Who benefits and who pays for data centers?

Fairness and Equity issues dominated a data center panel with state officials hosted Thursday night by the Williamsburg League of Women Voters.

Happy Juneteenth! It’s June 19. Virginia leads the world in data centers, and they generate billions in economic activity. But they’ve raised electricity prices for consumers and get $1.9 billion in state tax breaks. Also…James City County officials take credit rating agencies on a tour….and Williamsburg publishes study saying its water meets or exceeds regulatory standards.

Deputy Energy Officer Louise White speaks at panel, left. Data center in Henrico County.

Virginia benefits from its massive data center industry, but the main players are not paying their fair share of the costs. And the legislative argument over how to make them pay has created a stalemate in passing the state budget.

That was the crux of the argument panelists made to the annual meeting of more than 80 members of the Williamsburg Area League of Women Voters Thursday evening.

Northern Virginia is home to the largest group of data centers in the world. They generate $9 billion in economic activity every year and attract other companies with good paying jobs, said Louise White, the Governor’s Deputy Energy Officer.

But public opinion has been turning against the data centers, according to a recent poll by the Washington Post-Schar School poll, because of environmental concerns and their role in increasing consumer electricity costs. Dominion Energy Virginia won permission to increase consumer rates significantly this year after arguing it needed to significantly expand power production.

The sales tax exemption data centers first got in 2009 to incent them to come to Virginia is also costing the government $1.9 billion a year in taxes, said panelist Megan Davis. She is a senior policy analyst at The Commonwealth Institute, a liberal policy group that bills itself as working for equity and justice in the state tax code.

Davis said a study by the Joint Legislative Audit and Review Commission found five data center companies out of the dozens operating in the state got more than 80% of the sales tax benefit. And the cost of the sales tax exemption consumes half of the money Virginia can use to attract other business to the state.

The terms “equity” and “fairness” came up often in the conversation.

The Chief of Staff for Del. Shelly Simonds, D-70, said she considers it unfair that Northern Virginia counties that host most data centers reap the benefit from the property taxes the data centers pay, while cities that don’t have them like Newport News or Williamsburg get nothing.

The current stalemate on the state budget centers on a disagreement between the two houses on data centers: the senate had been holding out to eliminate the sales tax exemptions. But Gov. Abigail Spanberger and House of Delegate leaders disagreed, saying the state would be going back on a binding commitment.

White said going along with the Senate’s initial request could impact “our position as the number one state for doing business in America. And part of that is keeping the commitments that we had made in the past, that the legislature voted on just three years ago” to extend the tax break to 2035.

White said the state would look at phasing out tax break for new data centers, as well as other new taxes to raise revenue from data centers.

But she also said Dominion Energy and several other utilities are partly to blame for rising consumer costs because they are not fairly allocating the cost of generating and delivering power to electricity-hungry data centers.

She said Dominion had over-estimated the demand for future electricity needs, and the infrastructure to meet it, and has raised consumer bills as a result.