Nevada Considers Incentives For Rackspace Data Center Project in Reno

The agenda for the next meeting of the Nevada Governor’s Board of Economic Development (GOED) includes an application for 20-year data center sales tax and personal property tax abatements by Rackspace US, Inc.


Rackspace (photo – Garrett Heath/flickr)

The 20-year tax abatements require the project to commit to the creation of at least 50 jobs and an investment of $100 million within a five-year period. The Rackspace data center project located in the Reno Technology Park will meet this job creation level, and far overshoot the investment requirement.

The jobs created will have an average annual wage of $29.75. Rackspace will invest approximately $100 million for real estate and construction alone, with about $211 million in personal property. Overall, the company expects to make a capital investment of $422 million into the Reno data center project over the 20-year period of the tax abatements it is applying for.

San Antonio, TX-based Rackspace (NYSE: RAX) is one of the world’s top managed cloud companies with more than 6,000 employees. The company currently serves more than 300,000 business customers from existing data centers in Texas, Virginia, Illinois, the United Kingdom, Hong Kong and Australia.

Having decided that there was a need for another large-scale data center facility to better serve its customers, Rackspace undertook a multi-year site selection process to identify a suitable site. Apart from Nevada, other sites in consideration were located in Oregon, Texas and Virginia.

According to its application, the company identified Reno as an attractive site because of “the competitive power costs, low network latency to the Bay Area, access to a skilled workforce, and an attractive state incentive program.”

The Reno Technology Park is ideally located along the I-80 ‘fiberway’ that links NYC and Silicon Valley. Data centers can furthermore access the western wholesale power market to negotiate some of the lowest power prices ($/kWHr) in the region. The recently approved Nevada data center incentives provide tax advantages that match or exceed any available in the U.S.

Rackspace’s application for tax abatements is supported by Reno economic development agency EDAWN. The application, if approved, will abate the sales tax on equipment to two percent for 20 years, which works out to incentives of about $23,062,300. The 75 percent personal property tax abatement for 20 years will likewise save Rackspace $10,508,264, adding up to a total of $33,570,564 in tax incentives.

After factoring in the indirect impacts, the project will still generate new state and local taxes totaling $47,418,214 over the 20-year period. Not to mention new payroll totaling $95,512,245 and economic output of $323,384,200.

Apart from the Rackspace data center project, the GOED Board will also consider applications for incentives for the following projects:

Reno Flying Service, Inc. – RFS is expanding in Northern Nevada with an investment of approximately $3,000,000 for a new Beach 1900 Airplane, and the creation of 22 new jobs. The company is seeking 20-year aviation sales tax and personal property tax abatements totaling $2,416,153.

Verascan, Inc. – Las Vegas-based Verascan is an aerospace services and solutions company, and expects to increase their employee count from seven to 22 within the next year. The company is seeking 20-year aviation sales tax and personal property tax abatements totaling $648,587.

Turano Baking Co – Turano already has 825 employees in four states, and is considering adding a western location. They have sites under consideration in Nevada, California and Arizona. In order to locate at a site in Clark County, the company is applying for $3,611,200 in sales tax, modified business tax, and personal property tax abatements from Nevada.

VadaTech, Inc – The company, which is already located in Clark County, is now in need of additional capital equipment that will allow them to continue to grow and hire more people. VadaTech is applying for $405,300 in tax abatements to help support their growth plans.

New Millennium Building Systems – New Millennium is a division of Steel Dynamics. The company already has 168 employees in Churchill County, and plans to create 27 new jobs with the addition of a fourth crew in the production facility. The company is seeking $386,500 in tax abatements.

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