116 3rd St SE
Cedar Rapids, Iowa 52401
Cedar Rapids City Council approves data center agreement, calling it an investment in the future
QTS will invest at least $750M, receive $529M tax rebate
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CEDAR RAPIDS — The Cedar Rapids City Council has approved a development agreement for a data center campus that officials described as one of the largest economic development projects in city history that’s “getting the attention of the world.”
The city’s development agreement is with QTS Cedar Rapids I LLC, the developer of a planned $750 million data center campus along 76th Avenue SW west of Edgewood Road SW. The project will be located on 560 acres within the Big Cedar Industrial Center.
“Someone spends almost a billion dollars in your city — and we have two of these projects — that means that something’s going on in Cedar Rapids that’s getting the attention of the world,” Cedar Rapids City Manager Jeff Pomeranz said Tuesday, referring to QTS and a planned Google data center also in the Big Cedar site.
Pomeranz was among nearly a dozen city officials who spoke about the project at Tuesday’s City Council meeting. They touted the benefits of Cedar Rapids becoming home to two data centers. They also addressed community questions about job creation, water usage and electricity demand.
The development agreement states that QTS must create at least 15 jobs per phase for two phases of the data center campus. Pomeranz acknowledged that’s a “relatively small number of jobs,” but he said it’s likely that number will grow over time.
Mayor Tiffany O’Donnell said once all of the data center buildings are complete, “we know that it’ll be 100 to 200 jobs.”
“We’re not giving anything away,” O’Donnell said of the development agreement’s incentives. “We’re investing in our future. And the return? Jobs for our residents, growth for our economy and revenue that’s going to strengthen our community for generations to come.”
City officials said the more immediate workforce need will be construction jobs.
“It’s going to take 500-plus construction jobs over a 10-year period in order to build, and this is just one building. They’re going to have multiple buildings,” Pomeranz said. “That is a profound impact on the community. These are good-paying jobs and jobs we should be very proud to have within our community in general.”
Bill Micheel, the city’s economic and development services director, said the construction also will increase demand for other goods and services.
“Those folks are going to be living in our city or using hotels, buying food at restaurants, grocery stores, local shops,” he said. “That multiplier effect of people coming in from out of town and bringing their money with them has a very positive impact on the local economy.”
What does the agreement include?
The development agreement lays out specific requirements for QTS:
- It must invest at least $750 million in the campus;
- Construction of the campus must occur in at least two phases, with the initial phase beginning within three years of the effective date of the development agreement and being complete within six years. The next phase must begin within three years of completion of the first phase and also be complete within six years. Any additional phases must be completed within 25 years of the agreement’s effective date.
- The company must create at least 15 jobs per phase and those jobs just pay at or above the high-quality jobs threshold.
In addition, the agreement establishes the framework for a “community betterment fund.” QTS agreed to make up to 20 annual payments for each project phase — equal to $300,000 annually for each project phase — not to exceed $18 million.
Council members Ann Poe and Ashley Vanorny said that money could be used to fund police and fire services, and also could be given out to nonprofits that supports arts and culture, and provide human services support. Pomeranz said guidelines for how the city uses the fund will be developed after the first payment is received.
The agreement states that the city agrees to:
- Rebate 70 percent of the property tax increment from the project over 20 years. It’s estimated $1 billion in total property taxes will be generated, and that the rebate to QTS for the increment would be $529 million;
- Rebate 75 percent of the franchise fees collected by the city through the electrical provider over 20 years;
- Extend utilities to the property and make off-site improvements, including road improvements to accommodate traffic.
Council member David Maier asked about the city’s responsibility to extend utilities to the development site, and whether that work would be more expensive than any other infrastructure project.
The city will pay to extend its utilities — water and sanitary sewer — to the property, but QTS must pay to get the utilities to its buildings and extend the lines south to 76th Avenue SW, Micheel said. The cost for QTS to do that work is estimated at $13 million for the sanitary sewer and $3.8 million for the water.
“That’s infrastructure we don’t have to build,” Michell said, referring to having utilities extended to 76th Avenue SW, which he described as “a growth area.”
‘If Cedar Rapids doesn’t compete, we lose’
O’Donnell said she sees the city’s development agreement as an investment, not a cost. She said that while the city would rebate an estimated $529 million in tax increments back to the company, those rebates eventually will phase out.
“That’s conservatively $100 million per year in property taxes when this expires,” she said. “We’re thinking past 20 years.”
And, she said, if Cedar Rapids hadn’t worked with QTS, the company would have picked another city.
“Why do we offer these incentives at all? If Cedar Rapids doesn’t compete, we lose,” O’Donnell said. “We lose the jobs, we lose the investment, we lose the growth and let me be clear, I don’t believe we can sit on the sidelines and watch others reap all of these benefits.”
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