Mesa lands $1B deal with Google for a data center - SanTan Sun News SanTan Sun News

Mesa lands $1B deal with Google for a data center

July 9th, 2019 SanTan Sun News
Mesa lands $1B deal with Google for a data center

By Jim Walsh

Staff Writer

Technology giant Google is coming to Mesa, lured by a tax incentive agreement to build a massive data center in the emerging Elliot Road Technology Corridor.

In a major coup for Mesa, Google will join fellow tech heavyweight Apple, which already operates a large data center in the same area of southeast Mesa.

The Mesa City Council is primed to approve the Google development agreement at its meeting on Monday.

Steve Wright, a city spokesman, said he does not know specifically how many jobs will be created at the Google data center.

He said the city is limited on how much it can say about the project and that more details may become available when the agreement comes before the council Monday night.

“They’re very guarded in what they say,’’ Wright said. “Obviously, building out the facility, there will be a lot of jobs in construction.’’

Google issued a statement acknowledging the company’s interest in the data center, but it provided few details.

“Google is considering acquiring property in Mesa, AZ., and while we do not have a confirmed timeline for development for the site, we want to ensure that we have the option to further grow should our business demand it,’’ a Google spokesperson said.

A council report posted with the agenda also does not mention a number of jobs, but sets a series of milestones for development of the data center, including construction of at least a 250,000-square-foot building by July 2025 with a $600 million investment.

By July 2027, the company would need to meet a 500,000 square foot requirement, with a minimum investment of $800 million.

In July 2029, a 750,000 square foot requirement is imposed, with at least a $1 billion investment. The entire deal is outlined in a 35-page development agreement.

Google also would be required to pay the city $10,000 a year in rent to cover the administrative costs associated with the agreement.

“In terms of a financial deal, this is home run. This is a great day,’’ Mayor John Giles said, after the council discussed the deal Thursday during an hour-long executive session.

Giles said there are still elements of the project that need to be worked out, such as Google buying the property, 186 acres located at Elliot and Sossaman roads in southeast Mesa.

Giles said Google’s decision to build the data center in Mesa means that the Elliot Road Tech Corridor will be anchored at each end by one of the world’s largest tech companies, Apple and Google.

“There’s no city that wouldn’t be envious of that,’’ Giles said.

He said the project has been known to insiders by a code name, “Project Red Hawk,’’ for more than a year because Mesa signed a confidentiality agreement with Google.

Vice Mayor Mark Freeman said that Google would be buying the property from the Morrison family, long time farmers in the southeast Valley who have been selling off parts of their holdings for different types of developments — including the Morrison Ranch subdivision in southeast Gilbert.

Bill Jabjiniak, Mesa’s economic development director, played a major role in the negotiations. In a slideshow after the executive session, estimated the Google project will produce $156,567,507 in revenues for the city.

The slideshow said the property would produce $3,604 in property tax in 2019 as an agricultural use and $162,007 during a 25-year period if the use remains unchanged.

If the tax incentive plan takes effect, the projected revenue to the city in excise taxes is estimated at nearly $33 million during the same 25-year period, as opposed to nearly $49 million if Google were to build the data center without the tax incentive.

The city anticipates generating another $28.1 million in revenues, at minimum, from a combination of construction sales tax, electricity sales tax and property taxes, Jabjiniak said.

“It’s an economic development tool approved by the Legislature. We have been very judicious about using this over the years,’’ Jabjiniak said.

He said the incentive plan, called a “GPLET,’’ would be in effect for 25 years if it is approved by the council.

A GBLET, an acronym for government property lease excise tax, is calculated based upon the gross square footage of a building and is an incentive that reduces a project’s operating costs, according to the Arizona Commerce Authority’s web site.

The financing tool, approved by the legislature in 2013, requires that the land be conveyed to a government entity and leased back for private use, the website said.

Jabjiniak said during his presentation that the data center would cover a staggering 750,000 square feet.

“Data centers are the engines of the internet,’’ Jabjiniak said. “We are talking about a $1 billion corporate investment.’’

He said Google would join Apple, AT&T, and Boeing as top Fortune 500 corporations with operations in Mesa.

The agreement also requires Mesa to make available 1,120-acre feet of water to Google initially, and that the amount of water can eventually grow to 4,480-acre feet per year if Google reaches certain development milestones.

Jabjiniak said data centers use the water for evaporative cooling. He said the availability of electricity from Salt River Project also was vital in Mesa’s efforts to recruit Google.

Google has up to five years to begin construction on data center and up to 10 years to finish building it, under the terms of the agreement, Jabjiniak said.

“That could be as much as five years or it could be sooner,’’ Jabjiniak said. “We were trying to give them some flexibility.’’

Jabjiniak’s presentation did not include job projections, but it did say the typical salary would be $65,000 or more per year.

An economic impact report on Google’s six data centers nationwide, as of April 2018, said they support 11,000 jobs and $1.3 billion in economic activity, according to Oxford Economics. Google also maintains several data centers in other countries.

The study said that in 2016, the U.S. centers generated $750 million in labor income and $1.3 billion in economic activity, with 1,900 employees working on the campuses.