In the early 1990s, Gov. Douglas Wilder was supposedly late for a meeting with a visiting European corporate executive who was considering Virginia as a possible expansion site — prompting the company to go to one of the Carolinas instead. Whether the story is true was hard to pin down even at the time, but it’s undeniably true that Republican George Allen made good use of the story during his 1993 campaign for governor — arguing that Democrats had made the state unfriendly to business.
More than three decades later, Virginia Democrats might want to reacquaint themselves with this story, because Virginia Republicans need no reminding.
The issue of the moment (aside from redistricting) is whether Virginia should accelerate the end of the state’s tax abatement for data centers — from a planned sunset in 2035 to 2027. Senate Finance chair Louise Lucas, D-Portsmouth, who wields outsized power in the state Capitol, has insisted she will not support a budget that doesn’t include this early phase-out. House negotiators have insisted the tax break stay, fearful of what would happen to the data center boom (and the jobs and tax revenues it brings) if the state did end it.
For some this is a simple matter of a giveaway: The state now forgoes an estimated $1.9 billion a year.
For others, this is an equally simple matter, just in the other direction: This tax exemption has helped power the growth of an industry that contributes $9.1 billion to the state’s gross domestic product each year. Do away with the tax incentive and data centers will go elsewhere — although that would be just fine with many data center critics.
Lucas, as the loudest voice for those on the “giveaway” side, is probably closest to the public’s mood at the moment. A recent Washington Post-Schar School poll shows a dramatic swing in public opinion against data centers.
In 2023, 61% of those surveyed said they supported tax breaks for data centers.
This year, only 37% said they did.
Asked a second question about whether the state should eliminate this tax incentive, 67% said end it.
What support remains for these tax breaks is lowest in Northern Virginia, where data centers are concentrated, the poll found. However, there’s no part of Virginia that backs them. In 2023, “central and western Virginia” — the pollster’s term — showed the highest support for data center tax breaks at 79%. Now that’s fallen to 36%, which is in line with most other parts of the state — except for the D.C. suburbs at 27%.
I’d surmise that the “central and western Virginia” support was so high in 2023 because that’s the part of Virginia most in need of new jobs and the feeling seemed to be that if tax breaks are what’s necessary to attract them, then let’s do it. Now there’s more widespread skepticism of data centers and their energy demands.
This popular uprising against data centers does not necessarily extend to the business community and some local governments, some of whose members have been quietly (or not so quietly) pointing out that many rural areas have been begging for data centers (and the jobs and tax revenues they bring) and now feel they’re about to see their chances at landing one taken away.
As with many things, much of this debate takes place in the abstract. It was against this backdrop that Secretary of Finance Mark Sickles last week dropped the news that the data center company planning a $73 billion investment that’s projected to create 2,050 jobs over 30 years is now in jeopardy because of the possible end to tax incentives.
“With the end of the tax exemption, that project goes away,” Sickles told members of the Senate Finance Committee.
Here is something that’s not so abstract.
Here is an actual project that is apparently just one signature away from being formalized. Last month, the Danville-Pittsylvania Regional Industrial Facilities Authority approved the sale of 2,900 acres in the Southern Virginia Mega Site. The performance agreement — the document that governs certain incentives and other details — has been drafted but not yet signed. It’s unclear why that hasn’t happened, but the timeline suggests the company wants to wait and see what happens in Richmond. The company — Stack Americas — has all but said so. The tax exemption is “essential to the viability of Stack’s proposed data center campus at Berry Hill,” chief external affairs officer Kevin Hughes told Cardinal News in an email.
A few years ago, when the Southern Virginia Megasite sat empty, Ford Motor Co. looked at the site for a battery plant. The governor at the time, Glenn Youngkin, nixed the state’s courtship with Ford over concerns about the company’s use of Chinese technology. Democrats skewered Youngkin for turning away jobs from a part of the state that needed them. “He wanted to make headlines by calling Ford — Ford — a front for China,” said House Speaker Don Scott, D-Portsmouth. “And who’s paying the price? Twenty-five hundred hard-working Virginians.”
The Ford deal remained a Democratic talking point until another company — the Tennessee-based battery company Microporous — announced it would locate at the megasite. At the time, Microporous was the biggest jobs announcement Southside had seen in decades (2,015 then, since reduced to 1,700 but with higher salaries). Now there’s a deal in sight for an even bigger announcement, a projected 2,050 jobs.
This is a part of Virginia that’s still recovering from the economic trauma of seeing its economic pillars crumble — tobacco, textiles, furniture. It’s taken a quarter-century for Southside to get to a position where it’s attracting these kinds of technology jobs that Northern Virginia now takes for granted.
Maybe Sickles is bluffing or mistaken. In that case, perhaps Virginia does away with these incentives and Stack still shows up to build a massive data center campus that transforms the economy of that part of Southside.
What if he’s right, though? What if Virginia changes the data center tax rules in such a way that Stack concludes there’s a better deal somewhere else — and it scratches Berry Hill? The political implication is easy: Democrats will get the blame for wrecking the state’s economy and “the one that got away” — scratch that, “the one we chased away” — will become a key Republican talking point all the way to the 2029 governor’s race.
Allen in 1993 made good political use out of a mere visit that didn’t produce a jobs announcement; a company on the verge of inking a deal to bring 2,000-plus jobs to a job-deprived part of the state and then backing out because of a Democratic-driven policy would be a different magnitude of political opportunity for Republicans.
If Stack weren’t on the table, this would be a different conversation. Virginia could change its tax rules on data centers and it might be difficult to measure the impact — maybe data center growth would slow here and spike somewhere else, but it could always be argued that that might have happened anyway. Here, though, is a specific project that can be tracked.
This is a fascinating issue politically because the opposition to data centers is strongest in a solidly Democratic part of the state (Northern Virginia), while the Stack development would be in a part of Virginia that Democrats had trouble carrying even in a time when they were more competitive with rural voters.
Somehow Democrats have to address the popular demand to “do something” about those energy-sucking data centers without endangering the prospect of 2,000-plus jobs in a part of the state where local leaders are eager for data centers. Can they? Or is that even part of the equation?
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