Shakopee Considers $400,000 Enticement Package for Data Center

A Dallas-based company is considering building a $67 million data center—an enormous hive of computer servers—in east Shakopee. In exchange, the company has asked for a substantial investment from the city, at least $400,000.

Compass Datacenters has set its sights on an 11.3 acre site in the Dean Lakes, which is billed as one of the largest mixed-use developments in the Twin Cities. The company hopes to build the 109,000 square foot data center over the next two years.

"They are a relatively new phenomenon," said City Manager Mark McNeill, who explained that the explosive growth of cloud computing was responsible for the proliferation of data centers.

The centers are heavy on hardware but require relatively few employees, just eight per building, or 40 in all. Nevertheless, Compass has approached both the city and the county asking for an infusion of government aid in exchange for job creation.

The company's initial proposal called for $2.1 million in assistance from Shakopee alone, including a $1,482,000 tax abatement over 10 years. The original figure was premised on the entire projected investments, said to be $67 million, which includes purchase of the land, the machines inside and other costs beyond the building itself. However, if approved, the tax abatement would apply to only the value of the structure itself, or $13 million. If the company were granted a full abatement, the city would forego about $560,000 over nine years.

The Economic Development Advisory Committee advised the council to cut that figure in half, to $281,659.

The company also asked for about $613,000 in waivers for fees and infrastructure costs, as well as reduced utility rates. Data centers require large amounts of uninterrupted electricity, McNeill said. Some consume as much as small city to both power the computers and cool down the structure (the banks of computers create massive amounts of heat). 

These requests garnered mixed reactions from the council and city staff alike.

"That seems like a steep price to pay for so few jobs," Councilor Matt Lehman said of the original proposal.

McNeill recommended that the council jettison all but the abatement and $124,000 in SAC credits (Sewer Availability Charge). Including the county's abatement ($272,173), that would work out to $12,000 of local government money per job, McNeill said.

Even the smaller proposal seemed to leave some members of the council cold, though Councilor Pamela Schurman argued that the data center could have some less tangible benefits that might be worthwhile.

"It could accelerate the growth of Dean Lakes," Schurman said.

In spite of some qualms, the council agreed to put the proposal before the public, which is invited to a hearing at 7 p.m. on April 9 in the council chambers.