Loudoun’s booming data center market makes up a major portion of the county budget, expected to put more than $200 million in the county coffers this fiscal year. But it is also an industry that changes so quickly the county budget staff has difficulty knowing what to expect.
This year, budget staffers had a pleasant problem: They had once again underestimated how much money the county would make from the business property tax on computer equipment, the major source of tax revenue from data centers. But the county can’t make the most of that money if it isn’t planning for it. Instead of being integrated in the county’s strategic planning, or used to push real estate tax rates down, it ends up sent toward one-time expenses at the end of the year or forwarded to the next budget cycle.
In Fiscal Year 2018, the county budgeted for $154.9 million in business computer equipment tax. However, the county collected $195.2 million, more than $40 million more. That was a big part of why the county’s total revenues were 5 percent higher than expected.
“We’d really like to be more in the 3 to 4 percent range,” said Director of Management and Budget Erin McLellan told supervisors serving on the board’s finance committee this month.”
To that end, she said, the county has been working to better understand how data centers operate and how they are changing. Loudoun County Economist Doug Kinney said the county government has worked with consulting firms to figure that out. He said data centers have steadily been pouring more electricity into every square foot, and buying more and more expensive equipment. For example, he said, the cost for the most common type of sever has escalated from about $5,400 in 2014 to about $8,000 today.
“There’s so much going on in this industry, the capacity to generate this equipment, the demand is so large, that right now it looks like that trend is continuing,” Kinney said. “But this is something we’re going to have to monitor on an ongoing basis, because that could change.”
Data centers now generate upwards of $20 of tax revenue per square foot, McLellan said.
But supervisors are cautious about expecting too much out of an industry over which they have no direct control. And McLellan pointed out the county doesn’t want to become too reliant on one industry for its tax revenues.
Board Vice Chairman Ralph M. Buona (R-Ashburn) cautioned that the exponential growth in data center revenues could suddenly level off. And finance committee Chairman Matthew F. Letourneau (R-Dulles) said, “if we’re wrong, then we have shortfalls, which is a lot worse than the situation we’re in tonight.”