Loudoun Leaders Wary of Data Center Exodus

Loudoun’s Department of Economic Development is keeping an eye on the data center market to make sure it stays here in Loudoun.

At a Board of Supervisors’ finance committee last month, supervisors considered lowering the property tax on computer equipment to forestall data center companies packing up for other counties and cities.

Loudoun’s tax rate on computer equipment is $4.20 per $100 of assessed value. That’s competitive in Northern Virginia—Fairfax charges $4.57—but much higher than some competitors. Henrico County near Richmond recently lowered its tax on data centers to only $0.40, and Ohio and New York charge no computer equipment tax. State law also allows Loudoun to make a distinction in taxing general computer equipment and data centers differently, which Henrico has done. Currently, Loudoun does not.

Loudoun’s Economic Development Executive Director Buddy Rizer said his office will keep an eye on it, but there’s no need to act now. Loudoun has “a lot of advantages that they don’t.”

“This has become the most important internet place in the market, or in the world,” Rizer said. “So if you have an Ashburn address or a Loudoun County address for your data center, everyone knows that you’re getting quality—you’re getting quality power, you’re getting quality services, you’re getting quality fiber, water that you know you can count on. … We’ve built everything that you could possibly want.”

According to a report from the Department of Economic Development, the majority of expense and revenue in a data center comes not from the building, but from the computer equipment inside. That equipment depreciates quickly on the tax rolls, and is replaced every three years—meaning data centers can very quickly shift to another jurisdiction if they find a better market.

Data centers are a major leg of Loudoun’s budget. In fiscal year 2016, taxes on computer equipment brought more than $117 million to the county’s budget—while the data centers themselves put comparatively little burden on county resources. Although they can be power- and water-thirsty, they employ relatively few people at relatively high wages, meaning less impact on roads and schools.

In this year’s budget, data centers are expected to bring in more than $155 million. The Department of Economic Development estimates they bring in more than $9 of county revenue for every dollar the county government spends supporting them.

The finance committee directed Rizer’s office to keep an eye on the issue, but recommended no tax change at this time. The county government is currently facing down a major overhaul of its employee pay plan which is expected to stretch the county budget.

“It’s a very difficult time for us to forgo a significant amount of revenue when we don’t have just the information I think we need to make that [decision,]” said Committee Chairman Matthew F. Letourneau (R-Dulles).

rgreene@loudounnow.com

4 thoughts on “Loudoun Leaders Wary of Data Center Exodus

  • 2017-10-03 at 4:35 pm
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    117 out of a 2B budget? All this hype for a segment that contributes 5.8% of our county taxes?

    • 2017-10-03 at 5:45 pm
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      Yeah, it is a big deal. It’s going to be up to $175,000,000 next year. That equates to about 23 cents on the property tax rate. The whole idea of commercial tax revenue is to lower the residential tax burden and keep the same services.

    • 2017-10-04 at 10:02 am
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      Only $117M? 5.8% is huge.

      If we lose any of that revenue, let’s take it out of the school budget.

  • 2017-10-03 at 4:43 pm
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    Most of these companies lease space in the data centers. In most leases, the landlord passes along real estate taxes to the tenant in the form of CAM. The tax on equipment is a cost of doing business. If the cost is too high for the tenant, they can take that up with the landlord. As much as the County doesn’t want to lose the tax revenue, the landlords want to lose the tenants even less. If these developers and tech companies invested hundreds of millions of dollars in the data center market in the hopes of Loudoun giving up the necessary commercial tax revenue they bring, well, that was a foolish business decision on their part.

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