Shakopee’s push to boost development is once again prompting the city to consider using financial incentives to lure a new business to the city.
Last year the City Council unanimously approved economic incentives to attract two large companies: Seattle-based Sanmar Corp. received $2 million in tax-increment financing to build a 580,000-square-foot distribution center, and Faribault-based Trystar Inc. got a $1 million tax abatement for an office and manufacturing facility.
Earlier this year the city approved a tax subsidy of almost $600,000 as part of a larger financial package involving Scott County, the Burnsville School District and the state for Emerson Process Management Rosemount, which is considering putting a large factory on the abandoned ADC Telecommunications site.
Now the target is Compass Datacenters, a Dallas-based company looking for a site for a $67 million data center. The company has focused its search on the southwestern metro area, and now has a shortlist of three possible locations, according to Ray Watson, a company consultant. He said Compass also is considering a site in Iowa and is expected to make a decision in May.
Shakopee city planners recently recommended a $400,000 financial package for Compass that would include a nine-year tax abatement and sewer-charge credits. Residents get to voice their opinions of the deal at a public hearing Tuesday.
In an interview, Mayor Brad Tabke said he’s had no feedback from people for or against the proposed financing package since it was announced a few weeks ago.
“We need to be competitive and put the best possible package together,” Tabke said. To do that, the city considers how a development would meet job and wage targets as well as the impact on Shakopee’s overall tax base, he said.
“I have no problem sacrificing a reasonable amount of current dollars for future gain. It’s what you believe is reasonable that’s the kicker — that’s open to interpretation,” Tabke said.
Data centers typically don’t have large numbers of employees. The Compass facility is expected to have a workforce or 40 to 65, according to City Administrator Mark McNeill.
But the average salary would be $68,500. Data centers also can help draw other employers who use the facilities for data storage. Some very large companies have their own data centers, but other businesses use facilities like those developed by Compass that serve multiple end-users.
Compass CEO Chris Crosby said he’s not aware of research that specifies the number of spinoff jobs generated by data centers. But he said a large majority of companies consider the proximity of a data center when deciding where they want to put their information technology operations.
Crosby said the company has the Twin Cities at the top of its list. “It is a very underserved market, considering the number of Fortune 500 companies and large private companies that are here,” he said.
A recent research report by the Twin Cities office of Colliers International points out several reasons the area could be attractive to data center developers. The cold climate is a major advantage since it lowers the cost of keeping the facilities cool. The area has a stable electronic grid and lower risk of natural disasters, factors that came into sharp focus last year when data centers on the East Coast found themselves in the path of Hurricane Sandy.
The Colliers report also points to the Twin Cities’ large, tech-oriented workforce, a ready labor supply for a data center.
Compass has built data centers in suburban Nashville, Raleigh, N.C., and Columbus, Ohio, for which it did not receive public financing. Crosby attributes the difference to the lower cost of doing business in those communities, including taxes.
Shakopee isn’t the only area community willing to use public financing to land a data center. Earlier this year Chaska approved a tax abatement for a data center to be operated by Dallas-based Stream Data Centers.
In addition to financial help from Shakopee, the Compass center also would qualify for Minnesota’s data center sales tax break, which covers projects that are at least 30,000 square feet and involve an investment of at least $50 million in the first two years.
The Compass center would be a five-building complex with almost 110,000 square feet. The company looked at a few other sites in Shakopee before choosing an 11-acre parcel in the Dean Lakes area.
McNeill said the site is near some multiunit housing but would not need to be rezoned.