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Regional agreement opens door for new data centers

Regional agreement opens door for new data centers

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DUFFIELD, Va. — A group of Southwest Virginia localities agreed Tuesday to establish the state’s lowest property tax rate for data center equipment in hopes of attracting more to the area.

Member localities of the Lonesome Pine Regional Industrial Facilities Authority, including Dickenson, Lee, Scott and Wise counties and the city of Norton, announced the agreement to set the tax rate of $0.24 per $100 of assessed value with a favorable depreciation schedule, according to a news release.

“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,” state Sen. Todd Pillion, R-Abingdon, said in the statement. “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 coincides with Senate Bill 1423, championed by Pillion, Sen. Jeremy McPike, D- Prince William, and Sen. 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 Del. 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 game changers for our region.”

Preliminary action has been completed, and the member localities are expected to formally adopt the terms of this agreement through their annual budget process this spring. 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.

An economic and fiscal impact analysis conducted in the 2020 Project Oasis study estimated that a large data center in the region would create more than 2,000 jobs 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, the news release states.

Six regional sites met the general criteria for establishing a large 36-megawatt data center, and four additional sites could be suitable for a smaller data center of up to 10 megawatts, the study found.

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