Amazon will spend $35 billion over the next two decades to expand its data center business across Virginia, the company announced Friday, adding at least 1,000 jobs to a lucrative industry that has been rapidly growing in the state’s northern suburbs.
If approved by Virginia lawmakers, the tech giant’s cloud-computing arm, Amazon Web Services (AWS), stands to receive up to $140 million in economic incentives from the state and as many as 15 years of additional tax breaks for equipment and software. (Amazon founder Jeff Bezos owns The Washington Post.)
“AWS has a significant presence in Virginia, and we are excited that AWS has chosen to continue their growth and expand their footprint across the Commonwealth,” Gov. Glenn Youngkin (R) said in a statement. “Virginia will continue to encourage the development of this new generation of data center campuses across multiple regions of the Commonwealth.”
Youngkin’s statement said “numerous localities” are under consideration for the new data center campuses and will be chosen at a later date. Neither AWS nor the Virginia Economic Development Partnership (VEDP) said how many locations were being considered and how many would ultimately be selected.
The data center industry has in recent decades ballooned in Northern Virginia, which is home to about 275 data centers and handles at least a third of the world’s online use. Thanks to the region’s dense network connectivity, business-friendly policies and easy access to land and electricity, Ashburn has come to be known as “Data Center Alley.”
Many local officials have touted this growth, saying it increases local tax revenue without adding traffic or requiring much public infrastructure. Data centers, which act as a physical home for cloud computing, contain hundreds or thousands of computer servers in nondescript, highly secure buildings.
But their arrival in the region has not been without controversy. As companies like AWS have gobbled up land to meet increased demand, some residents in wealthy exurbs in Prince William and Loudoun counties have complained about noise, impacts on water and property values, and the high-voltage transmission lines needed to power the data centers.
A fight over turning a ‘rural crescent’ in Northern Virginia into a hub for data centers
Del. Mark D. Sickles (D-Fairfax), who sits on the legislative commission that negotiated the economic incentives for Amazon, said the company’s expansion is meant to bring data center campuses to “small-town, rural Virginia,” where the industry has yet to take off in a similar fashion.
Local lawmakers in each county or city being considered for a campus will likely be involved in determining where the facility will be located. “Each one of them [data center campuses] will probably engender a debate locally,” he said, “but hopefully a debate about how to make it work for everybody.”
Data center companies have seemingly faced little pushback from residents as they have set up a few outposts in less prosperous parts of the state.
In Mecklenburg County, Microsoft has invested nearly $2 billion into a massive data center campus and has planned to build more facilities in other parts of Southside Virginia. Facebook’s parent company Meta set up a large facility in Henrico County, outside Richmond.
Officials in Virginia Beach, where new subsea cables to Europe and Africa provide unusually fast connections for data centers, recently slashed their taxes to try to attract more of these facilities.
Sickles said the 15-year tax break extension was meant to make the commonwealth a more competitive candidate for the Amazon expansion because other states have permanent tax breaks for data centers.
Virginia’s exemption on sales and use tax for data center equipment is set to expire in 2035. The state’s deal with AWS, pending approval in Richmond, would extend this exemption to 2040 for any company that invests at least $35 billion in Virginia data centers and creates at least 1,000 direct new jobs that pay an average of at least $122,300.
If a company such as AWS invests another $65 billion and adds another 1,500 direct new jobs, the tax breaks will remain in effect until 2050.
But some economic-development watchdogs were critical of the deal. They said it was unlikely for Amazon to locate outside Virginia and pointed out each data center does not employ more than a handful of people when fully operational.
“The headline amount of money is really disassociated from the benefits that happen at the local level,” said John C. Mozena of the Center for Economic Accountability in Michigan. “If all those billions of dollars are being spent somewhere else, that’s of no benefit to the state.”
Roger Wehner, AWS’s director of economic development, said the expansion will add to Virginia’s status as a leader in the cloud-computing industry and further cement the company’s presence in the state.
“Virginia is a world leader in innovation and cloud computing, thanks to its investment in a robust, highly-skilled workforce and emphasis on long-term public and private partnerships,” he said in a statement.
Wehner added that AWS has invested more than $35 billion in the state since establishing its first Virginia data centers in 2006. Now one of the largest private-sector employers in Virginia, Amazon is building its second headquarters in Arlington, with another $750 million in subsidies from the state potentially on the table.
Antonio Olivo contributed to this report.
Amazon launches $35 billion data center expansion in Virginia – The Washington Post