As a property owner and industrial/commercial real estate broker who has worked in Prince William County for more than 30 years, I am surprised when I reflect on how the industrial/commercial market has matured. In the late ’80s and early ’90s, there were vast swaths of land that presented a seemingly endless supply of opportunities for a variety of industrial and commercial businesses. Over the last decade, however, some of that land was rezoned for residential uses, as no one foresaw a demand for much of anything else. Today, however, things have changed and at a dramatic pace.
Prince William County is quickly running out of land zoned – or able to be zoned – for commercial uses most needed in today’s market: manufacturing, distribution and warehousing and, perhaps most critically, data centers.
For the last three years, I have heard the Prince William Board of County Supervisors proclaim a goal of attaining a 35% commercial tax base. This is a grand idea, as it reduces residents’ tax burden and is the basis through which better schools, social programs and the like are better funded.
Today, however, Prince William County’s commercial tax base remains a paltry 15%. What’s more, in part because of COVID-19, land for businesses such as retail, office and hospitality are projected to decline in value, and thus could drag down the cashflow on which the county relies to operate.
Potomac Mills used to be the No. 1 destination in the state of Virginia. Today, there are questions as to whether malls will survive the pandemic-driven changes in the way retail goods are sold, which is increasingly online. In addition, the office market continues to struggle as employers have realized that it’s less expensive for employees to work from home than rent office space.
Given these realities, how can the county anticipate any increase in the commercial tax base, much less achieve its goal of 35% of revenues from non-residential sources?
Today, Loudoun County has just more than 20 million square feet of data centers, and the taxes they generate represent approximately 24% of the county’s general fund tax revenue, or approximately $423 million a year. Prince William County has just more than 5.2 million square feet of data centers, which generated approximately $64 million in 2020.
For fiscal year 2022, Loudoun County decreased its real estate tax rate by 5.5 cents per $100 in assessed value to .98. Prince William supervisors are discussing cutting the real estate tax rate by just 1 cent to $1.115. Translate this savings in real dollars: A $500,000 home in Loudoun County pays 12% less in taxes than the same priced home in Prince William County.
The data center industry is eagerly looking for opportunities in Prince William County. They are seeking parcels from 50 to 200 acres to build corporate campus-style developments.
There is an abundance of power and infrastructure to support data centers, but there is a scarcity of existing land parcels where they are allowed. Prince William County has major transmission lines that traverse the county, feeding Loudoun County’s data market. Before we blight our landscape with more transmission lines, why not capitalize on where they are now? The cost of redeveloping sites like malls or shopping centers is cost-prohibitive, and if no viable options are available, data center operators that need more server capacity now will move to other markets, passing Prince William County by.
Data Centers are low impact to county residents: They generate little traffic, do not draw on county services (education, public health and safety), are the largest revenue producer per business and are good community sponsors for local charities.
Data centers offer high-impact to the county’s financial bottom line: Data centers are taxed not only on real estate but also on the property within the data center, which includes computer servers and equipment.
This combination of low impact to residents but high impact to the county’s finances results in a real solution to the county’s ability to pay for services.
It seems fairly obvious to me that if the county’s leaders want to attract a higher quality of services for their constituents, provide a higher quality education for their K-12 students and attain a 35% commercial tax base, they would find a way to offer more land for data centers.
The writer is a resident of The Plains, in Fauquier County, and principal of The Wiley Companies, Inc., a commercial real estate developer that has helped develop data centers in Prince William County.