Quincy Cashes in on the Cloud

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Quincy also faces increasing competition for data center building projects from cities around the country. Virginia, Wyoming, New York, Missouri, and Iowa are among the states whose rural areas have attracted technology giants. Google (GOOG), Apple (AAPL) and Facebook have all broken ground in small towns in North Carolina.

Washington's biggest rivalry may lie in neighboring Oregon. Quincy lost out to Prineville, 287 miles to the south, to become the site of a data center for Facebook. As the world's largest social network, Facebook needs more servers to store a growing number of photos, videos, and other information posted to user profile pages.

Prineville had more alluring tax incentives, says Morris. Facebook declined to comment about its decision.

To keep cities like Quincy from losing out in the future, the state approved a 15-month, 7.9 percent sales-tax break on any computing and power equipment that will be used there. Unlike many cities, Quincy doesn't offer property tax breaks.

Exchanging Tax Breaks for Jobs

Quincy also takes steps to ensure that data center building translates to more jobs. To receive a tax break, Dell, Sabey, Yahoo, and Microsoft had to agree to employ at least 35 people each from within the community at a living family wage, estimated by the Washington Research Council to be about $58,140.

Companies are also attracted to Quincy by bargain real estate prices, plentiful fiber-optic network connections, and low-cost electricity produced by hydropower. For instance, electricity in Quincy costs 2.85¢ per kilowatt hour. By contrast, in Melville, a small town on Long Island, New York, that's also the site of data centers, electricity costs 25.59¢ per kilowatt hour, according to a report last year by the Boyd Company, a consulting firm.

Quincy has negotiated its hydroelectric power supply, which comes from the Columbia River, for the next 44 years. In 2008, renewable energy—much of it fueled by hydroelectricity—accounted for 77 percent of the energy in Washington state, according to an April Greenpeace report. North Carolina, by comparison, relied on coal for 61 percent of its energy in 2007, and in 2008 only 3.6 percent of its energy was renewable. Aside from Washington, the biggest green data center locale is Oregon, with 65 percent renewable energy from hydroelectric power, according to the report.

Investing in Infrastructure

Quincy began as little more than a signpost on the Great Northern Railway in 1892 and was officially incorporated in March 1907. Morris's grandfather endured the statewide drought of 1920 and 1921 and stayed on, even as many other residents left. Water finally flowed to Quincy in 1951, bringing irrigated farming to the area.

Half a century later, in 2004, Quincy decided it wanted to bring development to the area, so it invested in infrastructure and made sure that areas were zoned properly. "We bought farmland and we put in roads, water, and power," says Morris. Soon after, Microsoft bought 75 acres at an average of $13,000 an acre, he says. The city can issue a building permit in a six-week period, whereas some cities can take more than a year, he adds.

Another milestone came in 2006, when Microsoft and Yahoo announced plans to build data centers in the area. Microsoft later expanded its operation. "A big piece was the renewable energy sourcing, primarily all hydro, and the cost of energy," says Christian Belady, general manager of data-center advanced development at Microsoft, who says the company uses about 43 different criteria when locating data centers. "We had the land and the infrastructure. It was a natural place for us to put the expansion." Microsoft, the world's largest software maker, is based in Redmond, Wash., 160 miles away. Dell and Yahoo declined to comment on operations in Quincy.

And while joblessness remains high for now, Quincy officials and some residents say they're confident that higher receipts will mean more jobs in the future. For every job created in a data center, another is created indirectly in the community, according to a January 2010 report by the Washington Research Council.

Construction workers in the area bring business to local restaurants, such as Zack's Pizza and the Grainery, a sandwich store. Debbie Henne, owner of Rob's Video, around the corner from City Hall, says she has noticed more construction workers coming in at night to rent videos. She has lived in Quincy her whole life and remembers a time when downtown businesses were thriving. She says she hopes to see that again.

King is a writer for Bloomberg Businessweek in San Francisco.