How This County Made the Data Center Boom Pay Off

[00:00:00] Speaker 1: This is a story about making sure a deal is good for both sides. Between March and August of this year data center projects tripled in the U.S. and the hyperscalers putting up these data centers are certain they're good for their businesses. But many communities are questioning whether what is good for the companies is also good for them. Many communities but not [00:00:21] Speaker 2: necessarily all. What it means for a community is jobs and lots of money and lower taxes. For his [00:00:30] Speaker 1: part president Trump has little doubt that data centers are a good deal for America. If you want to create tremendous [00:00:36] Speaker 2: wealth if you want your house to be more valuable and everything else you're going to want a data center. If you want to go through poverty crime and squalor I would say don't approve data centers. You have your choice. And some people [00:00:48] Speaker 1: living closest to the centers agree with Mr. Trump. In Ashburn Virginia Paul Serrano walks out his front door every [00:00:55] Speaker 3: morning to see a data center. And he isn't complaining. The value of my property has gone up by almost two thirds since I had moved in here since 2013. But the property taxes have been almost flat. And the reason for that is because the tax rate has been going down steadily. In fact if you you factor in inflation the real dollars that I pay for property taxes are 12 percent less than they were 13 years ago. [00:01:29] Speaker 1: Serrano lives in what's known as data center alley in Loudoun County just next to Dulles Airport in Washington DC. It's an affluent county historically known for its horse country and rolling hills bordered by white fences. But in recent years it's become famous for its abundance of data centers. So many that they're expected to generate about 1.3 billion dollars next year. About 40 percent of the county's total tax [00:01:57] Buddy Reiser: revenue. Just launched a new high school last year. 144 million dollar high school with all the bells and whistles. Plus we've been able to add a lot of recreation facilities. We think that this is a very livable community and a lot of that is thanks to the tax revenue that we've been able to get from the commercial sector and the data centers. I was a rock and roll disc jockey who came into a job trying to figure out [00:02:21] Speaker 1: what I was selling right. Buddy Reiser is the executive director of economic development in Loudoun County. A former radio DJ he moved to the county in 2007. Well you know everybody grows up wanting to be [00:02:34] Buddy Reiser: something and I grew up wanting to be a disc jockey and was lucky enough to get in the industry and really wanted to get back into helping the communities that I was a part of and that was how I kind of stumbled across economic development and been here in Loudoun since about 2007. We had the airport but we were a bedroom community largely dependent on residential real estate for our tax base. In fact 81 percent of all the revenue we received was from residential real estate. When the housing bubble burst we lost a lot of our revenue and and that was the real entry point in which I joined Loudoun County as an economic developer. We needed to find new revenue sources and that needed to come from the commercial sector. Loudoun County had been a participant in the dot-com era. We had really because of AOL and UUNet and a lot of different things we were really building a lot during that late 90s early 2000s. So when the dot-com bubble burst we were left with a lot of assets. Namely we were left with a ton of fiber. We were left with some great talent and some buildings that were built but never occupied. So after a little research I decided you know let's pitch these empty buildings to Amazon and Google and Microsoft and digital reality and all the people out there that were really starting to build on the internet infrastructure. We kind of said you know what I think we have something and certainly it's turned out pretty good for Loudoun County in a lot of ways. When you drive through here you see the roads are just amazing you know beautiful landscaping. [00:04:15] Speaker 1: Riser says the county has about 230 data centers with another 20 or 30 coming but even a good deal has its limits. In September following increasing pushback from locals the county moved to pause approvals for [00:04:31] Buddy Reiser: some new data centers. We're at the end of our life cycle you can no longer build data centers by right here in Loudoun County. There's some that are already permitted and will be going forward but you know until the energy situation is sorted out and we get a better understanding of where we are we're not really looking to bring new data centers into Loudoun County and I think that's okay right I mean I think there's opportunity for everywhere and I think we've been able to take advantage of the opportunity we've had but that doesn't mean that we want them everywhere we want to be very thoughtful [00:05:04] Speaker 1: in our future growth. So what is the difference between a good deal for all concerned and one that favors only the big tech companies and what can other communities learn from Loudoun County? [00:05:17] Speaker 5: Well places have more leverage than they thought it's turning out and I think that is how they will [00:05:24] Speaker 1: get better outcomes by asking for it. Mark Muro is a senior fellow at the Brookings Institution and authored a paper titled Turning the Data Center Boom into Long-Term Local Prosperity. [00:05:38] Speaker 5: I think the important thing is that the data center in itself needs to be part of some plan for the future, some strategy for regional identity. Another problem that I think communities face is many of them don't have thoughtful strategy for the future, a sense of what they want to be. So that needs to be in place and with that will come requests. I think communities should be able to and ready to negotiate in a tough but fair way and try to extract enough to make these deals valuable to them. So it might be negotiating a compute partnership with the local university that has computer science needs. Maybe it is about housing, maybe it's about workforce training. Communities need to lift their aspirations. They should not be afraid to ask for much more here. And I think that's been part of the problem. They've been cowed. There's been a race fear of missing out. Fear that the data center plum will go to the next county over or the next state over. And therefore there's been a fear of asking for more. [00:06:58] Buddy Reiser: I would say that I don't go a day without hearing from somebody and somewhere in the world who wants to pick our brain and see how we can give them advice on what we've learned. I think that there are things that we have learned along the way as far as how do you site the buildings and what kind of engineering are you looking at and how do you make sure that you're using resources that are available and not taxing the resources that aren't. But I think that it's also about, you know, where do you put them? How do you make sure that they're not near residential? How do you make sure that they're in the locations where you want them? So that's why I say define the opportunity. Decide where you want them and say, you know, you want them in this industrial park and then you want to make sure that the infrastructure is already there and you want to make sure that everything you need is in the right places because you can build this in a way that is not overly impactful for citizens. But if that's what the local [00:08:02] Speaker 1: communities can do, what can the data center developers do? Equinix is an internet and data center company based in California. Adair Fox-Martin is its CEO. We operate over 281 data centers and we [00:08:16] Speaker 6: do that all the way around the world. And one of our differentiating prospects is because we're focused on connecting businesses to businesses, we tend to build in metro locations so close to where people are. And our facilities are not enormous facilities at all. The average size of our data center is about 10 megawatts with the largest being in the 35 or so megawatt category in the U.S. So data centers were [00:08:46] Speaker 1: necessary and facilitated the internet. Now we hear about them in connection with AI. How much of the data centers that we're talking about are connected to AI as opposed to the rest of the internet? Well, in our case, the vast majority of the [00:09:00] Speaker 6: work that we underpin is work that kind of makes possible very, very ordinary daily things. You know, so for example, if you've bought some stocks today, you've probably traversed our platform. If you've had a video call today, you've probably traversed our platform. If you've accessed your health care app or your banking app, then you've probably traversed our platform. Do data centers have a public relations problem? I think there is an education problem. You know, if I think about Equinix and the kind of things that we enable on a day-to-day basis, I'm not sure that that is widely understood by everyone in the public domain, the things that data centers make possible. And just like not every single building on a landscape needs to be a skyscraper, not all data centers are built for the same format. Or the same function. And so I do feel that the industry has a duty to continue to educate about the different formats, the type of capabilities that they provide and how that impacts the community and the environment. I think it's very important to emphasize that we don't see ourselves as a visitor, you know, to these communities. We absolutely see ourselves as a neighbor. So our strategy has always been to engage very, very early to explain, to listen, to listen to what the community needs, to understand, and then to work in a transparent way, you know, to meet the requirements of that community as we become one of their important neighbors. [00:10:38] Speaker 1: With the amount of capital pouring into AI, demand for data centers is unlikely to slow anytime soon. The challenge is meeting that demand without alienating local communities. [00:10:50] Buddy Reiser: It's mind boggling the trillions of dollars that are going into that. I think people forget, you know, data centers aren't the end product. You know, that's not what the product is. The data centers are what enables you and I to have this conversation. It's every text you send and every post you'd like and every photo you take and everything you buy online. I read a poll, I think it was New York Times said that 71% of American adults don't want data centers in their community. Yet 96% of American adults use the internet every day. So, I mean, there's obviously a disconnect there, right? We got to figure that part out.