Virginia legislators are currently considering a proposal that will harm Virginia’s business climate and close off economic and job opportunities for communities like those we serve.
State studies have found that Virginia’s data center industry is one of the most impactful and important sources of investment, jobs and tax revenue. A yearlong study by Virginia’s highly respected, nonpartisan Joint Legislative Audit and Review Commission found that the industry contributes 74,000 jobs, $5.5 billion in labor income and $9.1 billion in GDP to Virginia’s economy every year. Many of these jobs allow people to earn a six-figure income without a four-year college degree.
While the majority of these benefits have occurred in Northern Virginia, communities like ours are increasingly attractive places for these lucrative investments and associated job opportunities thanks to our available and affordable land, strong workforces, low taxes and access to utilities.
Communities across Virginia, including Chesterfield, Wythe, Caroline, Spotsylvania, Wise, Botetourt, Petersburg, Louisa and others, are beginning to compete for and win major investments that will create jobs and support strong communities.
But now, just as the benefits of this industry are starting to be shared more broadly across the commonwealth, lawmakers are considering a plan that may signal the end of data center investment in Virginia.
At issue is a proposal to abruptly end Virginia’s Data Center Retail Sales and Use Tax Exemption program. The program, which is currently set to expire in 2035, has been a tremendous economic success story.
The Virginia Department of Taxation and Virginia Economic Development Partnership recently issued a joint report which found that, in just the last two years, the data center industry has invested $80 billion in Virginia, generated more than $5 billion in local and state tax revenue, and supported thousands of jobs in communities across the commonwealth.
Importantly, the Department of Taxation, VEDP and JLARC have all considered what would happen if the tax exemption program went away.
These agencies say that 90% to 100% of data center investment would not have occurred without the tax exemption program.
Put more simply, these nonpartisan state agencies have said that if Virginia terminates the tax exemption program data center investment will likely disappear along with all the jobs and tax revenues associated with it.
VEDP actually found that ending the program would cost Virginia taxpayers $1.3 billion over five years because investment would flee the state.
So, what would that mean for rural and economically challenged communities?
First, as Gov. Abigail Spanberger and House Appropriations Chair Luke Torian have pointed out, ending this program early and terminating existing agreements with major businesses would severely damage Virginia’s reputation as a trustworthy partner. Businesses of all sizes will wonder whether the commonwealth can be relied upon to keep its commitments, or whether its promises can be unilaterally broken or changed without notice. This will make business recruitment all the more challenging at a time when we are already facing economic uncertainty.
Second, eliminating this economically successful tax exemption program would mean communities like ours won’t even be able to compete with the 35 other states that offer a tax exemption program. Virginia will likely be crossed off the list of potential investment sites and it is probable that projects under development will be canceled.
This would be a deeply disappointing and unfair outcome for communities that want to recruit responsible data center investment and create good-paying jobs, just as their neighbors to the north have done. Many of these regions, including the ones we serve, have spent decades preparing for these opportunities with site, infrastructure and workforce investments. All of that would be for naught if Virginia removes itself from the competition for investment.
If localities that once embraced data center investment now want to move in another direction that is absolutely their right, but it would be unwise for the commonwealth of Virginia to pull up the ladder of economic opportunity before communities like ours even get to climb the first rung.
In Northern Virginia and other communities around the state, localities receive hundreds of millions, or in the case of Loudoun County, a billion dollars every year, in tax revenue from data centers, in addition to thousands of jobs in the digital economy. Those are game-changing revenue and job opportunities that have allowed these counties to slash their property taxes, build new schools, raise teacher pay and invest in community priorities.
All Virginia communities are asking is to have the same opportunity that others have had to compete for the investment that makes sense for our communities.
Virginia should protect its economy, its reputation and its rural and economically challenged communities by preserving this proven tool for economic development.
Garrett Hart is president of the Virginia Economic Developers Association and director of economic development for Chesterfield County. Linda Green is executive director of the Southern Virginia Regional Alliance. David Manley is executive director of the Joint Industrial Development Authority of Wythe County. Keith Boswell is president and CEO of Virginia’s Gateway Region. Kyle Rosner is director of economic development for Botetourt County.
