UPDATED: Proposal To Advertise Increase Computer Taxes on Businesses, Data Centers in PWC Fails

| April 17, 2019 | 0 Comments | News

UPDATED, April 17 at 9:25 p.m.

The move to increase the tangible personal property taxation rate for programmable computer equipment and peripherals employed in business or trade, primarily to impact data centers, failed at a Special Meeting of the Prince William Board of County Supervisors, Wednesday evening.

The proposal by Chairman Corey Stewart (R) and Gainesville Supervisor Pete Candland (R) was controversial but would allegedly raise funds for the schools, mental health needs in the county and allow the county to marginally reduce the tax burden on homeowners.

The motion to advertise the tax proposal failed along a tie vote. Stewart, Candland, Frank Principi (D-Woodbridge) and Maureen Caddigan (R-Potomac) voted “aye.” Supervisors Jeanine Lawson (R-Brentsville), Marty Nohe (R-Coles), Ruth Anderson (R-Occoquan) and new Neabsco Supervisor Victor Angry (D) voted “no.”

Those who voted against the measure felt it was too big of a risk, and they did not want to drive away data centers, nor punish the business community.

2nd UPDATE April 18 at 11:35 a.m. 

The tax proposal would raise the tax for businesses on computers and computer-related equipment from $1.25 for $100 of assessed value to $2 in the first year, incrementally growing each year until $2.5 in the fifth year. It was explicitly intended to gain more tax revenue from data centers in the county.

If that would have passed, $9.6 million would have been generated in the first year. $2 million would have went to schools and $1.5 million to the county. $800,000 would fund mental health services, prioritizing people with mental disabilities receiving treatment.

Additionally, the real estate property tax rate would have fallen from $1.125 to $1.115 for every $100 of assessed value.

Woodbridge Supervisor Frank Principi (D) thought it was a great opportunity to make the biggest investment in mental health services and “intellectual disability contracted support.”

Supervisor Pete Candland (R) of the Gainesville District emphasized that this tax increase for data centers would benefit the citizen tax payers, who have consistently seen their taxes go up for the past 20 years.

Speaking against the proposal, Brentsville Supervisor Jeanine Lawson (R) said she would like to cut the tax bill but “not on the backs of businesses.” She said that some of those data centers would be discouraged to build additions.

Occoquan District Representative Ruth Anderson agreed that it was too big of a risk to lose the data centers that do bring in big tax revenue for the county. Should they leave, the burden on resident would only increase.

Nohe mentioned that the tax rate is not special for data centers. All businesses pay a $1.25 computer tax.

But Stewart disagreed that prince William would lose any of its data centers to other counties. He said they needed to stay close to Ashburn in Loudoun County, the nation’s internet hub. If they went too far out they would face latency issues and their vendors would have to travel too far.

Additionally, Loudoun County charges a $4.2 tax rate on computer programmable equipment. Their data center revenue is approximately $300 million a year whereas Prince William’s is $25 million. It has allowed them to do great things for their school division.

He said this is a great opportunity to benefit schools, the county and the tax-payers, a “win-win.”

He also said that anyone on the fence could vote for it just that evening to “advertise the tax rate.” Then, they could have further discussions with the business community and the teachers.

Read more about the proposal in the previous article below. 

Original Article: 

Chairman Corey Stewart (R) Chairman at Large of the Board of County Supervisors has once again proposed a tax increase to primarily affect data centers in the county. At a media conference held Monday, Stewart announced his plan to have data centers pay more and residents to pay less in real estate property taxes. The plan was created by both Stewart and Gainesville Supervisor Pete Candland (R).

The Prince William County Supervisors will hold a Special Meeting, Wednesday, April 17 at 6 p.m. at the McCoart Building to discuss a proposed increase to the “tangible personal property taxation rate for programmable computer equipment and peripherals employed in business or trade,” otherwise known as the “data center tax.”

Should a majority of the supervisors approve, the new proposed tax rate will be advertised and a public hearing on the matter will be scheduled for April 30 at 7:30 p.m.

The vote will precede the final approval of the fiscal year 2020 county budget and corresponding real estate property taxes. Members of the community have until that time to contact their elected representatives to provide their input on the matter.

Should the increase in the “data center tax” be approved, Stewart said the supervisors could then pass off the savings to the residents and reduce the proposed real estate property tax from the flat rate of 1.125 per $100 to 1.115 percent. It would save the average Prince William homeowner $37 against a tax bill that is rising due to an overall increase in home values.

Stewart thinks it is a solid plan, because Loudoun County, which has the most data centers in the area (and the nation), charges 4 percent for $100 of assessed value.

At the press conference, Stewart explained his reasons behind increasing the tax. One is to provide equity so data centers, many of whom are mega-corporations such as Amazon, Google, Apple, Facebook and Microsoft, do not receive better tax deals than other business owners Prince William County. Currently, while businesses pay 1.25 percent for programmable computers, general business property taxes are 3.7 percent. The new increased tax would help county revenue and still allow supervisors to reduce real estate property taxes.

To soften the blow, the plan is incremental. Stewart proposed that in FY20 the “data center” tax should increase to 2%. Over a period of five years, the tax will incrementally grow to 2.5%. Still the jump is large in the first year according to Stewart’s plan. (It may change after board discussions.)

But, Stewart does not see data centers leaving the county. Loundoun County is the primary hub of data centers in the nation, yet their computer recordation tax is 4.2% and it has not discouraged data centers from moving in. In fact, that county makes hundreds of millions of dollars on data center taxes alone.

Stewart said those same businesses utilize Prince William as a secondary location for their centers. They choose Prince William County because it is near Loudoun and the county has the infrastructure, such as high voltage power lines. It also has an established data center “hub” at Innovation Park and along the Route 234 corridor in Western Prince William/Manassas.

While residents will see a better tax bill, the technology tax increase should yield an approximately an additional $9.6 million for the county, offsetting the real estate decreases and then some.

Stewart promises that not only would the school system’s budget be kept “whole” as residential property taxes decrease, but the school system would also receive an additional $2 million in the next year alone. That is a reoccurring gain, that would slightly increase as the tax increases each year.

Both Supervisors Candland Maureen Caddigan, who joined the chairman at the media conference, said they would not be on board unless it would benefit the school division.

According to Stewart, the tax increase would positively affect county revenue as well, providing approximately a $1.5 gain after being made “whole.” Much of the gain could be used to support mental health services in the county, an area of weakness.

Candland approved of the increase. Speaking at the media conference, he said the big data centers have been given a “sweetheart” deal. He explained it matches his agenda: lowering property taxes for residents and supporting the school system.

Caddigan said that she would never approve if the measure would negatively affect schools. She said that the deal with the data centers dates back to 1999; it was not supposed to be a permeant arrangement.

Further, Stewart added that the county likes data centers but primarily because of the revenue they bring. Otherwise, they take up a lot of land and bring few jobs.

The Opposition

Ross Snare, Director of Communications & Government Affairs for the Prince William Chamber of Commerce, said the Chamber strongly opposed the measure.

Firstly, he said it would negatively affect 4,000 businesses. Whenever a local business purchases a computer, it will be paying slightly more in taxes. However, if a company purchase multiple computers, this tax could hurt its ability to invest in their businesses, progress and grow within the county.

Secondly, it may create an unstable business environment for large data centers, and Prince William County cannot be sure that data centers might up and move. Even more concerning, is that the county will likely attract fewer data centers in the future.

While Stewart says Prince William County is the prime location outside of Loudoun, Snare said Prince William will have to compete with neighboring counties such as Fauquier and Stafford. Those localities are actively looking to increase data center presence in their communities.

Snare also said that although the rate took effect in 1999, it has been working. Prince William has been successful in attracting those data centers it once sought. Why change that formula and create uncertainty? He said it’s “mind-boggling” and he sees it more of a political maneuver, not smart governance.

He believes that Prince William should look at the longterm investment in economic growth. He notes that when dealing with a billion dollar school budget, $2 million per year is relatively insubstantial and it would better to take the longterm view.

He would think the average homeowner would rather see their 37 dollars per family invested in the county’s financial future of which data centers play a huge role.

Supervisors are split on the issue. Brentsville Supervisor Jeanine Lawson was particularly opposed to Stewart’s plan last year, and some supervisors feel that it would hurt the economy and tax revenue more than help it. It’s a delicate balance.

Supervisors will share their opinions Wednesday evening at the Special Meeting. In the meantime, they will accept comments from citizens.

Prince William Education Association President Riley O’Casey expressed her hesitancy to support the proposed plan, despite being told the school system would benefit.

“Should the data centers pull out, what happens then?” she asked. “What happens with a new board next year?”

She also asked: “Why the rush?” She wished it had been addressed earlier.

Stewart said this has been something that has been debated since last year and the data centers have known about it. However, Snare said that economic development began seriously looking into it in February at the request of the board. Now only two months later, it is being proposed into the budget in April. He finds that rushed.

© 2019, Bristow Beat. All rights reserved.

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