Digital Realty Asks To Get Out Of $104M Economic Development Deal
A major player in the Dallas-Fort Worth data center sector is asking city officials to cut the amount it agreed to invest in capital improvements to a site by almost 88%, or more than $90M, while still qualifying for state enterprise funds.
Austin-based Digital Realty has jettisoned plans for an $104M expansion at its 2323 Bryan St. location, requesting that its agreement with the city be amended to allow a $13M renovation to satisfy its investment requirement. That would allow the company to maintain its eligibility for a $2M Texas Enterprise Fund grant, The Dallas Morning News reported.
A 2021 economic development agreement with the city called for Digital Realty to complete more than $100M in capital improvements through a multiphase expansion and renovation of the company’s data center and offices.
In exchange, Dallas officials agreed to provide a 50% business personal property tax abatement incentive for things like equipment, machinery and furniture added to the data center property over five years. A Chapter 380 economic development grant was also approved, giving the company $1,000 for each new permanent job it creates at the property up to $200K.
A city memo states “unforeseen circumstances and technical challenges” derailed the company’s plan to expand the data center’s capacity.
Digital Realty operates 13 data centers in the Dallas-Fort Worth region, including three in the city of Dallas. The 454K SF Dallas DFW10 data center at the heart of its request is the largest of those. The company’s other DFW-area data centers are in Carrollton, Lewisville and Richardson.
Digital Realty did not immediately return Bisnow’s request for comment.
The Dallas Office of Economic Development is recommending that city council approve a reduction in the minimum investment requirement at its June 11 meeting.
But it also recommends other modifications to the agreement in light of the pullback. Those include removing a personal property tax abatement and increasing the job creation requirement to 175 while lowering the grant amount for each job to $290 and capping it at $50K. City officials also requested council reduce the hiring requirement that 35% of the data center’s employees be Dallas residents to 25%.
The memo states Digital Realty has already created 143 jobs with a minimum salary of $120K per year.
Digital Realty signed similar economic development agreements last year with Garland for two data centers that could see the company invest close to $2B.
Garland is home to three major data center campuses with a taxable land value of nearly $1B, and city officials have worked to turn megawatts into reinvestment opportunities to improve infrastructure, beautify green space and grow their commercial districts.
The aggregate value of state and city business incentives has spiked in recent decades, rising to $38B nationally in 2022, according to a Cato Institute report last year. In 2000, that figure was just shy of $7.5B.
