The debate over Virginia’s $1.9 billion sales tax exemption for data centers will likely continue, Gov. Abigail Spanberger told the several hundred people gathered for the Virginia Clean Energy Summit.
A bid to end the exemption by Senate Finance Committee chair Louise Lucas, D-Portsmouth, stalled passage of the state budget until two days before the start of the current fiscal year. Lucas has said she still thinks ending the exemption is a good idea.
The budget impasse ended when both the House of Delegates and state Senate accepted Spanberger’s proposal for a new electricity consumption tax for data centers — basically a sales tax on their electricity purchases.
The sales tax exemption remained.
“I think there will be continued conversations into the future about how people view the benefits and the shortcomings of the sales tax exemption,” Spanberger told the summit at the Greater Richmond Convention Center on Thursday.
Spanberger said the theory behind the sales tax exemptions that Virginia grants to 80 different kinds of businesses is that they bring business investment that generates significant local government tax revenue and jobs.
“I do look forward to having real, clear conversations about the potential opportunity to leverage data center investment with aggressive guardrails,” Spanberger said.
She proposed a series of guardrails in the data center framework policy statement she released last month.
Among other things, it calls for ending the current zoning laws’ automatic permission to erect data centers in areas zoned for industrial use.
Instead, the framework said any data center proposal should be subject to approval and could be denied by a local government. That change would require legislation next year.
“I think there's a lot of worry out there, and correctly and justifiably so,” Spanberger said. “For an individual who might have significant worries or not want a data center to come to their community, this is a place where the local control really matters.”
She said the framework also includes requirements on public benefits agreements and energy investments to fund the state’s shift to clean energy.
“Ultimately, what we know is that clean energy is the most affordable energy, and so what we did was we really focused on how is it that we build out a plan, an energy plan for the Commonwealth of Virginia that is prioritizing principally affordability, like in doing so, also clean energy investments,” Spanberger said, talking about the state energy plan she unveiled last week.
“Importantly, we also demonstrated what would it look like and what would it cost if we pulled back from our engagement in RGGI, or if we pull back from our clean energy economy goals, and we see that that's a costly path forward,” she said, referring the Regional Greenhouse Gas Initiative, a multi-state program that makes utilities pay for the carbon gases emissions their power plants produce.
Former Gov. Glenn Youngkin pulled Virginia out of the initiative, saying it was boosting Virginians’ power bills, but Spanberger made returning to it a priority and pushed for legislation that says some of the money RGGI requires utilities to pay the state would be returned to Virginia rate-payers.
Earlier Thursday, she announced the release of more than $67 million in RGGI funds to help residential ratepayers afford repairs to reduce their energy use, money that had been withheld by the Youngkin administration.
The savings her energy plan outlined for several clean energy paths came from ending much of the costs for Virginians’ healthcare and reducing the social cost of environmental change, including sea-level rise.
“It hasn't been without its pushback,” she said.
“The healthcare costs, the social costs of carbon, these are important elements of the conversation regardless of where you might fall on the sort of ideological spectrum,” Spanberger said.
“If you have a child with asthma, and that asthma is exacerbated because of localized pollutants that you face … that is expensive for you and personal. If you are a coastal Virginia community dealing with rising sea level changes, the impact of CO2 emissions and climate change is personal,” she said.
But a clean energy future isn’t just up to her, Spanberger said.
“I don't just get to say this is what we're going to do for the next decade plus, and have everyone just go along with it. Frankly, it's going to be the utilities that need to take action, to actually build out our grid infrastructure and our generation ... It's going to be the legislature that's going to need to make legislative changes to put some parameters or guidelines in place, and ultimately, it's the (State Corporation Commission) that makes the regulatory decisions,” she said.
Still, she said, it’s not like she’s going away after issuing the plan.
“What we've done with the energy plan is working to pull on all those levers, and it certainly will continue as it will continue with SCC cases along the way, with additional … legislation that would be necessary to long-term prepare us for the full implementation of our energy plan, but we have to take every step,” Spanberger said.
“People will get hung up on this one fix, and they'll work for years trying to do this one fix, you know, and it's that or less, and so you achieve nothing. And here, I think it's really important that people see you're trying all sorts of things because, taken in a complementary fashion, that's how you really move things forward. That's how you make an impact,” she said.
