Just steps outside the Aug. 5 Pima County Board of Supervisors meeting in downtown Tucson, protesters held signs, hung banners, and made clear to passing motorists and county officials they were against a mega data center coming to town. Inside, county supervisors again took up the topic of Project Blue.
While the supervisors voted June 17 to sell the land for the proposed data center, the decision about moving forward now rests with the city. Still,the county continues to address the public’s concerns about Project Blue.
The board of supervisors voted to direct the county’s state legislative lobbyist to “advocate for the elimination of state and local sales tax exemptions on equipment purchases by computer data centers,” a proposal outlined in a July 22 county memo from Supervisor Jen Allen, of District 3.
The state sales tax exemption was put in place in 2013, and allows for some sales tax relief for equipment purchases for certified data centers. While the sales tax is state-level, the revenue generated from state tax is shared with Arizona counties, which means that some county level taxes are lost because of the exemption.
The exemption, initially intended to incentivize data centers to be built in Arizona, is scheduled to sunset by 2033.
Allen and Supervisor Andrés Cano, of District 5, both of whom voted against selling the Project Blue land, were the most vocal supervisors against the exemption.
“We have to ensure, from a legislative level, we are asking corporations to include their fair share” of taxes, Cano said at the meeting.
The exemption “prioritizes a powerful company over public good,” Cano added. He said that while a board majority did support Project Blue, “there is a way for us to advocate for enhanced revenue.”
The county’s lobbying effort will be led by Michael Racy, a veteran lobbyist working for Pima County to advocate for its legislative priorities at the state capitol.
Racy told Arizona Luminaria that Arizona lawmakers of both parties are concerned about tax exemptions. He mentioned the recent Republican-led effort to repeal state tax exemptions for the film industry.
As for data center exemptions, “It’s really hard to defend this tax credit,” Racy said.
It could also be really hard to undo the tax credit. That’s because in 1992, Arizonans voted to pass Prop 108, which requires a two-thirds majority from both chambers to increase state revenue through taxes.
Noting that Arizona has been becoming a major site for data center growth, Racy said repeatedly during his discussion with the supervisors that there is not much justification for the incentive.
Chair of the Board of Supervisors Rex Scott said he is generally against tax exemptions, though Racy cautioned him it would be more strategic to focus on the single tax exemption for data centers.
Allen said, “We are seeing municipalities across the state looking at regulations [of data centers], at community benefits, and trying to do reassessment of an industry that has proliferated.”
Project Blue is anticipated to generate about $150 million in tax revenues for the city of Tucson and Pima County over a 10-year period, according to the city.
Racy told the supervisors he believes that estimation takes into account the state tax exemption.
Cano said the tax relief “still hurts the ability of local jurisdictions to have a full piece of the state revenues.”
It is unclear how much lost tax revenue may result from the exemptions already in place if Project Blue moves forward.
He said it was a good time to work with state legislators to bring more revenue down to counties in order to support first responders, parks, affordable healthcare and more.
Non-disclosure agreements
At the Aug. 5 meeting, the county considered three times whether to release memos protected by attorney-client privilege or non-disclosure agreements.
One such memo —from Pima County’s Chief Civil Deputy Sam Brown on July 16 — was placed on the agenda by Scott for public release. Scott told Arizona Luminaria that the memo is about how the county uses non-disclosure agreements. He said it should be released, with redactions, soon.
Also to be released will be expired non-disclosures that the county has signed. Those will likely also be partially redacted.
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