Southwest Virginia leaders announce lowest regional data center equipment tax rate in the Commonwealth
~ Lonesome Pine RIFA local governing bodies and Commissioners of the Revenue signed MOU, agreeing to new property taxation class with favorable depreciation schedule ~
DUFFIELD – The Southwest Virginia member localities of the Lonesome Pine Regional Industrial Facilities Authority (Lonesome Pine RIFA), including Dickenson County, Lee County, City of Norton, Scott County, and Wise County, announced today an agreement on what will be the Commonwealth’s lowest regional property tax rate on data center equipment. The regional partnership will be implementing a tax rate of $0.24 per $100 of assessed value with a favorable depreciation schedule, taking into account the capital cost of equipment and frequency of server replacement. This unified approach strengthens the region’s business case and opens up the opportunity for revenue sharing.
“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 Senator Todd Pillion (R - Abingdon). “This five-month effort to implement InvestSWVA’s Project Oasis recommendation demonstrates our commitment to making Southwest Virginia a prime location for data centers.”
This announcement builds on related efforts during the 2021 General Assembly session. Pillion worked in a bipartisan way, as chief co-patron of Senate Bill 1423 along with Senator Jeremy McPike (D - Prince William) and Senator Frank Ruff (R- Clarksville), to reduce the job creation requirement for data centers to qualify for the retail sales and use tax exemption in a distressed locality from 25 to 10 jobs. The bill also lowered the new capital investment threshold from $150 million to $70 million.
“Local tax rates are extremely important considerations for site selection due to the capital cost of equipment and frequency of server replacement,” said Delegate Terry Kilgore (R - Gate City). “We are sending the message to the data center industry that Southwest Virginia is aggressively pursuing investments that will be gamechangers for our region.”
“The Lonesome Pine RIFA’s MOU and collaborative efforts serve as a model for the Commonwealth,” said Delegate Will Wampler (R - Abingdon). “With that model now in place, we want to work with other Southwest Virginia localities to implement this competitiveness tool region wide.”
The Lonesome Pine RIFA member localities and their Commissioners of the Revenue entered into a Memorandum of Understanding on February 1, 2021. The local governing bodies individually agreed on the new property tax classification and uniform depreciation schedule over the course of the month (Scott: 2/3/21, Lee: 2/16/21, Norton: 2/16/21, Wise: 2/18/21, and Dickenson: 2/23/21). The localities will take final action this spring, formally adopting the terms of this agreement through their annual budgetary process. These localities will be among the first in Southwest Virginia’s GO Virginia Region One footprint to have a data center specific taxation class in place for computer systems, servers and other equipment.
The Code of Virginia allows localities to offer data center specific tax rates and aggressive depreciation schedules, with the goal of providing a more competitive operating cost environment. The cost of servers is a significant capital expense, and their regular replacement provides additional ongoing tax revenue for localities. This equipment would otherwise be taxed at the business tangible personal property rate if no special taxation class is designated, or unless negotiated on a case-by-case basis.
“The Lonesome Pine RIFA is pleased that its member localities have worked collaboratively to create a unified, equitable and competitive approach to the attraction of data centers to our region,” said Mitzi Sykes, Chair of the Lonesome Pine RIFA. “Our localities working in sync on this initiative to attract significant capital investment will reap positive benefits to our entire region as we stand stronger together.”
The Lonesome Pine RIFA was established in 2019 to provide a mechanism enabling its member localities to capitalize on the strength of collaboratively working together and engaging in revenue sharing for regional projects. The purpose of the LPRIFA is to develop and enhance infrastructure, programs, and initiatives that diversify economic development and job creation opportunities for the region.
The Lonesome Pine RIFA worked with InvestSWVA since October 2020 to implement this taxation classification recommendation. InvestSWVA’s year-long Project Oasis study found that Southwest Virginia is well-positioned for data centers because of land availability, mine-based geothermal cooling opportunities unique to the region, and workforce readiness and development. The study also outlined policy and infrastructure changes that could be made by the region and state to make Southwest Virginia more attractive for data centers.
“Swift action over five months demonstrates Southwest Virginia’s commitment to following InvestSWVA’s playbook to secure new data center investment in the region,” said Will Payne, Managing Partner of Coalfield Strategies and project lead for InvestSWVA. “Project Oasis is a data-informed and industry-backed tool highlighting Southwest Virginia’s competitive advantages.”
InvestSWVA’s Project Oasis study was performed by R. Kent Hill, managing principal of On Point Development Strategies and the former manager of strategic economic development for Dominion Energy. The LENOWISCO Planning District Commission, Southwest Virginia Energy Research and Development Authority and Energy DELTA Lab served as strategic partners, with funding from the GO Virginia Region One Council and the Virginia Department of Energy. Both the Northern Virginia Technology Council and Data Center Coalition provided industry expertise.
The economic and fiscal impact analysis that was conducted for Project Oasis estimated that a large data center locating in the region would result in over 2,000 jobs created during construction, 40 direct and 59 additional permanent jobs, $233 million in economic activity during construction, and over $50 million in economic activity annually once operations begin. This model facility would require an estimated $464.1 million total capital investment.
Six sites met the general criteria for a large 36-megawatt hyperscale data center, and four additional sites could be suitable for a smaller data center of up to 10 megawatts. Two of the sites have opportunities for geothermal cooling through utilization of 51-degree mine water contained in vast pools below the surface of previously mined properties. An additional site has underground space that provides a consistent 55-degree temperature. Both conditions maximize water utilization and make data center operations more sustainable.
InvestSWVA’s Project Oasis study can be found here (tax classification pp. 21-26).
The Lonesome Pine RIFA’s data center equipment property tax MOU can be found here.
About Lonesome Pine RIFA
Lonesome Pine Regional Industrial Facilities Authority was established in 2019 under authorization of Virginia Code Section 15.2-6400. Member localities of the Lonesome Pine RIFA include Dickenson County, Lee County, City of Norton, Scott County, and Wise County. The authority provides a mechanism enabling far Southwest Virginia localities to capitalize on the strength of collaboratively working together and engaging in revenue sharing for regional projects. The purpose of the Lonesome Pine RIFA is to develop and enhance infrastructure, programs, and initiatives that diversify economic development and job creation opportunities for the region.
About InvestSWVA
InvestSWVA is a public-private business attraction and marketing campaign launched under the umbrella of the Virginia Tobacco Region Revitalization Commission and backed by private industry that spans the entire GO Virginia Region One footprint. Coalfield Strategies, LLC and its strategic advisor, the Global Economic Development practice at Hunton Andrews Kurth LLP, are leading this effort to drive new business investment into Southwest Virginia.
