Prince William County is considering increasing the tax rate on data centers, with supporters on the Board of County Supervisors eyeing a $9.6 million windfall as the county enters the final stages of the annual budget negotiations.
“Data centers are not paying their fair share,” said Supervisors Chairman Corey Stewart, noting that the county hasn’t increased the tax rate on computer equipment since 1999.
Stewart is proposing increasing that tax rate by 75 cents for fiscal year 2020, which starts July 1, shifting the rate from $1.25 per $100 of assessed value to $2 per $100 of assessed value.
If approved by the supervisors, the county would use some of the revenue to cut the residential property tax rate by 1 cent per $100 of assessed value. Currently the residential tax rate is $1.125 per $100 of assessed value.
Stewart has called a special meeting of the board for Wednesday, April 17. If the board approves his proposal, the county will advertise a public hearing on the rate changes April 30, the day when the board is expected to adopt its budget.
Increasing the county’s personal property tax rate for computer equipment and peripherals would mean county businesses — mostly data centers — would pay the county an additional $9.6 million annually, Stewart said.
The residential tax cut should save taxpayers around $6.2 million, according to county staff. The county would share the rest of the money from the data center tax increase with Prince William County Public Schools, Stewart said, adding the county would use its additional revenue to fund mental health services.
Future boards could increase the rate incrementally over the next five years to $2.50 per $100 of assessed value, according to Stewart’s proposal.
Supervisors Pete Candland, R-Gainesville, and Maureen Caddigan, R-Potomac, have backed Stewart’s proposal. Candland said even with the proposed increase, the county will have the lowest computer equipment tax rate in the region.
Loudoun County’s tax rate for computer equipment is $4.20 per $100 of assessed value, Stewart said.
The county has received $15.4 million in revenue from the computer equipment tax rate this fiscal year, said Jason Grant, the county’s spokesman.
After rejecting a proposal from Stewart last spring to triple the tax on data centers, supervisors voted 4-2 in February to direct county staff to begin conversations with data centers on a multi-year plan to incrementally increase the tax rate.
Supervisors Marty Nohe, R-Coles, and Jeanine Lawson, R-Brentsville, voted against the directive, while Stewart, Candland, Caddigan and Supervisor Frank Principi, D-Woodbridge, voted to approve the directive.
Betty Dean, chair of the Prince William Chamber of Commerce, said she is mystified at the proposal.
“The way to generate more tax revenues from the data centers is to continue to encourage their plans for growth,” Dean said. “If we lose the single largest source of capital investment in the county, it will be the residential taxpayers who will end up paying for that loss with their own increased property taxes.”
More than 4,000 businesses in the county pay taxes on computer equipment each year, said Ross Snare, the chamber’s director of communications and government affairs. The 16 data centers in the county are not going away, he said. “But what it does, it puts the brake pedals on them expanding.”
The majority of capital investment in the county in 2016 came from data centers, said Brian Gordon, vice president of government affairs for the Apartment and Office Building Association of Metropolitan Washington — which represents commercial properties, including some data centers.
“Our focus is economic development,” Gordon said. “Data centers have comprised a huge component of that.”
In December, the county’s supervisors were celebrating two new data center facilities at the county's Innovation Park and signaled their support for keeping a low tax rate.
“By providing a designated Data Center Opportunity Zone and positive business climate for high-caliber enterprise, the county provides an ideal environment that stimulates commercial growth which benefits businesses and residents alike,” said Supervisor Jeanine Lawson, R-Brentsville.