Amazon expands its $35 billion data center business in Virginia

Amazon company announced on Friday that it will invest $35 billion over the course of the next two decades in Virginia to expand its data center business. This will result in the creation of at least 1,000 new jobs in a lucrative sector that has been expanding rapidly in the northern suburbs of the state.

Amazon Web Services (AWS), the cloud computing arm of the tech giant, stands to receive up to $140 million in economic incentives from the state and up to 15 years of additional tax breaks for software and equipment if lawmakers in Virginia give their approval. The Washington Post is owned by Jeff Bezos, who founded Amazon.)

“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.”

According to Youngkin’s statement, “numerous localities” are being considered for the new data center campuses and will be selected later. Neither AWS nor the Virginia Economic Development Partnership (VEDP) specified the number of potential sites under consideration or which ones would ultimately be selected.

Northern Virginia, which is home to approximately 275 data centers and handles at least a third of the world’s online use, has seen a boom in the data center industry over the past few decades. Ashburn is now known as the “Data Center Alley” because of the dense network connectivity, business-friendly policies, and easy access to land and electricity.

This growth has been praised by a lot of local officials, who claim that it boosts local tax revenue without adding traffic or requiring a lot of public infrastructure. The nondescript, highly secure buildings that house hundreds or thousands of computer servers serve as the physical home for cloud computing.

However, there have been a lot of controversies since they arrived in the region. Some residents of wealthy exurbs in Prince William and Loudoun counties have voiced concerns regarding noise, the effects on water and property values and the high-voltage transmission lines required to power the data centers as companies like Amazon Web Services (AWS) have acquired land to meet increased demand.

According to Del. Mark D. Sickles (D-Fairfax), a member of the legislative commission that negotiated Amazon’s economic incentives, the expansion of the company is intended to bring data center campuses to “small-town, rural Virginia,” where the industry has not yet experienced a similar fashion.

Each county or city that is being considered for a campus will likely have local lawmakers involved in deciding 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.”

Due to the fact that they have established a few outposts in less prosperous regions of the state, data center companies appear to have received little opposition from residents.

Microsoft has invested nearly $2 billion in a massive data center campus in Mecklenburg County and plans to construct additional facilities throughout Southside Virginia. Meta, the parent company of Facebook, constructed a substantial facility outside of Richmond in Henrico County.

In an effort to attract more of these facilities, officials in Virginia Beach recently slashed their taxes. This is because new subsea cables connecting Europe and Africa provide data centers with connections that are unusually fast.

According to Sickles, the commonwealth’s 15-year tax break was intended to make it a more competitive candidate for Amazon’s expansion because other states offer permanent tax breaks for data centers.

In 2035, the sales and use tax exemption for data center equipment in Virginia is set to expire. This exemption would be extended until 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. The state’s agreement with AWS is still awaiting approval in Richmond.

The tax breaks will remain in place until 2050 if a company like AWS invests an additional $65 billion and creates an additional 1,500 direct new jobs.

However, the agreement was criticized by some watchdogs for economic development. They noted that each data center employs no more than a few people when fully operational and that Amazon would probably not locate outside of Virginia.

“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.”

According to Roger Wehner, AWS’s director of economic development, the expansion will strengthen the company’s presence in Virginia and strengthen Virginia’s position as a cloud computing industry leader.

“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 since AWS opened its first Virginia data centers in 2006, the company has invested more than $35 billion in the state. Amazon, which is building its second headquarters in Arlington and is currently one of the largest private-sector employers in Virginia, may receive an additional $750 million in state subsidies.