Economic Development, Government, and Technology

Reaching for the Switch

County sets in motion tax zone request to draw data center to Pyramid.

June 10, 2016
| By Pat Evans |
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Kent County commissioners are a step closer to finalizing the deal to bring Switch Ltd. to West Michigan.

The county Finance and Physical Resources Committee recommended submitting a Renaissance Zone application to the Michigan Strategic Fund at its meeting Tuesday. County commissioners will vote on the application June 23, and the Gaines Charter Township Board will vote on the issue July 11.

Should both entities approve the application, it will move to the MSF Board on July 26.

If approved, Nevada-based Switch will locate its eastern U.S. data center at the former Steelcase Pyramid in Gaines Township. Renaissance Zone designation of two parcels of land would allow Switch to forgo taxes for 15 years.

The commissioners’ approval also would enter the county into an agreement of payment in lieu of real property taxes from the company. The vacant structure currently does not generate revenue for the county.

The Renaissance Zone process would finalize the legislative policies voted on in December to attract Switch to Michigan, the company’s executive vice president of strategy, Adam Kramer, told the finance and physical resources committee.

“This makes Kent County competitive in attracting data centers that run the internet and create economic diversity,” Kramer said.

In the first five years, or the first phase of the project, Switch will invest an estimated $151,190,000 and create 103 jobs in Kent County, according to information Switch supplied to the county board. Switch also said the project will attract co-located clients that will create an estimated 100 jobs and generate regular airport traffic, hotel occupancy and other economic activity.

The agreement will forgo the property taxes received from the property for Switch, and the state will reimburse the missing revenue to intermediate and local school districts, community colleges and public libraries.

Renaissance Zones are in a sunset period, with exceptions made for projects with significant economic potential, which is why Switch qualifies for the zone. The county must apply for the zone, as Gaines Charter Township isn’t qualified as a “distressed community,” but the same economic exception for the county is made for significant economic investment.

With the agreement of payment in lieu of taxes, Switch will pay both Kent County and Gaines Township an amount equivalent to all real property taxes.

The tax abatements are for personal property tax on the multimillion-dollar equipment Switch and the co-located clients will buy to operate within the facility. The estimated savings for Switch is $1.1 million annually, according to the information supplied to the county.

The first five years will include a renovation of the Pyramid building to a Switch data center and at least one SuperNAP data center with more than 400,000 square feet of co-location data center space.

The first phase is set to finish in 2021 and include $20 million in building improvements, $30 million in new construction and nearly $100 million in personal property.

The 103 estimated jobs created will have an average wage of about $78,000 a year and include technical and sales positions, clerical, security, infrastructure and construction employees, according to Switch.

In the application packet, Switch estimates more than 300 contractors will work on the Pyramid renovations and 400 will build the first data center, in addition to the investment from Switch and its clients.

Approximately 95 percent of the raw materials and commodities will be purchased in Michigan, according to the application to the county.

Kramer told commissioners the site will be similar in size to the company’s data center in southern Nevada, where 6,500 people have badge access to the facility. Approximately 33 percent of the badge holders have Nevada licenses, while many of the others commute on a weekly or monthly basis and stay in hotels, fly in and out of the airport and frequent restaurants.

Clients in Switch’s Nevada facilities include 1,000 companies, including eBay, PayPal, Shutterfly, MGM and Intuit.

“Switch estimates that the economic impact of the SuperNAP Grand Rapids data center campus will be transformative to Gaines Township and the surrounding communities,” Kramer wrote in the application to the county. “In addition to the investment by Switch, it is forecasted that the co-located clients will invest hundreds of millions of dollars in new equipment to be located on the data center campus.

“As part of the deployment of new capital, co-located tenants are estimated to create 100 new jobs as well as to generate new airport traffic, hotel reservations, restaurant visits and potential housing and car rentals from the commute of employees to Gaines Township to service their IT equipment.”

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