New (Kid on the Block) Carlisle Lands Largest Capital Investment in Indiana History
If you hadn’t heard of New Carlisle, Indiana, a year ago, you’d be forgiven. If you haven’t heard of New Carlisle, Indiana, as of today, you’re still forgiven, but let me tell you why you’re probably in the minority.
New Carlisle lies just west of South Bend (and the University of Notre Dame) in northern Indiana with a population of around 2,000 people, and it just landed the single largest planned capital investment in the state of Indiana. Amazon Web Services is planning on spending $11,000,000,000 to build a state-of-the-art data center. If you’re like me, you may be asking yourself why New Carlisle and why Indiana? Well, let me offer my humble opinion and findings.
First, big data centers require immense power, and wouldn’t you know it, the St. Joseph Energy Center, the third largest natural gas power plant in Indiana, will be right next door. However, big power requires big water. Data centers are all about processing information quickly and reliably. Until we get an actual “LK-99”-esque superconductor that is economical to manufacture, pushing electricity through a metal wire will experience resistance and generate heat. Conductivity and speed in a metal wire decrease as temperature increases, and we just established that we need it to be fast, fast, fast.
So, we need to find a way to keep everything nice and cold. We can do just that by using a chiller system, which uses refrigerant chilled water as a medium to extract undesired heat from a targeted area. The other major water draw for data centers occurs off-site. We said earlier that we need big power, and we solved this with the St. Joseph Energy Center. This style of power plant burns natural gas to spin a turbine and power a generator. This process also produces a lot of hot exhaust, so some pretty smart people realized they could capture the energy in this exhaust by transferring it to water, converting that water to steam, and powering a traditional steam turbine. Brilliant, so now we just need the water! Hello, Kankakee Aquifer. Estimates show that Kankakee can support about 45 million gallons of water per day, and the current usage is around half of that, so we now have the energy and water.
Land and speed to market were likely the next big considerations, largely trailing power and water, yet still important in an incredibly dynamic, information-is-king, AI-developing world. Acquiring, testing, and zoning contiguous parcels of land can take a long time. But designing, bidding, procuring, permitting, and constructing a new power plant and acquiring, testing, and zoning the land it’s on takes a really long time. And if you don’t have the water, you can probably forget about it unless you plan on pumping it from another location. Similar to the LEAP innovation development district in Lebanon, Indiana, St. Joseph County has the Indiana Enterprise Center, a 7,200-acre area designed for projects just like this.
As for what New Carlisle doesn’t have, it doesn’t have a high population. And while it has good connections via road, rail, and air, there are great options for these modes of transportation nearby in Chicago or Indianapolis, which also have significantly higher populations. So why not either of those cities? A data center doesn’t need either of these. Data centers have notoriously low employment numbers. Based on the trends from Google’s $845 million — strike that, now $2 billion — data center announcement in Fort Wayne and Meta’s $800 million data center in Jeffersonville, it seems to track about 100 people for every billion dollars of investment. That shakes out to over half of New Carlisle’s current population. Still, I’m sure Amazon isn’t too concerned about convincing enough people to commit to a 20-minute commute to work from nearby South Bend, should the employment pool need to reach that far.
As for transportation connectivity, its employees are about the only thing a data center needs to consider when evaluating this area, as it’s not producing a widget it needs to ship out across the country, and everything it brings in to run daily operations comes in through a pipe or wire. Another thing New Carlisle doesn’t have is natural disasters. Now, that may not have been a driving factor, but I’m willing to bet it was considered. Data centers, especially your brand new $11 billion data center, generate value by being up and running constantly. They don’t shut down for a week twice a year for maintenance like car manufacturers. Per their website, a tier four data center guarantees it will be offline for no more than 26 minutes a year. So, you’re considering everything if you’re offering that guarantee.
On top of that, the state of Indiana and IEDC have been very conducive on the economic development front. One of the biggest motivators in attracting AWS was, no doubt, Indiana’s Data Center Sales Tax Exemption program. AWS will not have to pay Indiana’s 7% sales tax on any of its data center equipment-related purchases or on any of the energy it uses to run the facility for the next 50 years. Say half of the project cost is qualified equipment costs, which rounds out to $385M in sales tax exemptions. Add on top of that not paying 7% on 50 years of energy bills, and you can see how attractive this made Indiana look.
So, congratulations to New Carlisle, St. Joseph County, and those who worked on making this happen. Indiana is thankful and is taking a position as a top state for attracting business. This project will be a great reference point for bringing even more business to the state in a burgeoning industry.
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Ben Worrell, MBA
As a Principal for McGuire Sponsel’s Location Advisory practice, Ben Worrell fosters client relationships by guiding clients through the intricate compliance requirements associated with credits and incentives benefits.
Ben builds confidence in the McGuire Sponsel client relationship by working with clients throughout the duration of their project – not just in a one-off transaction.