A Renaissance Up North?

With a boost from Apple and a strong energy infrastructure, Reno looks for a tech-fueled recovery

There seemed to be no jewel, no glimmer of good news to push Northern Nevada out of a prolonged lethargy and into a dramatically more solid economic position. The region’s unemployment rate had hovered around 12 percent this year, and setbacks abounded in local gaming, office vacancy rates and the real estate market.

But summer suddenly pushed away the succession of bad news and created new momentum for development and diversification in the greater Reno area. Information technology giant Apple announced June 26 it would open a new data-storage facility on 350 acres in the Reno Technology Park as well as a business office downtown. The data center, to open later this year east of Sparks, will bring 235 permanent jobs to the region and is the center of an expected $1 billion Apple investment in the region during the next decade.

Northern Nevada first made inroads in the tech field in the 2000s, using its vast geothermal resources to attract renewable-energy startups. This summer was a welcome sequel. In addition to Apple’s entry, cybersecurity firm NJVC opened a 20,000-square-foot data center in southeast Reno. The clothing retailer Urban Outfitters also made a big investment in the region in September by opening a 462,000-square-foot Internet fulfillment center in Stead, 11 miles from Reno.

“Apple’s arrival opens the eyes of other major companies to the state and the region,” says Steve Hill, director of the state Governor’s Office of Economic Development. Hill had negotiated with the Cupertino, Calif., company since February on a venture augmenting the growth of its burgeoning App Store, iTunes and iCloud services. Apple sold 26 million iPhones alone in its third fiscal quarter ending June 30, and set a sales record when it introduced its iPhone 5 in September, garnering 2 million sales in the first 24 hours.

Mehmet Tosun, an associate professor of economics at the University of Nevada, Reno, says measuring the economic impact of a potential Apple data center and its billion-dollar outlay over a decade is relatively easy. “That is going to create a lot of business, and it will create sales-tax revenue,” he says. “Bringing Apple here is not just bringing in any business. It creates momentum.”

And signs of this momentum abound:

Virginia-based NJVC, an IT service provider for the Department of Defense and other government contracts, also found what it needed for a data-center base in Northern Nevada. Set to ramp up full operations in October, the firm—named to the InformationWeek 500 as one of the nation’s top business technology innovators—found value in the less-expensive industrial space and more friendly tax and regulatory environment of the Silver State.

NJVC selected Reno as the center’s home because it lays on the western edge of the Department of Homeland Security’s “safe zone,” among the most stable data-center environments and free from most natural or man-made disasters.

Renewable energy is the focus of a trash-to-fuel project to open in Storey County, about 20 miles east of Reno. The U.S. Department of Agriculture pledged a $105 million loan guarantee to Fulcrum BioEnergy for a facility that will convert 2,000 tons of municipal waste into 10 million gallons of ethanol yearly. At its 2014 completion, the plant at the Tahoe Reno Industrial Center will process trash and make it into ethanol. The three-year project is slated to employ 430 people for construction and 53 workers to operate production.

Hill views the plant and Fulcrum’s investment of about $170 million in the facility as another novel idea in economic development, helping to defuse negative perceptions that resulted from a 2011 Forbes magazine ranking of best places for businesses and careers that listed Reno 179th out of 200 cities.

The Urban Outfitters plant north of Reno is expected to handle 30 percent of the company’s Internet business. The center, featuring a $25 million merchandise-handling system, will employ 120 people by the holidays. It furthers the region’s reputation as a base for large distribution centers, with Amazon, Walmart, eBay and Zulily.com having moved here. More than 200 construction workers built the Urban Outfitters center.

Despite the string of recent successes, Northern Nevada has the occasional fisherman’s tale about “the one that got away.” Coach, the luxury handbag designer and retailer, was slotted as another firm that might relocate a distribution center to Reno. But a corporate spokeswoman said in August that move is not in the works.

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Northern Nevada’s advantages in site selection for information-technology operations include its proximity to the San Francisco Bay area and Interstate 80, along with its ability to support the electricity needs of large-scale data centers. Apple’s electricity usage is equivalent to 15 megawatt hours per employee—that’s a tall order, but Reno is well-equipped to handle it.

“The Reno Technology Park has direct access to existing high-voltage infrastructure,” says Steve Polikalas, a partner in Unique Infrastructure Group who has negotiated the park’s development. The Tracy power plant just across Interstate 80 has 345-kilovolt transmission lines available. And two large natural gas lines run right through the park.

The list of advantages goes on: Northern Nevada’s temperate nights and low humidity make it much more efficient to cool a data center. The area offers easy access to multiple fiber-optics lines. Companies can transfer data quickly, for example, to the growing markets of the Far East.

“Our location at the technology park would afford tremendous latency—that’s the speed at which data can be transmitted,” Polikalas says. “The closer to real time you are [in transmission], the greater the value for consumers of that data. It’s in nanoseconds and milliseconds.”

Half of the technology park—a 2,200-acre space founded in 2009—will be dedicated to data centers, Tosun says. The rest will be used for renewable energy enterprises.

Renewables are important for the Apple center—the firm has made considerable use of them in the Maiden, N.C., facility it opened in 2011—and the park will have plenty to offer. According to a 2010 Data Center Knowledge report, the park will have transmission lines that generate up to 100 megawatts of wind power (a megawatt powers roughly 700 homes for a year), a potential 20 megawatts of geothermal energy from an accessible water source, and solar power from at least a 20-megawatt photovoltaic operation.

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Tax-abatement strategy was another key factor in luring Apple to the region. Washoe County offered the company an 85 percent reduction on its property tax for 10 years, a savings of nearly $17 million. Reno offered a 75 percent reduction in sales tax. The county’s school district pitched in by waiving the sales-tax reimbursements it would have netted through the deal.

“In the short term, you’re giving away a lot to bring them here,” Tosun says of the Apple deal. “That’s a short-term negative. But the policymakers believe the long-term positives are going to outweigh the short-term negatives. We wouldn’t have been able to bring Apple in if we hadn’t [made those commitments].”

Continued regional investment from Apple will attract the interest of similar companies, Hill says, and further boost the perception of Northern Nevada among corporate site-selection firms.

“Other companies are calling and considering Nevada,” Hill says. “I’m not saying Northern Nevada is going to become the next Silicon Valley, but it will help the whole tech industry in Northern California to consider Nevada for expansion.”

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