Virginia revenues surge amid data center debate
Virginia lawmakers are debating the state budget, including proposed changes to tax incentives for data center developments. Senator Louise Lucas advocates for reducing these incentives, citing concerns about the electric grid, natural resources, and potential higher utility costs for residents. Compass Datacenters has reportedly redirected investments outside Virginia due to the current legislative climate.
Virginia's state revenues are significantly outperforming forecasts, but lawmakers are cautioning against using this temporary growth for ongoing expenses as budget negotiations continue. Secretary of Finance Mark Sickles reported that revenues are up 7.3% year over year, despite a loss of 41,900 jobs in the last 10 months, primarily due to non-withholding income from stock market gains.
During a Senate Finance and Appropriations Committee meeting, Chairwoman Louise Lucas defended efforts to scale back tax incentives for large data center developments. She argued that residents should not bear the burden of infrastructure and utility costs associated with rapid expansion, emphasizing the need to protect the electric grid and natural resources. Lucas stated that data centers, which employ few permanent jobs, should pay sales tax on computer equipment and that Virginians should not face higher utility costs to fund existing services.
Sickles warned lawmakers that entirely removing data center tax exemptions could push future projects out of Virginia. He cited a written statement from Compass Datacenters, which indicated the company had redirected all further investment outside the state due to Virginia’s “current legislative and political environment.” This includes abandoned projects in the Prince William Digital Gateway area and potential expansions in the Greensville County-Emporia region. Sickles suggested there is room for compromise on the issue.
Some lawmakers, including Sen. Creigh Deeds and Sen. Lucas, questioned whether the long-term infrastructure demands of additional data centers, such as the estimated 40 centers needed to create 2,500 jobs for a proposed Southside project, would outweigh their economic benefits, especially considering the expanded power, water, and infrastructure capacity required.