Local officials continue to express concern about how recently-passed legislation encouraging potentially-lucrative data center development affects tax revenue and the power over regulations affecting communities.
“My apprehensions on HB 2014 remain intact even after the bill passed. I believe Governor Morrisey and the legislature’s intentions were to create a pathway for a new income stream to the state and encourage data center projects to look at West Virginia,” said Morganne Tenney, executive director of the Putnam County Development Authority.
“However, with the county restrictions and taxation language added to the ‘microgrid bill,’ I fear that counties will ultimately shy away from these types of projects.”
On the final evening of the regular session, lawmakers completed approval of one of the governor’s priorities, intended to allow developers, particularly data centers, to harness localized, self-sufficient energy systems.
One focus of discussion during the legislative session was how the bill might affect counties, which rely on the financial support of property taxes. The bill directs associated tax revenue to several funds, including one meant to help West Virginia reduce its personal income tax rates.
The bill was adjusted several times throughout its legislative journey. By the time of its final passage money generated under the terms of the bill was directed at several areas:
50% for a personal income tax reduction fund;
30% to the county or counties where the data center is located;
10% to go to all counties on a per capita basis;
5% to be used for an economic enhancement grant fund; and
5% for an electric credit stabilization and security fund.
Tenney said she was regularly told that there is enough money to go around and that the bill is necessary to land data center projects.
“I disagree with both points,” she said, suggesting a project coming in at $5 billion could have generated $2 million to $3 million in tax revenue for a county commission as well as $3 million to $4 million for schools.
“A lot to a community, but I remain uncertain if the amount would be transformative to the state as a whole. How many massive data centers can we land in the Mountain State?” Tenney said.
She added that the dollar amount takes into consideration “an incredibly competitive data center incentive we have in West Virginia through the High Technology Valuation Act, which taxes servers at 5% salvage value; that to me is already a huge incentive for a project.”
Secondly, Tenney said, there are already data center projects in play around the state even without the bill.
“Yes, there may be some projects that needed the microgrid portion of this bill to move forward, but did they need the taxation and regulation language?” she asked.
“What about the other ‘high impact data center’ projects? What about the counties who have been courting projects for months or years? This wipes their feet out from under them in the 11th hour.”
‘Single biggest economic development bill’
HB 2014 introduces a Certified Microgrid Program and a High Impact Data Center Program for West Virginia, aiming to attract and support these industries.
Gov. Patrick Morrisey and his administration have touted the bill’s focus on data centers, the physical facilities that house computer structures like servers and storage.
Data centers are enormous energy users, and that is only expected to grow as artificial intelligence and other computing innovations gain traction.
They are prolific in states like neighboring Virginia, but they are also controversial among residents because of their aesthetics and noise. They are not major employers but can contribute significantly to local property taxes.
Morrisey, speaking this past week on MetroNews Midday, described passing “the single biggest economic development bill in many, many years.”
The governor said he believes the framework will encourage job growth in related sectors, including construction — as well as steady demand for energy sources produced in West Virginia.
“And so it feeds into the whole system. So you need big economic development, and this is the first thing that’s been done in many, many years, designed to make it very attractive for a new industry to come, because we just haven’t been successful in that area in the past,” Morrisey said.
‘A lack of value the state has on county government’
Greenbrier County Commissioner Tammy Tincher said she appreciates the concerted effort by lawmakers to ensure counties will receive increased amounts of tax revenues from data centers that may be located in their regions — as well as recognition for counties who may not have an opportunity to locate a data center to still benefit financially.
But she said the legislation fell short.
“I believe it is essential to have local governments at the table on these projects and so I am disappointed changes to include any local input for planning and zoning were not included. Economic development provides many opportunities for the citizens of the site county as well as the surrounding counties and the state,” Tincher said.
“However, the local site county also bears the increased responsibility of public safety and other infrastructure to make sure these projects are successful. The allocation while appreciated demonstrates the lack of value the state has on county government and the services it provides to residents and businesses.”
Restrictions on local regulation
The bill says certified microgrid districts and certified high impact data centers may not be subject to county or municipal zoning, horticultural, noise, viewshed, lighting, development, or land use ordinances, restrictions, limitations, or approvals.
The legislation also says the certified developments would not be subject to county or municipal building permitting, inspection or code enforcement.
Delegate Evan Hansen, D-Monongalia, raised concerns about local control throughout its consideration during the regular session. He sponsored a floor amendment, unsuccessfully, to strike the part of the bill restricting local control.
He raised the points again during an interview last week.
“I’m concerned that these microgrid districts are heavy industrial districts that would include not just data centers, which could be loud or have other impacts, but also power plants; they could include coal or gas or nuclear plants, and they could also include solar ad wind,” Hansen said.
“And I think it’s important if there are local ordinances related to setbacks or noise or traffic or any other types of local issues that that be retained. I don’t think it’s right to just roll over local ordinances and force these large industrial developments in an area, where they may have impacts on residents.”
He added that there are plenty of places in West Virginia that could be appropriate for data centers and microgrids. “The question will those go into those appropriate places or will they go into places where they’re not wanted?” he asked.
Hansen, like local officials, also questioned whether it’s wise or fair for the state to redirect property taxes that otherwise would have gone to local governments.
“To be clear, if that money was not commandeered by the state and then reallocated according to this formula,”Hansen said, “it would go to the local governments because that’s where local property taxes go according to state code.”
He added, “It’s a philosophical question to some extent about whether that’s their money or whether it’s the state’s money to use for the state’s own priorities, but I think you also have to recognize that counties might incur some additional costs if these large developments come in — so there’s a good reason why the additional property taxes should go to the county.”