Data center experts offer insight into that business
Published 6:59 pm Monday, May 18, 2020
with knowledge of the data center industry offered insight into Prince Edward County’s recent $1.9 million investment that resulted in the purchase of property suited for a data center site.
The county’s press release noted the site is 280 acres of land just off of Persimmon Tree Fork Road, where two major Dominion Energy transmission lines merge. There is also access to both Mid-Atlantic Broadband Communities Corporation (MBC) fiber and water from the Town of Farmville. There is sufficient land to construct multiple structures totaling 1.3 million square feet of usable space. The county plans to proactively market the site with the help of Dominion, MBC and the Virginia Economic Development Partnership.
QTS Data Centers Chief Hyperscale Officer Tag Greason said he could not condemn or endorse the county’s investment because he did not have all the details, but he did offer some perspective.
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“There are hundreds of data points that a local leader will need to consider when developing an incentive package, and while I generally support data center incentives, I can’t comment on whether this specific incentive is the right one for Prince Edward County,” he said. “But partnering with companies like both Mid-Atlantic Broadband Communities Corporation and Dominion Energy is a great way to leverage the county’s position in trying to attract data centers.”
Josh Levi is president of the Data Center Coalition, which is described on its website as the trade association for the data center industry. He shared his thoughts on whether or not Prince Edward had made a good investment and whether it makes sense.
“I think there can be a substantial return on investment as a result of data center investment in states and in localities,” he said. “Virginia has a tax incentive. It was an early leader in developing a tax incentive to try and encourage data center investment going back to 2008. They expanded their incentive several times.
“We are now the largest data center location globally — northern Virginia specifically, but certainly Virginia by extension,” he continued. “And I think the opportunity to try and leverage all of the data center activity we already have here and try and encourage expansion in other parts of the state makes a lot of sense.”
He noted data centers are heavy on capital investment.
“They make huge investments in capital infrastructure,” he said. “They pay taxes through real estate taxes. They also pay taxes through tangible property on the equipment that they put inside the data centers, and that can be potentially very lucrative for local government.”
He said in the case of Loudoun County, which is one of the largest data center markets in the world, the county brings in more than $15 in tax revenue for every dollar it has to spend in relation to the data center.
“Prince William County, it’s more than $17 in tax revenue for every dollar in cost to the county,” he said. “And then Henrico County more recently is up to $8.60 in benefit for every dollar in services they have to provide.”
Levi stated data centers are top economic development targets nationally. With Maryland becoming the 33rd state to pass tax incentives to try to woo data centers, many states and localities are taking steps to increase their competitiveness in attracting data center investment and jobs.
“They recognize that data centers tend to spur a lot of construction employment and activity, generate substantial tax revenues without requiring a lot of government services, create high-wage jobs and often grow vendor ecosystems around their sites,” he said. “The COVID-19 epidemic also has heightened awareness of the essential role data centers play in powering our global economy.”
Data centers typically have highly-compensated employees, relatively speaking, Levi said.
“Statewide and in each of the localities I mentioned, the data center salaries are at least double the average private sector salary in those jurisdictions or in the state,” he said. “So you’re talking about some real high-wage jobs but not so many jobs that they’re going to burden the schools or require substantial new infrastructure investment. So they tend to be a win-win.”
He said he thinks data centers can and do spur an ecosystem and a supply chain around them.
“Loudoun County is definitely extraordinary in terms of the scope and scale and size, but as an example, we know in Loudoun County, every data center job has led to six additional jobs to service the data center industry,” Levi said.
These jobs include the construction jobs while the data centers are being built, he stated.
“Usually that’s 12-18 months, anywhere from 400-600 construction workers on a site,” he said. “They tend to be a lot of highly skilled construction workers and electrical and HVAC and highly compensated.
“Then once a data center is up and running, there’s internal reconfiguring and construction, there’s maintenance, there’s equipment and there tends to be a pretty strong vendor community built around the data centers to help serve them — catering and lunches and all those other things you would expect from kind of an economic engine in the location.”
When asked about the average number of jobs at data centers, Levi highlighted variables that make that difficult to estimate. He said there are two kinds of data centers.
One is a co-location data center, also known as a multi-tenant data center. For this kind, a data center developer would come in and build the data center and lease it out to one or multiple tenants, so a locality could have multiple companies inside having server space.
“In that case each tenant might bring jobs into the facility and locate people in the facility to watch their equipment,” Levi said.
The other kind of data center is the enterprise data center, also known as an owner-operated data center, like the Microsoft facility in Mecklenburg County, Levi said. For this kind, a company has its own data center and will bring its workforce in there.
“We’ve got data centers with 50 people, we’ve got data centers with a hundred people, we’ve got data centers with several hundred people in Virginia right now,” Levi said.
He noted it is hard to put a fine point on the size of the workforce, but it is not a workforce that will overwhelm the locality, at least not the full-time workforce.
Prince Edward County Director of Economic Development Kate Pickett stated the county would work with either type of data center business model.
“Enterprise data centers, or owner-operator centers, would be preferred because they utilize the entire site and would expand substantially, like Microsoft has done in Boydton (Va.),” she said. “This would generate high tax revenue and continue to do so with each expansion. We would, however, welcome either type of data center on this site and would consider any legitimate prospect.”
Continuing to describe data centers, Levi said they are huge catalysts for renewable energy.
“Dominion tells us that 51% of all of their renewable solar energy now to be deployed is as a result of data center partnerships,” he said. So they’ve really been pushing the envelope in terms of trying to get access to more renewable energy.”
He stated data centers consider many factors in their site selection process, including cost and availability of land, energy infrastructure and access to renewable energy at competitive rates, availability of fiber and latency, workforce availability, and state and local taxes and regulatory policy.
“In my view, it certainly makes sense to try and bring in data center investment,” he concluded. “I think it can really be a substantial upside, financial upside for a county, for a location, and then data centers tend to be active in their communities — they support STEM education, they support philanthropic efforts and things like that as well.”