"Data Center Alley" in suburban Virginia may be hitting a dead end

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Loudoun County, Virginia, in suburban Washington, D.C., claims the highest concentration of data centers anywhere in the world. Data Center Alley, as some people call it, started growing in the 1990s. The first wave of internet giants began opening offices there, along a backbone of fiber networks. America Online put its headquarters in Loudoun. And between 1990 and 2000, the county’s population nearly doubled.

“When we were gaining about 1,000 people a month, putting a strain on local services and — a lot of new residents, a lot of new school students,” remembered Robert Wertz. He’s been Loudoun County’s commissioner of the revenue (basically the chief tax assessor) since 2004.

The first of these facilities in Loudoun was built nearly 30 years ago. The county draws almost 40% of its tax revenue from them. Loudoun has been spending that money on new schools and roads and more. And it cut property taxes by about 30% over the past decade.

”I think we’re the lowest tax rate in the D.C. area,” Wertz said.

But data centers depreciate over time. Which means the older they are, the less tax revenue they generate. So, in order to keep the cash flowing, the county has needed to keep approving new ones. Cue the backlash. Residents have complained that data centers use too much power and water, and they don’t like living next to them.

At a county open house on data centers, one resident, retired science teacher Debbie Neuhaus-Palmer, said she’d even be willing to pay up to $1,500 more a year in property taxes, “If that would stop the data centers, not a problem. And this is coming from someone who is retired on a fixed income.”

Now, not everyone wants higher taxes. The county will have to deal with declining data center tax revenue somehow.

“If you have an expenditure problem, you don’t have enough revenue, you can raise revenue or you can cut expenditures. But yes, those are the two decisions that elected officials have to make,” explained Megan Bourke, Loudoun’s budget director.

In a data center parking lot in Leesburg, the county seat, assessor Robert Wertz pondered this. Those decisions don’t have to be made right away, he said. There’s some wiggle room because Loudoun created a fund a few years ago to address it.

“The Revenue Stabilization Fund is supposed to offset those blips in the budget that may arise from an estimate that may be incorrect.”

Wertz said most of the money in the fund will come from data center tax dollars. In other words, the county is using data center revenue to plan for a future with fewer data centers.