Arizona Legislature Passes Significant Data Center Tax Incentives

Arizona State Capitol Building

The data center incentive arms race continues, as legislators in existing industry hubs are adopting beefed-up incentives to keep pace with up-and-coming states seeking to attract new projects.

The latest state to pass enhanced incentives is Arizona, home to an active data center cluster in the Phoenix market. At the behest of a coalition of data center companies, the Arizona legislature has passed a package of incentives, which were signed into law Monday by Gov. Jan Brewer.

“This legislation is a quantum leap forward for Arizona,” said Jim Grice, a partner with Lathrop & Gage LLP and a primary architect of the legislative effort. “I have analyzed every state’s standing in the competition for data centers. This will not go unnoticed in the data center industry and I fully expect investment and jobs to follow.”

Industry Coalition Drives Initiative

The effort was advanced by the Arizona Data Center Coalition, a group of data center operators, utilities, realtors and economic development groups that would benefit from increased data center business in the state.

Arizona’s passage of incentives follows the adoption this year of tax breaks in Virginia and Texas, two of the most active data center markets. The moves are a response to aggressive incentives offered by states seeking to attract major server farm projects, such as  North Carolina, Iowa and Wyoming.

The coalition says that while other states have introduced legislation that primarily benefit single occupant data centers, Arizona has tailored its legislation to assist colocation and multi-tenant facilities as well as single-tenant sites.

The legislation allows data center operators and qualified tenants to receive an exemption for sales and use taxes attributable to data center equipment purchased for use in a qualified data center, defined by new investment in the state of at least $50 million for urban locations and $25 million for non-urban locations.

Data center operators can benefit from the tax exemption for 10 years. The incentives also reward sustainable redevelopment, adding an enhanced tax benefit for up to 20 years if an owner/operator seeks to redevelop a vacant structure or existing facility using sustainable development practices.

Benefiting from the Cloud

“This legislation will bolster Arizona’s standing in the data center industry and position it to benefit from the ever growing transition to the cloud, particularly as site selectors evaluate the relative benefits of locating in Arizona,” said David Caron, Senior Vice President, Portfolio Management with Digital Realty, founding member of the Arizona Data Center Coalition. “These prudent tax framework adjustments can be a ‘game-changer’ for Arizona.”

In 2012, Digital Realty founded the Arizona Data Center Coalition to publicly advocate for legislation to keep Arizona in the top tier of states to host data centers.

“Arizona was losing ground … it was at a crossroads,” said Russell Smoldon, CEO of B3 Strategies and a founding member of coalition. “The Governor and the legislature chose to boldly march forward to secure the jobs we have, expand the facilities that are here and attract new investments.”

Coalition members included eBay, Microsoft, Digital Realty, CyrusOne, GPEC-Greater Phoenix Economic Council, The Arizona Technology Council, CBRE, Grand Canyon State Electric Cooperative, CRBE, Jones-Lang-LaSalle, NextFort Ventures Chandler LLC, Salt River Project, and Tucson Electric Power.

The state’s largest data center player, IO, also expressed support for the new measures.

“We have long been committed to the Arizona market and to creating employment opportunities here in our home state,” said Troy Rutman, Director of Corporate Communications, IO. “We see this legislation as a real win for our substantial base of Arizona customers.”

Virtuous Cycle for Data Centers

The new round of state-level incentives creates a virtuous cycle for the data center industry, as providers get more tools to boost their attractiveness, and customers get more options to save money on their IT deployments.

What about the states themselves? Thus far the incentives have been driven by two scenarios:

• States seeking to win data center projects to boost their efforts to adapt to a digital economy, including the infrastructure to drive the Internet.
• States with a large base of existing data centers seeking to maintain their competitive position amid changing tides in site location and data center geography.

Both groups seem happy with their investments, which in most cases have been eagerly supported by legislators and governors. For now, the cycle seems to have no end in sight.

[Courtesy Data Center Knowledge]

Five 9s Represents Dacentec on Sale of its Data Center and Operations in Lenoir NC

CentriLogic, a trusted provider of international hybrid hosting and data center solutions, has acquired North Carolina data center operator and hosting services provider Dacentec Inc.

Founded in 2009, Dacentec Inc. operates a 23,000 square-foot purpose-built data center in Lenoir, North Carolina, and offers a comprehensive suite of dedicated hosting, colocation, and technology-neutral green cloud data center services. CentriLogic will integrate these services with its own hybrid hosting, managed services, and cloud computing solutions. The addition of this facility, which is located in the Southeast’s most active data center cluster, will provide CentriLogic with direct access to the numerous large organizations with enterprise-class workloads located throughout the region. CentriLogic will also utilize this facility to provide its existing customers with an additional U.S.-based cloud availability zone, along with geographically dispersed managed hosting, co-location, and disaster recovery solutions.

CentriLogic’s acquisition of Dacentec is strategic to its international expansion program, and strengthens its network of interconnected data centers throughout North America, Europe, and Asia. Dacentec’s location in North Carolina was especially attractive to CentriLogic due to the region’s low risk of natural disaster, skilled high-tech workforce, reliable power grids, and ease of accessibility.

“Dacentec is a leading regional provider of hosting services, has won a number of customer contracts and operates in a data center hub that has been validated by investments from companies like Facebook and Apple,” said Robert Offley, CentriLogic’s President and CEO. “This acquisition gives us the immediate ability to offer our hybrid hosting solutions to companies located throughout the southeastern region of the United States, and fulfills the demand from current customers requiring data center space beyond our existing North American facilities in Western New York and Southern Ontario, Canada.”

The 23,000 square-foot data center is SSAE 16 Type 2 compliant, has access to abundant power on Duke Energy’s low-cost power grid, and is designed with multiple layers of redundancy across all levels of infrastructure. Other assets acquired by CentriLogic in the acquisition include Dacentec Inc.’s staff, its existing office space, and current customer contracts.

“We are delighted to become part of CentriLogic and offer our customers a one-stop shop for a multi data center presence and international hosting solutions throughout four countries,” says William Groh, VP Operations for Dacentec Inc.

The North Carolina data center is CentriLogic’s third data center in the United States and the eighth worldwide. CentriLogic’s international footprint now covers four countries and three continents, with additional expansion activities planned for the remainder of 2013. Five 9s Digital represented Dacentec throughout the sale.

About CentriLogic:

CentriLogic is a trusted provider of international hybrid hosting, cloud computing, co-location, and managed data center solutions to organizations that gain advantage by outsourcing their IT hosting requirements, with global headquarters in Canada and data center facilities throughout North America, Europe, and Asia. Unlike other hosting companies, CentriLogic uses insights derived from a customer-first philosophy to deliver agile and elastic solutions designed to meet evolving IT infrastructure outsourcing needs.

Google Buys Wind Power for its Data Center in Finland

http://www.forbes.com/sites/uciliawang/2013/06/04/google-to-buy-wind-power-for-its-data-center-in-finland/

MAP: North Carolina Data Centers at a Glance

Five 9s Digital has been reporting on data center market activity over the past two years; most recently analyzing market activity of the first quarter of 2013, and trends have shown a steady increase in activity as investor confidence has risen. Even through market downturns and the economic recession that plagued the country, North Carolina showed resiliency in the data center sector and experienced a boom in data center activity over the past five years.

Economic development groups, investors, corporations, and developers have requested a more detailed, visual representation of the data center marketplace in North Carolina.

MAP: NORTH CAROLINA DATA CENTERS

This snapshot includes the more nationally recognized data center projects, such as Facebook’s massive data center campus in Rutherford County, Apple’s iCloud data center and solar farm in Maiden, and Google’s data center campus in Lenoir.

The Five 9s Digital North Carolina Data Center Map highlights a large sampling of the most significant data center developments in North Carolina, which includes a range of data centers from large-scale enterprise data centers to major colocation facilities. It covers metropolitan markets such as Charlotte, Raleigh-Durham, Greensboro, Hickory, and Winston-Salem. It also includes rural markets rich in tax incentives, power, and locational advantages.

For more information on the data center projects outlined in this overview, or for information regarding new or developing data center opportunities available in the Southeast, please visit the Five 9s Digital website, or contact our team at 704-651-2210.

Savvis Data Center Wins Energy Efficiency Data Center Award

Global colocation firm Savvis has been awarded a Certified Energy Efficient Datacenter Award (CEEDA) for its LO3 London Docklands data center.

The award was presented by DCProfessional Development to Savvis, a division of telecoms giant Centurylink, in recognition of its energy efficiency following a rigorous assessment of the facility.

CEEDA is a global data center industry accreditation developed and awarded by the BCS, the Chartered Institute for IT.

“We are proud to meet the comprehensive, rigorous standards of the CEEDA independent assessment program,” said Drew Leonard, vice president, colocation product management, at Savvis. “This recognition speaks to Savvis’ dedication to enhancing the energy efficiency of its global data centers and the commitments of our people, who have worked diligently to optimize our operations for providing sustainable, secure and agile IT infrastructure solutions to our clients around the world.”

CEEDA awards are based on independently assessed and audited appraisals of data centers energy efficiency best practices.

Renewed biennially, the assessment has been developed in line with EU Code of Conduct for energy efficiency in data centers, based on globally recognized best practices in data center engineering, IT infrastructure, monitoring and management.

Under the program, DCProfessional Development assesses participating data centers for gold, silver or bronze certification. The assessment includes a comprehensive report combining a description of the performance of the best practices measured, a set of benchmarking tools and a roadmap for further improvement.

Savvis’ LO3 Docklands data center, which opened in June 2012, is a 1.5MW with 11,000sq ft of raised floor space.

DCProfessional Development-appointed assessor John Booth evaluated the facility against CEEDA energy-efficiency best practice criteria. He said: “The LO3 Docklands data center is an excellent example of a facility where the latest energy efficiency design measures and the on-going efforts by facilities staff and management to fully comply with the EU Code of Conduct and CEEDA – as well as go above and beyond – are to be applauded. Savvis’ commitment to energy efficiency and carbon reduction is clear to see, as its commitment to customer sustainability and energy efficiency efforts. It is refreshing that the performance of the data center is seen as important within senior management.”

By earning a Silver CEEDA accreditation Savvis is the seventh organization to be recognized for leadership in sustainability and data center energy efficiency, which is administered by DCProfessional Development on behalf of BCS.

Other organizations to receive CEEDA recognition include: ARM, Fujitsu, the Co-Operative Group, the University of St. Andrews, the Wellcome Trust Sanger Institute and Westpac Bank.

[Courtesy Data Center Dynamics]

NEWS: Texas Legislature Approves Significant Data Center Tax Incentives

The Texas Legislature has approved legislation to create a temporary sales tax exemption intended to attract major data center projects to Texas. The bill now goes to Governor Rick Perry, who has 20 days to decide whether to sign, veto, or allow the bill to become law without his signature.

House Bill 1223 (“H.B. 1223″) by House Ways and Means Committee Chairman Harvey Hilderbran (R-Kerrville) passed Friday after Hilderbran told the House that he was willing to accept two important changes that the Senate made to the bill:

1. The Senate increased the minimum capital investment required to qualify for the exemption. Under the finally agreed upon version, only projects involving a capital investment of at least $200 million may qualify for a ten-year sales tax exemption, while those having a $250 million capital investment may qualify for a 15-year exemption. Hilderbran had proposed a lower threshold: $150 million for a ten-year exemption and $200 million for a 15-year exemption.
2. The Senate also defined a qualifying data center to require that the center be used by a single occupant.

If the bill is signed, the sales and use tax exemption will become effective on September 1, 2013 and apply to personal property that is necessary and essential to operate a qualified data center, including electricity; an electrical system; a cooling system; an emergency generator; hardware or a distributed mainframe computer or server; a data storage device; network connectivity equipment; a rack, cabinet, and raised floor system; a peripheral component or system; software; and any other equipment or system necessary to operate qualified property, including a fixture; and a component part of any qualified property.

The exemption specifically does not apply to office equipment or supplies, maintenance or janitorial supplies or equipment, equipment or supplies used primarily in sales activities or transportation activities, property on which the purchaser has received or has a pending application for an enterprise zone refund, personal property not otherwise exempted that becomes an improvement to real property, equipment rented or leased for a year or less, or a taxable service that is performed on property exempted by the bill.

To be eligible for the exemption, the data center owner, operator, or occupant must jointly or independently:

• Meet the required capital investment requirement, and
• Create at least 20 full-time permanent jobs that pay at least 120% of the average weekly wage in the county in which the job is located. The jobs must be maintained for five years.

Other important requirements include:

• The Comptroller of Public Accounts (“Comptroller”) must pre-approve a qualifying data center, owner, operator, or occupant. The Comptroller will issue registration numbers for use in claiming the exemption.
• The exemption begins on the date the registration number is issued and expires in either 10 or 15 years, depending on the amount of capital investment.
• No investments made or jobs created prior to September 1, 2013 would count toward the eligibility criteria.
• Each applicant for the exemption must certify to the Comptroller that it will meet the job creation and investment requirements within a five-year period that begins on the date the Comptroller certifies the applicant’s right to participate.

Further, data centers that have property tax abatement agreements under Tax Code Chapter 313 are not eligible for the sales tax exemption.

[Courtesy Yahoo Finance News]

NSA and Gov. Gary Herbert Confident Data Center Can Avoid New Energy Tax

Artist’s rendering of the NSA’s new Data Center in Bluffdale, Utah

Gov. Gary Herbert and National Security Agency officials are confident they can work out an agreement to avert taxing the new Utah Data Center on millions of dollars in electricity it needs to run the mammoth computer farm.

The Legislature this year passed and Herbert signed a new law that would allow the Utah Military Installation Development Authority (MIDA) to collect a tax of up to 6 percent on electricity flowing from Rocky Mountain Power to the new Bluffdale data center.

The law irked NSA officials, though the parties now say tweaks can be made to exempt the center, which was located in Utah partly because of the cheap energy costs.

“There’s probably more than one way to skin the cat but the bottom line would end up being … that NSA will not be charged something in addition to what they were told to begin with,” Herbert told The Salt Lake Tribune this week. “I believe the NSA had a legitimate complaint and that complaint is going to be dealt with by the Legislature in a satisfactory way to the NSA.”

RELATED: NSA Data Center Ignites Debate and Fears: Security vs Privacy

Harvey Davis, NSA director of installations and logistics, had raised concerns in emails to Herbert’s office after learning of the new law.

On Thursday, Davis said in an interview he was confident it would be worked out so that the agency doesn’t face larger energy bills.

“That was just more of a hiccup,” Davis said. “Sometimes things get through legislatively that people really aren’t focused on and as soon as the governor and I saw that, there was a commitment to fix it right away, get us back to status quo. I think it was much to do about nothing.”

———-Read the rest of the report online at The Salt Lake Tribune.