Speaker 1: Hello, and welcome to this week's episode of the Texas
Speaker 1: trib Cast for Tuesday, April twenty eighth. I'm Eleanor Klibanoff,
Speaker 1: joined as always by editor in chief Matthew Watkins. I
Speaker 1: feel like it's been a little while since we've done
Speaker 1: an episode together.
Speaker 2: Did you enjoy your trip?
Speaker 1: I went to Dallas, the Dallas suburbs, Exaltica. I was
Speaker 1: up there for one thing, and then I'll tell that
Speaker 1: we heard Ken Paxton announced that he was doing an event,
Speaker 1: which you know, he doesn't do a ton of public events,
Speaker 1: even though he's campaigning for Senate, and so we they said,
Speaker 1: would you stick around for an extra day or two
Speaker 1: and you know, try.
Speaker 3: To see him? And uh, it was great.
Speaker 1: I spending two extra days in the Dallas suburbs has
Speaker 1: I was like, man, there's something deeply an eight in
Speaker 1: me that makes me want to see what another town's
Speaker 1: old navy looks like.
Speaker 3: And I'm gonna tell you this right now. It is
Speaker 3: the same as our old navy.
Speaker 2: That's funny because I feel like usually my experience when
Speaker 2: I hear about you traveling is that you're seeking out
Speaker 2: the nearest soda fountain.
Speaker 1: I did go to Swig. I went to Swig several times.
Speaker 1: They were like, will you stay for two extra days?
Speaker 1: And I said, can I what is my Swig budget
Speaker 1: for dirty sodas?
Speaker 3: And yeah, I blew through it, So please.
Speaker 2: I'm sure there are many people listening who have no
Speaker 2: idea what you're talking about, but that's okay, yep.
Speaker 1: If you're not from the Dallas suburbs or Mormon country,
Speaker 1: you should really introduce yourself to Swig, which is essentially
Speaker 1: just a soda with more calories added to it.
Speaker 3: It's great.
Speaker 1: Anyway, That's not what we're here to talk about this week.
Speaker 1: We are going to be diving into, honestly, one of
Speaker 1: the thorniest issues facing Texas right now, and an issue
Speaker 1: that looks really destined to define next year's legislative session
Speaker 1: and the political conversation for the next couple rounds. Over
Speaker 1: there in the capital data centers, Texas is currently on
Speaker 1: track to become the data center capital of the country,
Speaker 1: with more data center projects under instruction and announced than
Speaker 1: any other state. They're drawn here by plentiful land, minimal regulations,
Speaker 1: abundant tax breaks to the tune of about three point
Speaker 1: two billion dollars in sales tax revenue over the next
Speaker 1: two years alone. It's a very Texas sized problem, but
Speaker 1: not unique to Texas. It's something other states are wrestling
Speaker 1: with two. In fact, Virginia, the only state that currently
Speaker 1: has more data centers than we do, is locked in
Speaker 1: a huge budget impasse right now over whether to continue
Speaker 1: giving tax breaks to data centers, which sort of a
Speaker 1: foreshadow of what might come next January for us here
Speaker 1: in Texas, as we decide how much we want to
Speaker 1: welcome these data centers and how much we want to
Speaker 1: demand that they pay their share.
Speaker 3: To be here.
Speaker 1: To dig into this, we are joined by Paul Cobbler,
Speaker 1: the economy and industry reporter at the Texas Tribune. Hey, Paul, Hey,
Speaker 1: thanks for having me absolutely thanks for being here.
Speaker 2: Paul, you may not know got me sick last week.
Speaker 2: We had Soon as the podcast was over, I became
Speaker 2: terribly ill. And it's Pul's fault.
Speaker 4: Who knows the order of events here. I think someone
Speaker 4: else got me sic too.
Speaker 1: We had a chain of illness like whip through the
Speaker 1: Texas Tribune last week, which is why I was like,
Speaker 1: I will stay in North Texas.
Speaker 3: You guys all seem disgusting. We are also joined.
Speaker 1: By a very special guest, Charles Pollin, a Virginia based
Speaker 1: reporter for Inside Climate News who has been reporting on
Speaker 1: this very same issue a few hundred miles north.
Speaker 3: Charles, thanks for joining us.
Speaker 5: Hey everyone, thanks for having me. Glad to be meeting
Speaker 5: over zoom and not contributing or receiving the sickness. I guess, yes, yes.
Speaker 6: Yes, you're safe.
Speaker 3: Yeah. How are things in Virginia.
Speaker 1: I mean, we'll talk about the data centers, but generally,
Speaker 1: you guys are in the midst of a legislative session.
Speaker 5: Yeah, well, I guess a special session. We had our
Speaker 5: regular session for this year between January and March. It's
Speaker 5: a short one. It's a part time legislature here, either
Speaker 5: forty five or sixty days, wrapped up in March and
Speaker 5: got some bills across. They went to the governor. We're
Speaker 5: undergoing some final tweaks or final decisions from the governor
Speaker 5: about those now and more broadly, overarching, all that was
Speaker 5: work that was left undone on the budget regarding data
Speaker 5: center tax exemption.
Speaker 1: Yeah. It's funny and I feel like Texas sort of
Speaker 1: created this redistricting fight the Virginia is having, and you
Speaker 1: guys are having this data center fight that we're going
Speaker 1: to have, so a real two way street for ruining
Speaker 1: political reporters' lives.
Speaker 3: It's great.
Speaker 5: Yeah, it's been a busy one, I guess. Yeah, we're
Speaker 5: horse trading on who can take the lead on what.
Speaker 5: There's some hope that with that being settled last week
Speaker 5: here in Virginia, that that might open up negotiations and
Speaker 5: allow people to focus in on this issue. I should say,
Speaker 5: our redistricting effort is still being reviewed by the courts.
Speaker 5: There was a here on Monday, so TVD on it
Speaker 5: fift holes or not. But we're moving along way.
Speaker 1: It's a you know, I never saw so many connections
Speaker 1: between Virginia and Texas. But Paul, maybe you can start
Speaker 1: with sort of the basics, like this where data centers
Speaker 1: get thrown around a lot when we're talking about data centers,
Speaker 1: what do we mean? And like, why is this issue
Speaker 1: suddenly here?
Speaker 6: Yeah, So data centers are not a new thing.
Speaker 4: I think it's a thing that's kind of entered the
Speaker 4: public consciousness in the past couple of years, obviously as
Speaker 4: they've gotten much larger. But when you when you think
Speaker 4: of a data center, it's you know, really it's just
Speaker 4: sort of the the memory of the Internet is maybe
Speaker 4: the easiest metaphor to use here that it's kind of
Speaker 4: like all the servers, you know, the cloud storage infrastructure,
Speaker 4: sort of like the Internet is a physical thing, even
Speaker 4: though we think of it as being out in the ether,
Speaker 4: but there is equipment that makes all of this happen,
Speaker 4: that stores all of this data, and that is essentially
Speaker 4: what a data center is. And in the kind of
Speaker 4: recent terms that people are thinking about is just as
Speaker 4: the Internet has become more intense, largely because of the
Speaker 4: rise of AI and all of the computing power that
Speaker 4: that takes, data centers are getting a lot bigger and
Speaker 4: people are starting to notice them.
Speaker 3: Yeah, it's super interesting.
Speaker 1: It feels like, I mean, we have this with a
Speaker 1: lot of things at the legislature, but it's like suddenly
Speaker 1: everyone has to get very up to speed on a
Speaker 1: new niche thing that we didn't really pay that much
Speaker 1: attention to, which is I mean, you did this story
Speaker 1: about these tax breaks, and it was one of the
Speaker 1: things I found interesting about this is like this was
Speaker 1: not a thing that people were paying them, like a
Speaker 1: law passed and no one paid that much attention.
Speaker 3: And now suddenly it's super relevant. Can you talk a
Speaker 3: little bit about that.
Speaker 4: Yeah, So the tax break that we're talking about here
Speaker 4: was actually passed in twenty thirteen during that year's legislative session.
Speaker 4: That was about the same time that Virginia was passing
Speaker 4: its own sales tax break and a bunch of other
Speaker 4: states around the country. This was at the time really
Speaker 4: an emerging industry. This was something that you know, states
Speaker 4: looked upon as a source of you know, economic development
Speaker 4: of sales tax revenue, sorry, of tax revenue, not sales
Speaker 4: tax revenue. And you know, there was a reason to
Speaker 4: try to bring and draw these things here. And that
Speaker 4: first full year in twenty fourteen, after that tax break
Speaker 4: was passed, it was valued at about five.
Speaker 6: Point four million dollars.
Speaker 4: So really, I mean, when we're talking in the context of,
Speaker 4: like you said, three point two billion dollars over the
Speaker 4: next two years, I mean, it was it was basically pennies.
Speaker 4: I mean, obviously I'd love to have five point four
Speaker 4: million dollars, but you know, and it has just ballooned
Speaker 4: in size, very slowly kind of over the course of
Speaker 4: a decade, but just in the last three years, it is,
Speaker 4: it has really grown. And again you know, this is
Speaker 4: sort of like we're talking about, is as these things
Speaker 4: get bigger, as the tax breaks get bigger, people start
Speaker 4: paying attention and noticing.
Speaker 2: It's sort of like passing a law like two years
Speaker 2: before the iPhone comes out that says like, you know,
Speaker 2: no sales tax on like things you buy on your phone,
Speaker 2: right right, Like no one anticipating that you know, we're
Speaker 2: going to essentially just like completely change the way that
Speaker 2: this works and you know, have this massive expansion.
Speaker 1: Yeah, that's a great metaphor of just like you're like, oh, sure,
Speaker 1: why not come on it, and now you're like, oh no,
Speaker 1: we're being like deluged with this.
Speaker 4: Well, I thought the funny one of the funnier parts
Speaker 4: of the reporting for that story was I spoke to
Speaker 4: the bill's author, Harvey Hildebrand, and he was joking with
Speaker 4: me that he was like, you know, they did say
Speaker 4: it would take you know, ten fifteen years and we'd
Speaker 4: probably be the number one market. This is maybe the
Speaker 4: most successful bill I ever authored while I was in
Speaker 4: the legislature. And he was, you know, joking about that,
Speaker 4: but you know, I think it's true that it's it
Speaker 4: certainly is worked.
Speaker 1: Yeah, or like extremely impactful. Yeah, so we now have
Speaker 1: as you said, this has exploded. We'd sort of set
Speaker 1: up this you're this huge sales tax exemption, which maybe
Speaker 1: was not the original intent for it to be quite
Speaker 1: that large. What are you hearing from lawmakers about sort
Speaker 1: of what are the animating sides of this issue?
Speaker 4: Yeah, I mean the lawmakers I have spoken to this
Speaker 4: is it's like you said, I think a lot of
Speaker 4: them are kind of getting caught up to speed. I
Speaker 4: think it's a lot of sort of like we need
Speaker 4: to get our arms around this issue. But the numbers,
Speaker 4: you know, when they when they look at this three
Speaker 4: point two billion dollars over the next two years, when
Speaker 4: they look at how much it's ballooned in size, which
Speaker 4: we can talk about a little later, just over the
Speaker 4: past couple of years, that you know, their eyes pop
Speaker 4: and they're like, this certainly does not look right to me. So,
Speaker 4: you know, I've heard from a number of legislators, from
Speaker 4: state Senator Joan Huffman, who's chair of the Finance Committee,
Speaker 4: which is one of the key committees in any tax break,
Speaker 4: you know, repealing or reworking would go through, and she
Speaker 4: is she said she would be open to repealing it,
Speaker 4: or the very least taking a look at it.
Speaker 6: Same on the House.
Speaker 4: Ways and Mean side, a lot of the members of
Speaker 4: that committee have also said about the same. I mean,
Speaker 4: this is definitely something that they are taking a look at,
Speaker 4: but I think they're kind of treating this next you know,
Speaker 4: how many months is it, like seven months or so
Speaker 4: before the legislative session starts to kind of wrap their
Speaker 4: arms around it and figure out what they want to do.
Speaker 1: Charles, I mean, what are sort of as again, you
Speaker 1: guys are sort of living through our future. What have
Speaker 1: been sort of the battle lines around this issue in Virginia.
Speaker 5: Yeah, so I'll say it's a very similar story to Texas,
Speaker 5: you know, wanting to create economic development and like to
Speaker 5: thousand and eight here in Virginia and it's exploded to
Speaker 5: this huge market. You know, the data center industry really
Speaker 5: likes Virginia because there's a strong fiber network. It's right
Speaker 5: next to there's strong fiber network here, it's next to
Speaker 5: the capital, so it stores a lot of information for
Speaker 5: the government. There's relatively cheap power, and there relaxed land laws,
Speaker 5: land use laws with localities, and so it really blossomed
Speaker 5: and grew to its world leading market now and that's
Speaker 5: brought local tax revenue to local governments. Up in Louden
Speaker 5: County where a majority of the data centers are, it's
Speaker 5: about an hour west of Washington d c UH. They
Speaker 5: get about a billion dollars in revenue from localities are
Speaker 5: from data centers and that goes towards schools and other
Speaker 5: critical services that they want to provide. And so counties
Speaker 5: have really grabbed a hold of that. And then the
Speaker 5: labor unions really like the work too. These electricians he's
Speaker 5: building in trade construction workers see you know, I guess
Speaker 5: good jobs. They talk about the perform the work agreements
Speaker 5: with the companies and how the salaries are higher. So
Speaker 5: the economic factor has really been driving this. But people
Speaker 5: are waking up to the increases in utility rates for
Speaker 5: customers to kind of build out the infrastructure, the concerns
Speaker 5: about water use that these data centers need for cooling
Speaker 5: and then air quality for when they're using backup diesel generators.
Speaker 5: So there's a lot of like external costs that the
Speaker 5: environment and people might have to deal with. And this
Speaker 5: senator here in Virginia is a very bold, fire brand legislature.
Speaker 5: She wants to kind of rein in some of that
Speaker 5: data center development and generate some revenue for the state
Speaker 5: that is dealing with, you know, budget shortfalls and what's
Speaker 5: to fund some additional core services. So it's really a
Speaker 5: fight kind of between her and the industry on how
Speaker 5: much money the state should get, and also with local
Speaker 5: governments and other lawmakers who want to keep the economic
Speaker 5: development going and preserve Virginia's reputation.
Speaker 3: How does that sort of compare to what we're seeing here.
Speaker 6: It all sounds very familiar, you know.
Speaker 4: I think the sort of the arguments on the pro
Speaker 4: data center side, like Charlie was talking about it certainly
Speaker 4: is they point to this tax revenue at the local level.
Speaker 4: I think it's about thankfully easy to remember about three
Speaker 4: point two billion dollars that a commissioned studied by the
Speaker 4: Data Center Coalition, which is basically a trade association of
Speaker 4: all the top tech companies that you know, build a
Speaker 4: lot of these data centers. They say they contribute about
Speaker 4: three point two billion dollars and local revenue about in
Speaker 4: twenty twenty four. This what it would have been. So
Speaker 4: that's sort of part of the argument that there is
Speaker 4: a lot of money that is still going into you know,
Speaker 4: city and county coffers on one hand, and then also
Speaker 4: you know, we've seen a lot of these sort of
Speaker 4: local fights happening where trade unions are also arguing in
Speaker 4: favor of having data centers. You know, I think part
Speaker 4: of the argument against data centers is that construction jobs
Speaker 4: are quote unquote temporary. But I think you you know,
Speaker 4: tell that to a construction worker, all of their work
Speaker 4: is temporary. And then plumbers and electricians, like we have
Speaker 4: a shortage of them now, and a lot of these
Speaker 4: companies that are coming in and building data centers are
Speaker 4: announcing sort of like career programs to train more electricians
Speaker 4: than plumbers because they say they need them. So there
Speaker 4: is there is sort of like this whole discussion I
Speaker 4: found honestly so interesting just because it's it's really a
Speaker 4: discussion of trade offs. You know, are we getting our
Speaker 4: money's worth for the amount of money that we are
Speaker 4: forgoing in this in this tax break, and you know,
Speaker 4: when you think about the water use, the electricity use,
Speaker 4: the questions about rising rates, but also the job creation,
Speaker 4: the local tax revenue, so on and so forth, And
Speaker 4: so I think that's kind of what the legislators need
Speaker 4: to figure out is what is the right balance here?
Speaker 4: And I think the argument is that that balance isn't
Speaker 4: quite there right now.
Speaker 2: Do you get a sense of how much of this
Speaker 2: is actually being driven by the tax breaks or how
Speaker 2: much it's just being taken advantage of by the companies
Speaker 2: who might locate here otherwise, Like I spent some time
Speaker 2: in West Texas recently talked to some people involved in
Speaker 2: the development of data centers. The tax breaks actually didn't
Speaker 2: come up that much. What came up more was there's
Speaker 2: a lot of land in Texas which makes it very attractive,
Speaker 2: particularly in that part of the state there close to
Speaker 2: the Permian Basin, where there is you know, a massive
Speaker 2: amounts of cheap natural gas which can be used to
Speaker 2: power these plants. There's obviously the regulatory environment that you know,
Speaker 2: not a lot of restrictions on land use, particularly in
Speaker 2: the rural areas of the state, which can allow these
Speaker 2: things to be easier to build, fewer hoops to jump through.
Speaker 2: Do you have any sense as to how much those
Speaker 2: factors are driving this compared to you know, we can
Speaker 2: save three point two billion dollars in sales taxes.
Speaker 4: Yeah, I think it's hard to know. For certain unless
Speaker 4: the sales tax break goes away. And there are arguments
Speaker 4: on either side. But I think one recent example that
Speaker 4: really sticks out to me is in Hood County. They
Speaker 4: recently a data center was pursuing a local tax break
Speaker 4: that was rejected by the Commissioner's Court after a lot
Speaker 4: of resistance by locals there, and the data center is
Speaker 4: they're still going out with the construction. They were like, Okay,
Speaker 4: well that's unfortunate, but you know, they're still building it.
Speaker 4: And you know, talking to a lot of tax experts
Speaker 4: sort of about just like economic development in general, you know,
Speaker 4: this is a really common fight across a lot of
Speaker 4: industries of whether we need to be foregoing tax revenue
Speaker 4: to bring X industry here. And the argument that I've
Speaker 4: heard from some tax experts is basically that states, local
Speaker 4: governments so on, like they have more leverage now really
Speaker 4: than they will at any point, just because of the
Speaker 4: sort of you know, desperation is maybe too strong of
Speaker 4: a word, but the rush right now to build these
Speaker 4: data centers. These companies are trying to build as many
Speaker 4: of them as quickly as they can, and so this
Speaker 4: idea that they are going to you know that I
Speaker 4: was reading about Virginia and then same in Texas. The
Speaker 4: Data Center coalition folks have said, if you get rid
Speaker 4: of these tax breaks, that's an end to the investment
Speaker 4: in this state. But you know, I don't think they
Speaker 4: can afford to just forego two of their largest markets
Speaker 4: if they get rid of these tax breaks, because they
Speaker 4: are trying to build so quickly, so many for all
Speaker 4: the reasons that Matthew just said.
Speaker 1: Yeah, I mean, it's interesting because like you do sort
Speaker 1: of need Like let's say Virginia is like, we're going
Speaker 1: to get rid of this tax break, but Texas doesn't. Right,
Speaker 1: Like maybe within that you say, oh, well, now Texas.
Speaker 3: Is a little bit more appealing. But if everyone.
Speaker 1: Suddenly starts like looking at this again, and like I mean, Charles,
Speaker 1: I'm I know your stories have mentioned this, but like
Speaker 1: it doesn't like there's a decent amount of So I
Speaker 1: want to call it fear mongering because I'm sure there's
Speaker 1: some truth to it, but fear being raised by the
Speaker 1: industry Virginia that's like, well, Texas still has this, Illinois
Speaker 1: still has this. Like how much is Virginia feeling that
Speaker 1: heat of Well they might go to other states.
Speaker 5: Yeah, that's very much part of the conversation here. I mean,
Speaker 5: this industry is highly competitive first and foremost too. You know,
Speaker 5: they want to build really fast and get these programs
Speaker 5: developed and advance their models. From what I understand, so
Speaker 5: they're saying, look, if we aren't going to be respected
Speaker 5: and have our old contracts honored with an abrupt end
Speaker 5: to this sales tax exemption, we'll just go elsewhere. The Senator,
Speaker 5: Senator Luis Lucas here in Virginia kind of punches back,
Speaker 5: if you will, and says like, well, go ahead, call
Speaker 5: my bluff, call our bluff. You're not really going to
Speaker 5: go anywhere because of all the infrastructure and everything here.
Speaker 5: So that's where it's really gotten tense, and we're I
Speaker 5: guess going to see who can who can buy first.
Speaker 5: I'll say it does seem pretty consequential to these companies
Speaker 5: that want to be highly profitable and their bottom lines
Speaker 5: from what I gathered here in Virginia, like in northern
Speaker 5: Virginia where a lot of them want to cite UH
Speaker 5: and be located UH land values have to increase quite
Speaker 5: a lot. I think Amazon just bought a old George
Speaker 5: Washington University campus for like four hundred and twenty five
Speaker 5: million dollars, and so if there's any other way to
Speaker 5: eke out a few dollars and cents with the tax exemption,
Speaker 5: which you know applies to their computer equipment, maybe even
Speaker 5: some of their backup generators that are crucial that can
Speaker 5: help them, you know, and their business case. So it's
Speaker 5: it's kind of nitpicky, but it's part of the big
Speaker 5: calculation you know that these companies UH are are factoring.
Speaker 2: Is there any benefit to having the data center in
Speaker 2: your state beyond the tax revenue? I mean, is there
Speaker 2: is there anything to the idea of you know, you
Speaker 2: want this built, they're going to build it somewhere, so
Speaker 2: you'd rather than build it here.
Speaker 6: There?
Speaker 4: There is definitely like these fiber opt like It's like
Speaker 4: Charlie said that they have the fiber optic cables in Virginia,
Speaker 4: so that that is like one of the things that
Speaker 4: makes it more appealing. And you know it, it is
Speaker 4: true that the Internet takes time to travel, so having
Speaker 4: data centers closer by like that helps with a lot
Speaker 4: of these operations. But yeah, I mean, past that, the
Speaker 4: appointed job growth. It's like we talked about, there are
Speaker 4: certainly these gig jobs that are created, there are these
Speaker 4: construction jobs, and then it's the tax revenue, and you know.
Speaker 2: Not an insignificant thing, particularly in places where you know,
Speaker 2: a lot of these are having in rural communities where
Speaker 2: you know, the schools and other areas are really struggling
Speaker 2: right now and they want to see that revenue come in.
Speaker 5: Yeah.
Speaker 1: I mean I did a story last year about like
Speaker 1: small town in West Texas that is seen. I mean,
Speaker 1: it's like the wind farms, but it's similar like their
Speaker 1: wind farms, battery farms, data centers, like helping prop up
Speaker 1: their hospital, right, helping prop up their you know, certainly
Speaker 1: their schools. They're just like keeping the city afloat in
Speaker 1: a lot of ways and cashing in on that. But
Speaker 1: then we do hear this local pushback as well. I
Speaker 1: mean what tools are local I mean, yeah, like, what
Speaker 1: tools do local like municipalities have on this to either
Speaker 1: empower this or pull back from it.
Speaker 4: Not a lot, honestly, certainly in unincorporated areas and counties.
Speaker 4: You know, this was something we talked talked a lot
Speaker 4: about last year after the Curville floods and sort of
Speaker 4: the inability to regulate development in the floodplain and a
Speaker 4: lot of these areas that weren't incorporated and how that
Speaker 4: you know, contributed to some of the damage we saw
Speaker 4: from those floods. It's the same thing with data centers.
Speaker 4: I mean, if if a company in Texas wants to
Speaker 4: come and build and they are you know, not you know,
Speaker 4: in the city limits, they can really just sort of
Speaker 4: do whatever they want. You know, there are like we
Speaker 4: talked about in Hood County. You know, these counties can
Speaker 4: offer tax breaks, they can do other things. They can
Speaker 4: help construct infrastructure, they can do economic development grants. There
Speaker 4: are things they can do to attract these data centers.
Speaker 4: But like, really, if you're not in a city limit,
Speaker 4: there's not a lot you can do outside of that.
Speaker 4: And then what we have seen, like in San Marcos
Speaker 4: there was a big fight over this where there was
Speaker 4: an effort to rezone a plot of land to make
Speaker 4: it industrial so a data center could be built, and
Speaker 4: the locals there were able to kind of ban together
Speaker 4: and get the city council to block that. But you know,
Speaker 4: that's the case where it's in city limits, and it's
Speaker 4: also the case where this was a plot of land
Speaker 4: that needed to be rezoned. But you know, if it's
Speaker 4: industrial use land and.
Speaker 6: A company wants to buy it. I mean, in Texas,
Speaker 6: we have property rights.
Speaker 2: So yeah, one of their concerns that I've heard is that,
Speaker 2: you know, a lot of these are happening in rural areas,
Speaker 2: which are you know, sparsely by definition, sparsely populated governments,
Speaker 2: particularly county governments, that don't have a lot of experience
Speaker 2: with just massive, massive developments. And you have i mean
Speaker 2: quite literally the biggest, most powerful companies in the world
Speaker 2: coming in and saying to you know, this Commissioner's Court,
Speaker 2: who you know, their day to day job is like
Speaker 2: funding the construction of roads and and you know, funding
Speaker 2: the jail and things like that. Now having to negotiate
Speaker 2: these deals with you know, a team of lawyers from
Speaker 2: Meta or you know, Alphabet or insert your like massively popular, powerful,
Speaker 2: and heavily resourced company and organization, and I think, you know,
Speaker 2: some people I've heard kind of express a little bit
Speaker 2: of worry of just like, do these folks even know
Speaker 2: what they're getting into and they're signing these deals or
Speaker 2: reaching these arrangements, and do they have the resources to
Speaker 2: make sure that the deal that they are signing is
Speaker 2: you know, not just the best possible deal, but a
Speaker 2: deal that will you know, be beneficial to the county
Speaker 2: going forward.
Speaker 5: Yeah.
Speaker 3: I think there's so much of that.
Speaker 1: I mean just like look, I mean particularly what we
Speaker 1: talk about, and we could talk about this a little
Speaker 1: bit more, but like the water impact, the you know,
Speaker 1: power impacts, all this stuff that's like there's going to
Speaker 1: be add on effects of this.
Speaker 3: You know.
Speaker 1: Do they have the lawyers and the you know, sort
Speaker 1: of industry knowledge to make sure that they're.
Speaker 3: Really checking out these deals before they sign on to them. Yeah.
Speaker 4: Well, I think another kind of interesting thing that's happening
Speaker 4: right now that's contributing to this in both directions, in
Speaker 4: Virginia and in Texas is really weird in like sort
Speaker 4: of the first full budgeting year for states, for cities,
Speaker 4: for counties post COVID federal funding running out, and that
Speaker 4: was something that in Texas I'm sure in Virginia too,
Speaker 4: was contributing to very large budget surpluses and sort of
Speaker 4: allowing the legislature to kind of do all of its
Speaker 4: different pet projects that wanted to do. You know, it's
Speaker 4: the same cities, same at counties. That money is now
Speaker 4: gone and so budgeting is just becoming much tighter all
Speaker 4: over the country, and so that's a draw for a
Speaker 4: lot of these cities and counties that they see this
Speaker 4: as a new source of revenue at a time when
Speaker 4: budgets are tight, and for the state, you know, when
Speaker 4: they're looking at these big sales tax breaks they're giving
Speaker 4: all also at a time when their budgeting is tight,
Speaker 4: they're taking a closer look at it.
Speaker 2: It's been interesting to see though, the sort of like
Speaker 2: strange bedfellows that have come together in opposition of this.
Speaker 2: You know, Charles, you mentioned the sort of environmental concerns, right,
Speaker 2: the amount of power that these use, the amount of
Speaker 2: water that they use. There are a lot of people,
Speaker 2: a lot of environmentalists and other folks who are concerned
Speaker 2: about that are just also these sort of popping up
Speaker 2: and you know, perhaps pristine land beforehand. But then you
Speaker 2: just I think also have while there's this sort of
Speaker 2: like broad societal backlash to AI right and fear of
Speaker 2: like what that's bringing along, and maybe an idea of
Speaker 2: like we got to slow this down. But then you
Speaker 2: also just have people in rural communities who are very
Speaker 2: conservative who have it in their heads, rightly or wrongly,
Speaker 2: that these data centers are like not great places to
Speaker 2: live near. You know, they're very noisy, and they I
Speaker 2: think can like make it hotter sometimes around them, and
Speaker 2: just these ideas of like we don't really you know,
Speaker 2: the sort of not in my backyard attitude of we
Speaker 2: don't want this in our community. And so you get
Speaker 2: to a place where you have someone like Bernie Sanders
Speaker 2: calling for a data center moratorium, and then you have
Speaker 2: you know, like State Rep. Helen Kerwin, who's a conservative,
Speaker 2: her daughter is in the Trump administration, is a cabinet member,
Speaker 2: you know, raising this idea as well. It's been interesting
Speaker 2: to see sort of the politics shift around this in
Speaker 2: Texas and I assume elsewhere in recent in recent months.
Speaker 1: Really, yeah, I am curious, Charlie, like what the sort
Speaker 1: of you know, surprises have been on this in terms
Speaker 1: of how it's playing out. And I think Virginia is less.
Speaker 1: I mean, Texas just has this like specific sort of
Speaker 1: political bent to it, and Virginia seems a little more
Speaker 1: purple and interesting around this.
Speaker 5: Yeah, last year when a lot of legislation was introduced
Speaker 5: to kind of reign in some of the data center
Speaker 5: development and put some guardrails, and that's when we saw
Speaker 5: like these big tech companies and labor kind of align
Speaker 5: with each other to kind of protect the industry. And frankly,
Speaker 5: sometimes when you see big industry and labor and a
Speaker 5: policy debate their opposite ends. But when they unified, that
Speaker 5: made it pretty strong, a pretty strong argument, you know,
Speaker 5: for that side, and hard to go against them. I'll say,
Speaker 5: we recently had an election in November and elected a
Speaker 5: new Democratic governor. She took over after a former Republican
Speaker 5: governor was term limited, and she ran on data centers
Speaker 5: paying their fair share. She won by fifteen points. It
Speaker 5: was a pretty easy win. The House Democrats also picked
Speaker 5: up thirteen seats, and I'll say that House and the governor,
Speaker 5: Governor Spanburger, have taken more of the approach of wanting
Speaker 5: to protect Virginia's business climate. So there is a little
Speaker 5: bit of a fixture there in between the Democratic Party
Speaker 5: where the Senate, also controlled by the Democrats, wants to
Speaker 5: have an abrupt end to this tax exemption, but they
Speaker 5: have to go and negotiate with some of their more
Speaker 5: centrist counterparts. I mean, there there's been polling showing increasing
Speaker 5: opposition here in Virginia to not being near parks, to
Speaker 5: putting on clean energy requirements, which is another alternative that
Speaker 5: the environmental community kind of wants to make sure that
Speaker 5: this industry is sustainable. It seems like it's going to
Speaker 5: be here for a little bit at least in the
Speaker 5: near future, so that's an option to put on these
Speaker 5: environmental protections and then if data centers don't want it,
Speaker 5: don't want to comply with those, they don't have to
Speaker 5: get the tax exemption, and then that would generate some revenue.
Speaker 5: So it's almost like the environmental community is trying to
Speaker 5: work with the industry as opposed to pushing back against it.
Speaker 5: So yeah, it really turns politics and these fault lines
Speaker 5: on their head quite a lot.
Speaker 2: I mean, Paul, it really feels like the things have
Speaker 2: shifted in Texas over the last few months. I mean,
Speaker 2: I mentioned Kerman earlier, you know, Dan Patrick raising this
Speaker 2: as an issue in his you know, asking the Senate
Speaker 2: to study the tax exemption that you specifically wrote about.
Speaker 2: And I would just say, you know, anecdotally, from the
Speaker 2: publication of your story a couple of weeks ago, we
Speaker 2: just heard a lot of people from across the aisle
Speaker 2: kind of standing up and saying like this needs to stop.
Speaker 2: We need to to, you know, if not slow down
Speaker 2: data center production, at least take a real good look
Speaker 2: at this sales tax rebate.
Speaker 4: Yeah, and I think the thing that matters here as politics.
Speaker 4: I mean, there was a Quinnipiac poll just to bring
Speaker 4: Virginia into this too, a couple of weeks ago that
Speaker 4: found I think it was sixty five percent of Americans
Speaker 4: suppose a data center being built in their communities. That
Speaker 4: was kind of undefined on how close that would be
Speaker 4: to their home. But you know, this is something that
Speaker 4: goes that is a very bipart is an issue, and
Speaker 4: I think lawmakers that are thinking about their reelection at
Speaker 4: the end of this year are certainly.
Speaker 6: Looking at it.
Speaker 4: I think one of the best examples, like you said,
Speaker 4: I also heard from just folks all over the spectrum.
Speaker 4: I had, you know, Newsmax, the right wing news outlet,
Speaker 4: aggregated and republished my article. But then I also Ginahnejosa,
Speaker 4: the Democratic candidate for governor, put a statement out about it.
Speaker 4: So I mean there's there was just both sides I
Speaker 4: think are taking a very close look at this, and
Speaker 4: it's been really fascinating for me to see sort of
Speaker 4: the conversation happening.
Speaker 1: Are there any state lawmakers who have been at this
Speaker 1: point like overtly build baby build for data centers or
Speaker 1: tax exempt tax exempt.
Speaker 6: No, not loudly. I would say.
Speaker 4: I would say that the issue with Texas just not
Speaker 4: having not being in session yet is that everybody's pretty
Speaker 4: tepid about it. That sort of the kind of first
Speaker 4: thing anyone's going to say, as well, we don't even
Speaker 4: have our arms around this issue. We're not even sure
Speaker 4: how many data centers there are in the state, which
Speaker 4: is true. We don't have any sort of like database
Speaker 4: of this that is like required by any government, so
Speaker 4: it's sort of you know, you're just relying on data firms,
Speaker 4: you know, that goes with the electricity costs, the water use.
Speaker 4: So I think like at a minimum, everybody's sort of
Speaker 4: in agreement that we need to just better understand, you know,
Speaker 4: what this issue even is before we can start to
Speaker 4: kind of draw the battle lines and address it.
Speaker 2: Yeah, I mean, I would I agree with you that
Speaker 2: I wouldn't necessarily say there's anyone out there that you
Speaker 2: could point to and be like that's you know, like
Speaker 2: mister data center in Texas politics. But I would argue
Speaker 2: that Texas is sort of like in default, build baby
Speaker 2: build mode, you know, so norm that you know, even
Speaker 2: if there hasn't been a big booster, sort of carrying
Speaker 2: the mantle that that that's sort of the attitude that
Speaker 2: we've taken in this state so.
Speaker 3: Far, are right, No, definitely, Yeah, And.
Speaker 2: Like I think it's going to be incredibly interesting to
Speaker 2: see like how far, if at all, Texas is willing
Speaker 2: to go kind of against that instinct in the legislative session,
Speaker 2: given you know, our sort of free market proclivities, and
Speaker 2: also given the fact that there is a lot of
Speaker 2: money behind this and a lot of people who are
Speaker 2: going to try to spend to influence elections and elect
Speaker 2: pro AI pro data center politicians, and you know, frankly,
Speaker 2: like there's a lot of money to be made among
Speaker 2: former Texas politicians and money being made by tech former
Speaker 2: Texas politicians in this world as well. I mean, look
Speaker 2: at you know, Rick Perry's company related to this, which
Speaker 2: had an initial public goth heory and I think last year,
Speaker 2: and he you know, might be a billionaire now because
Speaker 2: of that, right.
Speaker 1: I mean, it is notable that anyone is coming out
Speaker 1: now and saying, well, we need to look at this
Speaker 1: more because makes it harder to later say like, well,
Speaker 1: with the help of the industry, I looked at.
Speaker 3: It more and I actually think we're okay. I think
Speaker 3: we're good. So, yeah, it certainly is notable.
Speaker 1: Yeah, I mean if you put on your prediction hat Charles, like,
Speaker 1: where do you think Virginia is going to land on this?
Speaker 1: And you know, how much do you think it will
Speaker 1: signal to other states? Like what comes next?
Speaker 5: Yeah, that's certainly a waiting factor. What this, what the
Speaker 5: messages sends. That's why it's kind of been like the
Speaker 5: defining issue on datas in a regulation. If I had
Speaker 5: to bet, I would expect it to come down the
Speaker 5: middle somewhere, particularly between the Senate and negotiations with the
Speaker 5: industry and then the governor again wanting to respect the
Speaker 5: business climate but also generate some revenue. I should say,
Speaker 5: I don't think. I mentioned it was expected to be
Speaker 5: one point five million at the start and now it's
Speaker 5: one point nine billion, So same exponential growth throughout the
Speaker 5: you know, And I guess I should say too, there
Speaker 5: are other regulations being debated and put in place on
Speaker 5: data centers, and so I think that's part of the
Speaker 5: conversation on how much money do you want to recoup
Speaker 5: from them, while you're also changing their business model with
Speaker 5: how they operate sustainably or not. There's a whole bunch
Speaker 5: of other laws and regulatory processes going under way to
Speaker 5: kind of determine how many projects are real or not.
Speaker 5: I guess this tax exemption could help contribute to that.
Speaker 5: So we'll see. They're supposed to have a decision by June.
Speaker 5: They say, we'll see what the governor does with some
Speaker 5: other bills and if it can be done by July one.
Speaker 2: I want to just like kind of run by the
Speaker 2: two of y'all, like some of the arguments in favor
Speaker 2: of this, or maybe maybe in favor. I mean it
Speaker 2: is in favor, but also sort of resisting some of
Speaker 2: the pushback, right, Like you will hear people make the
Speaker 2: case like, you know, yes, data centers use a good
Speaker 2: amount of water, but they're becoming more efficient and like
Speaker 2: they use less water than like a golf course, right
Speaker 2: and you don't see like people like calling for a
Speaker 2: moratorium on golf course construction in Texas right now, or
Speaker 2: this idea that yes they use a ton of power,
Speaker 2: but a lot of those centers coming into Texas are
Speaker 2: bringing their own power with them and essentially you know,
Speaker 2: bringing generation building their own things that are going to
Speaker 2: exist right next to the plants. It's not like necessarily
Speaker 2: we're talking about like just hooking them up to the grid,
Speaker 2: and you know, suddenly like we can't control all that demand.
Speaker 2: Is there any truth?
Speaker 4: Do you?
Speaker 2: Like? What do you think of the arguments being made
Speaker 2: that like some of this is a little bit like
Speaker 2: the fear is a little bit trumped up here more
Speaker 2: than more than reality reflects.
Speaker 4: Yes, No, I think that's a totally legit argument. Honestly, Like,
Speaker 4: I think that AI has really kind of sent a
Speaker 4: shock through our society since Open Eye first launched in
Speaker 4: twenty twenty two. And you know, there's all these questions
Speaker 4: about what it is going to do to the way
Speaker 4: we worked, to jobs that people might have, and you know,
Speaker 4: I think that's part of it, is like are we
Speaker 4: we're building these big boxes that use a lot of
Speaker 4: power and may use a lot of water and could
Speaker 4: also you know, are powering this tool that could steal
Speaker 4: our jobs. And you know, I think that is just
Speaker 4: sort of that's just how it is. I mean, this
Speaker 4: is just such a new thing I mean, if you
Speaker 4: hear the people that work on these kind of tools,
Speaker 4: like a I talk about this, I mean they say
Speaker 4: this is like the next industrial revolution and then they
Speaker 4: really mean it. And I think people hear that, and
Speaker 4: you know that is that is part of this is
Speaker 4: people just don't really have their heads wrapped around what
Speaker 4: all of this means yet. And so you know, I
Speaker 4: think it's very easy to hook onto these questions about
Speaker 4: power use, about water use, and you know, it's like
Speaker 4: I said, it's really still hard to know exactly what
Speaker 4: the landscape is too. And so I think you know
Speaker 4: that that information vacuum gets filled by something.
Speaker 1: Yeah, I think this is like to your point, like,
Speaker 1: I think we're going to see people cycling through arguments
Speaker 1: on this right Like I think a lot of the
Speaker 1: arguments we're having today or like that, you know, data
Speaker 1: versus some of these other groups are having will not
Speaker 1: be the same shape of the arguments that we're having,
Speaker 1: you know, five years from now on this, as people
Speaker 1: get more up to speed and sharper.
Speaker 3: On all this.
Speaker 1: Yeah, all right, Well, thank you so much Paul and
Speaker 1: Charles for joining us. Charles, we will send you back
Speaker 1: into the warm embrace of the legislature, which you know
Speaker 1: we will enjoy not having to deal with this year,
Speaker 1: which is great for us, but sorry for you. And yeah,
Speaker 1: I'm sure we will be following closely what is happening
Speaker 1: in Virginia to understand what awaits us next January when
Speaker 1: the legislature returns.
Speaker 3: Thank you both so much for joining.
Speaker 6: Thank you, thank you, and you can get.
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Speaker 1: Our producers are Rob and Chris and we will see
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