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CL- 2000 New Business   Item #:   K.    
City Council Regular Meeting
Meeting Date: 09/18/2018  
Subject:    Data Center Tax Rate
From: Telly D. Tucker

COUNCIL ACTION
Business Meeting:     09/18/2018
SUMMARY
City Council is considering lowering the personal property tax rate for computer equipment in order to attract large data centers to the City of Danville.  During the 9/4/2018 City Council Work Session, the majority of City Council voiced their support for creating a new, special tangible personal property tax rate specific to data centers of $.25 per $100 of assessed value (which is determined by applying a depreciation schedule to arrive at the fair market value).  The data center facility must house equipment used for the transformation, transmission, distribution, or management of at least twenty megawatts of electrical power capacity.  
BACKGROUND
Last year, Vice Mayor Vogler requested that City Council consider lowering the business personal property tax rate for computer equipment in order to attract large data centers. 

Data Centers typically look at a number of factors when deciding to locate in a particular area. This includes cost of power, cost of construction, access to high speed internet, and tax rates, among others.  During previous work sessions, Council Members have discussed setting the business personal property tax rate to the lowest in the State of Virginia.  A rate below 40 cents, when combined with Danville's low real estate rates, would make Danville the most competitive location in the state.  The following is the estimated business personal property tax revenue that would be generated over five years by a 20 megawatt data center with $200 million in computer equipment at various tax rates:
 
  • Current rate:  $15,260,000 (average of $3,052,000 annually)
  • 40 cents: $1,744,000 (average of $348,800 annually)
  • 35 cents: $1,526,000 (average of $305,200 annually)
  • 30 cents: $1,308,000 (average of $261,600 annually)
  • 25 cents: $1,090,000 (average of $218,000 annually)
RECOMMENDATION
Staff recommends that the City Council set a minimum size of 20 megawatts for data centers to qualify for a reduced rate for the tax for computer equipment. 
 

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