Data center deal in Senate clears way for development
Keith M. Phaneuf
Senate Democrats struck a compromise Monday with Gov. Ned
Lamont to fast-track incentives for data center development in Connecticut
while also addressing environmental concerns over their operation.
The Senate overwhelmingly gave final approval Monday to the
data center incentives measure, as well as a second bill that pledges roughly
$110 million to $120 million in new general government aid to cities and towns
— but doesn’t commit the funds right now.
Both bills cleared the House of Representatives last week
and now head to Lamont, who is expected to sign both.
“There’s a recognition that with the new industry, particularly the data center industry, we need to have some environmental considerations in place,” said Sen. Christine Cohen, D-Guilford, who co-chairs the legislature’s Environment Committee.
Originally expected to approve the data center measure last
Thursday, the Democrat-controlled Senate deferred action over concerns about
how the program could affect air quality in future years.
Negotiations between the Senate Democratic caucus and the
Lamont administration over the past few days concluded with the bill moving
forward, along with a pledge from the governor to support new environmental standards
that the legislature would adopt this spring, Cohen said.
The Senate passed the incentives bill Monday by a 29-5
margin.
“Governor Lamont’s administration is committed to working
with the legislature to pass a bill later this session that augments the
current data center legislation,” Paul Mounds Jr., Lamont’s chief of staff,
said Monday. “The administration supports strengthening emissions standards for
any new fossil fuel generators at data centers under this bill, as well as
mandate new data center construction conforms to a certified green building
standard. Governor Lamont remains committed to environmental leadership, while
also focusing on high-growth industries and job creation.”
Data centers consume huge quantities of electricity, both to
process data and to support heating, ventilation and air conditioning units
that protect computer hardware.
Electricity generation, along with transportation, is one of
the leading sources of greenhouse gas emissions. And Cohen said data centers
usually rely heavily on diesel generators as a secondary power source after
buying electricity from the regional grid.
The legislation still is being developed, but Cohen said she
anticipates a limit that mirrors federal Environmental Protection Agency
Standards for data centers’ diesel-related emissions involving emergency
generation during power outages. And when diesel-powered generators are used
for brief periods to level out peaks in energy usage, the limit would be even
stricter than federal EPA standards.
Cohen added that this environmental legislation, which will
be adopted this spring, is vital given the potential for the incentives to
significantly expand data center development in Connecticut.
The incentive plan the Senate approved Monday would waive
state sales tax obligations for 20 years for any data center that invests at
least $200 million in the state — or just $50 million if the facility is
located within a state-designated enterprise zone.
The sales tax exemption would be extended to 30 years if a $400
million investment is made, or a $200 million investment in an enterprise zone.
Connecticut also would waive its right to impose a financial
transactions tax, such
as those proposed last summer by New York and New Jersey on these
facilities.
Most states, including Connecticut, impose a sales tax that
applies to online shopping. But some states have considered a separate, second
levy that would apply to a broad range of online transactions, including
purchases and stock transactions.
David Lehman, Lamont’s commissioner of economic and
community development, said last week that the administration has been in
serious talks with operators of data centers for months, and the exchanges were
looking for assurance that a transaction tax was off the table.
Sen. Norm Needleman, D-Essex, who co-chairs the Energy and
Technology Committee, was one of several who argued that the incentives could
give Connecticut a foothold on one of the fastest-growing segments of the
21st-century economy.
“This is the bill for our future,” Needleman said, adding
that data center development could someday rank alongside technological
advancements like the telephone exchange and the portable typewriter. “It is
saying to the tech world: ‘Welcome. We want you here.’”
The bill also empowers the municipalities where these data
centers would be located to negotiate “host fee agreements.”
While the centers, technically, would be exempt from
municipal property taxation, communities could impose a host fee that could be
less than, equal to or greater than the lost taxes.
Still, some critics charged that Connecticut wasn’t getting
much of a return.
Sen. Alex Kasser, D-Greenwich, one of five who opposed the
incentives, said data centers create construction jobs for a year or two but
then employ minimal staff to maintain the facility.
“Thirty years is a long time to give an industry a free pass
on taxes” in exchange for “a skeletal staff.”
And Sen. Cathy Osten, D-Sprague, who voted for the measure,
used her comments to chastise the Lamont administration for finding the time to
prioritize data centers — but not Connecticut’s relationship with the two
Native American tribes that run casino complexes in the state’s southeastern
corner.
“I am extremely offended,” Osten said, noting the
Mashantucket Pequot and Mohegan tribes have been hoping to reach a deal with
the state regarding online gaming issues since Lamont took office in January
2019. “They’ve never asked for a dime from the state of Connecticut, yet we
can’t in two-and-a-half years come up with an agreement?”
Max Reiss, Lamont’s communications director, said afterward
only that “negotiations between members of the governor’s administration and
the tribes are ongoing.”
More aid to cities and towns — in theory
Also Monday, the Senate endorsed an omnibus fiscal bill that
lays the groundwork for a major boost in non-education aid for communities with
large quantities of tax-exempt property.
“This is a commitment to greater equity in this [budget]
process,” Senate President Pro Tem Martin M. Looney, D-New Haven, said a few
minutes before the Senate passed the fiscal bill 28-7.
The measure specifically creates a new methodology for
funding the state’s PILOT, or Payment In Lieu Of Taxes, grants, which reimburse
communities for a portion of the revenues they lose because certain types of
property are tax-exempt.
Legislatures and governors have struggled to maintain their
commitment to PILOT over the past two decades as surging pension and other debt
costs have consumed more and more of the state budget.
PILOT grants are supposed to replace about 45% of the funds
communities lose because they can’t tax state property. Communities currently
get less than 15% back, according to the Connecticut Conference of
Municipalities. Similarly, the grants once designed to replace 77% of taxes
lost on nonprofit colleges and hospitals now cover less than 25%.
No community would receive less PILOT aid than it currently
does through the bill under consideration, but those in low-income
municipalities would receive additional funds.
Democratic leaders estimate this new system would cost the
state about $110 million to $120 million per year, but the bill adopted Monday
doesn’t actually appropriate the funds — leaving that crucial step to late
spring when the next two-year state budget is expected to be approved.
“We’re passing a policy without funding? Wow!” said Senate
Minority Leader Kevin Kelly, R-Stratford, who voted against the bill and
suggested it was more about politics than about substantive relief. “We need to
be more mindful of the middle class.”
Advocates for cities and towns last week thanked lawmakers
for the pledge legislation, but also warned that municipal budgets would be
left in a lurch this spring if the aid isn’t delivered.
The property tax pledge bill included two other fiscal
components:
The first would clarify that more than 100,000 Connecticut
residents who work in other states and pay income taxes to those jurisdictions
still can get a credit for those taxes on their Connecticut returns.
New York and Massachusetts enacted laws holding that telecommuters
working from home for “convenience” actually owed taxes first to their
employers’ home state. Connecticut responded with its own convenience law in
2019, and those and other northeastern states are battling the issue out in
federal court.
The second additional component wrapped into the municipal
grant bill would end the controversial practice of placing liens on the homes
of former welfare recipients.
Siting Council gives East Windsor solar farm green light
Joe Chaisson | Journal Inquirer he state Siting Council on Thursday unanimously granted approval for construction of Gravel Pit Solar, a 485-acre solar farm slated to become the largest of its kind in the Northeast.
The approval marks the final significant hurdle for the project’s developers, D.E Shaw Renewable Investments, or DESRI, and North Light Energy. They anticipate construction to begin this summer with the bulk of it occurring in 2022, Aaron Svedlow, director of development for Gravel Pit Solar, said.
“We are very pleased with the Siting Council’s unanimous decision to approve Gravel Pit Solar’s certificate,” Svedlow said. “Gravel Pit Solar is an exciting project that will provide significant benefits to the town of East Windsor, the state of Connecticut and the New England region.”
The proposed project is a 120-megawatt solar development that will straddle several sites between Apothecaries Hill Road and the south side of Plantation Road.
Developers said the project would generate enough clean energy to power 23,000 homes for customers in Connecticut, Massachusetts, and Rhode Island.
When the project is complete, DESRI will become the town’s largest taxpayer. Under an agreement approved in June by the Board of Selectmen, the town will get $378,000 in taxes annually plus $1.5 million for infrastructure improvements.
Upon completion, DESRI will become one the town’s largest taxpayer, First Selectman Jason E. Bowsza said.
Selectman Alan Baker said when the project is fully active it will contribute significantly to the town’s commercial tax base.
“I am also sensitive to the fact that a percentage of the project is using farmland and it is my goal as a selectman to ensure our open space fund is replenished so we can conserve more farmland in the future,” Baker said. “The open space fund is an extremely important tool for our community to use to balance our tax base growth with our environmental stewardship responsibilities.”
On top of that, the development will also significantly reduce dust, noise, and truck traffic, as well as illicit activity in the gravel mines, such as off-road, all-terrain vehicle riders and various other festivities.
Bowsza said the developers have been team players since the entire process began.
“The town is looking forward to continue working with them, as well as the jobs it will create, and the revenue it will bring in,” he said.
Meanwhile, some residents on a Facebook post questioned why the town wouldn’t receive any of the power generated from the solar farm, or at least a discount on the delivery fees from Eversource Energy?
Bowsza responded by saying that is not how utilities are governed in the state.
“We could have entered into a power purchase agreement with them for town and Board of Education buildings, but we already have an existing one with another company, which is set to expire at the end of the year. Even if we had, it would have saved us only around 15% on our energy bill, which is about $75,000. Alternatively, we will make $378,000 per year in tax revenue and eliminate an attractive nuisance,” Bowsza wrote.
Svedlow said that over the next few months, developers plan to continue finalizing the project’s design and securing the additional permits required to start construction, as well as submitting a Development and Management Plan to the Siting Council.