Eagan lands a major data center

The Eagan City Council has approved a package of financial incentives — an unusual step for the city — that will pave the way for a Dallas company to develop a data center, a longtime economic development goal.

DataBank Holdings, Ltd. will spend about $48 million to redevelop a portion of the former Taystee Foods at 3255 Neil Armstrong Blvd.

Vice President of Marketing Aaron Alwell said that work on the project will begin this summer and is expected to be done late this year or early in 2015.

The public assistance to DataBank includes $420,000 in a grant and loan from the state.

Eagan has agreed to provide a tax abatement, with the amount geared to how much the property value increases after it is redeveloped. The amount of the abatement is capped at $23,420 a year, totaling $351,400 assuming a base term of 15 years.

When complete, the facility will have about 30 employees earning an average of $32.50 an hour.

Data centers typically don't have large workforces. But they can create other jobs by drawing other employers that use the facilities for data storage.

Some very large companies have their own data centers, but other businesses use facilities like those developed by DataBank.

The new center will be designed as a co-location data center, sometimes called a "carrier hotel," for business customers. Tenants will include Internet service providers, telecommunications companies and businesses that need off-site data storage.

Those businesses could include firms not just in Eagan but throughout Minnesota or even outside the state.

The vast majority of Twin Cities public Internet traffic now runs through the 511 Building in downtown Minneapolis and from there to Chicago, a major Internet intersection.

"For some time now, information managers in the Twin Cities have pointed to the need to have a substantial alternative to the 511 Building and additional robust routes out of the region to places other than Chicago to minimize single points of failure," said Community Development Director Jon Hohenstein.

Eagan's new data center would provide that alternative.

"This will strengthen the region's information economy in general, but by having it located in Eagan, it will be an additional asset for the city and its businesses," Hohenstein said.

Mayor Mike Maguire added, at last week's council meeting:

"This really is the culmination of a strategic plan and a vision this council has had on its agenda for the last couple of years to attract a communications facility and provide some different Internet and broadband alternatives in the metro region."

A task force of business and civic leaders studied the issue of broadband and in 2011 recommended that the city pursue a goal of becoming a site for a major data center.

The new data center will be connected to AccessEagan, the 17-mile-long wholesale fiber network that is owned by the city and open to telecommunications carriers wishing to provide services to Eagan businesses. The city provides no retail services.

Frontier Communications, Arvig, Velocity Telephone and Granite Telecommunications currently have signed on as telecommunications providers with AccessEagan.

DataBank isn't the first company to pursue plans for a major data center in Eagan.

Five9s Digital of North Carolina initially proposed bu=ilding a new facility to be called The Connexion on Yankee Doodle Road. That project would have cost at least $75 million, and the facility would have been about three times larger than the center to be built by DataBank.

Last year Five9s dropped those plans and for a while looked into buying and redeveloping the Taystee Foods building. DataBank will lease its space for its data center.

DataBank isn't new to the Twin Cities. Last year it took over a data center in Edina as part of the company's acquisition of VeriSpace. DataBank has upgraded and expanded the Edina facility.

DataBank's other data centers are in the Dallas and Kansas City, Kansas metro areas. "We looked as Minneapolis and St. Paul as an emerging market," Alwell said. "We think it is underserved."

Susan Feyder • 952-746-3282