Watchdog: Data centers dominate Virginia's incentive spending
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More than half of Virginia's economic development incentives over the last decade have gone to data centers, according to a new report from the state's watchdog agency.
Why it matters: Data centers avoided paying $2.7 billion in state taxes — including $1 billion last year alone — through those incentives.
The big picture: Virginia spent $5.2 billion overall on economic development incentive programs between fiscal years 2015 and 2024, the Joint Legislative Audit and Review Commission (JLARC) found.
- Those included dozens of programs designed to entice businesses to open or expand operations in Virginia, like the millions in grants the state offered to land Amazon's HQ2 in 2019 and Lego in 2022.
- In exchange for incentives, the businesses agree to create a certain number of jobs and make specific capital investments in the state.
Zoom in: Over the last decade, "data centers were by far the largest beneficiary of incentive spending," per the report, accounting for 53% of it.
- Those figures are likely an under-estimate because of a change in state record-keeping several years ago, JLARC noted.
- Between the lines: Data centers are getting the lion's share of state incentives despite supporting few long-term jobs, per the report.
How it works: Data centers' incentives largely come through sales and use tax exemptions, meaning the mega-server complexes don't pay sales tax on the computers, servers, software and other equipment they need.
- In exchange, they generally have to create at least 50 jobs and make $150 million in capital investment, per a previous JLARC report.
Yes, but: The fact that data centers' tax savings amounts to $2.7 billion, at minimum, underscores the "sizable capital investment" the industry has made in Virginia, JLARC noted.
- Plus, last year's data center report from JLARC noted the industry ultimately supports thousands of jobs, even if the bulk of those are temporary roles, and pumps billions into the state's economy.
What we're watching: Virginia's data center exemptions are set to expire in 2035.