A multibillion-dollar data center project is coming to Western Mass.
Boston Globe (November 20, 2024)
So which giant tech company is going to set up a major operation in Westfield? Will it be Amazon, Alphabet, or maybe Microsoft?
The state Legislature last week approved a measure that exempts data centers from the state’s sales and use tax. And a massive project near the Westfield-Barnes Regional Airport, about 15 miles west of Springfield, is moving ahead as a result, according to Jeff Daley, president of the Westmass Area Development Corp.
Estimated to cost more than $3 billion at full buildout, the Westfield data center would be the largest such complex in the state by far, not to mention one of the largest private-sector projects of any type. As many as 10 buildings packed with computer servers for storing and processing data would be built there over time.
Westmass helped the data-center developer, Servistar Realties, secure approval from the city’s planning board as well as a major tax break from the city council two years ago. Servistar also negotiated a power purchase agreement with the local municipal utility, Westfield Gas & Electric, that will allow it to receive below-market electric rates. But a sales tax exemption, like what is offered to data centers in more than half of US states, was a big missing component necessary to make the deal happen, Daley said.
That changes with the passage of a new economic development bill last week at the State House; that bill, which includes the sales tax exemption for data centers, was signed into law by Governor Maura Healey on Wednesday. Servistar was represented in State House negotiations by Smith, Costello & Crawford, Boston’s busiest lobbying firm.
Data center developers have long steered clear of New England, in large part because of the high cost of electricity here. But Daley argues that the sales-tax exemption will spur other projects, beyond the one in Westfield, in other cities and towns served by a municipal electricity utility, particularly those that are strategically located on the electric grid (as the Westfield site is).
Daley said he spoke to Paul Corey, a Connecticut lawyer who represents the investors in Servistar, on Friday, the day after the bill passed. Corey told Daley that he is having conversations this week with several potential anchor tenants for the data center complex. Daley said he doesn’t know the specific company names, other than many of the biggest data-center users in the country have expressed an interest — a group that includes the likes of Amazon, Google parent Alphabet, and Microsoft.
“One of his quotes was, ‘None of this would have moved forward without these tax incentives,’ ” Daley said. “They won’t even look at Massachusetts without that being on the books.”
The project was proposed before the recent boom in artificial intelligence prompted many of the big tech players to devote even more capital to expanding data center capabilities. A recent analysis from McKinsey & Co. shows demand for data-center capacity more than tripling in the US by 2030 from today’s levels.
Daley said the 10 data-center buildings would go up over two decades, eventually spanning 2.7 million square feet of space. He said the AI boom would likely accelerate that timeline. Because of the need for regular equipment upgrades, Daley said the sales tax exemption could save the future data-park owners up to $30 million a year. Construction could start by sometime in early 2026, Daley said, and the first building would likely take around 18 months to complete.
Servistar, named after the road where the project would go up, will most likely sell the 155-acre development to a national data center operator, which would then lease some or most of the buildings to a big tech company, while also hunting for smaller users to share those buildings. Under the city’s tax break plan, the owners would pay up to $372 million in property taxes to Westfield over 40 years, Daley said, while also saving them millions of dollars a year. Eventually, as many as 400 people could work there on a full-time basis.
The provision in the economic development bill, sponsored by Representative Michael Finn of West Springfield, would exempt qualified data centers from sales taxes for up to 30 years. Finn issued a statement saying the bill “represents a major step forward in ensuring Massachusetts remains a competitive player in the digital economy.” Senator John Velis of Westfield filed a similar bill in the Senate.
“I honestly think it’s a game changer, not only for Western Mass.,” Daley said. “It opens up a whole other sector of technology for Massachusetts to compete with other states.”
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