DUFFIELD — Five Southwest Virginia localities have agreed on a new tax category and accelerated equipment depreciation schedule to attract a new business sector to the region — data centers.
The common tax category rate and depreciation schedule came together formally on Tuesday with an announcement by the Lonesome Pine Regional Facilities Authority, economic development partnership InvestSWVA and Southwest Virginia legislators.
LPRIFA member localities Lee, Scott, Wise and Dickenson counties and the city of Norton all approved in February a memorandum of understanding that their governments will incorporate the new 24-cent per $100 assessed value personal property sales tax rate for data center equipment in their 2021-22 budgets along with a depreciation schedule that would allow center operations to write off equipment value over five years.
State Sen. Todd Pillion, R-Abingdon, credited the help of Sens. Jeremy McPike, D-Manassas, and Frank Ruff Jr., R-Clarksville, in carrying legislation that passed the General Assembly in February to allow for the tax rate. Under that legislation, operations with $70 million or more in investment and 10 or more employees would be able to take advantage of the rate.
“I’m proud that LPRIFA is taking the lead to implement Project Oasis’ recommendations,” Pillion said.
“That gives us a push to recruit some of these data centers,” said Del. Terry Kilgore, R-Gate City, adding that the region’s growing broadband infrastructure makes the region “able to provide the infrastructure these data companies need.”
InvestSWVA project coordinator Will Payne said the rate marks a significant drop from localities’ existing personal property tax rates. In Wise County, he said, the normal personal property rate is $1.59.
The new rate follows an InvestSWVA report from last fall — Project Oasis — which examined potential data center sites based on land, availability of cheap electricity and the potential for geothermal equipment cooling by underground mine water sources.
Three of the six prime sites in the Oasis report are in the LPRIFA service area — one each in Wise, Scott and Dickenson counties.
Kent Hill, who oversaw the Oasis study for InvestSWVA, said that the region’s access to commercial capacity broadband along the Interstate 81 corridor into central Tennessee has also become an advantage for the LPRIFA sites.
Even with the lower tax rate category, Hill said, data centers with a 2- to 3-year equipment replacement cycle still represent a “tremendous revenue stream for localities.”
“We don’t want folks to think we’re giving away the store,” Hill added.
While new jobs in potential Southwest Virginia data centers may not have the pay levels found in Northern Virginia, Payne said they will be high-paying jobs.
The Oasis report estimated that one large center locating in the region could bring more than $464 million in investment and would create more than 2,000 jobs during construction. Another 99 direct and associated permanent jobs with an annual $50 million in regional economic impact would come once the center became operational.
Former Virginia Commerce and trade Secretary Todd Haymore, now a global development director with law firm Hunton Andrews LLP, said companies considering expanded or new data center operations have looked more over the past three years at locations outside the Northern Virginia region and other urban areas of the state.
State Del. William Wampler III, R-Abingdon, said the tax rate category and the Oasis report come at a time when Northern Virginia — the main concentration of data center operations in the state — helped Virginia handle about 20% of the world’s daily data traffic. Growing demand for those centers combined with a lessening supply of sites puts Southwest and Southside Virginia in a good position for attracting centers.
“People in Northern Virginia probably want to see fewer data centers,” Wampler said.