Southwest Virginia Strikes Tax Deal to Lure Data Center Business
In a bid to draw data centers, leaders in southwest Virginia announced a joint agreement this week that sets the lowest property tax rate in the state on data center equipment.
Under the agreement, Virginia’s Dickenson, Lee, Scott and Wise counties, along with the city of Norton — have agreed to each set a tax rate of 24 cents per $100 of assessed value on data center equipment, along with a favorable depreciation schedule.
The tax deal builds on SB 1423, recently approved by the Virginia General Assembly, that reduces the job creation requirement for data centers to qualify for tax exemptions in a distressed locality from 25 to 10 jobs. The bill also lowered the new capital investment threshold from $150M to $70M.
“I am proud of the Lonesome Pine RIFA localities for taking the data center industry’s lead by implementing this critical competitiveness tool for our region,” said Virginia state Sen. Todd Pillion in a statement. “This five-month effort to implement InvestSWVA’s Project Oasis recommendation demonstrates our commitment to making southwest Virginia a prime location for data centers.”
As part of Project Oasis, leaders in southwest Virginia are pitching the region as a complement to neighboring northern Virginia, otherwise known as Data Center Alley.
Southwest Virginia is home to many unused mines, which could make for ideal data center sites if outfitted for built-in cooling that natural floodwater provides. InvestSWA, a regional economic development group, identified six sites suitable for a 36 MW data center, and four additional sites suitable for smaller data centers. The group estimated that mine-water cooling could save operators more than $1M annually in electricity costs and municipal water purchases.
“We have great assets: power, land and water, and with this Project Oasis technology we think we can save data centers significant municipal water and energy costs and help them achieve their sustainability goals,” Will Payne, director at InvestSWA, told Bisnow last fall.
Payne said that for specialized customers, such as national security agencies, data center sites in southwest Virginia could supplement existing capacity in neighboring northern Virginia.
Northern Virginia leads the U.S. by far in terms of total capacity. According to CBRE, northern Virginia accounted for about 70% of total net absorption among first-tier U.S. markets in the first half of 2020.