Do you really want a datacenter in your town?

While Intel may be touting the advantages of running your datacenter's at a warmer temperature, many locations vying for datacenter business are pushing the climate advantages of places that are naturally cool, such as recent efforts from Minnesota to get datacenter business. But in many ways, the Minnesota story, as reported by Minnesota Public Radio, highlights the disadvantages of vying for the business of datacenter builders.

When you take a step back and look at the climate and location of Minnesota, it looks like a natural winner for datacenter business. And average daily temperature of 47 degrees means that free air cooling is a reasonable choice, the cost of energy is low, and the location central to the US and Canada. With those factors in place, Minnesota government wondered why they kept losing out on new datacenter projects to their neighboring states. A quick look made the answer obvious; those neighbors were offering major tax breaks to businesses that chose to build in their locations.  Minnesota had no such program in place.

There's an interesting business blindness in place here when people start talking about big datacenter projects. The MPR story reported "...local officials covet the construction jobs they generate, and the high-value buildings that add to their tax base." They realize that the number of jobs created in the operational phase is often quite small, especially in the backup datacenter market that Minnesota has been perusing, and the local municipalities hope to gain revenue for their coffers through the taxes on the high-value properties that will be built.

But they realize that to get these businesses to build there they need to provide competitive (read that as "huge") tax breaks. So the dreams of adding a large, reliable revenue stream to the local economy has to be put off for the length of time the tax break applies (and in many cases, these breaks exceed the projected lifecycle of the datacenter, or end at the point in the datacenter lifecycle when the business will be deciding what to do with future expansion and growth).

Like any other business, the growth of datacenter construction is a bubble; at some point it will burst and the capacity may exceed demand, especially as computing and storage technologies improve.  So planning on granting tax benefits now for the chance of a tax win for the local economy in the future, seems very short sighted.

If you want to bring datacenters in to get short term construction job growth, to hope that high-tech companies will flock to your area with other types of facilities, to build a basis for future business growth, then be honest with your motives. Understand that the benefits of bringing ion datacenters isn't going to be much beyond short term job increases, and that any other type of growth will require additional efforts. And that expecting a major growth in tax revenue from building datacenters while handing out tax breaks to get those same datacenters to locate in your communities makes very little economic sense.