The Data Center Lottery Ticket

In an article nearby, Coweta County Commissioner Jeff Fisher said that the Project SAIL data center project could one day contribute $100 million annually to the combined Coweta County Schools and Commission. Why Jeff Fisher Voted for the Project Sail Data Center | The Citizen

While he goes onto say that he believes the data center developers are “are losing the PR war.,” he may be missing the bigger red flag. The data center people are not using the cudgel of the potential of one fifth of the combined Coweta County budget being paid by one taxpayer. That bonanza could really provide meaningful property tax relief or at least some spiffy boondoggles.

While this feels like a lottery -like winning ticket windfall for Coweta County, I wonder if project SAIL has the same certainty as any other lottery ticket. He discounts the possibility of residential growth instead of SAIL, given the further need for resources, driving the costs (and taxes) even higher. 

The Project SAIL proposal includes a financial estimate that projects tax revenue estimated at $100 million in year ten of Project SAIL. However, even in year ten, the net benefit to both the commission and school system is “only” $72 million, which reasonable people will argue is attractive. (https://www.cowetaprojectsail.com/coweta-lp/)

We need to remember that many/ most construction projects fail to meet the initial optimistic timelines or estimates. Therefore, the nine different data center buildings are likely not going to be fully operational by year ten, if ever. So, the “full benefit” should not be expected until a later period. Like any projection, the further out they go, the less precise the projection becomes.

Next, the proposed property tax benefits are not only for the land and the buildings, but the technology that is housed inside them. The assumption is that the equipment will be replaced and upgraded over time. However, will the replacement equipment need as much space, or be as expensive as it is today?

For example, my first IBM computer encompassed half my desk, had a keyboard, monitor, and two five ¼ inch floppy drives. While that equipment was state of the art at the time and cost over $2,000, today, my backpack holds two laptops and a tablet with plenty of storage and computing power with a total cost of approximately $1,500. 

As the technology gets smaller and more efficient, will some of these nine buildings go unbuilt or unused? This would affect the total tax due. The challenge is forecasting the future is the variability and uncertainty goes up as the forecast goes further in the future.

Civiciq, which is an organization that tracks and facilitates government spending, had an interesting blog post on data center revenue. While it is only one source, it provides examples of potential benefits. However, I wonder how this will age over time. Is there a coming AI bubble? The blog posts states that there are 162 data centers operating in Georgia with 285 MORE proposed, a 176% increase. The article claims there are over 4,000 in Northern Virginia that contribute almost a billion dollars in property tax. (source)Data Centers: How Much Tax Revenue Cities Are Earning

In Georgia, data center sales tax exemptions are projected to hit an estimated $625 million in foregone revenue in the next fiscal year—up from just $10 million in 2020, according to a state audit. The audit, conducted by the University of Georgia, also found about 70% of data center construction activity in the state would have occurred even without the tax exemption. (source) Data Center Backlash Forces States to Rethink Generous Tax Break

In the most recent Georgia special Legislative session, our Senator Brass (R-Newnan) tried to rein in the very generous data center incentives before Georgia becomes a technological hellscape scene from the movie “The Matrix.”

While Commissioner Fisher correctly states an estimate of revenue very far into the future, he neglects to at least acknowledge the relative uncertainty of that future in today’s terms. 

In the not-so-distant past, shopping malls were considered attractive developments, bringing jobs, sales, and property taxes. Today Shannon Mall is a movie studio, Gwinnett Place has been redeveloped into offices, and Northpoint Mall is a candidate for an NHL arena. This was not a scenario twenty years ago.

Technology has evolved in so many ways and impacted businesses and practices. Given that these data centers support the boom in AI investment and technology, prudent people may wonder if we are just catching a wave that will lift all boats, or has the wave already crested and we will be left holding the bag?

While I understand Commissioner Fisher’s rationale and appreciate his taking time to make his case, I do not share his certainty about the potential of this (and other) projects. While the projections offer great rewards, the risks to Coweta County are being unreasonably discounted to its detriment. Spending Coweta’s rural beauty on the “lottery ticket” potential of data centers, may render us all poorer in the future.