With new data center developments taking shape in the area, city officials and industry leaders expect substantial economic investments to the surrounding communities, with an estimated boost in sales and property tax revenue.
“[Data centers] tend to be a very strong asset to have in your community,” said Amy Madison, director of the Pflugerville Community Development Corporation. “Most data centers, of any size, are going to put as much as a billion dollars on the ground. There are significant investments in personal property and capital investment in the building itself. That obviously hits the tax base favorably.”
Two-minute impact
A wave of recent data center development has added to the growing technology landscape found in Central Texas. Round Rock, Pflugerville and Hutto appear to be taking great strides in the sector, with industry giants Switch, Sabey Data Centers and Skybox Datacenters each breaking ground on campuses in the area in recent years.
Mark Noonan, Sabey’s Austin-based senior vice president of product development, noted that the rise of artificial intelligence, or AI, programs in the technology and business sectors has led to a similar increase in the demand for cloud storage.
“Every type of business of a certain scale is going to find a way to use AI to make their business that much smarter, faster and user friendly,” Noonan said.
Data centers, like Sabey, have found the area attractive as the area offers a business-friendly environment in a deregulated energy market outside Austin city limits, Noonan said.
What is a data center?
Data centers include storage and processing equipment for digital information. Computing servers and equipment work together to store, manage and deliver data for various online services and applications.
The types of information stored could include:
- user account details
- financial transactions
- emails
- social media posts
- any data needed to be stored and accessed over the internet
Some experts predict the demand for data centers will continue to increase as a new era of AI reaches the business sector, Noonan said.
“Data centers in general have kind of seen three waves, or three seasons of life. The first one, obviously being the internet, prompted the need to build these stand-alone buildings to house all the servers and the storage,” Noonan said. “It migrated to the cloud. ... Now we’re on the third wave, which is the AI wave. It is projected to drive data center demand for at least the next 10 years, if not more.”
Noonan said that many in the industry believe the AI demand will be the biggest wave.
A professor from the computer science department at The University of Texas, Katrin Erk, said today’s AI is based on machine learning models and relies on massive amounts of data.
“These things really need tons and tons of data in order to learn,” Erk said. “... People may also want to store data that these systems can be applied to.”
The framework
While cities often maintain a diversified business market, data centers present a “unicorn development” opportunity, Hutto’s Director of Economic Development Cheney Gamboa said. Data centers present significant economic opportunities for Round Rock, Pflugerville and Hutto.
“Skybox’s data center campus has the potential—very key word, ‘potential’—to double the current property tax base,” Gamboa said.
City of Round Rock officials estimate both Switch and Sabey to be among the top 10 property taxpayers in coming years.
Industry experts from both Round Rock and Pflugerville also anticipate generating sales tax revenue from the substantial personal property taxes associated with these data centers.
Personal property refers to the taxable possessions that businesses own. This could include office supplies, IT equipment, furniture and other equipment that can be removed from the site.
The various data centers moving into the area have committed hundred of millions of dollars in total investments:
- Switch, Round Rock: $250 million
- Sabey, Round Rock: $190 million
- Skybox, Pflugerville: $548 million
- Skybox, Hutto: $10 billion
Diving deeper
Data centers typically impose minimal strain on the infrastructure of local communities, except for their water and power needs, Madison said. While construction of these buildings may increase noise and traffic, Noonan also noted that once online, data centers are a quiet neighbor.
The deregulation of the energy market outside Austin’s city limits is an attractive draw for data centers, said Jordan Robinson, president and CEO of the Round Rock Chamber. Their buildings require substantial power, and the ability to explore different providers becomes crucial for these companies. “Companies that are requiring large amounts of power can actually shop around and pick the utility provider that can offer them the best rates,” Robinson said.
Oncor, the local energy delivery company, said in a statement to Community Impact, “We collaborate with all our customers to grasp their load demand needs and ensure our facilities can meet them. Additionally, we assess growth needs in our communities and incorporate them into our long-term infrastructure planning.”
These types of facilities often use a considerable amount of water for cooling—a resource in short supply in Central Texas due to drought.
However, the local emerging data companies are taking steps to reduce water consumption.
Round Rock officials are also in talks with Switch regarding water reuse options.
Skybox and Sabey operations in the area utilize air chillers, which require very little water.
“Water availability is not a unique problem to Central Texas,” Skybox Chief Development Officer Haynes Strader said. “We care a lot about thinking about the impact our facilities are going to have on those communities.”
For context
Roughly 1 megawatt of energy amounts to the same amount of energy to power 200 homes in the heat of Texas summers. The power capacity of the incoming data centers are:
- Switch, Round Rock: 185 megawatts, or 37,000 homes
- Sabey, Round Rock: 84 megawatts, or 16,800 homes
- Skybox, Pflugerville: 30 megawatts, or 6,000 homes
- Skybox, Hutto: 600 megawatts, or 120,000 homes
“So by being deregulated, there’s a lot of flexibility—the ability to negotiate rates and ultimately provide companies, like data centers that have large power requirements, to make a decision that’s most cost-effective for their business,” said Jordan Robinson, Round Rock Chamber president.
Looking ahead
Sabey in Round Rock is scheduled to become the first data center to go online in March. Estimates for Switch in Round Rock and Skybox in Pflugerville to begin operations range from late 2024 into 2025.
The city of Round Rock already shows signs of sustained interest from the data center industry, as Round Rock City Council recently approved Amazon’s planned-use development application, which includes provisions for a data center development near Round Rock West. However, the company has not disclosed any official plans for establishing a data center.
“As technology continues to grow and with more technology that is being stored in the cloud, the more data centers are going to have to exist,” Robinson said. “With artificial intelligence ... there has to be a place to store all of this data.”
