Economic development officials, saying the city must be more competitive in luring high-tech firms, have asked the common council to exempt large-scale data management equipment from personal property taxes.
The request comes in the wake of recent news that Data Realty LLC plans a new data center in Ignition Park, the city’s proposed high-tech park on the former Studebaker property south of downtown.
In 2009 the Indiana General Assembly enacted a law, co-authored by Sen. John Broden, D-
South Bend, allowing local governments to grant the exemptions. Pat McMahon, executive director of Project Future, the St. Joseph County Chamber of Commerce’s economic development arm, said he lobbied for the bill after repeatedly losing new data centers to other states, especially Illinois.
When selecting site locations, McMahon told the council Monday during a committee meeting, such enterprises look at three primary factors: the cost of electricity, connectivity to the Internet, and taxes on the machinery and equipment.
With relatively cheap electricity rates and the Metronet, a high-capacity fiber-optic network that runs throughout the city, South Bend competes well on the first two criteria, McMahon said. But it has lost out to neighboring states, especially Illinois, which does not tax data center equipment.
McMahon gave the council a list of 11 companies, including Microsoft and Google, that built data centers in Illinois from 2006 to 2009. He said his staff had promising talks with more than half of the firms, and he believes they would have come to South Bend if the tax exemption had been in place.
In order to receive an exemption under the Indiana law, a firm must be engaged in a business that is dedicated to computing, networking or data storage activities; invest at least $10 million in real and personal property; and pay an average wage of 125 percent of the county’s average wage.
In St. Joseph County, that would mean paying employees at least $51,000 a year, McMahon said.
Unlike traditional property tax abatements, which expire after a set number of years, these exemptions would last as long as the company complies with the state law requirements.
The exemption would not cover real property, such as land and buildings, nor other equipment not specifically used for data management. But firms could seek additional abatements for those taxes, as any firm can do now.
McMahon noted that data centers typically pay relatively high wages, so even with other abatements, they would generate considerable income tax revenue for the city
Don Inks, city economic development director, said he planned to have a resolution for the council’s consideration at its next meeting Feb. 28. Data Realty, which has yet to negotiate the price it will pay the city for the Ignition Park land, plans to seek an exemption if the council passes the resolution, he said.
"We have an overall effort where we’d like to get into bringing data centers into the area," Inks told the council.
McMahon said he is planning to ask the county council to also adopt an enabling resolution.
Staff writer Jeff Parrott: