$1B Data Center Projects Signal New Tech Era for Arkansas

Jack Thomas of the Little Rock Regional Chamber was instrumental in negotiations that landed a data center. (Steve Lewis)

It has been Arkansas’ springtime for data centers since the state made luring tech hubs a priority in the recent legislative session.

Huge data center projects have been announced since April in West Memphis, Conway and Little Rock.

All are hailed as the biggest capital investments ever in their cities. And they have reaped major incentives while promising a construction boom and up to 50 high-value permanent jobs at each site.

“Since I became mayor [in 2017], it’s not been unusual to talk about new corporate business projects that are in the millions,” Conway Mayor Bart Castleberry said. “This is the first conversation that my office has been involved in that you’re talking in billions of dollars.”

The Conway and Little Rock centers are $1 billion projects, and that’s just for starters, officials say. The West Memphis facility, Project Pyramid, was revealed two weeks ago without an investment estimate. But the Memphis Business Journal reported that it’s a $10 billion project led by Google.

The data center flurry came on the heels of Act 373, the Generating Arkansas Jobs Act, and an expanded sales and use tax exemption. Act 373 set up a faster path for utilities to build power plants for serving “strategic investments” like data centers. It also allows utilities to bill ratepayers for some project costs while the generators are being built.

Secretive Plans

Details are scarce on the coming data centers — city officials and companies signed nondisclosure agreements. But all three are associated with a middleman, Michael Montfort, who has avoided news media contact.

Little Rock has a memorandum of understanding with Willowbend Capital LLC, which represents a Fortune 100 company planning to build a 300,000-SF facility on 440 acres at the Port of Little Rock. Montfort is Willowbend’s incorporator/organizer and manager, according to state records.

He’s listed in the same roles for Forgelight Ventures LLC, which is representing an unnamed Fortune 100 company looking to build the 300,000-SF data center along Lollie Road near the Conway airport.

The West Memphis City Council approved a $10 billion payment-in-lieu-of-taxes agreement with Groot LLC, which is set to build a five-building data center on 1,178 acres on Bollinger Road. Michael J. Montfort is listed as Groot’s manager, according to state records.

Entergy Arkansas will provide the bulk of the electricity for all three Arkansas data centers. But spokesman Matt Ramsey said the utility doesn’t discuss projects in development.

The Business Plan

Data centers are proliferating across the nation in states with low-cost power. Tech giants like Google, Meta, Microsoft and xAI build them for their own cloud computing and artificial intelligence endeavors. Other center builders have a colocation business model, leasing space and computing and power capacity via long-term contracts.

Jack Thomas, who worked on the port data center project for the Little Rock Regional Chamber, said the state Legislature put Arkansas on data center developers’ map with the sales tax exemption and the Generating Jobs Act.

“There have been a number of big players that have circled Arkansas and Little Rock, and obviously a couple are still doing that,” Thomas said in an interview. “In some cases the companies want to own and operate their own data centers. And then there are essentially these speculative projects where they go out and contract for power, contract for land, and then take those contracts into the marketplace.”

Thomas couldn’t reveal the business model of the port data center, but he said the $1 billion investment encompasses just the first phase. “The first development is a 300,000-SF building, but if the right business and market conditions can be met, there’s an opportunity for significant scale,” he said.

Economic developers see great benefits in data centers, but doubters say they yield few permanent jobs compared to factories or steel mills. They note that data hubs can gobble as much power as a good-sized city.

“They do good things for us, but I think right now they’re not always being good neighbors,” said Amy Sharma, executive director of the nonprofit Science for Georgia.

“They are giant climate-controlled warehouses” filled with computers and systems to keep them cool, she said. “They are crucial to just about everything connected to the cloud, like all the photos on your phone, or the AI assistant who answered my phone. Smart watches, video games on the internet, everything that we do in the cloud is facilitated by these data centers.”

But they are also “giant electricity hogs,” she said. “They can strain both the power and water infrastructure in the locality. They grab up all this power and water and they take advantage of incentives, and they’re not giving much back.”

Using a benchmark of 150 watts per square foot, a 300,000-SF data hub might draw 45 megawatts of electricity, enough to power 20,000 homes. “And with 45 megawatts of draw, the conservative water estimate is 90 million gallons per year,” Sharma said.

Thomas, of the Regional Chamber, said most U.S. data centers he’s seen rival “some of the largest industrial users in the state” when it comes to electricity consumption.

But Bryan Day, executive director of the Little Rock Port, is convinced that the Little Rock project will impress Arkansans once they learn more about it.

“Our board … authorized the sale of the land to an investment company for this data center,” he told Arkansas Business. “What that did is allow the data center some assurances so that they could complete their due diligence on the site. It also gave the port and the city of Little Rock some time to annex the property and resolve issues about getting utilities and roads and infrastructure to the site. That’s the reason for the delay,” Day said

“This will be the largest project that the port and the city have ever announced,” he continued. “It’s going to generate a lot of income, a lot of contracting jobs, and a lot of high-paying jobs when it’s fully finished. It’ll be another catalyst for continued growth.”

According to the MOU, the company will make annual payments of $300,000 to the city. For each additional data center, the city will receive an extra $200,000 a year. Among other incentives (see list), the MOU gives the center a real and personal property tax abatement of at least 65% for 30 years.

Sharma said the terms are bad for the people of Little Rock, but Mayor Frank Scott Jr. was overjoyed.

“There was a lot of work to get us to this point,” he said in late April. “We can’t say much about it, except for it’s a big deal.”

Incentives and Payments

A memorandum of understanding between Little Rock and Willowbend Capital LLC outlines these incentives for placing a $1 billion data center at the Port of Little Rock.

► A real and personal property tax abatement “of at least 65% for 30 years for the Data Center” and each additional data center or ancillary building.

► The city will reduce its electric franchise fee to 0.25%.

► The city will reduce its water franchise fee and sewer franchise fee to zero.

► The city will cap all permit fees for building, electrical, plumbing, mechanical and fire work at $200,000 for each data center.

► Central Arkansas Water will design, permit and build a water supply extension to the site, though Willowbend will pay for the infrastructure.

► The Little Rock Water Reclamation Authority will design and permit a cooling tower blowdown discharge dedicated line from the site to the Fourche Creek Water Reclamation Facility; it will also provide access to domestic sewer service to the site from an existing 30-inch main line along Zeuber Road, though Willowbend will be responsible for a sewer line extension and pump station.

The MOU calls for these commitments from the company:

► Willowbend will make an annual payment to the city of $300,000.

► For each additional data center constructed, the company will increase the annual payment by $200,000.

► The payment will be subject to a 2% increase every five years.

Source: City of Little Rock