Data Centers Present County Budgeting Challenge

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.”

rgreene@loudounnow.com

2 thoughts on “Data Centers Present County Budgeting Challenge

  • 2018-12-21 at 9:20 am
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    The goose that keeps laying the golden egg. But, yes, as easily as they came they can go too, so it is wise not to count on this revenue (but it is still really nice to have). Best slush fund ever.

  • 2018-12-21 at 5:50 pm
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    When countries, states or localities get a windfall the clever ones don’t try to spend the money, they save it for when the windfall might end. See Norway with a One Trillion (with a “T”) fund from their oil. Closer to home, Alaska with their oil fund. Why Loudoun cannot start to build a fund which will be there should data centers go away is a little beyond me. Meantime, that money invested will generate even more money, and if data centers stick around long enough, will produce enough income that one could care less if the data centers leave or not – at which time the extra income can be spent reducing, or even eliminating property taxes, and if they never go away, every resident could be getting a nice share of the income. Loudoun would become an even more desirable place to live!
    Again, the concept that one must spend whatever one gets is not very fiscally wise, be it for individuals or governments. Unfortunately politicians today, unlike when this great country was founded, seem to be more interested in trying to please all the people all the time and getting re-elected. And as there are so many people with different ideas as to how to be pleased, that can take an infinite amount of money. It all comes down to accepting some personal responsibility and not expecting the government to provide everything anyone could desire.
    PS: Data centers, re-purposed, could make superb vertical farms, generating healthy taxes as well as producing healthy, local food. And while at it, it is totally beyond me how anyone can complain about how they look – a simple solution, at almost no cost, (could even be free as developers love sites to get rid of excess dirt) would be a berm with some nice local evergreens planted on the sides and top – good for the environment, wildlife and aesthetically pleasing – and I guarantee that there would not be the tiniest peep from any data center company if that were part of the requirements for zoning or building.

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