Digital Realty offers De Soto $1,000 a household while asking Johnson County to defer the taxes
Every household in De Soto, Kansas is being offered $1,000 a year for ten years while Digital Realty seeks tax increment financing on the same $7.5 billion project. The $20 million fund is a rounding error against that cost, and a landlord borrowing at 5.125% can afford it; the compute layer, with debt near 16% yields, cannot.
Richard Tang · 4 min read
Digital Realty+0.86% — Digital Realty, up 0.86 percent today has put a price on a town's consent. Every household in De Soto, Kansas is being offered $1,000 a year for ten years, in utility and property-tax credits, as the data center landlord prepares to build 1. The same project carries a second ask: tax increment financing, or TIF, from Johnson County on a $7.5 billion development 2. Consent has become a budgeted construction cost in the AI buildout, and this month showed who can afford to pay it.
The town is paid from one pocket and asked to wait from the other
The credits land on exactly the bills that data center critics cite: utilities and property tax. TIF runs the other way, paying for a development out of the growth in the property taxes it generates, so the county waits for new revenue while the project funds itself. The household offer draws on a $20 million community fund, roughly a quarter of one percent of the project's cost, and CEO Andy Power frames it as a responsibility to communities that make the buildout possible 1.
De Soto's entire $20 million fund is less than a week of Digital Realty's capital spending
Data
| Capital expenditures | |
|---|---|
| FY2020 | $2.06B |
| FY2021 | $0.83B |
| FY2022 | $2.37B |
| FY2023 | $0.91B |
| FY2024 | $1.07B |
| FY2025 | $1.56B |
Four hundred signatures against, and a national poll that agrees
Neighbors have done the arithmetic. "It's a bribe, is what it looks like," resident Toni Caldwell told KSHB 41, a Kansas City television station 3. Another neighbor, Sara VanDeCreek, called the timing purposeful, coming "right now before they ask for tax incentives to help with bonds" 3. A petition against the town's two data center proposals has passed 400 signatures 3, and a CBS News poll found more Americans oppose a data center in their area than support one 1.
Indiana shows the other bargain on the table
The same month brought the other end of the experiment. Kokomo, a city in Howard County, Indiana, announced Digital Realty's plan for what would be the company's first data center in the state: three buildings totaling about a gigawatt 4. The city says the campus could be fully built out by 2033, will use closed-loop cooling to cut water use, and will carry no tax abatements 4.
In plain terms, Kansas pairs a cash offer to De Soto's households with a request that Johnson County wait on the project's property-tax growth, while Kokomo expects the company to build paying full taxes. Which of the two costs less per megawatt is what Digital Realty is now in a position to learn.
| De Soto, Kansas | Kokomo, Indiana | |
|---|---|---|
| Project | $7.5 billion development | Three buildings, about a gigawatt |
| Consent offer | $1,000 a year per household for ten years, from a $20 million community fund | None announced |
| Property taxes | TIF sought; the county waits on the tax growth the project generates | No tax abatements; the company pays full taxes |
| Timeline | TIF hearing on November 19 | Could be fully built out by 2033 |
The debt that makes the offer affordable
Digital Realty owns the buildings; CoreWeave−12.18% — CoreWeave, down 12.18 percent today and Nebius−12.48% — Nebius, down 12.48 percent today sell the computing that runs in buildings like them. The landlord priced EUR 1 billion of ten-year notes at a 5.125% coupon this month, earmarked for green projects 5, and added CHF 510 million of lower-coupon Swiss notes that first repay its revolving credit line, freeing room for construction 6. The coupon gap mostly reflects lower Swiss franc interest rates rather than cheaper funding 6.
A day after the Swiss notes closed, the company's joint venture with Mitsubishi broke ground on a 24-megawatt Osaka facility that is not scheduled to open until late 2028 6. The debt is pre-paying for buildings planned years out, and for the goodwill that lets them get built.
Four tranches in one week: coupons climb from the Swiss market to the euro market
Data
| Value | |
|---|---|
| CHF notes due 2029 | 1.68% |
| CHF notes due 2032 | 2.06% |
| CHF notes due 2036 | 2.42% |
| EUR notes due 2036 | 5.13% |
Sixteen percent at the compute layer
The compute layer cannot be so polite. Yields on CoreWeave's 2030 bonds climbed near 16% in the October selloff 7, and the selling spread to Nebius, which closed down 12% 7. BlackRock+0.99% — BlackRock, up 0.99 percent today chief Larry Fink warned that a data center moratorium would put the country in a recession, with the backlash a key issue in the November 3 midterms 8.
A settlement or an opening bid
Digital Realty is right to pay De Soto directly and right to build; the unresolved question is why the same project also needs Johnson County to wait on its taxes. The offer's terms are still open: the company and the city are working out how the credits reach households, and the announcement does not say when payments start or whether renters are treated like homeowners 1. Permission is now a budgeted cost of construction; the builders who can afford it keep building through the backlash, and the repriced compute layer cannot.
Two dates will show whether the payment was a settlement or an opening bid: the De Soto city council's TIF hearing on November 19 3, and Digital Realty's third-quarter results on October 29 5.
Deepdive
AI-generated from this story and its cited sources. Not investment advice.
