Data centers at county fairgrounds in California

Global Stack LLC, was incorporated only four months earlier and has a one-page landing page website with “coming soon” at the bottom. How could this brand new company with no online presence or track record possibly have gotten access to so many senior leaders running publicly governed entities in California so quickly?

The company’s CEO, Dan Kang, and its president, Nicholas Kovacevich, have publicly documented backgrounds in cannabis accessories manufacturing, garment sourcing and blockchain authentication. Kovacevich held a Newsom-appointed seat on the Orange County Fair Board through June 26 of this year. So yes, the company’s president has exposure to fairgrounds governance and likely well understands the somewhat curious financial positions many fairgrounds operations have been tightroping for the past several years.

Three subsidiaries are named in the proposal under the holding company: MeshClusters LLC for data center operations, DAA Parking LLC for parking, and PanGalactica LLC for an aviation network. None of the three are registered with the California secretary of state, or appear in a cursory search of states commonly used for their tax and privacy advantages.

The aerial component of the pitch involves eVTOL aircraft that are five to 10 years from FAA approval, by the presenter’s own acknowledgment at the Calistoga fairgrounds committee meeting in late June that did not result in a nonbinding memorandum of understanding as originally intended.

Fairground leaders are being pitched data center installation at up to 70 California fairgrounds by 2030 under 100-year land agreements, drawing up to 10 megawatts of electricity per site. The company has had conversations with at least eight fairgrounds so far, including the Cow Palace and the San Mateo County Event Center.

What the pitch materials don’t touch is what a centurylong agreement with a privately-backed company means for a public agency. A business projecting $2.24 billion in annual revenue with $6.3 billion in required investment doesn’t exist without outside capital, and whoever provides that capital has its own return requirements, timeline pressures and exit strategies. Looking at the numbers in its pitch deck, the 70 public agencies whose land makes the whole thing possible would collectively receive $160 million a year, or 7% of revenues with the rest going back to Global Stack and its investors in the form of valuation and EBITDA, at stated net margins of 42%.

But perhaps most importantly, a hundred years is a long time to be bound to a company whose ownership structure could change, be sold, restructured or dissolved well before the agreement expires. As we saw with solar, land leases were one thing, subcontractors to build and maintain were a different game entirely, and changes to energy buyback rates rewrote the economics for anyone midcontract. The same multitiered risk complexity would hold true here.

Since 2017, California has approved more than a gigawatt of diesel backup capacity for data centers through the Small Power Plant Exemption, a provision initially designed for emergency power and oil facilities that bypasses public hearings and environmental review required for large power plants. To date, data centers built under this exemption generate roughly 35 tons of nitrogen oxides per day and in aggregate backfill more than half of pollutants that are proposed to be saved by banning gas leaf blowers statewide. Even so, though the pitch deck projected 10 Southern California sites operational this year, no public lease, permit or formal application seems to have been filed anywhere in the state.

The San Mateo County Event Center sits on over 47 acres of land legally owned by San Mateo County and operated by a nonprofit association under a contract the Board of Supervisors renewed in 2021. Under current code, use of that property must not interfere with its fair purposes, and a 100-year land encumbrance would almost certainly require Board of Supervisors action.

It is important for the public to know that however curious it is that this got in front of fairgrounds leaders as quickly as it did, blue sky pitches are made everyday, and the distance between preliminary and executable in this case is something like several billion dollars and a Board of Supervisors vote. Four months of corporate history, three unregistered subsidiaries, a very hand-wavy 19 slide pitch deck and one very long meeting in Calistoga does not add up to a deal, but for all the right reasons have generated a lot of very good questions from the public.