Cedar Rapids City Council signs off on unnamed company’s ‘historic’ $576 million data center

CEDAR RAPIDS — In awarding city financial incentives Tuesday to an unnamed company to build a $576 million data center in the Big Cedar Industrial Center, members of the Cedar Rapids City Council lauded the project — the city’s largest ever — as a “historic” milestone in Cedar Rapids’ economic development history.

Eyeing the potential to expand the city’s tax base in the future, the council approved an agreement with Heaviside LLC that calls for the construction of one or more data centers along 76th Avenue SW and Edgewood Road SW in the Big Cedar Industrial Center. While Heaviside is named, the company that will occupy the development is not.

“Some future city council in 20 years is going to have a massive amount of property tax valuation that’s going to start flowing into the city budget,” council member Tyler Olson said. “I probably won’t be here to see that but somebody’s going to thank us for it.”

Mayor Tiffany O’Donnell agreed and said, “This is how a city scales … In 20 years, wow. What a lucky council.”

Council members Marty Hoeger and Scott Olson were absent, but those present on the nine-member council unanimously approved the agreement.

An 890-acre certified portion of the overall Big Cedar site is Iowa's first mega site, which offers hundreds of acres of development-ready land to potential developers. All 1,391 acres are controlled by Alliant Energy.

The project’s advancement adds to tremendous growth in southwest Cedar Rapids in recent years as the city has awarded incentives toward the construction of massive warehouses and other buildings in the area around Interstate 380 and The Eastern Iowa Airport.

Other recent projects include kitchen appliance company SubZero’s $140.6 million light manufacturing building, FedEx’s new $108.6 million distribution center and BAE Systems’ $139 million classified defense aerospace facility that employs 800. The data center project far surpasses those other recent major investments.

“You hear me often say cities are forever,” O’Donnell said. “When you look at the timeline of Cedar Rapids, this will be its own bulletpoint on the timeline in terms of another massive development.”

The development would create a minimum of 31 new full-time employees paid at or above the high-quality wage rate. Construction is slated to start within three years of the development agreement taking effect.

Development Services Manager Bill Micheel said staff anticipate the city will see more than 31 people employed by Heaviside, but do not yet know the full range of jobs that could be created. There would be seven or eight years of construction and likely hundreds of construction jobs created, in addition to the permanent jobs at the data center.

“What we’ve observed in other communities where these exist is that there are certainly construction jobs that materialize from these projects in addition to often other support businesses that pop up,” Micheel said, as the need for building materials increases.

Olson said construction jobs are typically seen as temporary, but the size and amount of construction jobs this project will create makes it different from typical projects.

“When you consider how these projects have gone in other communities, it’s likely to some extent … that there’s going to be more than one” data center, Olson said. “It could easily turn into a 15-year construction project. At that point it’s a permanent job.”

Under the terms council approved, the company will receive a 20-year, 70 percent tax exemption so long as it meets employment thresholds and the high-quality job application is approved. The tax break would start once the first data center is complete. City staff will work to create an urban renewal area over the next year, Economic Development Coordinator Scott Mather said.

The Iowa Economic Development Authority board is slated to consider state incentives for the project March 22. If the application is not approved, according to council documents, “the city agrees to work in good faith to provide comparable Tax Increment Financing (TIF) rebates in lieu of the tax exemption.”

To attract the massive data centers that have invested billions in Iowa from tech companies, including Google, Facebook and Microsoft, the Iowa Economic Development Authority pitches Iowa on its website as having “affordable and ample wind energy, a stable grid, a high density of telecommunications infrastructure and low costs for construction projects.”

Council member David Maier said not much has been shared publicly about the project’s use of water and energy, and that little information has been shared about the business or impact of utility rates for residents. He asked when additional information will be shared.

Micheel said more information will emerge as the company goes through the design process and once the state considers the High-Quality Jobs application, but didn’t cite a specific date.

“That will allow Heaviside to start making additional decisions and really put their foot on the gas to move forward,” Micheel said. “This step is a linchpin to lots more to come.”

Under the agreement, the company would give annual community betterment payments to the city “to increase economic development activities, including growth of amenities and infrastructure.” There would be yearly payments of $400,000 per data center for 15 years with a maximum of $6 million per data center — $36 million total.

“I think this agreement that we have is something that we’re going to start seeing role modeled in the future, especially larger developments,” council member Ashley Vanorny said. “It was a very thoughtful planned process.”

The company would still pay utilities, but the city also would provide a monthly credit of $1.30 per cubic feet of gray wastewater discharge, under the approved agreement. Per-unit credit would escalate each year at 2.5 percent, up to 57 percent for per-unit sewer discharge rate.

Council member Dale Todd said the city’s ability to provide significant water is key to the company’s decision to locate here.

“We have never done a development like this,” Todd said. “It’s a historic moment.”

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