Another voice: Subsidizing Server Farms in Iowa

Iowa throws a lot of money at the server farm industry, even though the state’s assets would make it attractive for the industry even without lucrative subsidies.

by Kasia Tarczynska, Good Jobs First

Facebook just announced a third expansion of its $1.5 billion data center in Iowa. This followed a similar move by Google for its server farm in the state. These developments are fruits of the effort by officials to encourage big-name tech companies to locate in Iowa. This private investment, however, does not come free. For example, the $1 billion Google expansion is supported by $19.8 million in state subsidies. Since 2007, Iowa has offered almost $100 million in state tax credits and refunds to Facebook, Google, and Microsoft.

Google data center facility in Council Bluffs, Iowa. Credit: Google

Google data center in Council Bluffs, Iowa. Image via Google

Subsidies to server farms raise a lot of questions and controversy.  A key issue is whether the tech companies should get subsidies at all, given that their location decisions are based primarily on the availability of cheap electricity (preferably renewable), plenty of land, cooler climate, access to water, and lack of natural disasters. These make places like Iowa seem a natural choice.

Because data centers are capital intensive projects, they usually create a small number of jobs and thus per-job subsidies tend to be quite large.

Despite these factors, Iowa still throws lots of money at the industry.  Here is a quick look at Iowa’s subsidies to the three tech giants:

Google, located in Council Bluffs

2007- The company received $1.4 million in state tax credits and $48 million in local property tax abatements. Google was the first big-name tech company to locate a data center in the state.

2013 – The Iowa Economic Development Authority approved another $16.8 million in tax credits for a second Google facility.

2015 – The company received an additional $19.8 million in state sales and use tax refund for an expansion. Google will also pay only 20 percent of local property taxes for 5 years.

Altogether, Google promised to invest $2.5 billion but create just 70 jobs.

Microsoft, located in West Des Moines

Microsoft’s state subsidies started on a small scale, $568,000 in 2008 and $131,242 in 2011.

2013 – The company was awarded $20 million from the state’s High Quality Jobs Tax Credit program for a $679 million investment.

2014 – EDA approved $20.3 million in state tax credits to Microsoft for another round of expansion. The city chipped in $18 million for construction and infrastructure improvements on the site. $3.5 million in Tax Increment Financing was committed to build a water facility that will be used by Microsoft, and others, to cool servers.

Facebook, located in Altoona

2013 – After an intense and secretive competition with Nebraska, Iowa won Facebook’s server farm.  The company was approved for $18 million in tax credits for creating 31 jobs and investing $1.5 billion (the EDA report lists Facebook under Siculus, Inc, a Facebook initiative). The company also enjoys discounted water rates and has received money through Tax Increment Financing.

There is one additional thing that stands out: Google, Microsoft, and Facebook are rich tech companies that easily can afford any costs related to construction and operation of those server farms.  As one journalist put it: “Google needs a tax break like Bill Gates needs food stamps.”

Kasia Tarczynska is a research analyst at Good Jobs First, She has a Masters in Urban Planning and Policy from the University of Illinois at Chicago. This blog originally appeared on the Good Jobs First blog at this link.
Good Jobs First is a national policy resource center for grassroots groups and public officials, promoting corporate and government accountability in economic development and smart growth for working families.

Where have you gone, Henry A. Wallace?

Iowa and national leaders should follow Wallace’s example, and confront climate change just as Wallace and and other leaders of his day overcame the Dust Bowl and Depression of the 1930s.

A call to leadership on climate change

437px-Henry_A._WallaceRepublican Henry A. Wallace was Secretary of Agriculture in Democratic President Franklin Roosevelt’s cabinet. In a Sunday column in the Cedar Rapids Gazette, Wallace’s grandson makes the case that his grandfather — an Iowan and a crop researcher — would put science ahead of politics to respond to climate change. He would recognize climate change endangers all of us — farmers included.

Solutions are more important than politics, but right now politics is blocking what science is teaching us. With climate change upon us, the oil industry still is able to set — or block — policy that could turn back this frightening attack on our economy and environment.

As an Iowan, a scientist and a political leader, Wallace would point out that Iowa exports include renewable fuels and wind power as well as corn and hogs. Climate science also fits with Iowa economic advantage.

Each new scientific study warns us that a policy of more digging of coal, more fracking for oil will be lead us to more problems. A recent letter signed by 180 researchers and teachers at 36 Iowa colleges and universities make that point that climate change is already adversely affecting the state.

Iowa and national leaders should follow Wallace’s example, and confront climate change just as Wallace and and other leaders of his day overcame the Dust Bowl and Depression of the 1930s. Let’s put science over politics.

Posted by David Osterberg

IPP-osterberg-75Osterberg, co-founder of the nonpartisan Iowa Policy Project, is a professor of occupational and environmental health at the University of Iowa. He is one of 180 scientists and teachers who signed the Iowa Climate statement, available here.

Also see his recent blog: Climate change impacts showing up now

And see the Cedar Rapids Gazette column by Henry Scott Wallace: What would Henry A. Wallace do?

Tackle the real question on erosion and pollution

An article tying erosion to corn production for ethanol has caused commotion in the heartland. The AP article was front page on the Tuesday, November 12, Des Moines Register and the story jumped to two full pages inside. The corn growers and Secretary of Agriculture Tom Vilsack are furious. Why? The AP story points out that high corn prices and a lack of regulation on how farmers farm has caused some bad effects on the land. The story blames ethanol and the Obama administration for mandating we use more and more of it in our vehicles.

It is true that ethanol takes much of the U.S. corn crop (44 percent, according to the story). That is one factor in high corn prices. It is also true that high corn and bean prices can cause more erosion, more Phosphorus into streams, more Nitrogen in the water — so much that Des Moines must treat its river-source water to make it into a drinkable supply.

One example in the story is notable. “In Wayne County, a gravel road once cut through a grassy field leading to a hilltop cemetery. But about two years ago, the landowners plowed over the road. Now, visiting gravesites means walking a path through the corn.” I have no doubt that happened. You can see bad land practices everywhere.

More land that used to be seeded down, and somewhat safe from erosion and chemical runoff, has become corn and bean fields. The Farm Bureau organizations in seven Midwestern states did a recent study on conversion and found that about 8 million acres changed from being seeded down to producing row crops. Of that, 1.2 million acres in Iowa were converted from grassy habitat to corn and beans. For six months of the year, row-crop ground is bare and subject to rainstorms that cause erosion and chemical runoff.

Wrong question

But the AP story goes after the wrong question. The mandate that more of our automobile fuel must come from ethanol has certainly had something to do with high corn prices — but so do the recent droughts and the fact that more people in the third world are eating better. Yes, the price of corn matters. But so does the lack of regulation. Growers can wreak destruction at will in their drive to plant more acres.

We often hear that “the enemy of my enemy is my friend.” And the ethanol industry is the enemy of the oil and gas industry, so I want to be on the side of ethanol, not Big Oil. Talk about destructive practices. Fracking. Deep Water Horizon. Do I have to remind you?

But how can we have economic development in Iowa and become less dependent on oil? Ethanol doesn’t have to be a problem. We can do something about how the land is farmed. We could mandate buffers along every stream and lake in Iowa. Pass a law and mandate it. Industries cannot legally dump waste into a river, so why should farmers be able to farm the land in a way that soil and agricultural chemicals go into the same river?

However, we don’t have to go that far. The five-year renewal of the U.S. Farm Bill is now in a conference committee between the House and Senate. The Senate version requires any farmer getting a subsidy on crop insurance to comply with certain environmental restrictions. The House version takes the position that this is just more regulation and the American people should shut up, give farmers $10 billion per year in insurance subsidies and let them plant over roads to cemeteries as they choose.

The issue is simple. If you want ethanol from corn, ask our government to make sure the corn is grown responsibly.

IPP-osterberg-75  Posted by David Osterberg, Founding Director of IPP


Hear Osterberg discuss this issue with KVFD-AM’s Mike Devine on “The Devine Intervention.”

Finding balance to protect all Iowans

David Osterberg
David Osterberg

People seem to like the idea of balance. It should remind us of a teeter totter. When weights are equal the equipment is horizontal.

But with policy, the balance is not always equal. Some have more influence and get their end of the teeter totter closer to the ground. So it is with many angles of public policy in Iowa. State law is biased toward agriculture, food producers and other industrial or corporate interests that have the right connections.

The Iowa City Press-Citizen quoted me in an August 8 editorial on the recent cyclospora outbreak. The newspaper thought the Iowa Department of Public Health should have worried more about people eating contaminated food rather than protecting the image of the companies that served it to them.

Pre-packaged salad mix was the source of the microorganism culprit, which made many people in Iowa and Nebraska very sick. Good epidemiology by Iowa and federal health officials led to the discovery of the source but once it was found, state law prevented the release of what company produced the contaminated greens and which chain restaurants served it to their customers.

I told the newspaper that the protectors of public health were engaged in balancing the need of citizens to know vs. the bad publicity that could come to the purveyors of the contaminated food. And I said that the balance was biased toward the needs of industry.

This is not unusual.

If a worker takes pictures of animal abuse in a factory producing meat products, a crime might be committed. But in our now-tortured notion of the public interest, the worker/whistleblower may be considered the criminal, not the company that may have used inhumane procedures that offend Iowa values.

Likewise, the new Iowa strategy to reduce the amount of nitrate pollution in our rivers will require cities to spend the money to make a small reduction while farm interests which are 90 percent of the problem will be encouraged, not required, to reduce their pollution. When a new hog producing facility decides to come into a rural neighborhood, the neighbors have few rights to protect their air and water, and the producer has the upper hand.

Food and agriculture policy in Iowa is out of balance. Lawmakers should be more concerned about protecting Iowans’ fundamental values and their health, and let big industry fend for itself.

Posted by David Osterberg, Founding Director

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To our readers:

Short, fact-driven comments from the public may be accepted on Iowa Policy Points in response to posts by Iowa Policy Project staff members. These comments are screened, and may be edited for space — but if they are long and require extensive editing, they likely will not be posted. If you would like to comment on a post, the best advice is to keep the comment short, 100 or 150 words at the outside, and stick to the facts, rather than comments about personalities including political leaders. Our work is issue- and fact-based, and this blog is produced in the same spirit, to help provide factual perspective on the issues of the day.

The IPP Staff


Health reform ruling one of many; should not affect implementation

Andrew Cannon, research associate
Andrew Cannon

Until this week, health reform had cleared a number hurdles. Federal district court judge Henry Hudson’s ruling Monday struck down the individual responsibility provision of the health reform law.

And though it was certainly disappointing news for supporters of the Patient Protection and Affordable Care Act and could have serious negative consequences if the decision is upheld by the Supreme Court, the ruling shouldn’t cause either reform supporters to despair or reform opponents to rejoice.

First, some perspective: the individual mandate has already faced three federal court challenges, including yesterday’s ruling. Judge Hudson’s ruling against the individual mandate is the only ruling to strike down any portion of the Affordable Care Act. Both earlier rulings found that individual mandate in particular and the entire health reform law fell within Congress’ constitutional powers under the Interstate Commerce clause.

The individual responsibility provision (Section 1501 of the Affordable Care Act) requires all individuals to purchase health insurance or face a tax penalty, with exceptions for those with religious convictions against health treatment and individuals facing extreme financial hardship. In order to prevent insurance companies from denying coverage to sick individuals or excluding preexisting conditions from coverage, a requirement that all individuals have insurance had to be included. Without such a provision, there would be a serious temptation for individuals to “game the system” — avoid purchasing insurance until they got sick.

But the other reason that this ruling is not as bad as it’s been made to sound, and in fact has some positives for health reform supporters, is that it struck down just that one provision of the law. Though Judge Hudson ruled that the individual responsibility provision was a constitutional overreach by Congress, he stated that the rest of the law falls within Congress’ constitutional purview. Virginia’s Attorney General, Kenneth Cuccinelli, requested that Judge Hudson halt the implementation of the law. Judge Hudson denied that request.

Lawmakers can (and should) continue to work toward the law’s full implementation, even in light of Judge Hudson’s ruling. The constitutionality of health insurance exchanges and the expansion of Medicaid are not in question.

This is just one ruling of three thus far, and undoubtedly more to come. When the legal wrangling is settled, we’ll know whether or not the individual responsibility requirement — and the tighter insurance regulations that rely on it — remains a workable part of the law. If the provision is found to be unconstitutional, there are workable solutions that would keep the insurance regulations in place and replicate the effects of an individual responsibility requirement. Until then, however, policymakers should continue their implementation efforts.

Posted by Andrew Cannon, Research Associate

Give thanks for what we do and do not have

Iowa does not have a reputation for having great water quality, but it could be worse.

Will Hoyer
Will Hoyer

My job here at IPP requires me to think a lot about water. Iowa does not have a reputation for having great water quality, and there are certainly plenty of threats, but it could be worse. As Thanksgiving approaches here are a few things I’m thankful for:

1) We don’t have companies extracting natural gas using unknown chemicals and potentially fouling our groundwater like Pennsylvania, New York, Michigan and other states do.

2) We have adequate water (for the most part). You don’t have to go too far to find areas where water quantity is a serious concern, like in Nebraska and Wisconsin. Travel further, to places like Florida and the American southwest and the issues get even more serious. Certainly increased chances of drought in the Midwest are recognized as a possibility with climate change, but to date we’ve avoided drought for a few decades.

3) We don’t (yet!) have major oil pipelines running across our state. It just so happens that they rupture occasionally like this one did in Michigan. A few years ago, Wisconsin had an oil pipeline break, too. And now there’s a pipeline proposed that would cross Nebraska.

4) While we’ve seen our fair share of flooding in parts of the state, we’re not going to see the problems that coastal cities will as sea levels rise.

5) We don’t have acutely toxic groundwater like this city in California does.

We in Iowa are plenty busy working on polluted runoff, CAFOs, emerging contaminants and seasonal flooding, among other things. That’s plenty for now.

Happy Thanksgiving!

Posted by Will Hoyer, Research Associate