State and local leaders held a flurry of meetings Thursday morning to approve $208 million in tax incentives for tech giant Apple to build two Des Moines-area data storage centers, calling the deal the biggest economic development win in the history of the state.
The exact location has not yet been disclosed, but it will be within the city limits of Waukee, a booming suburb neighboring Des Moines.
The Iowa Board of Economic Development unanimously approved $19.6 million in tax incentives from the state to build the $1.375 million project, which will employ about 50 people, and the city of Waukee plans to provide a property tax abatement of 71 percent over 20 years with an estimated value of $188,239,943.
The total value in state and local benefits for the project adds up to $207,889,943.00, which means that $4,157,798.86 in state and local funds will be used for each of those 50 jobs. The employees must be paid at least $29.12 per hour as part of the incentive agreement with the state of Iowa.
Apple has also agreed to purchase 2,000 acres of land for its Iowa data center division, which is enough to allow for future development, said Debi Durham, the state’s economic development director. The land will house two state-of-the-art, 100 percent renewable energy data center facilities, along with other various logistics and operational buildings.
Apple plans to complete construction on the first building in April 2020 and the second building by April 2021. The company expects roughly 1,700 temporary construction jobs to be created with the project.
At an event outside the state Capitol with Gov. Kim Reynolds, Lt. Gov. Adam Gregg and Waukee Mayor Bill Peard, Apple CEO Tim Cook said the company chose Iowa for its workforce, land availability, access to low-cost renewable energy and “the geographic benefit of being one of the safest states, free from earthquakes that might threaten the integrity of data centers.”
“At Apple, we admire what you guys have accomplished, and we want to be a part of it,” Cook told cheering supporters. “Data centers like this new facility are critical to Apple’s operations, and they make up the backbone of America’s innovation in infrastructure. Every day, they make it possible for Apple users to send tens of billions of messages, to save more than a billion photos and to place 10 billion FaceTime video calls.”
To sweeten the deal, Cook promised to invest $100 million for a public improvement fund to rebuild infrastructure, streets, parks, libraries and a youth sports campus that will host community and high school games and will feature a greenhouse, playground and fishing pier.
Critics questioned the wisdom and fairness of giving such tax breaks to one of the world’s richest companies.
“It’s a net fiscal loss that it’s a straightforward giveaway in the economy to a company that’s extraordinarily wealthy, and it makes no sense from an economist’s point of view. It only makes sense from a politician’s point of view,” said David Swenson, an economist at Iowa State University and critic of such large economic development project tax breaks.
But Matthew Mitchell, an associate professor of international business and strategy at Drake University, said the incentives are part of doing business, and even with a tax break, the new center will have a huge economic impact.
“When I see the 71 percent abatement, I also think it’s about 29 percent revenues that didn’t exist the very previous day,” Mitchell said. “You have the prestige of doing business with one of the most successful companies in the world.”
Waukee residents, however, said they are concerned with their city’s expansive growth, and the development only adds to their worries because they feel as if they’re being left behind.
“I feel like the red-headed stepchild over here,” Linda Porth said.
And Russell Miller said, “The taxes in Waukee are high already, and we’re bringing in big businesses to give them abatements.”
Reynolds defended the use of the state’s $19.6 million in tax credits at a time when the state budget shortfall may need to be addressed by a special legislative session, saying it’s a minimal investment for the return Iowa will get.
“If we want to grow this economy and provide more revenue, then we should be doing what we can to bring jobs and businesses to the state of Iowa,” she said. “This puts Iowa on the world stage. This gives us the opportunity, with a global company like Apple, to say, ‘We are the place to be.'”
Greater Des Moines Partnership CEO Jay Byers said the new partnership shows the rest of the world that Iowa is the Silicon Prairie.
“Having brand names, having Apple, having Facebook (and) having Microsoft in this community sends that powerful message across the world that we are (a) tech center not only for the country but for the world,” Byers said.
Google, Facebook and Microsoft have already built billion-dollar data centers in Iowa. Like Apple, they were drawn to the state by its generous tax breaks, wind-generated electricity and relative security from natural disasters that could disrupt service. The project is part of a greater movement to make Des Moines a technology corridor within the United States.
The economic development board’s chairman, Chris Murray, said such projects bring people who build homes, generating tax revenue and causing other businesses to explore moving to Iowa.
“They say we should go to Iowa because we have these epicenters there. And as you look at the age demographics and the growth of Iowa, I think it’s really difficult to challenge the fact there are ancillary growth benefits from making an investment like this,” Murray said.
The Associated Press contributed to this report.