“This company, they’re a data warehouse, so high-end technology. In fact, when this gets implemented and goes into place, it’ll be some of the most cutting-edge technology in the U.S.,” said Clark-Shawnee Superintendent Brian Kuhn. “They have already purchased the building ... What they have said is in order for this to be financially feasible for them to come here ... they requested a 100% tax abatement for 15 years. Our school district approved that tax abatement from our perspective.”
Documents provided by the city of Springfield on Wednesday morning indicate the tax abatement proposal will be presented to City Commission on Dec. 3.
The Springfield site that 5C Data Centers acquired is the current 67,000 square-foot LexisNexis Springfield site. The Data Center Map group describes it as “a hosting site for law firm data and systems … with a 62,000-square-foot data center, 20,000-square-feet of raised flooring, and an 18,000-square-foot mechanical/electrical plant” with generators, 350-ton chillers and state-of-the-art security measures.
5C Data Centers’ application to the city indicates LexisNexis had planned to shutter the site, but 5CDC bought it and plans to renovate it and build a “Phase II” project after acquiring about 40 acres of surrounding land.
In its application, the company says the project will create 200 temporary construction jobs and eventually 100 permanent jobs. The project’s eventual annual payroll is listed at $12.69 million. Hiring is projected to be phased, with over 50 employees in 2025, and 100 by 2028.
The school district tax-abatement resolution lists the purpose of the company’s move as “renovating the existing facility, and constructing a 147,000 square-foot expansion of the facility to attract hyperscale customers, bringing 200 megawatts to the facility in partnership with FirstEnergy.”
For comparison, the square footage of that expansion is roughly between the size of a basic Walmart store and a Walmart Supercenter.
An application that 5C Data Centers filed with the city of Springfield says they plan to invest somewhere between $16.1 million and $1.32 billion at the project site, an enormous gap between that floor and ceiling.
The document says the company will definitely pay $3.4 million to acquire existing buildings and $10.7 million to improve them, among other costs to arrive at the $16.1 million number. It says the $1.32 billion figure includes $413 million for new construction and $883 million for machinery/equipment.
In explaining why they were seeking the tax abatement, 5CDC said on the city application that it is “required to make project economics work and attract customers away for core data center market in Dublin/New Albany Ohio.”
Details on data centers
A data center is the physical facility that stores digital data and contains computing machines and related equipment, including the computing infrastructure that information systems require such as servers, data storage drives and network equipment, according to the website of Amazon Web Services.
Amazon recently announced plans to build a $2 billion, 450,000-square-foot data center campus in Sunbury, outside Columbus. Microsoft, Meta and Google have also built data centers in Ohio.
5C Data Centers is a Canadian company that recently acquired a data center in Columbus and planned to expand it into a larger campus.
At the time, Nick Etscheid, chief corporate development officer of 5CDC, said the Columbus facility would be “the first of many mega-campuses we plan to announce.” Steve Perez, founder and president of 5CDC, said the facilities would serve “hyperscale and large cloud customers.”
Credit: NYT
Credit: NYT
5C Data Centers company officials did not respond to a request for comment from the News-Sun on Tuesday.
Schools and tax provisions
The Clark-Shawnee school board document says 5C Data Centers USA was seeking, with city support, a 15-year, 100% property tax exemption for the project pursuant to an Enterprise Zone Agreement, as the site is within an existing Enterprise Zone.
“We will continue to receive the property taxes that we’re already getting on that site. We are delaying receiving property taxes on the addition and (new) investment for 15 years,” Kuhn said. “What we’re doing is setting up the district for a financial revenue stream that in 15 years the district will start to receive the property tax on that facility, and that’s going to be a solid and strong revenue stream.”
In the meantime, there is an income tax-sharing provision under the Municipal Cooperative Agreement (MCA) that will allow the school district to receive some city income tax revenue from the project.
In years where the wages paid to employees of the project exceed $5 million (net of infrastructure costs), Clark-Shawnee schools will get 37.5% of the city income tax on that excess in payroll, according to the abatement documents.
5C Data Centers USA has estimated its annual payroll at $12.69 million after the fourth year of project completion. That would mean $7.69 million in wages over the threshold, taxed at the city rate of 2.4%, and multiplied by 0.375 for roughly $69,000 in annual revenue to the schools.
The city would continue to receive all city income tax on the first $5 million per year in payroll, and 62.5% of the tax on the excess payroll over $5 million.
The city of Springfield’s tax abatement document has language that says the company must submit an annual report to the city on hiring progress by March 31 each year, with a clawback provision if the company doesn’t hit at least 75% of projected hiring over a three-year period.
Kuhn also said the school district has a seat on the Tax Incentive Review Committee that meets annually to determine whether area companies that received tax abatements have met stated benchmarks. The district “has a seat at the table” where they can have a say in continuing or denying an abatement if a company isn’t keeping up with their projection, Kuhn said.
Other project benefits
Kuhn said this investment is “setting the district up for future success, while also bringing jobs, technology and a big cutting-edge business into our community.”
Kuhn said the schools see this agreement having both immediate and long-term benefits as an investment in the future of the district and Springfield Twp. because it will bring in a company that has jobs with a “great salary” in an area that will show growth and need.
“I’ve gotten to have some conversation with an executive with the company and their desire to partner with the school district on internship opportunity with classroom need, district technology needs and just overall be a good partner,” he said. “They want to connect with us because they see us, our school district, as potentially a funnel for their future employees. They want to invest in that pipeline.”
