Virginias Data Centers Have a Significant Economic Impact, Driving Investment and Innovation

Research highlights critical role of data centers in Virginia’s economy and importance of tax incentives to maintaining Virginia’s competitiveness

February 5, 2018 – The Northern Virginia Technology Council (NVTC) today released the second edition of a research report that shows that the data center industry strengthens and diversifies the economy and drives innovation in Virginia. The Economic and Fiscal Contribution that Data Centers Make to Virginia 2018 (REPORT) was produced by Richmond-based Mangum Economics and provides updates to the original research published in January 2016.

According to the new report, the total statewide economic impact attributable to the data center industry in 2016 was approximately 43,275 jobs, $3.2 billion in labor income, and $10.2 billion in economic output. The report shows that, while much of this impact is in Northern Virginia, the sector’s impact is increasingly spreading to other regions of the state and this economic activity will likely be accelerated by two new subsea fiber optical cables in Virginia Beach linking the Mid-Atlantic to other areas across the globe.

In addition to outlining how the data center industry strengthens and diversifies Virginia’s economy, the report also calls attention to the industry’s sensitivity to state tax policies. Virginia currently offers a sales tax exemption on equipment purchases to qualifying data centers through 2035.

“Data Centers are a high performing industry that drive significant capital and human investment, while also promoting innovation," said NVTC President and CEO Bobbie Kilberg. "As the backbone of the modern technology economy, data centers are crucial to promoting diversification in Virginia’s economy.”

Highlights of the research’s findings include:

The data center industry is broadly represented in many regions of the Commonwealth and has wide-ranging economic development potential. Northern Virginia is home to the largest concentration of private sector data center employment and locations in Virginia, and one of the largest in the U.S.

Data centers are a high-performing industry, paying wages more than twice the statewide private sector average.

Over the last five years, data centers have experienced employment and wage growth that is four times the statewide average across all private sector industries.

In 2016, data centers made $2.6 billion in capital investments in Virginia and that investment was responsible for supporting approximately 4,617 jobs, $254.3 million in labor income and $670 million in economic output in the state’s construction industry.

Data centers generate significant tax revenue for local governments. In Loudoun and Prince William Counties, for example, the benefit/cost ratio associated with the data center industry is more than 8-to-1, i.e. for every dollar spent in county expenditures related to the industry, it provided more than $8 in tax revenue for each county. Data centers in Loudoun County and Prince William County allow those localities to draw $13.4 million less from the state general fund for school budgets.

Additionally, the high wages in the industry have a disproportionate impact on state income tax revenue, by far the largest source of revenue for Virginia state government.

The pool of highly skilled workers the data center industry employs also feeds the talent pipeline for other fast growing, high wage industries.

Data centers have emerged as one of the driving forces in the development of renewable energy resources in Virginia.

Tax incentives are critical in the competition between states to attract data center investment.

“Data centers continue to offer immense opportunities for Northern Virginia and the entire Commonwealth,” concluded Kilberg. “Maintaining Virginia’s incentives for this valuable industry will be critical to ensuring Virginia remains a top global destination for tomorrow’s technology companies.”

Lead sponsors of the report include AWS, CloudHQ, Dominion Energy, Microsoft, Mid-Atlantic Broadband Communities Corp. and NxtVn. Supporting sponsors include Equinix, Facebook, Loudoun, VA Economic Development, Sabey Data Centers and Visa.

Click here to read the full report.