Prospective data center developer offered over $1.1 million for city-owned land

Transcript of July 27 council closed session now public after offer expires

Swarm Systems, the company behind a proposed data center in Marshalltown's Edgewood Industrial Park, offered the city over $1.1 million for approximately 21.77 acres of land there, according to documents that are now public due to the expiration of said offer.

As a result of the expiration, the offer itself along with the transcript of a controversial and contentious closed session on July 27 are now public records as the city continues to navigate through a four-month moratorium on data center development currently set to end on Nov. 23.

The records show that on July 21, Swarm initially offered $1,113,200 for approximately 29.33 acres of land -- $40,000 an acre -- before later submitting a revised offer about a month later for the same gross amount but less land, this time 21.77 acres, at an approximate cost of $51,134.59 per acre with closing to occur on or before March 31, 2027. The council had approved a motion to enact a four-month data center moratorium on July 13, but it had not yet been enacted through the ordinance process.

The offer also included a zoning and entitlement contingency stipulating that:

The City of Marshalltown's existing moratorium on data center development shall have expired, been lifted, or been terminated as applied to the Property, and no extension, renewal, or replacement thereof, and no other moratorium, interim ordinance, or pending-ordinance restriction, shall then apply to the Property or to Buyer's planned data center project (the “Project”);

The City shall have adopted data center zoning regulations (or other applicable zoning text) in form and substance acceptable to Buyer in Buyer's sole and absolute discretion;

The zoning of the Property, whether by amendment of the text of the General Industrial (GI) district, adoption of an overlay district, rezoning, or otherwise, shall permit the development and operation of the Project, and such zoning status shall be final and non-appealable, with all applicable appeal, referendum, and challenge periods having expired without appeal or challenge (or any such appeal or challenge finally resolved in favor of the applicable action); and

Buyer shall have obtained all discretionary approvals, if any, required as a condition to Buyer's entitlement to submit building permit applications for the Project, including without limitation any site plan approval, special or conditional use permit, board of adjustment action, planning and zoning commission action, or development agreement required by the City, each in form and substance acceptable to Buyer in Buyer's sole and absolute discretion and each final and non-appealable.

Amir Atefi presented on behalf of Swarm during the Aug. 24 city council meeting after the council had officially enacted its moratorium by passing the third reading of an ordinance, and the council was ultimately gridlocked on proceeding with taking action on the offer in open or closed session. Without any further action since then, the offer expired on Sept. 11.

The closed session on July 27 is the subject of a complaint filed by Councilor Marco Yepez-Gomez contending that it violated Iowa's open meetings law, and the transcript from the session, which was conducted with the seven councilors, City Administrator Carol Webb, City Clerk Alicia Hunter, REALTOR ® Kristin Polley, acting as a dual agent for both the sellers and the prospective buyers, and City Attorney Doug Herman of Lynch Dallas PC (filling in for Steve Leidinger) shows that multiple councilors objected to the discussion occurring in the first place. Both Yepez-Gomez and Gary Thompson voted against entering into the closed session, which pertained to the original offer for 29.33 acres of land across five parcels.

Herman did clarify that he felt the council was legally permitted to enter the closed session, but once he and Polley provided the basic details of the proposed sale, Thompson quickly made his displeasure known and questioned why the discussion was occurring.

Contrary to the legal advice the city had received from Leidinger, Herman also told the council that he believed a single resolution carried enough legal weight to enact a moratorium. Both Thompson and Yepez-Gomez described the closed session as "sketchy" given the spirit of the moratorium vote, although said moratorium had not yet been fully enacted after an initial vote on July 13.

Webb pushed back against Thompson's claim that the council "legally, morally and ethically" should not be having the conversation, contending that city staff did not receive direction to not have any conversations with a data center, and a real estate transaction was different than a development approval. She also argued that the ordinance Leidinger had advised the council to pursue provided more specific language on what exactly the moratorium was and wasn't.

Councilor Sue Cahill later raised the question of whether it was typical for a dual agent to represent both sides in a transaction of this size, and Polley replied that there are no rules on how large the transaction can be for a dual agent. Councilor Jeff Schneider, who along with Greg Nichols has been the strongest proponent for data centers thus far, also countered Thompson's complaints regarding transparency.

"The bottom line is we have not approved an ordinance saying there is a moratorium (as of July 27). We can talk about anything we want to talk about right now. It just hasn't been passed," he said. "The other thing, a little history, Gary would remember this and Mike would too, when the council before I joined decided to do the industrial park, it was almost assumed that we might give away this land, and the fact that we are getting a full price cash offer is a pretty big deal."

"Over asking price cash offer," Polley clarified.

Cahill also expressed concern about a lack of transparency.

"I'm feeling very uncomfortable after all the discussion we had today, but yet now we are coming back behind the scenes saying hey we're going to sell these people land for a data center. Again you know I'm not against data centers, I just want to make sure we are following what our constituents asked for," she said.

Yepez-Gomez, who initiated the discussion on data centers by calling for a two-year moratorium back in June, echoed Thompson's comments and described the closed session meeting as "borderline corruption."

Mayor Mike Ladehoff replied that he felt any offer made on city real estate should be brought to the council, and he took umbrage with the allegation of corruption. Councilor Melisa Fonseca, a REALTOR ® herself, told the mayor that she didn't feel the city was a "ready, able and willing seller" at the time, and she felt it best to simply let the offer expire.

Councilor Mark Mitchell urged his colleagues to follow the will of the people, citing the results of a weekly T-R poll showing broad opposition to data centers, and postpone any discussions to a later date.

After more back and forth about how to proceed, and specifically whether the city should counter offer that they would give Swarm an answer once the moratorium expires on Nov. 24 or even into December and if other offers for the land could be entertained in the meantime, four councilors agreed to counter with a proposal allowing the council until Dec. 15 to accept or reject the offer. The council voted unanimously to go back into open session, but the motion to proceed as discussed in closed session only passed by a narrow 4-3 vote with Mitchell, Thompson and Yepez-Gomez opposed.

Status of the project

Since his presentation in August, Atefi told Zach Tomesch of KFJB Radio, in a recorded interview, that the project was not dead despite the opposition from some councilors and members of the public, and on Monday, Atefi shared further thoughts in an email to the T-R.

"We aren’t pushing for a land acquisition in (the moratorium) window. What we are doing is spending time with people in Marshalltown, both those who would benefit from a project like ours and those who have concerns about data centers generally, and listening to what they have to say. At the same time, we’ve been given no reason to believe a vote after the moratorium would come out differently than it did in August, and our customers have strong demand for capacity that can be built quickly, so of course we’re also looking at other sites, elsewhere in Iowa and in other states. That’s the nature of our business, but it doesn’t mean we’ve moved on from Marshalltown," he wrote. "If the council is open to revisiting the sale once the moratorium ends, we would like to be part of that conversation."

He added that Swarm presented the project publicly because he felt it was important to get the actual proposal in front of people early, so the discussion could be about what they actually intend to build rather than guesswork about its scale or what it would use.

"For anyone still getting to know this specific project, it would be a single building, roughly two-thirds the size of the Walmart Supercenter, on 21 acres in the industrial park. It would use a closed-loop cooling system that needs less water in a year than a restaurant, it’s designed so our neighbors hear nothing more than they already hear from the industrial users around the site today, and it would run solely on grid power under Alliant’s rules for large customers using infrastructure that already exists," Atefi said. "Alliant’s website sums up the electricity side pretty well: 'We ensure data centers will pay for the power and equipment they need, so you don’t have to.' That’s the basis we’ve proposed from the start. We also aren’t asking for real estate tax abatements, and we’ve never asked anyone at the City to sign a non-disclosure agreement."

Atefi still believes the project is "a good fit" for the industrial park, which is currently empty, and could provide a positive outcome for the company's customers, the city of Marshalltown and the wider community.

"Our model is to build dedicated computing capacity for enterprise customers, rather than for a hyperscale cloud provider, and to do it in a community with a skilled workforce and a long history of local organizations that welcome a partner willing to become part of the town rather than just operate in it," he said.

He concluded by referencing a conversation with a resident about community programs benefiting the children of Marshalltown and how he felt his company could assist in building pathways to vocational training.

"I came away thinking the ingredients are already here for a training partnership between us and some of those local groups, so that a kid growing up in Marshalltown has a path into a high-tech industry job without ever having to leave town to find one," Atefi said. "That’s the kind of thing we’d like to help build alongside our project. In the meantime, we’ll keep learning from the people of Marshalltown while we work out whether or not the Council is open to finding a path forward."

Contact Robert Maharry at (641) 753-6611 ext. 255 or rmaharry@timesrepublican.com.