Two-week surge in data center tax break applications rivals 13-year total
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Data center developers submitted nearly as many tax incentive applications in the two weeks before a three-year moratorium went into effect as they did in the previous 13 years, according to the Arizona Commerce Authority (ACA).
Why it matters: The last-minute surge in applications could diminish the impact of the tax break pause, which Gov. Katie Hobbs touted as a big win, saying it would save the state $57 million that can be better used for important services including child care, health care and food assistance.
By the numbers: The ACA, which oversees the data center tax incentive program, received 113 applications between June 15 — the Monday after Hobbs' weekend signing of the budget that included the moratorium — and June 30, the last day before the freeze went into effect.
- Between August 2013, when the program launched, and June 14 of this year, the ACA had received 123 applications.
- Many of the new applications are for proposed facilities on sites that already house data centers or for separate facilities that will be at the same location, the ACA tells Axios.
- The agency has 60 days to approve or deny the applications.
The big picture: That means Arizona could nearly double the number of tax breaks it's given data centers, providing almost 13 years' worth of exemptions during the three-year moratorium.
Caveat: Not every application is approved — of the 123 applications received through mid-June of this year, 83 were approved.
Zoom in: The number of new applications isn't as significant as it sounds, said Russell Smoldon, an Arizona lobbyist representing the national Data Center Coalition.
- He speculated that close to half the recent applications are from pre-existing facilities that are looking to expand or build new data centers on site.
- The others, he said, are largely from landowners who want to develop but don't have any tenants or concrete plans. Smoldon doubted that most would actually result in data center projects.
- "I think there was a little bit of panic associated with it, wanting to make sure you got in under the wire," Smoldon told Axios.
How it works: Under the 2013 incentive program, data center developers are exempted from taxes on equipment purchases if they invest a certain amount of money in their projects within five years — $50 million in larger counties, $25 million in smaller ones.
- The tax break lasts for 10 years, unless the data center qualifies as a sustainable redevelopment project, in which case the exemption is for 20 years.
What they're saying: Hobbs spokesperson Christian Slater said it's unknown how many of the applicants will be approved or how many certified applications will actually spend the money needed to trigger the tax incentives.
- No one who wasn't already looking to build a data center would decide to do so because the moratorium was about to go into effect, he told Axios.
- "Governor Hobbs is proud to have put a moratorium on the date center tax exemption," Slater told Axios, calling it "one of the toughest new policies in the nation."
Living United for Change in Arizona (LUCHA), a liberal advocacy group that pushed for the full repeal of the tax exemption, expected a rush to submit new applications before the moratorium went into effect, spokesperson Cesar Fierros told Axios.
- LUCHA expects to still see at least $57 million in savings from the policy.
- The group will continue fighting for repeal, Fierros said, but the temporary pause is a big step in the right direction.
Catch up quick: Hobbs proposed eliminating the data center tax incentive entirely in her State of the State address in January but faced pushback from GOP lawmakers.
Editor's note: This story has been corrected to note that the ACA received 123 data center tax incentive applications between August 2013 and June 14 (not July 14) of this year. It's also been updated with comments from the Data Center Coalition.