County provides more details about planned AWS data center campuses
County provides more details about planned AWS data center campuses
Louisa County announced in late August that Amazon Web Services plans to invest $11 billion by 2040 to build two data center campuses in the newly created Technology Overlay District, a special zoning designation approved by the Board of Supervisors in April to attract lucrative tech sector development. The project is part of a planned $35 billion investment by AWS to build data centers across Virginia, a deal that Governor Glenn Youngkin announced in January.
Economic Development Director Andy Wade, at the board’s September 5 meeting, provided more details about the tech giant’s plans for the campuses and the carrots the county is using to lure the company, presenting an initial performance agreement that provides a broad outline of what both parties are expected to bring to the table. The board approved the agreement in a 7-0 vote, but county officials acknowledged that it doesn’t include some key information and requires future amendments. (meeting materials, video)
Amazon plans to build 11 data centers across its two campuses, according to Wade. The smaller of the sites, dubbed the Lake Anna Technology Campus (LATC), will sit on about 150 acres at the corner of Kentucky Springs Road and Haley Drive adjacent to the North Anna Nuclear Power Station. The larger site, called the North Creek Technology Campus (NCTC), is slated for 1,400 acres south of Route 33 across from the Northeast Creek Reservoir.
The county has promised that the centers will deliver “hundreds of jobs,” making AWS one of the county’s largest private sector employers. Wade estimated that each facility will employ about 25 people, meaning the campuses would generate about 275 jobs at full buildout, which is expected to take 15 years. The jobs will likely be a mix of tech, maintenance and administrative positions based on reports on data center employment in other localities.
Compared to large-scale manufacturing facilities and distribution centers, data centers aren’t significant job creators, but they are prized by local governments because of the sizable tax revenue they generate—mostly from the pricey computer equipment inside—and their limited impact on core services like schools and roads. The facilities will house servers and network equipment that support AWS’s cloud computing and streaming services, helping “people connect to friends and family, work remotely, shop online, and stream movies, TV shows, music, and video games,” according to the county’s announcement.
Wade said that, at full buildout, the county could garner $25 million in local tax revenue annually from the campuses. About two-thirds of that money would come from the county’s business personal property tax levied on the computer equipment and other items while roughly one-third would come from real estate taxes. The $25 million figure is more than double the taxes paid by Dominion Energy last year for its North Anna Power Station. Dominion is the county’s largest taxpayer.
Though Amazon has promised to make an $11 billion capital investment in the county by July 1, 2040, according to the performance agreement, the county could see dividends from the project far sooner. Wade anticipates that work will start at the Lake Anna Technology Campus first, with a data center potentially in operation by late 2024 or early 2025. Based on an analysis by the Economic Development Department, Wade estimates that one data center could generate, on average, about $2.5 million in tax revenue a year over a 15-year span.
But tax revenue from data centers can be tricky to predict and Louisa’s anticipated windfall could be significantly impacted by several factors. According to the performance agreement, the county plans to lower the business personal property tax rate (BPP) from $1.90 per $100 of assessed value to $1.25 specifically for data center equipment, and implement an accelerated depreciation schedule that would rapidly decrease the taxable value of the equipment over five years. At the start, the county would tax the equipment at 50 percent of its value, but by year five and any year beyond that, it would tax the equipment at just five percent. The board will hold a public hearing and consider adoption of the tax plan at its September 18 meeting.
While Wade said that the anticipated $25 million in revenue accounts for changes to the BPP, exactly what the county pulls in via taxes would be impacted by how often the company replaces the equipment. Wade said that Amazon typically replaces its equipment every five to six years. If it opted not to, the county would receive less revenue.
Loudoun County, the global epicenter of the data center industry, is home to some 25 million square feet of the warehouse-like facilities, which contributed more than $600 million to county coffers last year. But, according to media reports, in tax year 2021, Loudoun faced a $60 million shortfall in its projected data center revenue because companies didn’t replace their servers after the pandemic. Loudoun is considering setting up a stabilization fund to protect itself against future shortfalls.
The performance agreement, which runs through 2050 to align with a state incentives package, also obligates the county to provide Amazon with both infrastructure grants over the first 20 years (beginning in 2026) and performance grants over the last five. County officials say that the grant money would be derived from new revenue generated by the campuses via real estate and personal property taxes, but the performance agreement doesn’t detail what percentage of that revenue the company would receive.
Legislation passed by the General Assembly last session to cement Amazon’s investment in the state establishes a $140 million grant fund available to data center developers that meet certain capital investment and job creation goals. The fund is essentially available only to AWS and the state plans to provide grant money on a proportional basis to localities where the company invests. The grant money is earmarked for infrastructure investment, workforce development and other project-related costs and designed to spur data center development in more rural areas that currently lack the infrastructure to support them.
The grant fund requires that localities provide two dollars in matching funds for every dollar invested by the state. Wade said the performance agreement would be amended at a future board meeting to show what percentage of tax revenue would be returned to the company, noting that the state hasn't issued guidance on how the grant fund will work and the county is still negotiating with Amazon on some incentives. The initial agreement says that the county’s payments to AWS could exceed what’s required by the state.
While the infrastructure grants assist AWS in getting its project off the ground, the performance grants are designed to spur additional capital investment in the county beyond $11 billion, according to county officials. The state incentive package includes milestones for up to $100 billion in investment statewide by 2040.
“The purpose of those incentives is to reimburse Amazon for some of those infrastructure costs. The same with the state grants so those two items align. The second is to continue to incentivize them to invest in the county over and above that $11 billion commitment,” Wade said, adding that “all indications are that the $11 billion will be eclipsed.”
Because data centers typically require large quantities of water to cool the servers inside, accessing the resource is perhaps the most significant piece of the infrastructure puzzle. Wade said that both campuses would rely on the county’s 187-acre Northeast Creek Reservoir for their water supply. The NCTC, located just across the street, will draw both potable and raw water from the reservoir and will be served by public sewer. The Lake Anna campus will draw only raw water.
Wade said that Amazon would pay for the water and sewer infrastructure, including a miles-long raw waterline to the Lake Anna campus, but the county would design build, own and operate it and charge AWS for its water use. Wade is working with Louisa County Water Authority (LCWA) General Manager Pam Baughman on a Water Services Agreement with the company that sets rates and connection fees, among other project parameters. The agreement will be considered by LCWA’s board and supervisors at future meetings.
One of the key concerns about data center development is the facilities’ demand for water. Wade said that the two campuses are expected to use 620,000 gallons of raw water per day and that the Northeast Creek Reservoir has a “safe yield” capacity of 2.77 million gallons of water daily. Baughman said in an email on Friday that the county recently conducted a capacity study on the reservoir, prompted by the AWS project, and the study found that the reservoir could safely yield some 3.2 million gallons daily though that figure hasn’t been approved by regulators. Baughman said that, from July 1, 2022 to June 30, 2023, the average daily withdraw from the reservoir was 277,000 gallons.
Wade said that the county could see another benefit from the deal. Amazon could donate up to 350 acres of unimproved land within the NCTC back to the county to develop as it sees fit.