Arizona Enacts Three-Year Moratorium on Data Center Tax Incentives
Arizona's Legislature enacted a three-year moratorium on a tax incentive for data centers, signed into law by Gov. Katie Hobbs. This decision aims to address concerns about data centers' water and power consumption amidst the state's severe drought and Colorado River supply cuts. While the moratorium passed, a proposed special water usage fee for data centers did not make it through the budget process.
Arizona's state Legislature enacted a three-year moratorium on a tax incentive for data centers, a measure signed into law by Governor Katie Hobbs. This action was taken amidst significant concerns over data centers' high water and power consumption, particularly as Arizona faces historically low reservoir levels and potential cuts to its Colorado River supplies. Senate Democratic Leader Priya Sundareshan noted that while it's not a full moratorium on data centers, it should reduce the number of companies seeking to build in the state. However, a separate proposal from Governor Hobbs for a special water usage fee for data centers, intended to support Colorado River programs, failed to pass during budget negotiations.
The data center tax incentive moratorium was one of only a few water-related bills to successfully pass and be signed into law during a legislative session that saw over 70 water bills introduced but little consensus. Governor Hobbs vetoed all but three of the nine water bills that reached her desk, with many lawmakers reiterating old arguments rather than introducing new solutions. Lobbyist Barry Aarons noted that many unsuccessful bills involved long-standing debates between rural and urban water interests.
Other notable outcomes include the appropriation of $6 million to the state's Colorado River litigation fund and the protection of the State Department of Water Resources' budget. Lawmakers also extended a program funneling groundwater withdrawal fees to infrastructure projects in Pinal County and expanded county water augmentation authorities' ability to pursue new water sources. Controversial legislation to transfer water from La Paz County to urban users, backed by a hedge fund, failed, drawing praise from Rep. Leo Biasiucci, who highlighted the ongoing rural-urban water divide. Representative Gail Griffin, Chair of the House Natural Resources Committee, criticized Hobbs' vetoes of bills she believed would have made progress on water issues, accusing the Governor of using water policy as leverage in Colorado River negotiations and sowing division.