Dr. John Lyver of Gainesville conducted an independent study this spring in which he investigated and analyzed the financial impact the Prince William Digital Gateway would have on the people of Prince William County.
The study differs from the one the county planners conducted since it not only focuses on positive revenue but also includes the cost of the project to be borne by the county taxpayers. According to Lyver, this cost will be especially high during the years before the centers become fully operational.
Lyver’s study concluded that the net cost the county must incur to make the Prince William Digital Gateway possible is extremely significant.
“What is hardly talked about is that Prince William County will incur an estimated $2 billion in implementation cost to the taxpayers of Prince William County,” said Lyver.
Additionally, the county won't see positive income from the digital gateway until 2051 after already incurring 2 billion in expenditures.
Not including those expenses makes a huge difference in the narrative surrounding the Prince William Digital Gateway, Lyver explains in his executive summary of the financial study.
“The Prince William County Digital Gateway represents the largest single financial impact to Prince William County in the past quarter century or longer. This constitutes an indisputable neglect of due diligence which risks irreparable harm to the cities of Prince William County,” Lyver stated.
Lyver contends inaccurate and incomplete information contributed to a misunderstanding and thus political support amassed largely based on erroneous assumptions.
“By failing to do a detailed financial analysis of the Prince William Digital Gateway, Prince William County was deliberately creating a false narrative of the cost of the project,” said Lyver. "The result was a public misunderstanding of the true revenue and costs of the PWDG. A thorough and accurate estimate may have further reduced public and political support for the proposal and result in a different recommendation by both the [Prince William County] Planning Commission and the Board of County Supervisors.”
People have been educated on the downfalls of the PWDG such as its proximity to the Manassas National Battlefield and Heritage Hunt senior HOA community. They understand that the HVAC noise from the data centers can be harmful to people’s health and should the data center need to run on diesel generators for their electrical power that would lead to harmful emissions into the air.
However, there seems to be an almost universal agreement that data centers will bring in high tax revenue to the county while requiring very few services. People tend not to question that, except perhaps to point out that Prince William County taxes its data centers at a lower rate than that levied by neighboring Loudoun County.
But without a proper study to enumerate costs, residents assume those costs are negligible. That is the reason Lyver volunteered his services to fill in the gap in information.
John Lyver, the NASA scientist and doctor of computational physics (and full disclosure, a Heritage Hunt resident) already provided a holistic noise analysis of the proposed data center to be sited in Prince William County. He once again took up the mantle to use his mathematical and engineering knowledge to shine some light on what the county had obscured in its incomplete report.
Despite the county providing insufficient information, people repeated what they had heard: that the data centers would be a windfall for the county. They focused on the $400 million annually from the county’s Feb. 2022 study, which politicians repeat frequently.
Will the gateway bring positive revenue? Eventually, but not anything near $400 million annually.
The bottom line is Lyver’s study projects the earliest county would see a positive net revenue from the digital gateway in 2051. In that year, the county will receive a net revenue of $45.2 million from the gateway project.
One would hope that $45.2 million annually will provide a steady stream of county revenue for several years afterward, but projections show that depreciating equipment and a short lifespan for the buildings will result in declining revenue. So, perhaps, $40 million in the second year, $35 in the third year, and so on…
This is after the county incurs a $2 billion net loss. It would take almost until the end of the century for the county to make up its expenses, but, of course, it is extremely unlikely the buildings will last that long.
But this is news to most people. In fact, there are several inaccuracies and misconceptions Lyver hopes to rectify.
First, there is the timetable. Most people do not realize that when the board of supervisors says, “annually,” they do not mean starting today, tomorrow, next year, or even ten years from now. They mean two-three decades from the approval of the project when all the buildings are fully operational. (Where will you and your children be in 20 years?)
Secondly, most do not realize that the county may only receive those tax funds after investing for 20-30 years in the infrastructure, meaning it would first be trying to recoup our significant investment. (Yes, the county will be taxing the property value, but expenditures outweigh income at that point.)
Thirdly, the $400 million overestimation completely ignored annual expenditures that would be necessary to fulfill the project’s vision. If you subtract expenses, the $400 million is non-existent because the county is losing money on the project at that point.
People also need to keep in mind that data centers depreciate, he explained.
Lyver believes the county conveniently left some Xs and Ys out of the equation to make the project appear more desirable. But as an engineer, he knew you cannot ignore the negative numbers and the cost of massive county projects.
Two billion is so enormous it is hard to wrap one’s head around the expense. Yet, it is left out of the report as though it is negligible.
According to Lyver, the 2021 CPA clearly lists a number of infrastructure costs including roads, a new fire station, expanded county parks, and landscaping. Additionally, there will be costs to borrow money via bonds, and an increase in county staff to manage new parks. His study shows an estimate of $2 billion for these expenditures.
“The county even admitted openly again and again that they did not know the ‘associated costs of implementing the CPA,’” he said.
Prince William Deputy Finance Director Tim LeClerc reported the revenue from the PWDG would likely be $400 million annually at the end of 20 years, However, in emails Lvyer attached to his study, LeClerc admitted to the fallibility of those numbers based on the simplicity of the county analysis.
He called it an “exercise in futility” to get a more precise number, “because you just don’t have enough information to be accurate,” said Lyver.
“As the Prince William County Planning office and the Board of County Supervisors reviewed the CPA, no attempt was made to analyze the missing parts of a complete financial study and provide details to the public,” Lyver wrote in his summary.
It was not only the public who was misinformed, but lawmakers made decisions based on incomplete information as well.
“This significant omission constitutes either inadvertent or deliberate misinformation to the public," said Lyver. “If these missing analyses had been performed, the information may have led to a different outcome with the votes at the Prince William County Planning Commission and/or the Prince William Board of County Supervisors.”
According to Lyver’s initial findings, the net annual revenue from the PWDG minus expenses would be approximately $75.8 million per year, in 2043. This in itself is way off the county’s estimate.
However, when he adapted his study to include the three new rezoning applications, using similar assumptions and background data, that estimate drops significantly.
The REZ had to be changed because it was not known until Nov. 1, 2022, that the applicants were not purposing 372.6 acres of protected environmentally sensitive land, but that the county would need to purchase that land, “at the inflated data center rate,” said Lyver.
The applicant’s plan shows those acres as open protected land, despite the fact that neither data center company (QTS nor Compass) plans to purchase them. Yet, they are telling residents- through their maps and presentation- that it will be preserved, and telling landowners they can sell at a price similar to what they would offer. To make this a reality, Prince William County would need to fit the bill for that, or the county could simply deny it.
Either way, this means that there would be a 17 percent decrease in possible tax revenues from the data center buildings since the buildings would occupy fewer square feet for the campuses. Lyver’s study considered that, but the county’s does not.
Then he considers the cost of new employees to provide upkeep to the land and the loss of real estate taxes on that projected land.
However, a much biggest cost few people are talking about is that the area will need water and sewer upgrades, to the tune of $530 million. Building out Pageland Lane will also have to be funded via hundreds of thousands of dollars in bonds.
There is also the cost incurred for other construction projects. The county plans to build a new fire station and adjacent roads will need to be funded by bonds. The county knows this but did not disclose the cost.
What about the wetlands that are exempt from building? And walking and riding trails? What about learning centers? These look attractive in documents but it will be the responsibility of the county to maintain them.
This is all before the county gets the bulk of the tax revenue from the PWDG.
As one can see from the graph, as costs mount, revenue decreases.
None of this includes the possible loss of tourism revenue, plus the possible loss of real estate taxes from other residential areas (especially due to the influx of data centers in other areas) should the data centers decrease property values in the area.
It does consider that over time the county may decide to increase the tax rate on the data centers’ computer equipment.
Lyver’s study also estimates $1 billion in utility costs for the Prince William Digital Gateway will be passed on to ratepayers. The cost of bringing high power voltage and substations to the area would fall between $200 and $500 million to be borne by utility customers, not the county. This applies not only to Western Prince William County but Eastern Prince William and surrounding areas.
So what is the result? The result is that the county will be spending $2 billion over the next 30 years to make the Prince William Digital Gateway a reality.
Subtract those expenses and there is no $400 million annually as the county projected. There will only be $45.2 million in 2051, and then decreasing every year after.
Lyver stops his charts and graphs at the year 2051; however, it is appropriate to think that the county will continue to collect annual tax revenue on the digital gateway after that, but he believes that year 29 will be a peak. After all, how long those data centers exist? Ten years, twenty years? As technology advances, it is unknown.
Again, in 2051, the county will still not be ahead. It has already paid out $2 billion to support the digital gateway.
People can still debate whether or not the Prince William Digital Gateway is a worthy investment for Prince William County, but Lvyer believes that at the very least they should consider the cost of investment over the next 30 years; because, unless offset elsewhere, that cost will weigh heavily on the current generation of Prince William County residents.
*Update: corrections have been made to clarify that the $45.2 million does make up for the $2 billion the county would have to spend on the project.
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