Data Centers

People gather to hear about recent efforts of area localities to lure data centers to the region.

Fredericksburg Regional Alliance president Curry Roberts insisted the Fredericksburg region will attract data centers and the tax revenue they bring.

“There are going to be data centers in this region,” told a group last week. “They will locate here.”

The city hosted the public information session about data centers at Germanna Community College’s FredCAT facility in Fredericksburg’s Central Park on Monday in an effort educate people about data centers and why the region wants to attract them. According to Fredericksburg Economic Development Director Bill Freehling, the area is in the early stages of attracting a data center, and the meeting came out of the City Council’s desire to ensure the public knows what a data center means for the community.

About 40 people—landowners, council members, bankers, developers and technology professionals among them—showed up to hear Roberts and city officials explain what is happening locally, and to hear from guest speaker Josh Levi, former vice president for policy of the Northern Virginia Technology Council and president of Center Strategies LLC. Levi is also soon to launch the Data Center Coalition, an advocacy group.

In 2016, Levi said, the industry was responsible for 25,000 jobs, $2.26 billion in labor income, and $6.57 in economic output in Northern Virginia alone.

According to Levi, 70 percent of North America’s internet traffic flows through data center facilities in Northern Virginia. Most of that traffic is centered in Ashburn, but has spread significantly to Fairfax, Loudoun and Prince William counties.

Now other parts of Virginia are seeing expansion as the scarcity of sites left in Northern Virginia is driving up real estate prices. Fredericksburg is a natural next step for these developers, he said. And the regional collaboration that is already underway is attractive to the companies.

Roberts said the region has recently identified 17 high-quality sites that are close to fiber-optic data lines and utilities and meet the other data center requirements.

The extended region already has a data center presence. According to Levi, Fauquier County has four data center clusters that represent $3 million in annual tax revenue. Culpeper County now has four data centers. And Stafford County has a small center with Yyotta in the Quantico Corporate Center.

Other parts of Virginia, including Mecklenburg County, Henrico County and Virginia Beach, are seeing an uptick in interest and the areas between them are filling in with data centers and their support services.

Levi explained the basic needs of the facilities, which house powerful servers. They need to have security, redundant fiber connectivity, reliable backup power and substantial cooling operations.

He explained further that there are two types of data centers: Those built by a single company such as Microsoft or Amazon for their own use, and multi-tenant centers, with users either renting servers or bringing in their own.

And the demand is not slowing, he said. Even as computing power grows, the need to store data outpaces it, and the march of data centers in Virginia has to keep up.

Data centers are attractive because they generate high-paying jobs that leverage skills already present in the region, but they don’t stress services such as schools and roads, Levi said. Each center can create about 100 to 200 in-house jobs that pay about $100,000 per year. They create ancillary opportunities, too. From initial construction to the constant facility maintenance, skilled trades such as construction, HVAC, electricity and plumbing are essential.

When looking for a site, developers of data centers take into account the physical climate, availability of workforce, regulatory climate, the possible tax burden, and the time from breaking ground to market, according to Levi.

The Regional Alliance led the charge after data center developers showed interest in the region last fall. Officials realized the whole region could compete for data center developers to the advantage of all. To do that, the Alliance worked with each locality to agree to have the same business tax rate and depreciation schedule for data centers.

The localities created a memorandum of understanding that called for a new tax classification for data centers of $1.25 per $100 of assessed valuation of business property, which City Council approved earlier this year. Fredericksburg’s previous rate was $3.40. That puts the city’s tax rate on par with Prince William County.

The city also added data centers as a business classification in its unified development ordinance and established a fast-track permitting process for the business category last year.

Prince William County has seen growth as result of its new data centers, according to Levi.

He said tax revenue and job creation are two benefits, but data centers also strengthen the tech ecosystem in the areas they locate, and can be a catalyst for renewable energy, since data centers use a lot of power.

“This community and its leaders see the opportunity,” Levi said. “The regional collaboration here is unique, and resonates with the people looking to create data centers.”

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