This afternoon I caught up with Gary McLaren, executive director of the Henrico County Economic Development Authority, who addressed the main questions I raised in the previous post. The Facebook data-center project, he says, is a great deal for Henrico County citizens and taxpayers.
Facebook will locate its $750 million data center in the White Oak Technology Park, in which the county had invested $40 million in the 1990s to induce semiconductor manufacturer Infineon Technologies AG to locate there. The plant, later part of Infineon spin-off Qimondo, was an excellent corporate citizen while it resided in Henrico, but it closed under competitive pressure of subsidized offshore chip plants.
The Infineon legacy bequeathed three important assets to the White Oak Park, says McLaren. First, thinking that the county might attract other semiconductor plants, the county had oversized its water and sewer lines. Thus, White Oak had 10 million gallons a day of excess water capacity and 13 million gallons of sewer capacity — more than enough to handle the estimated 3.5 million gallons-per-day needed to cool Facebook’s servers.
Second, the park was well supplied with fiber optic trunk lines. “We’re up to eight or nine fiber companies that have run fiber into the park,” McLaren says. Making the location even more attractive, he adds, is the laying of three separate transatlantic cable lines terminating in Virginia Beach. While he doesn’t know it for a fact, he is almost certain that Virginia Beach will link to the North American fiber grid through the Richmond region, making Henrico an ideal location for serving both North America and trans-Atlantic markets.
Third, the park is served by dual feed power. Dominion delivers electricity to the park via two transmission lines. If one line shuts down for whatever reason, the other will keep the park supplied with electricity. While designed to meet the specs of the semiconductor plant, the redundancy fits the needs of the data center industry as well. Says McLaren: “We have a unique and robust technology park ready to go.”
Henrico County has a good number of data centers. McLaren won’t say exactly how many — some corporate entities would prefer to keep a low profile — but reports have reported the number as twenty. Well known data centers include QTS Data Centers, Peak 10, and Capital One. As the data-center industry explodes, Henrico wants a bigger piece of the pie.
Northern Virginia localities Loudoun County and Prince William County are widely recognized for their large clusters of data centers. Thanks to their proximity to MAE-East internet exchange points in Northern Virginia, the two jurisdictions got off to a strong head start in attracting server farms. To get a bigger share of the business, Henrico had to do something dramatic to increase its competitive posture, McLaren says, so it the tax rate on computers and computer-related equipment.
“We decided we could have a strong value proposition if we made ourselves more competitive” by cutting the tax rate, says McLaren. The thinking was: “Would we rather have 100% of nothing or X percent of something?”
Cutting the tax rate from created a windfall for the dozen or more existing data centers in Henrico County, McLaren concedes. But after the Facebook announcement, the net effect is positive. “I can tell you, with this announcement we are more than made whole.”
When asked for specific numbers, McLaren says he cannot provide them. A breakout of the net gains resulting from the tax break would list data centers and detail proprietary information such as how much they’re investing in real estate versus how much in computers and other capital equipment. In effect, Henrico citizens have to trust that their local government knows what it is doing.
A second inducement offered Facebook — an $863,000 credit on a water-sewer connection fee that normally would cost around $2 million — won’t cost county citizens anything, McLaren says. When the county built the water-sewer infrastructure for White Oak years ago, it gave the Economic Development Authority some credits it could dole out to major prospects to reduce their connection costs. “From time to time, we can use [the credits] as an incentive for companies. … We’ve used them for other companies that have come into the White Oak Tech Park.” Issuing the credits creates no new liability for the county or its taxpayers.
McLaren hopes the visibility of the Facebook deal puts Henrico in the running for more data centers. He is told by industry consultants that the good sites for data centers in Northern Virginia have been taken. While NoVa has many advantages, it’s getting more difficult to supply electricity to the region. Public opposition to Dominion Energy Virginia proposed Haymarket transmission line suggests that the easy-to-serve locations might be tapped out.
Henrico has one less visible advantage in its competition for data centers, McLaren says. The county is highly responsive to economic development prospects and can move quickly. Speed to market is critical to technology companies. Facebook, he says, told him yesterday, “that our willingness to fast track their project … made a big difference in their impression of Henrico County.”