million, Hiltzik notes.

Some argue that with an $815 billion market cap, Apple hardly needs help from the taxpayers of prairie states like Iowa. “It’s a net fiscal loss that it’s a straightforward giveaway in the economy to a company that’s extraordinarily wealthy and it makes no sense from an economist’s point of view. It only makes sense from a politician’s point of view,” said David Swenson, per the AP’s Pitt.

Still, governments throughout the 50 states are giving tax breaks to tech behemoths to encourage them to build data centers. In 2009, for instance, North Carolina gave Apple $321 million worth of incentives to build a data center in Maiden, NC that would employ 50 permanent employees.

In addition to those in Iowa and North Carolina, Apple has data centers in California, Nevada, Oregon, according to The New York Times. 

According to that publication, Apple’s cost estimate for the Iowa facility breaks down as follows: $110 million to purchase and prepare the land, $620 million in construction costs, $600 million worth of computer equipment and $45 million worth of “other equipment.”

Featured Image via Wikimedia Commons

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