We were pleased with Hewlett-Packard’s recent decision to build a $240 million data center on its existing campus here in Colorado Springs.
H-P is a company whose Colorado roots and enduring presence in our city make it an especially valued member of our corporate community. The company has been in continuous operation in Colorado Springs, in one form or another, since 1961. And let us not forget that H-P founder David Packard, a Pueblo native, served as a Colorado College trustee and donated the money for the construction of Packard Hall (named after his parents).
Although the construction of the data center will create more than 300 construction jobs, the long-term job impacts are relatively slight.
In announcing an incentives package for H-P, the city claimed that the company’s decision will mean that as many as 125 high-paying, primary jobs will be added to the local economy.
That’s doubtful. H-P’s server farm will directly employ between 25-40 people, and might account for as many more indirectly.
Nevertheless, we have no quarrel with the city’s incentive package, which amounts $4.8 million in tax rebates. The taxes thereby rebated would be neither levied nor collected absent H-P’s data center.
The deal is not, like so many others, front-loaded. The city loses nothing, and gains both a major construction project and a few dozen well-paid positions.
But one feature of the deal presents a cause for concern. It has to do with the intrinsic nature of the data center business.
Data centers are to electrical use what Hummers are to gas mileage. That’s because operating and cooling the banks of servers that are at the heart of any such enterprise requires power – lots of it.
H-P’s new center is projected to consume 4 percent of the entire local electrical generating capacity of Colorado Springs Utilities. Just a few days before the city announced H-P’s decision, a press release from CSU announced that utility costs in Colorado Springs were among the lowest in the country.
According to the municipally owned utility, “Colorado Springs residents pay less to power and heat their homes than all but seven cities in the United States. Typical combined electric and natural gas bills here are $124.58 a month compared to an average of $188.45 for the 309 cities included in the first quarter 2009 ACCRA Cost of Living Index.”
Denver residents, the press release noted, pay an average of $194.73 a month, slightly above the national average.
Our costs are low, says CSU, because “Colorado Springs Utilities keeps its electric rates low by generating most of the electricity for the community at its local power plants.”
That’s commendable – and an excellent reason to support continued municipal ownership of our utility system.
But as our city grows, and as electrical demand inexorably increases, the day will come when CSU will need to construct a major new power plant. Such a plant will not be cheap to build, will not be easy to permit and will most likely be far more expensive to operate than our present plants.
The costs associated with such construction will be borne by utility ratepayers – that is, you and us.
Aside from incentives, one factor drives data center construction: the cost of electricity.
That’s why we already have a number of such centers here, and that’s why H-P is building another. That’s fine, but there can be too much of a good thing.
If we accelerate substantially the date at which we must build a new power plant, or are forced to buy more power on the open market, then City Council might find that its “cost-free” incentives will no longer be cost free.
We urge council and the Economic Development Corp. to carefully consider any future deals to build data centers in order to ensure that city ratepayers, be they businesses or individuals, do not end up with the bill.