PHOENIX — A three-year freeze on state tax incentives for data centers gives Arizona time to chart a new strategy, Gov. Katie Hobbs said Tuesday.
The moratorium is included in the new state budget, which took effect July 1.
“Nobody's talking about a moratorium on data centers themselves,” Hobbs said. “There are places where they make sense, where they provide economic opportunity and where they're not sucking the groundwater and overtaxing the utilities.”
Hobbs said the state can now examine its policies and work with local communities on new ones.
“I don't have all the answers right now, but I think that's what this pause gives us a chance to do,” she said.
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The moratorium affects new applications for the tax exemption, including renewals. Hobbs’ office estimates the change will save about $57 million – money Democratic lawmakers say can be better spent on priorities such as childcare assistance and rural hospitals.
“This is about the people of Arizona, and certainly, these profitable megacorporations do not deserve or need a data center tax giveaway – a sales tax exemption that the rest of us pay,” Senate Minority Leader Priya Sundareshan said.
Hobbs and Democratic lawmakers had called for the incentives to be repealed. The moratorium was a compromise in the budget deal, Hobbs.
State Rep. David Livingston, who chairs the House Appropriations panel, told ABC15 last month he didn’t think the freeze was a significant policy change.
The Legislature passed the incentives in 2013. Hobbs, who was a state senator at the time, voted for it but says it’s now time for a change.
“It was the right move at the right time, and it is clear that it has paid off,” she said. “Today, 13 years later, Arizona ranks in the top 10 for data centers nationwide, with nearly 98 facilities currently operating and 86 planned or under construction.”
‘Let them pay the full amount’
April Butler, who lives near the site of a massive data center complex proposed in the West Valley, said the three-year freeze is a good first step.
“Let them pay the full amount if they want to come in here and build in our communities,” she said. “Let them pay the full amount.”
Project Baccara would put two data centers and a gas power plant on a 160-acre site in unincorporated Maricopa County off Olive Avenue and Litchfield Road near Luke Air Force Base.
“I think we're building so many, and we're doing it so fast, and we don't know what the full impact is going to be to our state,” she said.
Butler said the community hasn’t had enough say in the process, adding that some people are just finding out about the project.
“We're learning this as we go, and the more we learn, the worse it seems,” she said.
Butler said she’s worried about Project Baccara’s water usage and effects on the environment. And she said she’s already seeing increases in her water and electric bills as infrastructure to support the data center complex is built.
“We're going to end up helping pay for it, and I don't think that the community should,” she said.
