Chesterfield supervisors approve incentive agreements for data center projects

The Board of Supervisors this week approved fixed tax rate agreements for a pair of data center developments planned near Moseley and Westchester Commons. (Screenshot)

While some mystery remains over who exactly is behind them, two sizable data center developments planned for western Chesterfield are now eligible for an extra financial boost from the county.

The Board of Supervisors this week unanimously approved tax incentive agreements for the EDA-initiated projects at sites near Moseley and Westchester Commons.

The agreements lock in the county’s personal property tax rate for the code-named data center projects at the current 24 cents per $100 of assessed value for a 30-year period.

Chesterfield agrees to collect taxes on the computer equipment at the future developments slated for sites at that fixed rate. If the rate is increased countywide, Chesterfield will provide annual grant payments back to the developers equal to the amount of the rate increase for the remainder of the term.

The county made the agreements with two limited liability companies – Skyward Holdings and Aeris Investments. It wasn’t clear exactly who is behind the entities. There hasn’t been a public announcement yet regarding who would operate the data centers subject to the agreements.

The county’s five supervisors all spoke in support of the future data center projects tied to the agreements they approved Wednesday, saying they represented notable economic development opportunities due to new tax revenue and job creation.

Board members also voiced regret that the projects remained largely a secret to the public, and that a nondisclosure agreement prevented them from providing more clarity on the projects by the time of the vote.

Supervisor Mark Miller said the incentives were key to secure what are expected to be large economic investments. He said that even at a fixed rate, the size of the projects would generate high tax revenue.

“Their investment is massive. And their operational lifespans are going to be measured in decades. A tax rate guarantee provides the financial predictability essential for their internal capital allocation decisions and risk assessment,” Miller said. “This isn’t just a 24-cent tax rate, it is about the volume of the taxable assets this rate will apply to.”

The projects are expected to be multibillion-dollar developments, according to Deputy Economic Development Director Jake Elder. He didn’t share details of the projects, such as square footage or number of buildings planned, in remarks made to the board ahead of their votes.

Elder said $1 billion of investment at a data center project typically breaks down as $300 million in capital expenditures and $700 million in equipment. Per billion dollars of investment, Chesterfield is expected to reap more than $4.2 million in tax revenue annually, between its 24-cent data center rate, created in 2019, and its 89-cent property tax rate.

The projects would diversify the county’s tax base and potentially open the door to lower real estate taxes overall, Supervisor Kevin Carroll said, as the development of large commercial projects stands to offset tax burden currently shouldered by homeowners as the county’s growth creates a greater need for revenue to provide services.

“We’ve had an 80% residential, 20% commercial (tax base) for years. … We have been a bedroom community. Everybody complains about the houses being built. I get it, we got zoning cases that are coming out of the ground from years ago,” Carroll said. “If you want to lower the (real estate) tax rate of 89 cents by 4 cents or 8 cents, you have to bring the commercial in.”

Though supportive of the data center projects at hand, Supervisor Jessica Schneider floated the idea of hiking the data center tax rate as a deterrent to additional data centers, because she said the county has enough of them.

“I don’t want to bring any other data centers. I appreciate the company and all that I’ve learned about them and their commitment to the community. There’s no reason to bring another data center here,” she said.

As part of the agreements, any grants awarded to the projects due to a tax increase could be directed to the county’s utilities department to go toward infrastructure costs associated with the project.

The 30-year agreements would cap data center equipment taxes at their current rate of 24 cents per $100 of assessed value for the projects. (BizSense file)

The agreement with Skyward grants the fixed rate for a 871-acre area on the northern end of the Upper Magnolia Green West site for what’s referred to as Project Skye. The land is a portion of a larger 980-acre assemblage that includes 4200 Moseley Road and was rezoned in May.

According to a separate but similar agreement with Aeris, the county will provide the same tax incentive to what’s called Project Loch, which is slated to rise on a 342-acre site. The Aeris site is the majority of the Watkins Centre South property at 750 Watkins Centre Parkway, which was also rezoned last month.

The agreements hinge on the LLCs’ acquisition of the properties from the EDA, which owns some of the land involved in the projects but hasn’t closed on the entirety of the project sites.

Skyward and Aeris are expected to buy at least a portion of the properties within 36 months of the effective date of Wednesday. If they don’t, the agreements would be canceled, as would the real estate option agreements between the LLCs and the EDA prior to 36 months after the effective date.

The fixed tax rates are also contingent on timely progress on the development of the data centers and associated infrastructure on the sites. The agreement is split into three terms, with the first period starting on the effective date and ending 10 years after the issuance of a certificate of occupancy for “an operational data center building on the property” in both agreements.

There would be two automatic 10-year renewals to follow the first term, subject to how construction progresses on the data centers and related infrastructure at the sites.

Both projects are subject to noise and water use limits and also feature road improvements, according to the requirements of the EDA-initiated rezonings approved last month to allow the sites’ development as data center campuses. As the western Chesterfield projects secure their incentives, local officials are weighing new restrictions on where data center projects can be located in the county as part of an update to the zoning ordinance. Last week, the Planning Commission recommended denial of a zoning request for a 700-acre data center project near Chester.

The post Chesterfield supervisors approve incentive agreements for data center projects appeared first on Richmond BizSense.