Microsoft’s “Project Osmium” plan to build its third data center in the city of Des Moines, may be stalled until July 1st 2018 due to pending legislation over water infrastructure governance.
The data center is intended to support the Azure cloud service, and was to be built in four phases, the final facility spanning over 1.7 million sq ft of land just south of the Dale Maffitt Reservoir in West Des Moines.
The build would represent one of the “largest economic projects in the State of Iowa,” West Des Moines City Manager Tom Hadden told The Des Moines Register, costing the company between $1.5 and $2.5 billion, the total investment amounting to an approximate $4 billion.
The delay could be terminal, as Microsoft needs the capacity.
It’ll end in waterworks
The water debacle was sparked in 2015, when Des Moines Water Works, the local utility in charge of three local water treatment facilities, launched legal procedures against three neighboring counties, claiming farm field runoff was causing high nitrate levels in its main water supply, the Raccoon River. This cost the utility $1.5 million in 2015, as it is its responsibility to defray the price of controlling nitrate levels in drinking water.
Des Moines has an expanding suburban population, 60 percent of which consumes water treated by Water Works, yet it has no say on the utility’s board of directors.
Republican House Representatives of the State of Iowa have proposed a bill which would shift control of the water treatment facilities from the independent utility Des Moines Water Works, offering it instead to a regional authority. This would shift control of the utility’s $250 million in assets to local municipalities.
As a result, the bill would legally halt all water utility planning, designing and building until the summer of 2018, and is likely to pass given the Republican majority in both houses of the Iowa legislature. This would block the Microsoft development, which requires new water supply lines. Following negotiations, Des Moines had previously agreed to invest $65 million in infrastructure to accommodate the data centers, building new roads, power lines and, importantly, water supplies and sewers.
It is unclear whether Microsoft plans to relocate its facility as a result, but what is certain is that it will not be possible for the company to wait a further two years to begin construction.
According to Bill Stowe, Des Moines Water Works ED, the bill is an attempt by state government to intrude on local government, and represents “retribution” for the utility’s lawsuit.
Efforts are currently underway to clarify unanswered questions created by the bill, as are attempts to incorporate such clarifications before it is passed, which could include amendments allowing for Microsoft’s construction, which local leaders say is essential to the city.
“We need to continue doing business. We can’t just stop making improvements for two years,” Hadden said. “That’s very significant for us.”
The local terrain around Des Moines is ideal for construction, with its vast stretches of cheap land, as well as supplies of affordable renewable energy. There is also plenty of low-latency fiber access,and the area has a low risk of natural disasters. The State of Iowa also offers sales tax rebates on equipment, having agreed to provide Microsoft with a $4.7 million sales tax rebate for the first phase, with plans to negotiate subsequent arrangements in future.
Other tech companies have grasped the opportunities of the State of Iowa, too. Facebook’s 476,000 sq ft data center is a mere twenty miles from West Des Moines, in Altoona, and Google’s slightly further Council Bluffs facility currently has a $1 billion expansion underway.
City managers are due to meet later this week.