NetChoice: Support HB 5305 to bring hyperscale data centers to Michigan

Summary

NetChoice fact sheets urging support for HB 5305 to bring hyperscale data centers to Michigan through a sales tax exemption. Citing a Virginia legislative audit commission (JLARC) review, they state that over ten years 75% of Virginia's sales tax exemption was recovered by the state and that for 2016-17 data centers generated income and sales tax revenue greater than the sales taxes exempted. They state that hyperscale data centers average $750 million in initial investment and that fiscal cost estimates for a Michigan exemption should be reduced by 75%. A map page lists Arizona, Connecticut, Pennsylvania and North Dakota as states passing data center laws this year.

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Fiscal impact of Data Center Tax Exemption —

based on a 10-year government audit of Virginia’s Incentives

| A | ‘ ( Virginia's legislative audit commission looked at 10 years of actual
investment, jobs, and tax revenue realized due to the state’s data center

JOINT LEGISLATIVE AUDIT i , ; : ; ips

ANID REVIcW COMMISSION sales tax exemption. The conclusions are impressive, and instructive:

@ The sales tax incentive Data center employment and investment have increased
achieves its purpose in Virginia as data center incentives have expanded

Jobs Colocations can. , Sunsetestended =. Capital
created use exemption i investment
1,400 $7.08
JLARC found that 90 1
percent of data center 1,200 Data center representatives rate H 56.0
: exemption among top four location i
investment made by 1,000 factors they currently use to select ' $5.0
. . a Site for location or expansion. '
the sales tax exemption 600 tm : $3.0
would not have occurred 400 — ¢ 52.0
in Virginia without the »00 $1.0
incentive. ! }
0 $0.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

@ Over ten years, 75% of the sales tax exemption was recovered by the state. And for
2016-17, data centers generated income tax and sales tax revenue greater than the
sales taxes it exempted. In addition, data centers created thousands of jobs with

billions of dollars in pay & benefits, plus billions in economic activity across the state.

3) At the county level, data centers generate property taxes that far
exceed the cost of local government services provided. For every
dollar in county expenditures that caused by data centers in 2018, MANGUM ck
counties realized from $8 to $18 in local property tax revenues.

What are the fiscal costs of data center sales tax exemptions for Michigan?

Based on a decade of actual experience in Virginia, the fiscal cost
estimates for a Michigan data center sales tax exemption should
be reduced by 75%.

Sources: JLARC report on Data Center and Manufacturing Incentives, 2019, and
Mangum Economics, Impact of Data Centers on the State and Loca! economies of Virginia, 2020

NetChoice
Support HB 5305 to bring
hyperscale data centers to Michigan

Spur millions in new investment and create family-wage jobs

Data centers are the backbone of the internet and the
foundation of our modern economy. Hyperscale data centers
average $750 million in initial investment, drive millions more in
local economic development, and create hundreds of local jobs

How can Michigan compete with other states for
this growing industry and investment?

, Ba) aoe Create a data center program that recognizes their unique

ey ea investment in equipment and construction — like Indiana,
an ng es a Illinois, Ohio, Minnesota, and Pennsylvania have done.

$200 million in annual economic output
from each hyperscale data center*

a
- 4
1,200 construction jobs 100 full-time operations jobs Generates millions in
$106 million in construction $150,000 average pay & benefits income tax, fees, and

worker pay & benefits property tax to support

plus 300 additional jobs schools and localities

* Michigan Data Center Study, Mangum Economics, March 2020

Putting Michigan on the Map

Sales Tax Exemption Programs To Attract
Hyperscale Data Centers

HB 5305 will put Michigan in the
running for multi-million dollar,
long-term data center investments.

States all over the country are enacting or
extending hyperscale data center programs,
with Arizona, Connecticut, Pennsylvania,
and North Dakota passing laws this year.

© Minimal or No Exemption (19)

N etC h oO i ce @ Long-Term Sales Tax Exemption (29}


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