Data center relocation hot spot is Colo. Springs

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Cities are likely to soon be swooning over data centers, and Colorado Springs could be a lucky suitor.

The Boyd Company, a New Jersey-based firm that’s established itself as an industry authority for corporate relocation and expansion, places Colorado Springs in the top 10 cities for data security — an industry that’s booming thanks to new banking rules, a digitized health care industry and high-profile cases of hackers to steal information.

New financial record-keeping requirements and a federal government decision to consolidate data centers means the search is on for the perfect location match.

“We have a number of data security projects we are working on and Colorado Springs is on the radar screen,” said John Boyd, the firm’s principal.

Colorado Springs has a number of the qualities that match what data companies are looking for, including low operating costs, a strong telecommunications infrastructure and a well-trained workforce. The geographical location of the city keeps it safe from natural disasters such as earthquakes and hurricanes, said.

Likewise, data centers would be a good financial partner for the Springs, Boyd said, because they bring in millions in construction work, offer jobs that pay about $80,000 a year, and contribute to the tax base.

“They are very coveted projects,” he said.

Boyd was in the Springs this month to meet with clients to discuss data center location. He would not reveal which companies were interested in expanding or locating to the Springs only that the clients were in the banking and financial industry.

“In our judgment, over the course of the next year or so, you will see expansion happing here,” he said.

The Boyd data security report, released this month, predicts an enormous uptick in information technology and information assurance operations — that is the need to protect and defend information and information systems, Boyd said.

Information assurance will drive capital spending and site selection, Boyd said. And, the banking industry could lead the way. He called it “a new wave of post debit crisis spending and facilities planning within the financial services industry.”

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act imposes additional record-keeping requirements of financial institutions. And, in 2011, President Obama announced an initiative to consolidate nearly half of the federal government’s 3,000 data centers over the next three years.

The government is going to want to get out of high-cost areas like Washington D.C., New York City and the Bay Area and head inland in favor of more affordable land and operations costs, Boyd said.

“But, when we do meetings with clients, cost is only one part of the story,” Boyd said. “So much of site selection comes down to business climate. Colorado has improved in the last 10 years.”

Still, some of the challenges for Colorado Springs, and the state, are its modified right-to-work status and its corporate income tax of more than 4 percent.

“The issue of right to work status is now on the minds of decision makers,” Boyd said. “Indiana just became a right-to-work state and other states are considering it. Colorado is not one of them.”

Colorado Springs’ biggest competition is Iowa, Oklahoma and South Dakota, which come in higher on the list for the best data security sites. Sioux Falls, S.D., for example, has the National Center of Academic Excellence in Information Assurance Education and specializes in banking and financial services.

And, other states are stepping up their game in the pursuit of data centers. Wyoming exempts the sale or lease of qualifying computer equipment and other items, like racking systems and cabling, from sales taxes on purchases larger than $2 million, according to the Grubb & Ellis data center real estate blog. Thirteen states have a statewide personal property tax exemption for data center equipment. And, Texas reengineered its tax policy to exempt data center equipment from business taxes, Boyd said.

Colorado Springs distinguishes itself with a robust bandwidth, Boyd said. And, it seems to be a secure location. The Springs already is home to such data storage giants as Federal Express, Hewlett-Packard and Quantum. And in July, Wal-Mart announced that it would build a 210,000 square-foot data center in the northern part of the city and has an expectation of 30 employees.

Data centers are not huge employers but they are a welcome growing sector in the Springs, said Fred Crowley, Southern Colorado Economic Forum senior economist. Annual reports by the forum have, for the past several years, touted El Paso County as the perfect location for data centers and called on local economic development leaders to pursue that industry, Crowley said.

As for location, Colorado Springs is 52 percent more likely to attract data centers than any other city, he said. And companies looking to build data centers, may look on the Springs more favorably because of the number of data centers that already are located here, Crowley said, “it’s the bird of a feather flock together idea,” he said.

“(Data centers) pay well, they have a high multiplier for jobs … it makes a lot of sense why they would come here,” he said.

Ten years ago data centers were not on Colorado Springs’ mind, said Tammy Fields, Colorado Springs Regional Economic Development Corp. vice president, business attraction. But, in recent years, after some major companies like Federal Express built centers here, the prospect of building a cluster of data centers became more attractive, she said. She also cited the 2002 Sarbanes-Oxley Act as the beginning of a new era of corporate accountability that required more data-keeping records.

Now, Fields talks up the city’s low utility costs, its telecommunication infrastructure and its talented workforce to companies scouting Colorado Springs, she said.

“We’ve worked on this a lot over the last five years,” she said.

The Boyd list ranking Colorado Springs in the top 10 cities for data storage could provide a little boost in interest, she said. But, the Springs floats to the top of some scouts’ lists because of its past successes.

“We do have quite a few data center projects in the pipeline,” she said.

Top 10 data security cities:

Sioux Falls, S.D.

Tulsa, Okla.

Ames, Iowa

Council Bluff, Iowa

Bloomington, Ind.

Albuquerque, N.M.

San Antonio

Omaha, Neb.

Colorado Springs, Colo.

Denton, Texas