2022 Virginia Data Center Report
THE IMPACT OF DATA CENTERS
ON THE STATE AND LOCAL
ECONOMIES OF VIRGINIA
March 2022
2022 Virginia Data Center Report
SPONSORS
We would like to acknowledge and thank the following sponsors of this report:
Lead Sponsors
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Report Prepared by:
© 2022 Northern Virginia Technology Council
2022 Virginia Data Center Report
About Mangum Economics, LLC
• Policy Analysis
Identify the intended and, more importantly, unintended consequences of proposed legislation and
other policy initiatives.
• Economic Impact Assessments and Return on Investment Analyses
Measure the economic contribution that businesses and other enterprises make to their localities.
• Workforce Analysis
Project the demand for, and supply of, qualied workers.
The Project Team
David Zorn, Ph.D.
Director, Technology and Special Projects Research
A. Fletcher Mangum, Ph.D.
Founder and CEO
Martina Arel, M.B.A.
Director, Economic Development and Renewable Energy Research
• Cluster Analysis
Use occupation and industry clusters to illuminate regional workforce and industry strengths and
identify connections between the two.
Mangum Economics, LLC is a Glen Allen, Virginia based rm that specializes
in producing objective economic, quantitative, and qualitative analysis in
support of strategic decision making. Much of our recent work relates to
IT and Telecom Infrastructure (data centers, terrestrial and subsea ber),
Renewable Energy, and Economic Development.
Examples of typical studies include:
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Acknowledgments
This report was made possible in part by the unique data supplied by the Loudoun County Department
of Economic Development (especially, Alex Gonski and Buddy Rizer) and the Prince William County
Department of Economic Development (especially Allisha Abraham, Thomas Flynn, and Jim Gahres). Fairfax
County Economic Development Authority (especially Catherine Riley and Stephen Tarditi) also provided
important information for the report.
2022 Virginia Data Center Report
About the Northern Virginia Technology Council
The Northern Virginia Technology Council (NVTC) is the trade association representing the
National Capital Region’s technology community. As one of the nation’s largest technology
councils, NVTC serves companies from all sectors of the industry, from small business and
startups to Fortune 100 technology companies, as well as service providers, academic
institutions, and nonprot organizations. Nearly 500 entities make up the NVTC membership
and look to the organization as a resource for networking and educational opportunities,
peer-to-peer communities, policy advocacy, industry promotion, fostering of strategic
relationships, and branding of the region as a major technology center.
If you are interested in joining NVTC, please contact Steve Upton, NVTC Chief Growth
Ocer at supton@nvtc.org.
website: nvtc.org
email: nvtc@nvtc.org
phone: 703-904-7878
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2022 Virginia Data Center Report
TABLE OF CONTENTS
Executive Summary
Data Centers Drive Investment in Virginia
Economic Prole of Data Centers in Virginia
The Northern Virginia Data Center Market in 2021
Rapidly Raising Wages in Virginia Data Centers
The Regional Distribution of Data Center Investment in Virginia
The Impact of Data Centers on Virginia State and Local Economies
Virginia Statewide
Central and Coastal Virginia
Investment Highlight - Community Action Grants
Northern Virginia
Investment Highlight - The Northern Virginia Community College Programs
Investment Highlight - New Data Center Expansions in Fairfax County
Southern Virginia
Investment Highlight - SOVA Innovation Hub
Valley and Western Virginia
Investment Highlight - Project Oasis and Mineral Gap
Data Centers’ Contribution to State and Local Government Budgets
Statewide and Regional Tax Collections Associated with Data Centers
Data Centers Contribute to Local Government Budgets
Data Centers’ High Local Benet to Cost Ratio
Local Data Centers Reduce the Burden on the State Education Budget
Virginia’s Data Center Sales and Use Tax Exemption
Virginia Treats Data Centers Like Other Capital-Intensive Industries
JLARC’s Evaluation of the Data Center Incentive
The Incentive Helps to Attract Some Data Centers that Do Not Qualify for the Incentive
National Context for Virginia Incentives
Competition Between States
New York - New Jersey - Connecticut
Illinois - Indiana
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2022 Virginia Data Center Report
Executive Summary
Data centers are the major drivers of investment in Virginia. According to information from the Virginia
Economic Development Partnership (VEDP), in 2021, 62% ($6.8 billion) of all the new investment announced
by VEDP was from new and expanding data centers.
The investment in data centers in Virginia is also driving investment in businesses in the data center supply
chain. Some specic examples of new investment in Virginia associated with data centers include:
• Aggreko establishing its North American data center headquarters in Loudoun County
• Anord Mardix adding a second manufacturing plant in Henrico County
• Hanley Energy establishing its U.S. headquarters and manufacturing plant in Ashburn
• Munters Group investing $36 million in a new manufacturing facility in Botetourt County.
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The concentration of data centers in Virginia spurred the construction of the subsea cable landing in Virginia
Beach that serves the MAREA, BRUSA and Dunant cables. Conuence Networks also plans the construction
of Conuence-1, a festoon cable connecting Virginia Beach to New Jersey, South Carolina and Florida.
Virginia now has data centers located throughout the state, from Wise County and Harrisonburg in the Valley
and Western Virginia, to Mecklenburg County in Southern Virginia, to Henrico County and Virginia Beach in
Central and Coastal Virginia, to Loudoun County in Northern Virginia, and other localities.
Northern Virginia has the largest data center market in the United States. As of 2021, the data center
inventory in Northern Virginia exceeds that of the next 5 largest markets combined. The compound annual
rate of growth in data centers in Northern Virginia from 2014 to 2021 was 25%. In comparison,
Dallas-Fort Worth, the next fastest growing area, had compound annual growth rate of 10%. From 2018 to
2021, the total data center capacity in Northern Virginia more than doubled.
Between 2001 and 2020, the average private sector employee of a Virginia data center saw their gross
income go up 70% faster than the average private sector employee in Virginia. We estimate that in 2021,
data center employed 5,550 Virginians, not counting construction workers building data centers in the state.
Approximately 88% (4,920) were working in Northern Virginia, while six percent (330) worked in Southern
Virginia, ve percent (250) worked in Central and Coastal Virginia, and one percent (50) worked in the Valley
and Western Virginia. The accumulated capital investment in data centers across the state amounts to
$126 billion in 2021 dollars. Virginia data centers spent $5.4 billion in 2021 for operational expenses, the
majority of which goes for stang and power.
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https://roanoke.org/2021/03/25/munters-group-ab-to-invest-36-million-in-botetourt-county/
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2022 Virginia Data Center Report
In 2021, the data centers in Virginia directly provided approximately:
• 5,550 operational jobs and 10,230 construction and manufacturing jobs
• $1.6 billion in associated employee pay and benets
• $7.5 billion in economic output
Taking into account the economic ripple eects generated by that direct impact, the total impact on Virginia
from data centers in 2021 was approximately:
• 45,460 supported jobs
• $3.6 billion in associated employee pay and benets
• $15.3 billion in economic output
For every job inside a Virginia data center, there are 4.1 additional jobs that are supported in the rest of the
Virginia economy.
We estimate that in 2021, data centers were directly and indirectly responsible for generating $174 million in
state revenue and $1 billion local tax revenue in Virginia.
In 2020, the local benet to cost ratios associated with the industry were:
• Loudoun County - for every $1.00 in county expenditures that data centers were responsible for
generating, it provided approximately $13.20 in tax revenue
• Prince William County - for every $1.00 in county expenditures that data centers were responsible for
generating, it provided approximately $13.50 in tax revenue
Because of the way that the state of Virginia subsidizes local education budgets, without data centers in
Loudoun and Prince William counties, the State of Virginia would have to reallocate $90.5 million in State
education funding away from other Virginia localities to provide $73 million in additional funding to
Loudoun County, and $17.5 million in additional funding to Prince William County.
In 2019, The Joint Legislative Audit and Review Commission (JLARC) published an evaluation of Virginia’s
data center and manufacturing incentive programs. JLARC found:
• 90% of the data center investment made by the companies that received the sales and use tax
exemption would not have occurred in the state of Virginia without the incentive
• In 2017, the State took in $1.09 in state tax revenue from data center related activity for every $1 of
potential state tax revenue that was exempted from qualifying data centers
• In 2016, the data center incentive was revenue neutral - it generated $1 in additional state tax revenue
for every $1 of potential state tax revenue that it exempted
• From 2013 through 2017, on average, the State recovered 75 cents in state tax revenue for every one
dollar of potential tax revenue exempted from qualifying data centers
Over 30 states have some type of incentive to attract data centers to their states. In the last couple of years,
Arizona, Connecticut, Idaho, Maryland, North Dakota, Pennsylvania, and Utah have all enacted or expanded
sales and use tax incentives targeting data centers for economic development.
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2022 Virginia Data Center Report
Data Centers Drive Investment in Virginia
Data centers are the major drivers of investment in Virginia. Investment in the state comes in the form of the
construction and operation of the data centers themselves, plus investments in Virginia made by businesses
that supply and support data centers in the state.
According to information from the Virginia Economic Development Partnership (VEDP),
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in 2021, 62%
($6.8 billion) of all of the new investment announced by VEDP was from new and expanding data centers.
In 2020, data centers accounted for 81% ($7.9 billion) of all of the new investment that VEDP announced. As
explained below, we estimate that the accumulated capital investment of data centers in Virginia amounts
to $126 billion in 2021 dollars employing 5,550 operational workers.
The investment in data centers in Virginia is also driving investment in businesses in the data center
supply chain. Some specic examples of new investment in Virginia associated with data centers include
the $36 million investment by Munters Group in a new manufacturing facility in Botetourt County for
200 employees.
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Munters is a global manufacturer of air treatment and climate control equipment,
including data center cooling systems. A signicant portion of the cost of building a data center goes to the
equipment needed for cooling. Michael Gantert, the president of Data Centers at Munters, stated that,
“A move to the Roanoke region will allow for the expansion that is needed for the Data Centers
business in the U.S.”
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Another example of recent data center supply chain investment in Virginia is Hanley Energy establishing its
U.S. headquarters and manufacturing plant in Ashburn.
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The Irish company provides energy-monitoring
products and services for data centers. The new plant and headquarters will employ 170 new workers by the
end of 2022. Additionally, Aggreko established its North American data center headquarters in
Loudoun County. The British company produces temporary power generation and energy story equipment
for data centers. Mike Clemson, the head of Aggreko’s North American Data Center Division, stated, “The
choice to establish a presence in Loudoun was a natural one, as virtually all of our data center customers
are present in the Data Center Alley. The opportunity for us to grow our data center business in
Loudoun County is tremendous.”
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In Henrico County in 2019, Anord Mardix, a global power distribution and management manufacturer,
spent almost a million dollars and added 51 new jobs for a second manufacturing plant. The power
switchgear produced in the company’s two manufacturing facilities is used in data centers and other critical
infrastructure businesses. Chairman of the Henrico County Board of Supervisors, Tyrone Nelson, said,
"Anord Mardix's success supports Henrico's growing data center cluster as they supply critical power
infrastructure to data centers and mission-critical facilities across the globe."
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https://announcements.vedp.org/Announcements/
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https://roanoke.org/2021/03/25/munters-group-ab-to-invest-36-million-in-botetourt-county/
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https://www.munters.com/en-us/media/news/global-news/2021/munters-relocates-in-the-us-to-expand-data-center-business/
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Dan Swinhoe, “Hanley Energy expands in Virginia, will base US headquarters in Loudoun County,” May 25, 2021.
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LoudounNow, "Aggreko to Establish Data Center Division Headquarters in Loudoun,” July 10, 2021.
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https://www.governor.virginia.gov/newsroom/all-releases/2019/january/headline-837867-en.html
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2022 Virginia Data Center Report
The concentration of data centers in Virginia spurred the construction of the subsea cable landing in Virginia
Beach that serves the MAREA cable going to Spain, the BRUSA cable going to Puerto Rico and Brazil, and
Google’s Dunant cable going to France. Conuence Networks also plans the construction of Conuence-1,
a festoon cable connecting Virginia Beach to New Jersey, South Carolina, and Florida. These subsea
cables enable very high-speed connections which businesses will increasingly need for the deployment
of “Industry 4.0” technologies. The Globalinx and Telxius data centers in Virginia Beach oer collocated
connections to the MAREA and BRUSA cables. The DP Facilities data center in Wise County takes advantage
of the MidAtlantic Broadband Communities Corporation ber connections to the MAREA subsea cable.
The data centers in Northern Virginia and the cable landing station in Virginia Beach attracted Facebook to
invest in its large data center in Henrico County, midway between the two locations. Additionally, QTS has
connected its large data center and network access point in Henrico County to the subsea cables in Virginia
Beach, oering very low latency connections to Europe and Brazil.
The technology companies that own and operate data centers have made commitments to use renewable
energy for their operations. In general, they prefer to have the renewable energy that they purchase
generated close to their facilities. That has created a strong demand for investments in renewable energy in
Virginia. Dominion Energy is spending over nine billion dollars to build a wind farm o Virginia Beach which
will create thousands of jobs in Hampton Roads. And the Solar Energy Industries Association reports that
3,444 megawatts (MW) of solar generation capacity has been installed in Virginia.
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Using general industry
averages of one million dollars of investment per MW, the data centers in Virginia have helped to create
demand for $3.4 billion of investment in solar energy projects in the state.
Virginia’s data center tax incentive programs are investments in not only in data centers, but also in the
manufacturing, energy, and service businesses that are associated with them. The incentive sends a clear
signal to potential investors worldwide that the business climate in Virginia is friendly to the high-tech
industry.
This report quanties the signicant contribution that data centers make to the state of Virginia and its
localities, and it puts Virginia’s data center incentive program into the national context of the competition to
attract data centers.
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https://www.seia.org/state-solar-policy/virginia-solar
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2022 Virginia Data Center Report
Economic Prole of Data Centers in Virginia
Virginia now has data centers located throughout the state, from Wise County and Harrisonburg in the Valley
and Western Virginia, to Mecklenburg County in Southern Virginia, to Henrico County and Virginia Beach in
Central and Coastal Virginia, to Loudoun County in Northern Virginia, and other localities. This report shows
how data centers in every part of the state make an important economic contribution to employment and
taxes in every region and to the state as a whole. We begin with an update on the remarkable data center
market in Northern Virginia.
The Northern Virginia Data Center Market in 2021
Northern Virginia has the largest data center market in the United States. As of 2021, by our calculations
based on data from CBRE
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and JLL
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, the data center inventory in Northern Virginia exceeds that of the
next 5 largest markets (Chicago, Dallas-Fort Worth, Silicon Valley, New York/Tri-State Area, and Phoenix)
combined.
Northern Virginia’s place at the top of the data center market is a relatively recent development. In 2016,
Northern Virginia had just supplanted the New York market as the largest data center market in the United
States. In 2017, the New York/Tri-State area had fallen to become the sixth largest data center market. A 2011
report on the data center market in the United States contains only one mention of Virginia in four pages,
“Reston, VA has excess supply and new construction will be minimal for a few years.”
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The locations that
were highlighted as important in the industry were Chicago, Silicon Valley, Southern California, Phoenix,
New York, St. Louis, Washington State, Boston, Minneapolis, Denver, and Charlotte. Regarding what has
become the second largest data center market, the report says, “Dallas has excess capacity and growth
remains slow.”
This illustrates the uid nature of the data center market and the speed with which market conditions can
change in the industry. Once-hot markets can cool o rapidly. In 2017, the data center market in Phoenix
had enormous growth, but between the second half of 2018 and the rst half of 2019, Phoenix saw net
outows of 26.5 MW worth of tenants, which is almost the same amount that Northern Virginia added in the
same period.
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The computer equipment in data centers is replaced on average every three to ve years.
Should circumstances warrant it, data center tenants can move from one location to another and leave
signicant vacancies in colocation data centers.
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CBRE, Digital Infrastructure in 2021: The Search for Land, Space, Power and Connectivity, North America Data Center Trends
Report, H1 2021.
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JLL, H1 2021 Data Center Outlook.
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ESD (Environmental Systems Design, Inc.), 2011 Data Center Technical Market Report. February 2011.
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CBRE, Large Supply Pipeline Sets Stage for Market Growth in 2019 North American Data Center Report H1 2019.
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2022 Virginia Data Center Report
As large as the data center market in Northern Virginia is, the growth of data centers in Northern Virginia is
even more impressive. We estimate that the compound annual rate of growth in data centers in Northern
Virginia from 2014 to 2021 was 25%.
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In comparison, Dallas-Fort Worth, a fast growing area, had a
compound annual growth rate of 10%.
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From 2018 to 2021, the total data center capacity in Northern
Virginia more than doubled.
Rapidly Rising Wages in Virginia Data Centers
One of the key characteristics of data centers is that they are extremely capital intensive. In other words, data
centers employ a relatively small number of highly skilled and highly paid people to operate and maintain a
large amount of expensive equipment. Therefore, it is useful to also look at trends in private sector average
annual wages in the industry.
Between 2001 and 2020 the average annual private sector wage in the data processing and hosting industry
in Virginia grew from $61,117 to $134,308 – a 120% increase.
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Mangum Economics estimates based on 2021 data from CBRE and JLL.
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Mangum Economics estimates based on data from CBRE and JLL.
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Mangum Economics estimates based on data from CBRE and JLL.
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Data Source: U.S. Bureau of Labor Statistics.
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Figure 1 shows the 18 largest data center markets in the United States, as identied by CBRE and JLL. The area of
each circle indicates the relative amount of power capacity in each market.
Figure 1: Relative Sizes of Largest Data Center Markets (megawatts of power capacity) - 2021
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2022 Virginia Data Center Report 10
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Data Source: U.S. Bureau of Labor Statistics.
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https://demographics.coopercenter.org/virginia-regions
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https://www.investswva.org/project-oasis
In comparison, over the same period average private wages across all industries in Virginia went from
$36,525 to $62,250 – an increase of 70%.
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In other words, over the 19-year period, the average private
sector employee of a Virginia data center saw their gross income go up 70% faster than the average private
sector employee in Virginia.
This combination of growing investment and rapidly rising wages make data centers one of Virginia’s highest
performing industries and an important (and growing) contributor to a strong and robust state economy.
Moreover, in a state such as Virginia where roughly two-thirds of state revenue comes from personal income
tax, high growth/high wage industries such as data centers also play a disproportionate role in ensuring the
health of the State’s budget.
The Regional Distribution of Data Center Investment in Virginia
As impressive as the data center market in Northern Virginia is, in this section, we describe how data center
investment is distributed across the state. In this report the method that we use to identify data center
investment is dierent than we have used for previous editions of this report for NVTC. This time we use
detailed information on the specic identity, exact location, and size of data centers in Virginia. Using a
proprietary data center cost model that we built and validated based on information from various industry
sources, we translate data center size information into estimates of employment, local capital investment,
and operating costs. We have used this model in projects across the United States.
For the purpose of this report, we have divided the state of Virginia into four regions: Northern Virginia,
Central and Coastal Virginia, The Valley and Western Virginia, and Southern Virginia. Figure 2 shows the way
we have dened these regions by locality. To identify these four regions, we started with the eight regions
identied by the Weldon Cooper Center Demographics Research Group that are based on “communities’
shared demographic, social, economic, and geographic characteristics.”
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We then grouped the eight
demographic regions into four regions of data center investment that have dierent catalysts for data center
development. Data center development in Northern Virginia is motivated by the existing bulk of data center
development in the area, as well as proximity to the federal government and tech companies in the area.
Development in Central and Coastal Virginia is signicantly due to proximity to the subsea cable landing
station in Virginia Beach and to the major terrestrial ber route running from Northern Virginia south to
Raleigh, North Carolina. Data center development in Southern Virginia has the security advantages provided
by distance from major population centers while still being centrally located on the East Coast of the United
States. For the Valley and Western Virginia, data center development can continue to occur fostered by a
robust ber network and access to geothermally-cooled water.
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2022 Virginia Data Center Report 11
Figure 2: Four Sub-State Regions
We estimate that in 2021, 5,550 Virginians were employed in data centers, not counting construction
workers building data centers in the state. Approximately 88% (4,920) worked in Northern Virginia, while
six percent (330) worked in Southern Virginia, ve percent (250) worked in Central and Coastal Virginia,
and one per (50) worked in the Valley and Western Virginia. A review of job listings posted online by data
center operators shows active job openings in all four regions of the state. Data center employment should
continue to increase throughout the state into the future.
Additionally, we estimate that the accumulated capital investment in data centers across the state
amounts to $126 billion in 2021 dollars. We estimate that Virginia data centers spent $5.4 billion in 2021 for
operational expenses, the majority of which was spent for stang and power.
2022 Virginia Data Center Report 12
The Impact of Data Centers on Virginia State and
Local Economies
The construction and ongoing operation of data centers in Virginia have large, broad eects across the state
economy. In this section, we estimate the statewide economic impact that data centers have on Virginia,
as well as in each of the four sub-state regions detailed earlier. To empirically evaluate the statewide and
regional economic impact attributable to data centers, we employ a commonly used regional economic
impact model called IMPLAN.
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Regional economic impact modeling measures the ripple eects that an expenditure generates as it makes
its way through the economy. Spending by data centers in Virginia has a direct economic impact on the
state and regional economy in terms of people hired as data center employees, employee pay and benets,
and economic activity in the region for utilities, construction, and equipment. That direct spending by the
data centers creates the rst ripple of economic activity.
As data center employees and businesses (like construction contractors for data centers, power companies
that supply data centers, and data center equipment suppliers) spend the money that they were paid by
data center companies, they create another indirect ripple of economic activity that is part of the second-
round eects of data center activity.
In addition to the economic eects in the Virginia state and local economies of the data center-to-other
business transactions, there are also the second-round economic eects associated with data center
employee-to-business transactions that ripple through local economies. These eects occur when data
center employees buy groceries; pay rent; go out for dinner, entertainment, or other recreation; pay for
schooling in Virginia; or make other local purchases. Additionally, there are the second-round economic
eects of business-to-business transactions between the direct vendors to data centers and their suppliers.
The total impact is simply the sum of the rst round direct and second round impacts. These categories of
impact are then further dened in terms of employment (the jobs that are created), labor income (the pay
and benets associated with those jobs), and economic output (the total amount of economic activity that is
created in the economy).
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IMPLAN is produced by IMPLAN Group, LLC.
2022 Virginia Data Center Report 13
Table 1: Some Businesses Serving Virginia Data Centers
There are many Virginia businesses that are part of the data center supply chain. To illustrate some of the
types of companies located in Virginia that benet from data centers in Virginia and that, in turn, generate
economic activity in the state, in Table 1 we list a few dierent types of businesses in the Virginia data
center supply chain. The list of businesses in Table 1 is not an endorsement, promotion, or commendation
of them, and it is far from a complete list of companies. We only provide it to illustrate some of the types of
businesses that are part of the second ripple eect of economic activity related to spending by data centers.
2022 Virginia Data Center Report
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Virginia Statewide
We estimate that in 2021 data centers in Virginia directly provided approximately:
• 5,550 operational jobs and 10,230 construction and manufacturing jobs
• $1.6 billion in associated employee pay and benets
• $7.5 billion in economic output
Taking into account the economic ripple eects generated by that direct impact, we estimate that the total
impact on Virginia from data centers in 2021 was approximately:
• 45,460 supported jobs
• $3.6 billion in associated employee pay and benets
• $15.3 billion in economic output.
For every job inside a Virginia data center, there are 4.1 additional jobs that are supported in the rest of
the Virginia economy, not counting construction jobs.
Table 2: Economic Impact of Data Centers in Virginia in 2021
Because of the large amount of data center development in Virginia over the last several years, parts of the
data center construction and operations supply chains (illustrated in Table 1) have developed in the state.
This is why data center development in one part of the state creates impacts in other parts of the state. In
the following sections covering the four regions of the state, we show the local impacts of direct investment
in a region from the construction and operation of data centers. We also show the impacts in each region
caused by data center development in other regions.
So, for example, the 9,680 construction jobs building data centers in Northern Virginia supported 5,330 jobs
in other industries in Northern Virginia, as well as supporting 380 jobs in Central and Coastal Virginia, 30 jobs
in Southern Virginia, and 540 jobs in the Valley and Western Virginia. Likewise, the 4,920 operational jobs
in Northern Virginia data centers supported 19,140 jobs in other industries in Northern Virginia, as well as
supporting 1,030 in Central and Coastal Virginia, 20 jobs in Southern Virginia, and 60 jobs in the Valley and
Western Virginia.
2022 Virginia Data Center Report 15
Central and Coastal Virginia
We estimate that in 2021, data centers in Central and Coastal Virginia directly provided approximately:
• 250 operational jobs and 290 construction jobs
• $41 million in associated employee pay and benets
• $289 million in economic output
Taking into account the economic ripple eects generated by that direct impact, we estimate that the total
impact on Central and Coastal Virginia from data centers in 2021 was approximately:
• 3,640 supported jobs (including 1,650 supported data centers in other parts of the state)
• $244 million in associated employee pay and benets
• $1.1 billion in economic output.
Table 3: Economic Impact of Data Centers on Central and Coastal Virginia in 2021
Investment Highlight - Community Action Grants
Meta (formerly dba Facebook) has a Community Action Grants program to fund non-prot projects that
meet community needs by deploying technology to benet the community, build stronger online and
oine connections among people, and improve local science, technology, engineering, and mathematics
education. In 2021, the program provided funding for eight projects including buying laptop computers for
local 10th graders, funding Henrico County Public Library’s WiFi lending program, buying video equipment
for children with illnesses, and supporting a telehealth program for underserved students and families.
2022 Virginia Data Center Report 16
Northern Virginia
We estimate that in 2021, data centers in Northern Virginia directly provided approximately:
• 4,920 operational jobs and 9,680 construction jobs
• $1.5 billion in associated employee pay and benets
• $7 billion in economic output
Taking into account the economic ripple eects generated by that direct impact, we estimate that the total
impact on Northern Virginia from data centers in 2021 was approximately:
• 39,230 supported jobs (including 160 supported data centers in other parts of the state)
• $3.3 billion in associated employee pay and benets
• $13.5 billion in economic output
Table 4: Economic Impact of Data Centers on Northern Virginia in 2021
2022 Virginia Data Center Report
Investment Highlight - The Northern Virginia Community College Programs
Northern Virginia Community College (NOVA) has developed programs to help address the challenges that
data centers in the Northern Virginia area have meeting their stang needs. Amazon Web Services (AWS)
has a paid apprenticeship program at the NOVA.
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In December 2018, the program graduated its rst
students into full-time Associate Cloud Consultant jobs with AWS.
NOVA also has a 2-year Associate of Applied Science program to train Datacenter Operations Technicians.
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The program includes lab training at a training data center that the State of Virginia built on the
NOVA Loudoun Campus. The program started with 19 students in its very rst year, and enrollment has
increased signicantly since then. Graduates quickly nd jobs in Northern Virginia data centers and the
companies that work for them.
Investment Highlight - New Data Center Expansions in Fairfax County
Data center investment in Fairfax County has increased signicantly in the past two years. Data centers in
Fairfax County currently occupy 2.4 million square feet in 28 facilities. As of February 2022, the pipeline
of new data center development includes 1.9 million square feet, with 375,000 square feet already under
construction. Fairfax County has development opportunities available in both greeneld areas near Dulles
International Airport and inll locations in Tysons Corner.
NOVA, “Amazon and Northern Virginia Community College Announce Graduation of the First Veteran Technical Apprenticeship
Cohort on the East Coast,” December , .
NOVA - Catalog, Engineering Technology: Data Center Operations Specialization, A.A.
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2022 Virginia Data Center Report 18
Southern Virginia
We estimate that in 2021, data centers in Southern Virginia directly provided approximately:
• 330 operational jobs and 260 construction jobs
• $39 million in associated employee pay and benets
• $215 million in economic output
Taking into account the economic ripple eects generated by that direct impact, we estimate that the total
impact on Southern Virginia from data centers in 2021 was approximately:
• 1,400 supported jobs (including 60 supported by data centers in other parts of the state)
• $73 million in associated employee pay and benets
• $402 million in economic output
Table 5: Economic Impact of Data Centers on Southern Virginia in 2021
2022 Virginia Data Center Report
Investment Highlight - SOVA Innovation Hub
Mid-Atlantic Broadband Communities Corporation and Microsoft TechSpark are investing in Southern
Virginia, in part, by jointly creating the SOVA Innovation Hub in South Boston to oer programs to inspire
entrepreneurship and the pursuit of digital careers. The new building houses coworking, meeting, and
training space. Training programs are oered for job seekers, educators, families, and businesses. The
Hub has assisted a broad range of businesses, from the arts, to driver training, marketing, and organic
horticulture.
Microsoft’s Southern Virginia TechSpark is a civic program created to foster job creation and economic
development in the area. In addition to the innovation hub, TechSpark has helped to create technology
education and literacy programs in every high school in the region, “Girls Who Code” clubs in Halifax and
Mecklenburg Counties, and the deployment of free public WiFi networks Boydton and Clarksville.
23
Miranda Baines, “Microsoft TechSpark Celebrates Third Anniversary,” Gazette-Virginian, December , .
19
2022 Virginia Data Center Report
20
Valley and Western Virginia
We estimate that in 2021, data centers in the Valley and Western Virginia directly provided approximately:
• 50 operational jobs
• $7 million in associated employee pay and benets
• $47 million in economic output
Taking into account the economic ripple eects generated by that direct impact, we estimate that the total
impact on the Valley and Western Virginia from data centers in 2021 was approximately:
• 1,190 supported jobs (including 950 supported by data centers in other parts of the state)
• $59 million in associated employee pay and benets
• $253 million in economic output
Table 6: Economic Impact of Data Centers on the Valley and Western Virginia in 2021
2022 Virginia Data Center Report
Investment Highlight - Project Oasis and Mineral Gap
Part of the InvestSWVA public-private partnership is Project Oasis – a program to attract data centers to
Southwest Virginia. The program emphasizes the ability of the area to assist data centers locating in the
area to achieve their sustainability goals by taking advantage of the region’s solar farms and availability for
geothermal cooling.
The DP Facilities data center in Mineral Gap (Wise County) oers a high-security, 65,000 square foot facility
in a reclaimed mine site with N+2 redundancy, 45 MW of power capacity, and an estimated power usage
eectiveness of 1.2. The 22-acre site has room to expand by an additional 200,000 square feet. An on-site
solar facility provides 3.5 MW of power for the data center. The $4.6 million solar project is the rst solar
project in the state to be built on reclaimed mine land.
21
2022 Virginia Data Center Report
22
Data Centers’ Contribution to State and Local
Government Budgets
Data centers pay millions of dollars in state and local taxes in Virginia, even though Virginia has a sales and
use tax exemption on some equipment for data centers that are large enough to qualify for the exemption.
All data centers (large and small) pay state employer withholding taxes. At the local level, both large and
small data centers pay real estate taxes, tangible personal property taxes, business license taxes, and
industrial utilities taxes. Additionally, many data centers still must pay state sales and use taxes on their
purchases of data center equipment because they are not large enough to qualify for the Virginia data
center incentive.
In addition to the taxes that data centers pay directly, the economic activity that they generate also results
in additional tax collections. Data centers pay taxes directly to state and local governments. The employees
and business suppliers that are paid directly by the data centers also pay taxes. All of these sources of tax
revenue are included in the tax revenue estimates described in this report
Statewide and Regional Tax Collections Associated with Data Centers
In addition to the taxes paid directly by data centers, local governments and the Commonwealth of Virginia
collect tax revenue from the secondary indirect and induced economic activity that data centers generate.
Table 7 shows our estimates of the taxes directly and indirectly generated by data centers statewide in
Virginia and in each of the four sub-state regions in 2021 through that rst round and second round
economic activity.
We estimate that in 2021, data centers were directly and indirectly responsible for generating $174
million in state revenue and $1 billion local tax revenue in Virginia.
Table 7: Tax Revenue Directly and Indirectly Generated by Data Centers in Virginia in 2021
2022 Virginia Data Center Report
23
Data Centers Contribute to Local Government Budgets
Data centers generate a large amount of property tax revenue for local governments without placing many
demands on local government services. Additionally, the industry also places downward pressure on overall
tax rates, thereby improving the locality’s business climate and economic attractiveness.
Data Centers’ High Local Benet to Cost Ratio
Data centers provide a high benet to cost ratio in terms of the tax revenue they generate relative to the
government services that they and their employees require. Loudoun and Prince William Counties are home
to the most signicant concentrations of data centers in Virginia. County sta in those localities were able
to provide us with detailed data on the tax revenue generated by this industry in each locality from real and
business personal property taxes.
24
As a result, we are able to use those data in combination with data from
other sources to compute the benet to cost ratio associated with data centers in each locality. If local scal
data were available, similar stories could be told for Mecklenburg and Henrico Counties where there are
larger data centers, and to a lesser degree in places like the Cities of Harrisonburg and Virginia Beach, and
Albemarle, Culpeper, Fairfax, and Wise Counties which also have data centers.
To quantify the budgetary cost that data centers and their employees imposed on these localities in
2020,
25
we use data from the Virginia Department of Education on local elementary and secondary
education expenditures per student, and data from the Virginia Auditor of Public Accounts on local non-
education expenditures per county resident. This approach focuses on the largest costs that any business
imposes on a local government – the costs associated with providing primary and secondary education, and
other county services, to the employees of that business.
It should be noted that, of necessity, these estimates exclude BPOL and other local taxes that also apply to data centers. As a
result, the revenue estimates provided almost certainly under-estimate the actual local tax revenues from data centers.
was the most recent year that data was available for these calculations.
2022 Virginia Data Center Report 24
Table 8 details the calculations used to estimate the budgetary cost that data centers and their employees
imposed on each of these two counties in 2020. As shown, we estimate those costs to be approximately
$37 million in Loudoun County, and $5 million in Prince William County.
Table 8: Estimate of Total Budgetary Costs Imposed by Data Centers and Employees in 2020
Data Source: Loudoun County Economic Development Authority and Prince William County Department of Economic
Development.
Data Source: Virginia Department of Education and U.S. Bureau of Labor Statistics. Derived by dividing total county elementary
and secondary school enrollment in by total county employment in .
Data Source: Virginia Department of Education.
Calculated as county private sector employment in data centers in , times students per employee, times per student
education expenditures.
Data Source: Census and U.S. Bureau of Labor Statistics. Calculated by dividing total county population in by total
county employment in .
Data Source: Virginia Auditor of Public Accounts and U.S. Census Bureau. Derived by dividing total county non-educational
expenditures in by total county population in .
Derived as county private sector employment in data centers in , times county residents per employee, times per resident
non-education expenditures.
Derived as the sum of total education costs and total non-education costs.
26
27
28
29
30
31
32
33
2022 Virginia Data Center Report
25
Table 9: Estimated Benet/Cost Ratio Associated with Data Centers and Employees in 2020
As shown in Table 9, combining the estimates of budgetary cost from Table 8 with data from each of
the localities on the local revenue generated by data centers shows that in 2020 the benet to cost ratio
associated with the industry was:
• 13.2 in Loudoun County — which means that for every $1.00 in county expenditures that data centers
were responsible for generating in 2020, it provided approximately $13.20 in tax revenue.
• 13.5 in Prince William County — which means that for every $1.00 in county expenditures that data
centers were responsible for generating in 2020, it provided approximately $13.50 in tax revenue.
2022 Virginia Data Center Report
Local Data Centers Reduce the Burden on the State Education Budget
Because of the way that the State of Virginia partially funds local education from State coers, the tax
revenue generated by data centers in some localities reduces the burden on the State education budget.
On average, the state of Virginia funds 55% of primary and secondary education expenditures, and localities
are required to locally fund the remaining 45%.
34
But, that local funding percentage is adjusted up or
down based on each locality’s “ability to pay” as measured by Virginia’s composite index formula that takes
into account the locality’s property tax base, adjusted gross income, and taxable retail sales. Of these three
factors, property tax base receives the highest weight (50%) and, therefore, has the largest inuence on the
nal calculation.
35
The 2020 composite index for Loudoun County is 0.5450 and for Prince William County it is 0.3739.
36
When
we recalculate those indices to take into account the loss of tax base implied by the loss in tax revenue
that would have occurred if data centers had not existed in these localities, those indices fall to 0.5026 and
0.3609, respectively.
As shown in Table 10, according to our estimates, this means that in the absence of data centers in Loudoun
and Prince William Counties, the State of Virginia would have to reallocate $90.5 million in state education
funding away from other Virginia localities to provide $73 million in additional funding to Loudoun County,
and $17.5 million in additional funding to Prince William County.
In actuality, however, baseline local funding percentages are typically higher than % because of local initiatives.
Virginia Department of Education. The actual formula weights each locality’s property tax base by ., adjusted gross income
by ., and taxable retail sales by .. Each metric is then divided by school population and total population and those per capita
figures are divided by the average across all localities to determine ability to pay. The per capita figures are then themselves
weighted with each per capita school population metric receiving a weight of . and each per capita population metric
receiving a weight of ..
Virginia Department of Education.
26
Table 10: Estimated Additional Revenue Required to Compensate for Loss of the Data Centers in 2020
2022 Virginia Data Center Report
27
Virginia’s data center incentive program is primarily a sales and use tax exemption on qualifying
equipment.
37
Generally, the sales and use tax exemption is available to data centers that make a minimum
new capital investment of $150 million and that create a minimum of 50 new jobs in a Virginia locality. If
the data center is located in an enterprise zone, the minimum new job requirement is reduced to 25. Each
new job must pay at least 150% of the annual average wage in the locality where the data center is located.
Tenants of colocation data centers that qualify for the incentive may also receive the sales and use tax
exemption. The incentive program is set to sunset in 2035.
In March of 2021, Virginia revised its sales and use tax exemption to require only 10 new employees and
$70 million of capital investment for data centers that locate where the unemployment and poverty rates
are higher than statewide averages.
38
According to the JLARC, as of scal year 2017 (the most recent year that data is available), 24 data centers
had qualied for the incentive, plus 135 colocation data center tenants.
39
According to JLARC’s 2021 report
on Virginia’s economic development incentives, in scal year 2020, $138.3 million of sales and use tax was
exempted under the incentive.
40
Virginia Treats Data Centers Like Other Capital-Intensive Industries
The Virginia data center incentive program oers qualifying data centers the same tax treatment that
it applies to all manufacturers. Like most states, Virginia exempts all manufacturing rms (regardless of
size) from paying sales and use tax on their production equipment. Part of the rationale for exempting
manufacturing equipment from sales and use tax is that the manufacturing industry requires large amounts
of expensive equipment in order to make products. If the state charged sales and use tax on manufacturing
equipment, manufacturers would locate in other states in order to reduce their costs of production. Virginia’s
sales and use tax exemption for qualifying data centers is a limited way to attract large data centers to
the state.
Virginia’s Data Center Sales and Use Tax Exemption
Virginia also offers a single sales factor apportionment method for calculating corporate tax liability. According to JLARC’s
report, that incentive was first used by data centers in and amounted to a change in taxes of only $,. Because this
incentive has such a limited impact, we do not discuss it in this report.
Dan Swinhoe, “Virginia lowers threshold for data center tax exemption,” Data Center Dynamics, March , .
Joint Legislative Audit and Review Commission, Data Center and Manufacturing Incentives, Economic Development Incentives
Evaluation Series. June , .
http://jlarc.virginia.gov/pdfs/reports/Rpt.pdf
2022 Virginia Data Center Report 28
JLARC’s Evaluation of the Data Center Incentive
In June of 2019, Virginia’s Joint Legislative Audit and Review Commission published an evaluation of the
state’s data center incentive using condential tax information that is not publicly available.
41
JLARC found that 90% of the data center investment made by the companies that received the sales and
use tax exemption would not have occurred in the state of Virginia without the incentive. Instead, that
90% of data center investment would have occurred in states other than Virginia. So, the “cost” of the State
data center incentive is only 10% of the amount of State sales tax revenue exempted. Using the condential
tax information, JLARC estimated the economic and government budgetary impact, not of the total data
center industry in Virginia (as we have done in this report), but specically of Virginia’s data center sales and
use tax exemption.
42
Table 11 shows the text of Appendix N from the JLARC report with JLARC’s calculations of the amount
of State tax revenue exempted by the Virginia incentive; the amount of additional State tax revenue that
was generated by the investment of the data centers that received the tax incentive; the net impact of
the incentive on the State budget (additional tax received minus tax revenue exempted); net new jobs
added, net additional state gross domestic product (GDP) generated, and net new worker pay generated
throughout the statewide economy as a result of the investment by data centers that received the incentive.
Table 11 shows data for the scal years 2013 through 2017. This is the most recent data available that covers
the years when the current version of Virginia’s data center incentive has been implemented. The General
Assembly made signicant revisions to the data center incentive in 2012.
Joint Legislative Audit and Review Commission, Data Center and Manufacturing Incentives, Economic Development Incentives
Evaluation Series. June , .
Appendix N: Results of economic and revenue impact analyses.
2022 Virginia Data Center Report 29
Table 11: Economic and Tax Impacts of Virginia’s Sales and Use Tax Exemption for Data Centers
43
The appendix to the JLARC report shows that:
• In 2017, the State took in $1.09 in state tax revenue from data center related activity for every $1 of
potential state tax revenue that was exempted from qualifying data centers.
• In 2016, the data center incentive was revenue neutral – it generated one dollar in additional state tax
revenue for every dollar of potential state tax revenue that it exempted.
• In every year since the data center incentive was modied in 2012, the State recovered the majority of
the state tax revenue that was exempted from qualifying data centers.
• From 2013 through 2017, on average the State recovered 75 cents in state tax revenue for every dollar of
potential tax revenue exempted from qualifying data centers.
44
Data Source: Appendix N: Results of Economic and Revenue Impact Analyses.
The JLARC report states that the data center incentive recovered cents in state tax revenue for every dollar of potential tax
revenue exempted from qualifying data centers. That conclusion is based on including the years through , prior to the
significant change made to the incentive in . The -cent estimate more accurately reflects
2022 Virginia Data Center Report 30
Incentive Helps to Attract Some Data Centers that Do Not Qualify for Incentive
Data centers tend to cluster, with smaller data centers often locating adjacent to larger data centers.
Therefore, one data center that is attracted by the incentive can attract other data centers to take advantage
of the existing local ber and power infrastructure.
45
Some of these follow-on data centers will be smaller
than the larger data center projects that qualied for the tax incentive and may, themselves, not initially
achieve the investment and job creation thresholds required to receive tax benet from the state.
Because large data centers that qualify for Virginia’s incentive help provide the infrastructure and technology
supply chain to attract smaller data centers that do not initially qualify for the incentive, the incentive
yields more data center investment than is measured by just counting the data centers that qualify for the
incentive. Virginia’s data center tax incentive plays an important role in attracting new data centers to the
state and in keeping them from moving to other states.
National Context for Virginia Incentives
Over 30 states oer some sort of incentive program to attract data centers. Twenty-six states have sales and
use tax incentives that last for 10 years or more, with 11 of them having incentives that are valid indenitely.
Examples in the Southeast include:
• Alabama oers up to a 30-year sales and use tax exemption. (AL 40-9B-3)
46
• Mississippi’s 10-year sales and use tax exemption has no program sunset. (MS 57-113-25)
47
• North Carolina’s sales and use tax exemption has no program sunset. (NC 105-164.13)
48
• South Carolina’s sales and use tax exemption sunsets for new applicants in 2031 with benets ending in
2041. (SC 12-36-2120)
49
• Tennessee’s sales and use tax exemption and reduced tax on electricity has no program sunset.
(TN 67-6-206)
50
In the last few years several states have added or expanded sales and use tax exemptions for data centers.
The following list does not include states like Ohio and Texas which have robust incentives in place.
Loudon Blair, “Finding Strength in Numbers: The Data Center Clustering Effect,” Data Center Knowledge,
http://alisondb.legislature.state.al.us/alison/CodeOfAlabama//.htm and Alabama Department of Revenue, General
Summary of State Taxes.
Mississippi Tax Incentives, Exemptions and Credits.
North Carolina Data Center Sales and Use Tax Exemptions.
South Carolina Department of Revenue Ruling #-.
Changes in Requirements for a Qualified Data Center, Tennessee Department of Revenue.
Pennsylvania Brings in Data Center Tax Breaks.
Matt Pilon, “In a crowded pond, CT goes fishing for data centers with new incentives,” Hartford Business Journal, April , .
Maryland Department of Commerce, Data Center Tax Incentive Program.
Rich Miller, “Quantum Loophole Plans , Acre Data Center Campus in Maryland,” Data Center Frontier, June , .
2022 Virginia Data Center Report
31
East
• Pennsylvania’s original incentive was ineective at attracting data center investment to the state while
billions of dollars of investments were being made in nearby states. The legislature enacted a new sales
and use tax exemption that is open indenitely with benets available for at least 15 years.
(72 PS 9931-D)
51
• Connecticut became the latest state to add a completely new data center incentive. Depending on the
size and location of the facility, data centers could be exempted from state sales and use taxes for 20 to
30 years. (CT Public Act 21-1, HB 6514)
52
• Maryland enacted a new sales and use tax incentive with a benet period of 10 to 20 years depending on
the level of investment. The incentive has no sunset date.
53
Following the enactment of Maryland’s data
center incentive, a data center developer announced plans for a new 2,100-acre data center campus in
the state. (MD 11-239)
54
Midwest
• North Dakota enacted a data center incentive to replace an incentive that expired in 2020. The new
incentive has no sunset date or limitation on the benet period. (NDCC 57-39.2-04.17)
55
West
• Arizona revised and extended its data center sales and use tax exemption by 10 years to run through
2033. The benet period ranges from 10 to 20 years, with the 20-year benet reserved for data centers
with that are considered a sustainable redevelopment project. (AZ 41-1519)
56
• Idaho enacted a new sales and use tax exemption for data center equipment used in new data centers.
The new incentive has no program sunset or limitation on the benet period. (63-3622V)
57
• Utah expanded its sales and use tax exemption for data centers with no minimum investment or
employment criteria and no program sunset. (UT 59-12-104)
58
North Dakota Century Code § -.-..
Dan Swinhoe, “Arizona extends data center tax breaks for another years,” Data Center Dynamics, April , .
HB .
Utah Sales and Use Tax General Information, Revised / and SB .
2022 Virginia Data Center Report
Competition Between States
With so many states oering incentives to attract data centers to their states, the competition for data
centers is keen.
New York - New Jersey - Connecticut
New Jersey is debating adding an incentive. There is a growing realization that the New York-New Jersey
region lost its lead in the data center market to Northern Virginia, at least in part because New Jersey is not
competitive with other markets on taxes.
59
An even more dramatic illustration of the sensitivity of data centers to tax changes is the way in which data
centers showed their mobility in response to a potential increase in taxes in New Jersey. In the summer of
2020, some elected state ocials proposed imposing a 25/100th of one percent or a 1/100th of one percent
tax on nancial transactions processed in data centers located in New Jersey.
60
In the fall of 2020, the New
York Stock Exchange ran its nancial transactions out of its data center in Chicago for ve days to practice
for any possible relocation of the market to data centers outside of New Jersey. The Governor of Texas was
involved in attempting to attract Nasdaq to migrate its data center operations to Dallas, the second-largest
data center market in the United States. In the spring of 2021, the state of Connecticut enacted a data center
incentive to make that state a viable alternative, in the event that New Jersey proceeded with the nancial
transaction tax.
61
Illinois - Indiana
In June of 2019, Illinois added a new data center incentive.
62
Although the Chicago area is one of the
largest data center markets in the United States, it was not keeping pace with the growth of data centers
in the markets of Northern Virginia, Dallas, and Phoenix – all located in states that provide sales and use
tax exemptions to attract data center investment. Since the enactment of the Illinois incentive, several new
large data center projects have been announced in the state, and over $5 billion in additional data center
investment has been committed, making it one of the fastest-growing states in terms of data center
activity.
63
The neighboring state of Indiana also enacted a 50-year sales and use tax exemption for data
centers to attract data centers to the Indiana suburbs of Chicago.
“Twenty years ago, New Jersey probably led the country and data center space, but we haven’t moved the needle at all in
years.” – Gil Santaliz, NJFX “New Jersey was once a hotbed of data center activity, with thriving markets for colocation and financial
data centers. The state maintains a substantial and strategically important data center community, but the hottest leasing action
has shifted elsewhere, primarily to Northern Virginia.” – Data Center Frontier, // “There is a bill being looked at, and it looks
very similar to the broad strokes of what you see in Virginia.” – Santaliz
Alex Alley, “NYSE and Nasdaq threaten to leave New Jersey if transaction tax goes ahead,” Data Center Dynamics, October ,
.
Matt Pilon, “In a crowded pond, CT goes fishing for data centers with new incentives,” Hartford Business Journal, April , .
Ally Marotti. “Data center boosters hope new tax incentives 'stop the bleeding,' keep tech sites in Illinois,” Chicago Tribune, June
.
Companies announcing large data center projects in Illinois since the enactment of the incentive include: Aligned Energy, Meta,
Prime Data Centers, NTT, and Stream.
32
