Salt Lake City, the Data Center Industry’s Silicon Slopes

The Salt Lake City region has long been a desirable data center location whose many advantages include extensive fiber infrastructure, low electricity and natural gas rates, renewable energy resources, and a “cold desert” climate that enables ambient cooling techniques, thus reducing data center cooling costs.

Up until very recently, however, the one critical criterion that Salt Lake City needed to level the playing field with competitors in data center markets such as Hillsboro, Oregon, was flexible infrastructure tax credits. So, when in its 2020 session, the Utah legislature passed Senate Bill 114 – Sales and Use Tax Exemption Amendments, modifying the sales and use tax exemptions related to certain data centers, the Salt Lake market gained an even higher foothold as one of the best places globally to site a colocation, enterprise, or hyperscale facility.

The Utah sales and use tax exemptions cover data centers of 150,000 square feet or larger, and are retroactive to data centers constructed after July 1, 2016. For example, Facebook’s mammoth Eagle Mountain data center, which broke ground in the spring of 2018, is covered by the amendment.

Under the Utah legislation, qualified data center owners, operators and customers are exempt from sales tax on purchases of data center equipment with an economic life of at least one year that is used in their operations. The exemption is not just limited to servers, but also covers other data center equipment and machinery, as well as standard maintenance, repair, and operating (MRO) parts. Additionally, these flexible tax incentives do not carry any mandates specific to capital investment, lease term, provisioned capacity, or job creation requirements.

Direct Access to the Cloud and Beyond                                                                                                                            

At least 27 states now use economic incentives to attract data center projects. But many of these states cannot match Utah’s pro-business environment; the state’s corporate income tax is only 5%, while Salt Lake’s personal income tax rate, combining state, county and city, is 4.95%. Nor can many states match the plentiful availability of affordable land for new data center builds and expansions in the Salt Lake City region, or Utah’s favorable profile for environmental risks and climate exposure – both of which are always significant criteria for data center site selection.

Not too long ago, Salt Lake City was considered a Tier 2, if not a Tier 3 data center market, but that’s rapidly changing. Just look at the recent launch of Google Cloud Platform in the region, which provides customers added flexibility to distribute their workloads across the Western U.S., including existing cloud regions in Los Angeles and Oregon.

As a number of large enterprises and tech companies have established roots in Salt Lake City, we’ve also seen PacketFabric deploy its software-defined networking platform at Aligned’s Salt Lake City data center (in addition to Aligned’s Ashburn, Dallas and Phoenix facilities), thus expanding customers’ connectivity options to the cloud and beyond. Along with Google Cloud, PacketFabric provides Aligned customers with private, direct access to major cloud service providers such as Amazon Web Services (AWS) and Microsoft Azure; connectivity to 160-plus Points of Presence (PoPs) in the U.S., Europe and Asia-Pacific; and interconnectivity to internet exchanges, network, and anything as a service (XaaS) providers.

The Salt Lake City area is also a growing tech hub boasting a highly educated workforce, making it a viable alternative to source talent as opposed to expensive Western data center locations.  In fact, a U.S. News & World Report ranked Utah as the sixth best state in the nation for higher education.  The city and surrounding region offer a widely celebrated quality of life and cultural attractions. And if soaring down a mountain is your thing, you’ll be thrilled to know that world class skiing and snowboarding is within a thirty-minute drive.

In view of the rising demand for latency-sensitive online services — the streaming content, video conferencing, cloud collaboration, eCommerce, social media and online gaming apps that increasingly occupy our professional and personal lives — it’s no longer realistic to serve the Salt Lake City market from as far away as Los Angeles. The outcome is that many enterprises and hyperscalers are deploying and expanding data center infrastructure, or planning to do so, in what has become known as the industry’s Silicon Slopes.