Oct. 5 (Bloomberg) -- Apple Inc. needed land owned by Donnie and Kathy Fulbright for a $1 billion data center in rural North Carolina. The couple showed no interest in moving out of their home of 34 years in the town of Maiden.
The Fulbrights say they spurned one offer, then a second. Finally, they agreed to sell for $1.7 million, county records show, opting to leave the single-story house on the less than one acre of land they purchased for $6,000.
“They told us to put a price on it and we did,” said Kathy Fulbright, 62, seated on a brown leather sofa in the living room of the home she and her husband built with the proceeds. The 49-acre property boasts a 4,200-square-foot house with a Jacuzzi in the master bathroom, as well as a manmade pond stocked with bass and catfish.
Apple was willing to pay up to get the land in its drive to improve digital entertainment services that fuel demand for iPods, iPhones and iPads. The plot is adjacent to the site where Apple is building a 500,000-square-foot warehouse-like structure that analysts say will brim with servers, generators and other gear that make it easier to deliver songs, TV episodes and movies via the iTunes online store.
“Apple’s growth has been pretty dramatic and they have probably exceeded their capacity,” said David Cappuccio, Stamford, Connecticut-based chief of research at Gartner Inc., which advises companies on the use of data centers like the one Apple is building. “Between iTunes and the video store they are going to have, you’re talking about massive amounts of data and millions of people trying to access that at the same time.”
Streaming Music, Video
The center is due to be completed by year’s end. It will help Apple customers stream and store music and videos remotely, via the so-called cloud, rather than having to download files to a hard drive, said Gene Munster, an analyst at Piper Jaffray in Minneapolis. Apple announced plans for the facility in June 2009 and began construction in August.
Apple may also use the center to help stream video to a newly revamped Apple TV set-top box, said Richard Doherty, director of the consulting firm Envisioneering Group in Seaford, New York. Cappuccio of Gartner said Apple may use the Maiden facility for initiatives the company has yet to unveil or discuss in detail, including social networking and Web search.
Apple, based in Cupertino, California, hasn’t disclosed its plans for the project. Steve Dowling, a spokesman, declined to comment.
The data center is already making a mark on Maiden, a town with a population of 3,200 located about 45 miles west of Charlotte.
In its pitch for approval and tax breaks, Apple said it may employ 50 people at the center and expects to generate 250 more jobs in areas such as maintenance and security, according to a state website and records compiled by the city and surrounding Catawba County. North Carolina projected the creation of an additional 3,000 jobs related to construction of the center.
Maiden and Catawba County may receive $9.3 million in taxes and other revenue over 10 years, according to the documents. That includes $5.1 million for Maiden, which has an annual budget of $13.1 million, and $4.2 million for Catawba, which has an annual $202.2 million budget.
Locals aim for added payoff from “Project Dolphin,” as officials have dubbed the center: that Apple will lure other companies. Google Inc., owner of the world’s largest search engine, already has a facility in a neighboring county.
Microsoft, Google Centers
“Names like Google and Apple indicate you’re in the 21st century and open for business, so we hope to propel this to something greater,” said Kitty Barnes, chairman of the Catawba County Board of Commissioners.
U.S. technology companies increasingly are setting up shop in small-town America. Microsoft Corp., Facebook Inc. and Twitter Inc. all are placing data centers in sparsely populated regions, drawn by tax incentives, inexpensive labor, cheap electricity and abundant space.
Microsoft, based in Redmond, Washington, weighs more than 35 different issues when selecting a site, said Kevin Timmons, general manager of the company’s data center operations. The company plans to build a $500 million data facility in Virginia, Governor Bob McDonnell’s office said in August.
“Topping the list were factors such as its close proximity to our customers, fiber-optic networks, a large pool of skilled labor and an affordable energy source,” Timmons said.
Apple Tax Breaks
Data centers have helped bring 3,100 jobs and more than $3.6 billion in capital investments to Virginia since 2006, said Rob McClintock, director of research at the Virginia Economic Development Partnership.
“Everybody understands these projects by themselves aren’t a panacea, but it’s the window of what the future can be,” McClintock said.
To land its Apple facility, North Carolina’s legislature approved $46 million in tax breaks for the company. Local governments also trimmed Apple’s real property taxes by half and slashed personal property taxes by 85 percent, records show.
Some local officials say companies, not communities, benefit most as big providers locate operations in rural areas.
“I have a problem with government giving large multinational corporations millions of dollars in handouts,” said T.J. Rohr, a city councilman in Lenoir, North Carolina, site of a $600 million Google data center lured by incentives.
While Google has been a “good corporate neighbor,” funding Wi-Fi downtown and donating computers to local schools, tax breaks are “a lazy way to recruit business,” said Rohr, who is a member of the Libertarian party.
Google has hired more than 80 employees at the site, said spokeswoman Emily Wood.
“We’ve had an excellent experience in Lenoir,” Wood wrote in an e-mailed statement.
Scott Millar, president of the Catawba County Economic Development Corp, who led the county’s discussions to attract Apple to North Carolina, says companies are unlikely to choose a location without a financial incentive package. Millar also acted as the liaison between the Fulbrights and Apple.
Catawba County’s August unemployment rate was 12.3 percent, compared with 9.7 percent in the state, according to the North Carolina Employment Security Commission. For much of the 1990s, the county had an unemployment rate of less than 5 percent, fueled by jobs making furniture, fiber-optic cables and textiles such as socks and pantyhose, Millar said.
“We’re trying to turn our ship around,” he said.
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