Sanford Nowlin
Express-News Business Writer

Microsoft Corp. is considering San Antonio for a $600 million data center that would bring the tech industry's best-recognized name to the city and generate up to 100 jobs, said two local officials close to the negotiations.

The software giant based in Redmond, Wash., is looking at San Antonio and at least one other city — Austin — for the center, which would store company data on scores of computer servers, said the officials, who declined to be named because of the sensitivity of the talks.

Company officials exploring the deal have visited the Alamo City three times.

Another source said Jones Lang LaSalle, an international real estate services and money management company based in Chicago, is working on Microsoft's behalf and looking in the Westover Hills area.

Though the operation wouldn't boast a big payroll, people in San Antonio's small but growing tech sector said an investment from an industry behemoth such as Microsoft would boost the city's image.

Because the data center would use an enormous amount of power, it would be a big revenue generator for the city through its electric utility.

The investment also would come as the city tries to build on a tech base that long has lagged that of Austin and Dallas.

"It would be testimony to the potential of San Antonio becoming a viable technology-based economy," said John Dascher, director of investment services for the San Antonio Technology Accelerator Initiative.

A Microsoft spokeswoman declined to comment on the company's site selection effort, data storage operations and future expansion.

Officials with the San Antonio Economic Development Foundation and the city's Economic Development Department were unavailable for comment. Marty Wender, the developer of Westover Hills, home to a growing array of corporate campuses, including World Savings, JP Morgan Chase and Capital Group, did not return phone calls.

Microsoft has asked the city and county for 10-year tax abatements for the planned 470,000-square-foot center, according to the two people familiar with its negotiations.

Even if the company gets the abatement, it still would pay hospital and school taxes on its investment.

The city and county two weeks ago offered a shorter abatement because the operation's payroll would be small, one source said. What's more, all but three of the workers at the center would be contractors from other companies.

"The issue is that it's a big capital investment, but it's not creating many new jobs to speak of," the source added. "It's a huge tax break in relation to the jobs."

But SATAI's Dascher said even a small number of skilled Microsoft workers would be a boon to the city because some later could start businesses here or lend expertise to home-grown companies."The importing of out-of-state technology dollars is important for the intellectual capital it brings," Dascher said. "Large-name companies like Microsoft generate the intellectual capital that later becomes the foundation for startups."

If Microsoft decides to locate the center here, it would be the company's second recent investment in San Antonio. In April, the company opened a 20-employee office to serve the city's growing corporate base.

Companies such as Microsoft and Yahoo are seeking more data storage space as they allow customers of their online services to archive more e-mail and post photos. Microsoft last week broke ground on a 75-acre data storage facility in the central Washington town of Quincy.

People close to San Antonio's talks with Microsoft said its site-selection staff likes the area's inexpensive electrical power, work force and lack of exposure to natural disasters.

The company's proposed center would generate major revenue for CPS Energy, San Antonio's city-owned electric utility, people familiar with the negotiations also said. Data centers tend to have big energy demands because they need massive amounts of power to operate and to keep cool their myriad racks of computer servers.

"No matter where in the country, those type of data operations are looking for power availability, reliability and cost," said Tom Long, CPS Energy's economic development supervisor. "CPS is very competitive in terms of electrical costs with the rest of the state and the rest of the country."

Long said he has talked with several companies considering data centers in San Antonio but added that he didn't know whether Microsoft was among them. Site-selection consultants typically use a code name — not their company name — when discussing prospects with the utility.

Home improvement retailer Lowe's Cos. also is considering the area for a data center. It's in talks with city officials about building a $68 million, 30-employee center near Westover Hills.

"This is an indication that San Antonio's starting to heat up economically," said San Antonio tech industry entrepreneur David Spencer. "Any time you've got a corporate citizen like Microsoft, it's a great deal for the city and the region."

Web Posted: 06/04/2006 12:00 AM CDT by Sanford Nowlin, Express-News Business Writer