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News and Features: Features

Booting up

Can Holyoke’s massive, new high-speed computing center help turn the Paper City into a technology hub?

BY: Gabrielle Gurley
Photographs By: Brian McDermott
Issue: Summer 2013


MICHAEL FELD IS moving his small tech company from Northampton to Holyoke. That’s not a big deal on its own for Holyoke, but it will be a very big deal if it’s a sign of things to come.

Feld, the chief executive officer of VertitechIT, a 21-employee technology firm specializing in telecommunications, information technology services, and outsourcing, could not find a Northampton commercial space big enough to house his growing company or the data center he wants to build to handle medical records for the firm’s hospital accounts.

When Feld looked for new space, he didn’t think of Holyoke, just 11 miles away. But one of his employees who lives there convinced him to take a look and he liked what he saw. He got a good deal on space in Open Square, a mixed-use retail, commercial, and residential development in a renovated Holyoke mill building. The Holyoke and Springfield community colleges are nearby, and could supply some of the 50 workers he plans to hire by the end of the year. The municipal utility offers low rates for electricity and high-speed data. And then there’s the gleaming, new 90,000-square-foot computing center, bankrolled by the state and five top Massachusetts universities, that has risen amidst the vacant downtown mills that are relics of the city’s industrial past.

Holyoke’s Canal District, with the computer center in the background.

Like an urban pioneer who has ventured into a once-sketchy neighborhood, the computing center makes a statement about Holyoke. It sends a signal that it’s safe for business people like Feld to at least look at Holyoke.

The computing center is “a marketing tool” and “an image booster,” says Mayor Alex Morse. “It’s brought positive energy here and it’s brought more young entrepreneurs to Holyoke.” The city’s 24-year-old mayor, himself a part of the city’s image boost among young professionals, talks about turning the mill town once known as the Paper City into “the digital city.” After a brief flirtation with casinos, Holyoke has switched gears to concentrate on an economic development strategy that relies on industries like information technology, precision manufacturing, and on the arts and culture. The plan hinges on attracting more firms like VertitechIT to set up shop near the computing center, in what Holyoke officials have optimistically rechristened the city’s “Innovation District.”

The center is the largest project Holyoke’s run-down industrial zone has seen in decades. “This project will anchor a vibrant new growth district in the Pioneer Valley,” Gov. Deval Patrick declared three years ago when plans for the computing center were announced.

Revitalizing downtown Holyoke, however, will take more than just state-of-the-art computing capacity. The computing center was never going to be a major employer; only 10 people work at the facility. The big question is whether the facility can spark business and housing starts and create a mix of jobs, particularly for low-income Holyokers.

About one-third of city residents live below the poverty level. Fifty percent of the population is Latino. Betty Medina Lichtenstein, a long-time community leader and executive director of Enlace de Familias, a local social services agency, says the university computing center changes nothing. “It doesn’t give us jobs; it doesn’t give us the opportunity for education,” she says. “It’s there, it’s great, it looks pretty, but it doesn’t have an impact on the people who live around here.”

Marcos Marrero, Holyoke’s planning and economic development director, has a different take. He views the center not as Holyoke’s savior, but as a signal that businesses and potential new residents should give the city a fresh look. “When people think that the only thing that we are doing is relying on the computer center, that it is the responsibility of the computing center to turn around the city, I don’t think anyone has charged them with that,” he says. “If the question is, ‘Is this a great step in the right direction?’ obviously it is.”

CALCULATE THIS

Holyoke got on the map in the mid-1800s, planned by some of the same industrialists who built factories in Lawrence. The industrialists constructed canals to facilitate the use of water to power the mills. During the Civil War, the cotton-reliant textile mills floundered while the paper mills flourished. By the end of the 19th century, 26 paper mills operated in the city. The crash of the industrial economy in the late 20th century hit the city hard.

A sculpture reminiscent of Holyoke’s industrial past
sits in front of the computing center.

Today, the same low-cost hydropower that fueled the rise of Holyoke’s mills in the 19th century is a key reason for the arrival of the huge computing center that local and state leaders hope will spark the city’s 21st century comeback. In the spring of 2009, the University of Massachusetts, the Massachusetts Institute of Technology, Harvard University, Boston University, and Northeastern University settled on Holyoke as the site for an unprecedented collaboration: a jointly-owned and operated $90 million supercomputer center. The state contributed $25 million, each university chipped in $10 million, and Cisco and EMC, the two private industry partners, contributed $2.5 million each. The federal New Markets tax credit program covered the balance of the cost. The schools can each use up to 20 percent of the facility and pay a share of the operating costs. But the center also plans to lease computing space to private firms that conduct research like VertitechIT.

Supercomputers allow university researchers to perform complex calculations at rates that far surpass the capabilities of even the most sophisticated desktop computers. The acre of supercomputers at the Holyoke center handle hundreds of projects, from the Large Hadron Collider in Switzerland to bone density simulations. It’s literally humming in the hot electrical room where a giant red fuse box distributes power to substations. The quieter refrigerator units in a neighboring area cool the facility. These core heating and cooling systems take up enormous amounts of physical space and consume vast amounts of energy.

The five universities put aside academic rivalries to build all of this for a simple reason: None of them could go it alone. Especially galling to MIT was the fact that one of the world’s most prestigious science and engineering universities had been losing major research projects to other schools willing to make significant investments.

Three years ago, Jack Wilson, then the president of UMass, got a phone call from Susan Hockfield, then the MIT president, about an MIT plan to ramp up its computing needs. Hockfield suggested that the schools work together on the project. “Did MIT ever before call the University of Massachusetts and ask them to partner with them?” asks Wilson. “The answers were no and no.”

MIT didn’t have space on campus for a new computing site. Researchers can work remotely, so the location of the computing center was dictated less by proximity to the universities and more by the cost of power. Cambridge industrial rates can run about 14 cents per kilowatt hour; in Holyoke, the cost is about 8.5 cents per kilowatt hour.

In 2005, an MIT analysis of its computing needs stressed that New England had a number of options for cheap, green hydropower. The study also said, “Look for a community that is interested in ancillary benefits—investment, jobs.” Two suggested options were Montague or Holyoke. The Paper City likely rose to the top based on its access to Interstates 90 and 91, its reliable, low-cost electricity courtesy of a municipal electric company generating hydropower; high bandwidth connections via the metro Springfield high-speed Internet hub; and capable local officials who could get the project done.

The 90,000-square-foot facility opened last November, with 10,000 sophisticated, high-speed computers and enough space for about 10,000 more. At maximum capacity, the center will use 15 megawatts of electricity, enough to power 12,000 homes.

Holyoke officials like to say that the city has gotten a new use for an old eyesore that is now generating revenue. City officials recently negotiated a payment-in-lieu-of-taxes agreement with the computing center that includes an annual $10,000 scholarship program for Holyoke public school students attending any of the five universities. Holyoke leaders initially proposed an annual $500,000 payment that would increase to $1.5 million by 2022. In a May 2013 letter to Morse, John Goodhue, the computing center executive director, argued that the center had made $10 million in infrastructure investments (some of them funded by state grants) during construction, including paying $108,000 in back taxes owed by the prior owners; $4.4 million in upgrades to Holyoke Gas and Electric, the municipal power company; and $500,000 for programs in the Holyoke public schools and Holyoke Community College.

Holyoke backtracked and accepted an annual $80,000 fixed payment based on the property taxes paid to the city by the previous owner at the time the universities acquired the property. Those payments are not guaranteed, however. “It is the current intention of the [computing center] to continue payments unless there are significant circumstances that…preclude it from doing do,” Goodhue wrote.

Why did Holyoke settle for less from some of the country’s wealthy universities? “The city would have had more leverage before [construction] permits were pulled under the previous administration, but that wasn’t done,” says Morse. “They are not required to provide the city with a payment; therefore, the city sees this as a fair and successful agreement.”

CANAL SIDE CONDOS

Holyoke has searched for an economic jumpstart for decades. City and state officials are loathe to place the entire burden for that on the computing center, but spurring the Holyoke economy is clearly one of the reasons why the state made the $25 million investment. “The hypothesis is that this leading-edge facility can become a catalytic economic development project for the city of Holyoke and the broader region leading to additional industry opportunities and ultimately job opportunities and economic growth,” according to a 2011 Massachusetts Technology Collaborative analysis for Holyoke and the Pioneer Valley.

Greg Bialecki, the state’s housing and economic development secretary, believes the computing center will be a magnet that draws businesses to Holyoke. “Other innovation companies want to be near and around the computing center,” he says. A win for Holyoke, according to Bialecki, would be a company that could employ 200 to 400 people, which would be a very big deal for a small city.

Marrero hints that “larger companies” have expressed interest in downtown Holyoke, but declined to provide details. He insists the city’s comeback strategy isn’t just based on the computing center or even information technology; it’s also about advanced manufacturing sectors like the medical device industry, which are thriving in western Massachusetts. “We are not going to be Kendall Square,” Marrero says, referring to the high-tech and biotech hub near MIT in Cambridge.

Marcos Marrero, Holyoke’s director of planning and economic development.

Holyoke’s goals are more modest, and include creating job opportunities to get the region’s college students to think about working in Holyoke after graduation instead of leaving for bigger cities. Marrero also has his eye on baby boomers who have tired of suburban living. “Even if we get a sliver of that trend, we could grow our city,” he says. No longer figuring in the growth plans is the casino that the mayor briefly considered, but then rejected after a grassroots blowback. It was touted, in part, as an opportunity to provide employment opportunities for workers left behind by the information technology revolution.

The challenge for Holyoke is to attract firms that seek the advantages of a market with good infrastructure, a lower cost of living, and ready access to talent in the college-graduate-rich Pioneer Valley—far away from competitors who gravitate to major metro areas such as Boston or New York. According to the Massachusetts Technology Collaborative analysis, however, it is not clear what type of industries would be attracted to Holyoke just because the university computing center is there.

Nor is it certain what incoming businesses would do for the city if they started to sprout. “These efforts at placing high-powered clusters of concentrated high-tech, biotech know-how in the midst of an island—it simply works as an enclave with no deep connection to where they are located,” says Ramón Borges-Méndez, a Clark University associate professor of community development and planning who studies Holyoke and other Gateway Cities.

At the opposite end of the canal district from the computing center, Open Square, the huge mixed-use building where VertitechIT plans to land, stands as an outpost of the “if you build, they will come” mentality that has prompted a trickle of new businesses, shoppers, diners, and residents to the area. (The new downtown pioneers include the city’s mayor, who rented a renovated loft unit in Open Square soon after winning election two years ago.)

Jeremy Kepner, a senior scientist at MIT, works
on his laptop at the computer center.

“With a slew of live-work condo spaces getting developed, Holyoke could be much like the next Brooklyn in terms of young, entrepreneurial people coming here,” says Northampton real estate agent Craig Della Penna, invoking what seems like more than just a little of the hyperbole that goes naturally with his trade.

Condos are planned for several vacant downtown buildings and Philadelphia-style row houses are also attracting first-time home buyers lured by the “Buy Holyoke Now” program that offers incentives and discounts on everything from gas and electricity rates to local cafés and home improvement stores. Last fall, a one-bedroom loft with a canal view near the computing center sold in one day for $145,000; the previous high in the building was $127,000.

The canals lend the neighborhood a distinctive sense of place that was never really duplicated elsewhere in Massachusetts. Holyoke is “a Venice that had fallen on hard times,” says former UMass president Wilson, now interim dean of the College of Engineering at UMass Lowell. Holyoke is one of the state’s poorest Gateway Cities, with an unemployment rate near 10 percent. It has managed, however, to get some handle on crime, one of the basics that must be tended to for any urban center to rebound. Former police chief Anthony Scott, who retired two years ago, launched a “Take Back Our Streets” campaign designed to crack down on petty nuisances such as loitering, public drinking, and loud music to begin to slowly wipe the slate clean of drugs and gangs. Holyoke had no homicides in 2012, the first time in more than 25 years that the city went an entire year without a murder.

For the revitalization project to succeed, persuading more people to work and live downtown is key. Can Holyoke accomplish that goal without driving out the low-income residents? The mostly Latino residents of the dilapidated Lyman Terrace public housing project near City Hall, which was slated for demolition, won a multi-million-dollar renovation for their homes only after threatening to sue the city. But Morse says Holyoke is a long way from gentrification. “It will be a good thing when we do hit that point because we have room to grow,” he says.

AN UNCERTAIN SPRINGBOARD

Holyoke wasn’t a slam dunk for Michael Feld and VertitechIT. Feld remembered the city as grim and dangerous from his days as a Hampshire College student in nearby Amherst in the 1980s. It was all Jessica Ryder, the company operations manager, could do to get him to tour commercial spaces downtown. Feld was amazed at what he saw. “It was a completely different city,” he says, citing overtures made by Mayor Morse and others and the beautifully restored mill building where his new offices will open later this summer.

Ryder argues that the improvement in the atmosphere downtown owes more to vigorous policing than to the recent arrival of the computing center. “A lot of what started [began] with residents getting sick of the state that their city was in and bringing in a police chief who would straighten things up,” she says. “Once that got some press, it just made it a lot easier for…bringing money back into town.”

Creating a technology cluster is a long-term project. Unlike fighting crime, there are uncertain rewards for post-industrial cities from these types of hubs. Troy, New York, is another former mill town with high poverty and unemployment that has gone the technology route. The city and its environs are part of a larger, eastern New York technology cluster. In 2008, Rensselaer Polytechnic Institute, in partnership with IBM and the state of New York, opened the Computational Center for Nanotechnology Innovations supercomputing center in Troy. It serves as a resource for government, start-up industrial users, and academic researchers.

According to Monica Kurzejeski, Troy’s economic development coordinator, 37 new businesses opened downtown last year, two years after the city established a business improvement district. Investors and small-to-midsize firms from New York City, Long Island, and Philadelphia are showing interest in the urban core. Downtown Troy is making a stronger play to keep area students from leaving for New York City or Boston with projects like “maker spaces,” where young entrepreneurs with bright ideas but no money can team up with venture capitalists and freelance executives. “It’s taken years,” says Kurzejeski, who has worked in Troy since 1997.

She admits that most new jobs in Troy go to professional and creative workers, not low-income residents. As for Holyoke’s bid to have the high-speed computer center start it down a similar path, Robert Atkinson, president of the Washington, DC-based Information Technology and Innovation Foundation, says there are likely to be “spinoffs,” especially from student entrepreneurs from the Pioneer Valley’s two- and four-year colleges. But Atkinson questions the wider impacts. “I wouldn’t hold my breath and say that this is going to be the giant economic savior of that region,” he says.

More broadly, creating talent clusters as an economic development strategy is coming under new scrutiny. The University of Toronto’s Richard Florida, whose groundbreaking research on the creative class spurred declining urban areas to make major investments to attract knowledge and creative workers, admitted on The Atlantic Cities website in January that the strategy has limits. “On close inspection, talent clustering provides little in the way of trickle-down benefits,” he wrote. “Its benefits flow disproportionately to more highly-skilled knowledge, professional, and creative workers.”

Using a university computing center to serve as a springboard to a better Holyoke is an unconventional gambit. In the short-term, the major beneficiaries of the computing center in Holyoke are the five Massachusetts universities and the wider global research community. Holyoke’s big hope is the center will also find favor with smaller technology firms like VertitechIT, who want to site tech operations in a low-cost location, and with manufacturing firms, artists, and other creative professionals.

State and municipal leaders are convinced that the Massachusetts Green High Performance Computing Center is a game-changer. The arrival of even one new firm with the potential to employ a few hundred people in a wide range of jobs would make a huge difference in a city like Holyoke. If commercial data centers and other businesses begin to show interest in some of Holyoke’s vacant lots and mills, the city property tax coffers will grow. That would allow the city to fund more municipal services, which could buff up Holyoke in ways that draw other businesses. And on it would go, according to the virtuous cycle theory that undergirds this and any other effort like it.

In the meantime, Wilson, the former UMass president, injects a necessary note of caution. “Keep expectations reasonable,” he says. “There are things that work on scales of decades and half decades; that’s certainly what we are talking about in Holyoke.”
2 Article Comments

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epluta
Says on 08.11.2013
at 3:50 PM
Dear Editor, overall the article on this issue was done very well but I would suggest doing more background work on how the Computer Center came to be. Back in the mid 90’s several of us City Councilors along with the Holyoke Gas and Electric administration were advocating for the City to bid for the license for the Holyoke Dam which the Federal Energy Regulatory Commission(FERC) had put in process. The City lost it’s bid to Northeast Utilities who eventually ended up putting the Dam license up for sale because of the onerous mitigations that the FERC had attached to the license reducing it’s value. We continued our push for purchase and finally convinced the powers to be what a great deal this was for the City. This happened in the early 2000’s. It was because of this purchase that the City of Holyoke was able to offer the reduced price for electricity to the Universities for a High Performance Computing Center. There were other factors involved but this was the main one. This was our legacy to future generations just as out forefathers’ purchase of the Tighe-Carmody Reservoir and Manhan Dam in the 1800’s. One thing I must clarify though is Mayor Morse’s statement on page 56 that because the previous administration did not pursue a PILOT program when the permits were being pulled for the Computer Center project caused the negotiation of the the low amount to be only $80,000. The previous administration, of which I was Mayor, vigorously pursued a PILOT program with the Computer Center. However, the Board of Directors and the Executive Director of the Center was not in place until Jan./Feb. of 2012 during Alex Morse’s term and they are the ones who would have the official final say on negotiating a payment-in-lieu-tax amount with the City of Holyoke.

Thank you,

Elaine Pluta, Former City Councilor and Mayor, City of Holyoke.
Caroline Ellis
Says on 07.30.2013
at 8:17 AM
The Boston Fed is interested in some of the same cities you are supporting. We blog about your Holyoke post, here: http://thecentralpremise.org/2013/07/30/more-on-working-cities/
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