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Google considering big data center project in KC with initial $600 million investment

Google is considering a data center project in Kansas City

Google could invest up to $25 billion in data center expansions in Kansas City over the next several years.
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Google could invest up to $25 billion in data center expansions in Kansas City over the next several years.

International technology giant Google is considering an expansive data center project in Kansas City, North, with an initial investment of $600 million.

The Port Authority of Kansas City’s Board of Commissioners on Monday voted to approve bond documents for what had been called Project Shale, but is in fact Google’s latest data center project in the Midwest.

Tech giants such as Google and Facebook have built data centers in states like Iowa and Nebraska to take advantage of cheaper land, alternative energy sources and central locations to house servers and other data components to support their far-flung web operations.

The Port Authority, or Port KC, ultimately could issue up to $25 billion in bonds over 35 years for the Google data center project, a figure that represents the company’s maximum investment in Kansas City. Think of the $25 billion as a credit limit on a personal credit card. It’s not necessarily an indication of how much Google will invest.

There’s no taxpayer guarantee on the bonds.

Google is said to be considering the Hunt Midwest Business Center, an industrial park in Clay County, for the data center project.

Monday’s vote does not clinch Google’s investment in Kansas City. The deal is still contingent on a number of factors, including land acquisition. But as one Kansas City development official put it, with his mind on the Kansas City Chiefs beginning training camp this week, Monday’s vote puts the city close to the goal line for landing Google’s investment.

“Google’s interest in the Kansas City region is an important validation of our market’s ability to support major data center activity and its final selection of Kansas City would mark a significant moment in our region’s economic growth,” said Tim Cowden, president and chief executive of the Kansas City Area Development Council. ”The ancillary benefits I’m really excited about, particularly as it helps establish the Kansas City region as a destination for data and tech investments.”

If Google picks Kansas City, Port KC could issue what’s known as Chapter 68 bonds, which would give Google an exemption on property taxes for 25 years.

“Google is considering acquiring property in Kansas City, MO, and while we do not have a confirmed timeline for development on this site, we want to ensure that we have the option to further grow should our business demand it,” said Andrew Silvestri, head of data center public policy and community development for Google, in a statement.

Data centers don’t involve many jobs. The initial phase of Google’s data center in Kansas City would involve a minimum of 30 jobs.

But Kansas City leaders count on employment and franchise taxes to justify forgoing property taxes for a quarter of a century.

Construction of data centers also is expected to be a boost to the local economy.

“Data centers also employ skilled construction workers,” said Jon Stephens, president and chief executive of Port KC.

Officials told The Star that payments in lieu of taxes were being considered to local taxing jurisdictions like the North Kansas City School District, but the amounts were not immediately clear on Monday.

In Council Bluffs, Iowa, Google has invested $2.5 billion in data center projects beginning in 2007.

Council Bluffs Mayor Matt Walsh acknowledged that the data centers don’t create significant new jobs. But he lauded the company for participating with local school districts to help with wireless devices, offer coding instruction to students and develop free wireless internet for students who couldn’t afford access of their own.

“I think there’s certainly residual benefits outside of the economic development forum — the expertise and the quality of employee they hire and their philosophy to give back to the community,” Walsh said.

He said Google received public assistance in the form of tax increment financing to support the Council Bluffs project. A 2015 report in the Omaha World-Herald said Iowa issued $71 million in tax incentives to Google, Microsoft and Yahoo for various data center projects throughout the state, working out to $523,000 of public investment per job created.

That investment from states and cities for relatively small job production has attracted criticism from corporate incentive watchdog groups.

Good Jobs First, a research group often skeptical of corporate incentives, in a 2016 report identified a Google data center project in Oregon from 2006 that received $360 million in subsidies in return for 175 jobs, or $2 million per job. Good Jobs First advised cities and states to treat data center subsidies with caution.

“Internet-based companies have to grow the cloud and they will choose stable areas with cheap electricity,” the report said. “They will barely benefit your local economies because they create so few jobs and often import top-wage labor.”

The Northern Virginia Tech Council said in a 2018 report that the data center industry was a boost to Virginia’s economy, directly or indirectly supporting more than 43,000 jobs in 2016.

Missouri and Kansas are trying to catch up to neighboring states for data center development. Local development officials for years pushed Missouri lawmakers to pass a tax credit for data centers.

“This has been a goal for the state of Missouri,” Stephens said.

Ryan Weber, president of the KC Tech Council, said tech giants like Google are fond of putting data centers in the Midwest for their central location. And, as big users of electricity, data centers like areas with alternative energy sources like wind and solar energy, both of which have been a benefit for Iowa and Nebraska in attracting projects.

Kansas City, he said, has an advantage with its proximity to major fiber optic backbones that are buried alongside railroad and interstate networks, of which there are plenty in and around Kansas City.

“We’re an intersection of the world’s internet in Kansas City,” Weber said.

Data centers dot the Kansas City landscape, but they tend not to be flashy, high-profile projects. They often pop up in remote locations as most companies prefer to operate data centers in obscurity for security reasons.

“They’re an important part of our tech community going forward,” Weber said.

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