Not Your Father’s Data Center - State of Datacenters in Nova

Episode Date: February 28, 2023

By providing the infrastructure required to store, process, and transport enormous amounts of data, supporting a wide range of applications and services, data centers in general play a crucial role in the digital economy. The "Data Center Capital of the World" title sometimes makes reference to Loudoun County in Virginia, which is a popular location for data centers. The county has become a desirable location for data center development due to its close proximity to Washington, D.C., its dependable power system, strong fiber-optic network, and its advantageous tax incentives.   The Executive Director of Loudoun County, Virginia Economic Development, Buddy Rizer, was the guest on this edition of the "Not Your Father's Center Data Podcast," hosted by Raymond Hawkins, CEO of Compass Datacenters.   According to Buddy, “Data centers allowed us to cut our tax rate to 89 cents last year, which means less pressure on homeowners to pay their loans. Additionally, we were able to construct a variety of schools, invest up to a billion dollars in road infrastructure, and extend the Washington D.C. Metro to Loudoun which in turn provides great jobs and services.”   Buddy Rizer is the Executive Director for the Department of Economic Development in Loudoun County, Virginia, which was named the 2021 Economic Development Organization of the Year by the International Economic Development Council. He leads the agency responsible for encouraging growth and developing relationships with Loudoun’s business community in both the commercial and agricultural-based business sectors.  During his tenure, Rizer and his team have attracted more than $40 billion in new commercial investment and more than 50 thousand new jobs.

All right, welcome. This is Raymond Hawkins, your host of Knox Your Father's Data Center. We are joined today by, I think his official title is King of Loudoun County. There's probably a more technical term for that. King, Sultan, somebody told me he was executive director of loudon county department of economic development but i think that i think the king of the county sounds got a little more ring to it for me buddy well i think you know uh it's i think king is still better than godfather of data center alley which is that's that's right it's just it's it's just catchier king of the county um you know a little a little uh a little

bit of a you know i think i we should get you shirts you know i think that'd be awesome you get get uh get buddy riser's merch as as the kids would say these days but yeah yeah yeah king of the county merch uh buddy you've been with us before on the podcast. We really, really appreciate it. For folks that don't have that episode loaded, will you give us a couple minutes on you? Always find that the folks understanding who we're talking to is helpful. Love for you to be a little personal about it. Where'd you grow up?

Where's home? How'd you end up in Loudoun County? And how did you end up with the internet revolving around what you do? I don't think people realize how big what you do is for all the things they do on the internet. So connect us to there, but let's go back to the beginning. Yeah, no, I am very excited by what has been a very interesting and long and winding career. You know, I started in radio when I was 15 years old and spent most of my life in major market radio. And when, I guess about 16, 17 years ago, I decided it was time to,

I joke, grow up and get a real job. And I had learned a lot about economic development through serving on economic development commissions and those kinds of things. And decided I wanted to give it a try to be in economic development. And applied to a lot of places, got a couple of offers, and decided that Loudoun would be a good opportunity. Gosh, that's 16 years ago now, and it's hard to believe. But, you know, when I came, my first thing was, you know, well, what is our product? What do we sell? And, you know, we had AOL and we had WorldCom and PSINet and just a lot of these, you know,

big tech companies and kind of identified data centers as an opportunity. And we had these three buildings that were built pre-tech bubble. And then we kind of went through this process of what do we do with those three buildings? And I was lucky enough to be able to work with your CEO, Chris Crosby, when he was at Digital, and decided then and there that we would at least give a shot to trying to figure out what to do with those buildings. And we ended up coming to a deal, and that was the first digital realty campus. And we've been off to the races since then, to be honest with you. We've got about 30 million square feet of data center. So early on, three buildings, what are we going to do with these?

And what are we selling here? And I mean, certainly there was some internet fiber infrastructure under the ground that made it make sense. But you really capitalized on that. So let's get back to that part of the story because it is unbelievable how things have changed in 16, 17 years. Yeah, no question. And we had a lot of the assets and that was really my first thing. It's like I started going to data center conferences and trying to learn. I got an early certification in data center operations just because I wanted to understand what was important. And we had available land. We had readily available cheap

power. We had more internet than anywhere in the world because May East was here at the time. Equidex was here. We had WorldCom, we have AOL. So we had infrastructure. My thing was, how do we then layer on some services on top of the infrastructure that might be able to make something really happen here? And I'll be honest with you, those early days, we were just trying to figure it out. You know, what are the important things? What are the things that we need? So, you know, we were early on in trying to figure out what zoning worked and how that could work here. We learned early on that, you know, having dedicated people who knew what data centers were and what data center industry needed would help. So we created this fast track team where if you were a data center,

you were pretty much getting the same people every time. So you weren't having to explain time and time again, what, what was important or why you couldn't put the loading dock here, but you needed to put it here. And, you know, so we've, we've, I think we've done a lot of those kinds of things. You know, so we've, I think we've done a lot of those kinds of things. You know, we typically haven't incentivized a lot of development in Loudoun County over the years, haven't really needed to. But we did understand that there was some things that we needed to do to make it price competitive. So worked with the Commonwealth of Virginia on a sales tax incentive that became one of the first and one of the best and is now critically important to our success. And, you know, 33 states have data center sales

tax exemptions now. I was going to say the gold standard that everybody measures against, right? I mean, people, states start with that and go, okay, here's how Virginia did it. And it's where that concept started, 100%. And it is so vital to us as developers when we think about where we're going. Hey, what's their state package look like? I mean, that's the first question we ask. So great stuff. Yeah. And for us, we wanted to provide as much predictability and certainty price-wise, process-wise. And if we could do that, then that gave me a strategic advantage to go out and market the county. Now, would I have ever thought that we were going to be the largest in the world? You know, it wasn't until 2016 that we became number one. And we've

been kind of on a rocket ship since then. You're about 30 million square feet, about 2 gigawatts of critical load. And we think that we've got the headway for another 20 million square feet and about another 2 gigawatts. We could be a 4 gigawatt market before the end of the decade. Holy cow. So, buddy, for guys listening to this podcast, they'll understand the square footage. They'll understand the gigawatts. They get the technology because it's mostly data center industry people. But I'd love it if you'd share with us what it's meant to the county and, you know, nothing that needs to be, you know, get anybody in trouble. But what has it meant to the county as far as how the rest of the county has developed? What has it meant to the county from a tax base? What has it meant to the county from a services perspective? To me, I think, you know, at the end of the day, in the chair you sit in, yes, there's a myriad of businesses you could promote and bring to the county. This one worked

out the way it did. What has it meant to Loudoun County to have the hub of the Internet in your backyard? Raymond, I think that's a great question. And I think to properly answer that, you have to understand where we were in 2006, 2007, 2008. You know, we were going through a global recession, you know, the Great Recession. Things were really tough. Here in Loudoun County, we, at that time, were about 19% commercial tax and 81% residential. Of course, what drove that Great Recession?

Home values. Right, home values. Crashing, yeah, loss of confidence in the credit market due to homes, yeah. So if you're making most of your money and and we were if you're making most of your money your tax revenue on homes and the values of homes go down you're in trouble you know and so i came in with a charge that we've got to grow the commercial tax base that That is job one. That's why I'm here. And so I started looking at, you know, what does a fast growing community really need? Well, at that point, we didn't really want a whole bunch more people. We already grown by

15,000 people a month. You know, we were growing really, really fast. So we needed to catch up. We needed to come up with some ways to do that. And data centers were the perfect thing for us. And because it's a high investment number, you know, we get paid on property tax, real property and personal property tax, big investment there, and a low drain on services. You know, and so it allowed us to catch up with schools. It allows us to kind of catch up with roads and those services. You know, in 2008, you know, our tax rate had got up to $1.285 per 100, really high. You know, data centers over the years, and, you know, we'll get over a half a billion dollars in local tax revenue this

year, data centers have enabled us to lower our tax rate to 89 cents last year. I challenge you to point to any other community in the country that has been able to lower the tax rate by 40 cents and talk about what does that mean and what does that mean to our citizens. What it means is less pressure on them as homeowners to pay for the government, but it also means that we were able to build all kinds of schools and put a billion dollars into road infrastructure and bring the Washington, D.C. metro to Loudoun County and provide great jobs and provide services and really have one of the most resilient and healthy economies anywhere in the country.

And really, it was that decision in 2006, 2007, and 2008 to really focus on data centers that has changed our community dramatically. So, Buddy, I want to connect some dots here because I think when you look and you see incredible success stories like the data center business in Loudoun County, for me, I'm like most people, I like a single cause, a single effect. It's easy for me to understand. This happened, and this is what resulted, and I can get it. But as I hear you tell the story, what an incredible confluence of events, right? The county under pressure because of the housing and credit crisis that killed home values in 08-09. The county under pressure because you've got huge influx of population, right? The county under pressure because that population's tax base is getting pushed and pushed and pushed.

And I think you said 128.5. You know, you're pushing that homeowner, you know, pretty hard on supporting all the infrastructure in the county. And because of the timing of that, the internet is really starting to change lives. The applications are coming, the smartphones are coming, what we do and how much bandwidth we eat. And that is starting to become a real thing about that time too. And to take all of that and lay it on together and now turn around and look back and see how incredibly well it fit together. And yeah, the fiber and yeah, May East and you had a few people, you know, a few data center or service providers already in the market, but what an incredible layer of other factors, right? To make for, or at least to prime the pump

for what you were able to do over the next 15 years is really pretty incredible. You think about the law of unintended consequences. Who would have thought a global credit crunch caused by lack of confidence in the housing market would fuel the need for data centers? It's sort of a circuitous route to go, hey, we've got an opportunity here. Buddy, you mentioned a number. You said a half a billion in revenue. Is that the 2023 number or over a half a billion in tax revenue? Is that the run rate now?

I think it was 560 million last year. I mean, I think depending on market conditions and dealing with some of the market constraints that I know we'll talk about, you know, we see that as a billion-dollar asset before the end of the decade. Wow, just incredible. Can you give me, just for reference sake, in terms of the county's budget, what percentage is that half a billion dollars? Well, I mean, we estimate that the data centers are more than a third of our overall revenue. Wow. Holy cow. That's unbelievable. Well, what you've done, and I know folks know you, and I joked at the beginning about the king of the county. I mean, not only lots of great overlap, but how you embraced it, the things that you did,

the having data center-specific people, understanding the business, meeting with people and understanding what they need and doing has really been fantastic. And now let's go to the other end. You're a little bit of a victim of your own success. So you mentioned a little bit of a victim of your own success. So you mentioned a little bit the constraint. It's not a secret to anyone listening to this podcast that there's some challenges in the county about, is there any more dirt left at the size that my industry needs? And the bigger question is, how long are we waiting for power infrastructure? And you aren't responsible for creating dirt. As they say, they're not making any more dirt. And you aren't responsible for creating dirt. As they say, they're not making any more dirt,

and you're not responsible for the power grid. But I know you know them both intimately. So can you talk a little bit about what's going on there, buddy, and how the county is leaning in, telling the story, helping the plan? Just how does the county think about, you know, are there still more pockets to grow? You said two gigawatts going to four, so you must think there are. Love to hear that.

You know, a little bit of the land story and a little bit of the power story from the county's perspective. Sure. Well, let's start with land. You know, I think it was never our intention to be overly dependent on any single industry, just like we didn't want to be overly dependent on residential 15, 16 years ago. So you want to take a balanced approach. And so it is important that we identify what is available for continued data center growth, but also preserving that land for other uses, other jobs, other opportunities, other growth. So, you know, we've taken kind of a strategic look. Now, you know, we do not have

a lot of big parcels left today. You know, we have a couple of things that we've kicked around. There's a huge parcel south of the airport we call Dulles Cloud South that we think is a future opportunity. There's some infill opportunities. You know, companies have been able to strike some deals on some some land that that we're going to transform and make into data centers. But we wanted to take a more strategic look at that. And I think we've done that. I think organic growth gets us another 10 million square feet, as if like a data center, if we didn't, you know, sell one

more acre of land to a data center, I think we get another 10 million square feet easy, right? But then we have these new projects that are coming online that can really layer on in the right place with the right infrastructure. You know, when you look at the county and you look at the way and where data centers typically are, it's up and down what we call data center alley. That's, you know, Waxpool, Loudoun County Parkway, north and south, then Route 50. And then, you know, north and south from there. There's some pockets in Sterling, some pockets out near Leesburg. There's a lot of places. But if you look at it,

and then you look at the infrastructure, you'll see that we've kind of laid it out right. Most of the data centers are where if you were planning it from scratch, you'd want them to be. So, you know, we are looking at that and we're trying to make sure that we're taking a, just a real thoughtful approach to it. So yeah, there's, I think there is still more opportunity. But eventually that opportunity will, you know, there's, as you know, a land rush and people are still trying to find property and they're paying, you know, millions of dollars an acre. You know, a deal got done just a couple of weeks ago at $3 million an acre. There's been one deal that was closer to $4 million an acre. That's a little higher than typical, but, you know, I think that we still see that opportunity.

But then we look at the densification. Some of the one-story buildings that are approaching 15, 20 years old, is there an opportunity then for growing those and going multi-story? So we think there's a lot of opportunity there. And I do think that we you know, we are interested in continuing to grow. And we want to continue to grow what we think is the most important industry, you know, driving the industries around it. So we think there's still opportunity there. So there's land to grow in. And that was a great, I'm a shepherd of the county's land description and love hearing how well you know it.

So there's places to grow. You mentioned in that conversation, hey, can we increase some density, right? If we've got a 15- or 20-year-old data center building, can we refresh, multi-story? Not only that, can we just get some more power in that building? Because now we can run it at a higher density. That leads us to the second part of the conversation. And again, I know this is not your responsibility, but how's the county thinking about power, not just generation, but power distribution to this very power hungry industry? Yeah. And I think power is probably the key right now. There's no question that over the last decade and a half that Dominion has been really the

gold standard in the industry and working with the industry, working with us. We've always been a great partnership. We've always kind of looked at power as a given, that if you give us and Dominion enough time, we'll get the power there. That was right up until about July of last year, when I think a confluence of events and turnovers and changes kind of got us to a point where all of a sudden there was question that the ability to deliver power in particular to what we call data center alley proper. And that's that eastern corridor in the county. There's still power available in a lot of the other areas, still plenty of power available where your campus is out by the toll road, still plenty of power available where your campus is out by the toll

road, still plenty of power available, you know, down on Route 50 and up and down that north-south 500 KV line. But it's in that specific area where there's some challenges. And I don't want to downplay it. It was a shock to us. It was something we didn't see coming. It was something the industry didn't see coming. Companies were investing billions of dollars here based on will serve letters that told them they would be able to get the power. So I'm not going to downplay it at all. But when you're looking at a longevity of an industry, an industry that is still fairly nascent in its development, we're talking about a shortage of power that is relatively short term. You know, we believe that we'll be able to meet all demands by the early parts of 2026. So while three years isn't ideal, and while it does make a huge difference, we're taking very proactive steps with Dominion, working hand in hand

to deliver the future power lines. Right now, we're bolstering some of the existing infrastructure that will deliver some more power. We're creating new substations on east and west of a line that we're creating that will help deliver that power. And they have filed a line for a high voltage line called Wishing Star to Mars in the southern part of the county that will get us to where we need to be today, where those power constraints will be lifted. We're fast tracking that. We're working through land acquisition and all those things that you need to do. And we expect that power will be delivered by early 26. So you're looking at less than three years at this point. So there's a pause, but there's not, this is not doomsday. It's not that the party's over. It's that, hey, we've got a bump in the road and we're going to get there. Right. And listen,

you know, do we want to have our data centers with buildings that they can't fit out? Absolutely not. You know, we get about 15% of our tax revenue from the buildings and about 85% from the equipment in the buildings. So buildings without equipment inside, that's not very good for us either. So we acknowledge it's a significant issue, but it's a temporary issue. And I don't think you make long-term investment decisions based on temporary conditions. That's kind of what I think. I don't want to make this episode the love Buddy Reiser episode, but let me just say as a representative of the industry and the developers

and landowners in your county hearing how you guys recognize the problem hearing how you guys are helping hearing how clear you understand the problem and how you guys are fast tracking and helping and and and and planning with our partners at dominion um this could be so much worse and so grateful for y'all's level of understanding and your partnership. And I understand it helps you guys that we can energize and put servers in there. I get that it helps us both, but you guys are such good professionals and understand the problems and are doing everything to help.

And for us as an industry, it's super appreciated. Well, I will say that there's nothing wrong with a love buddy riser episode yeah so those of you who named my episodes they're just a suggestion from buddy and i from two old radio guys we're just an idea kick it around but i i will also valentine's day is coming buddy so i mean hey i will also say that i've taken more than my share of slings and arrows over these land issues and power issues. So it's nice to get some positive reinforcements. So thank you, Raymond. I appreciate that.

I can't imagine you've had one or two tough phone calls about power, buddy. I can't imagine. Oh, it's – yeah. Yeah. Thank God that Chris wasn't, wasn't one of them. All right, all good. Yeah, yeah. But no, and then, you know, we're also, we're planning with Dominion, we have, you know, monthly meetings at the highest level, talking about after that, right? You know, we're delivering power in 26, but what does it look like in 28? And, and how do we, how do we make sure that this isn't an issue that we run into again?

So, you know, plans are in place and we're going through that process. And, you know, hopefully if we, if we do this again in a year, we'll have another plan in place for 28 and beyond. Because, I mean, you just want to make sure that you are being proactive, that you're being aggressive, that you're really working collaboratively. Somebody has to be in the middle of all this, right? Somebody has to be able to go to the industry and say, here's where we are. Go to Dominion and say, here's what we need. Go with the county government and the state government and say, well, here are the priorities. Here's the time. And then really figure out how do we get there.

And that's really, you know, that's what we've been trying to do. Because at the end of the day, you know, I'm not hooking up circuits and I'm not, you know, I'm not buying the properties. I'm not doing the servers. I'm not buying the properties. I'm not doing the servers. I'm not building the towers. But, you know, we're trying to facilitate a speedy remedy to this as best we can. So, Buddy, you mentioned in that in that summary that, you know, that there's there's state level stuff. There's there's county level stuff. You know, can you talk a little bit about, you know, we already referenced earlier that the state incentive package for data centers, first out of the gate and the gold standard, and now emulated 30 plus states across the union. Can you talk about what's coming legislatively there in the Commonwealth?

What are you guys working on and what's getting put together for what the future looks like. Yeah, and if I may, I'll start on the local scene. You know, we're going through a zoning ordinance rewrite. And I think one of the things that we have done that is unique across the data center industry is we've had the data center industry at the table as we have planned the zoning ordinance rewrite. You know, we've talked about design standards and sustainability goals that are the industry's goals. And how do we enable that? How do we make sure that we're doing this? I mean, when you go through a zoning ordinance process, you know, it can be very blocky and, you know, you know, buy the book. And if you don't bring real world market conditions into the discussion, you know, you can have a lot of unintended consequences. So salute to the industry. And Chris Curtis has been part of this process

from your company, trying to determine what is it that's important. And, you know, we go back to where we started 15 years ago. You know, where do you want to site? Where does the industry want to site the orientation of the building? You know, where do these, you know, where does the office piece fit into the critical load piece? Where do you need your loading bays to go? And what are those things that are important to you that can, you know, can achieve mutual goals, our goals and yours? So salute to the industry for being at the table and helping us through that process. I think we're gonna end up in a very good place.

And I talk with Josh Levy, if not every day, almost every day from the Data Center Coalition. We have the industry representatives come in and we do working sessions every couple of weeks in my office as we try to get to this. So all that I think is really important. On the state level, you know, the Commonwealth

has really recognized the opportunity for data centers across the Commonwealth. And so, you know, there's steps being taken now to try to make sure that we're able to to meet that from a Commonwealth perspective as well. We'd like to grow data centers across the Commonwealth. You know, I would say if it can't be here in Northern Virginia, you know, and that's Loudoun, Prince William, and, you know, Fauquier and Stafford to some extent, you know, where else? And they built something really good in Henrico and near Richmond. And are there other

opportunities, you know, the Virginia Beach landing? So I think the state is incentivized to continue to look for those opportunities. My thing right now that I think the most important thing that can be done in the current session and in other sessions is either to extend the sunset on the tax incentive, which right now is scheduled to end in 2035, or just eliminate the sunset. We need to give the industry what we've tried to give from the very beginning, and that is certainty. Certainty in process, certainty financial, certainty in your tax liability. So, you know, I think that that's something that we're working very hard on as a state. I think our legislators are incentivized and committed to trying to create that great environment across the Commonwealth.

So you raise a point that I thought I'd ask a question about. What is the Buddy Riser sweepstakes look like? I mean, how many times are the county, other counties calling, trying to recruit you away? I mean, are you under long-term contract? When do you become a free agent? Are there offers? Hey, we'll give you four legislators and a mayor to be named later in exchange for Buddy today. What's it like? I mean, there's got to be counties clamoring for you to come help them build this business. Well mean i think it's it's you know you get a mixed bag you you know you get the good but then you get all the the baggage that comes with that uh so so your agents fielding offers from all over counties all over the state yeah yeah and it's a package

i mean i think that if you talk to anybody in the Commonwealth, they'll tell you that I have tried to not only be conscious of this industry in Loudoun, but across the Commonwealth. You know, I'm at a point where it would be hard to uproot me. And I think everyone, you know, I love what I'm doing. I'm committed to this. And, you know, in a weird kind of way, I feel a responsibility now to get through the challenges we're dealing with now before I'd even think about it. But not only... You're breaking economic development hearts all over the state, buddy. I don't know about that. You know, but I think that, you know, in addition to the Commonwealth, where the governors, current and past, have asked me to help across the state, Senator Warner has asked me to help other jurisdictions

across the state, I think all that's great. But I also think from an industry standpoint, you'd be amazed at how many calls I get from, you know, outside of Detroit or Idaho or, you know, really all over the country and kind of, you know, picking my brain about how we build what we build. And I don't think it's rocket science. I think it's just, you know, putting, you know, I always say let's make it easy for our businesses to spend money. If we can make it easy for them to spend money, then good things come. But I've also been working a lot internationally. Have you been talking to my ex-wife, making it easy to spend money? I did.

Right? She has a seminar on it too, just so you know. I've been working in India to help them with their data center. I was honored to have lunch with the president of Ghana in December. And he spent the entire lunch asking me about data centers. And so he has invited me to come speak to the legislators in Ghana in June to just talk about our experience. So, you know, it's not a zero-sum game anymore. You know, it's not like if we don't win or if somebody else wins, we lose. Because the future of not only the economy, which has become a digital-first economy, that can't operate without the infrastructure.

And the infrastructure that enables that is the data center. So it's important. It becomes an equity issue. You know, if you talk to the president of Ghana, as I did, he'll tell you that, you know, he wants to have that the Internet be ubiquitous there like it is here. You know, he wants to make sure that people can use medical health over the Internet, banking and security and emergency services and opportunity. You know, this is the infrastructure that enables that. So I do think it's part of my mission at this point in my life to expand that as much as I can in my own little way, well beyond the boundaries of Loudoun County. Well, Buddy, as for me, a fitting way to close the Love, Buddy, Riser episode. The things you just rattled off, right?

For you to go talk in Africa, you're going to book a plane ticket, and you're probably going to do it via the Internet. And you're going to probably have an Uber drive you to the airport, and someone's going to have Chewy deliver dog food to their house. Someone's going to order Uber Eats, and someone's going or watch Netflix. And all of that happens over the internet. And there's lots of people, lots of smart, hardworking, good people that enable that digital infrastructure. And for me and for our industry, you're one of those key people. And thank you for how, what an incredible job you've done shepherding the county, shepherding clearly the most important market in North America and the world. And you're a great friend to us, great friend to the industry, and a great steward for helping the planet get more digital. And hearing you doing that in Africa is pretty cool. Man, thank you so much for chatting with me again. I know our folks that

listen to us like listening to you and hearing what's going on. And it's been great to have you, buddy. Thank you. It's been an honor. I mean, I love what you guys are doing. I think that you created an important leg in building this digital infrastructure. You know, all hail to the King, King Crosby and Chris Curtis, my good friend, and you and really your whole team. It's an honor to work with you. And it's been in all seriousness, you know, joking around the Love Buddy Riser episode. I just want to try to make as much of an impact as I can. And, you know, if I can do that, you know, at the tail end of my career, you know, I take that as a win. So I'm excited for what we've been able to accomplish and excited for the opportunity to kind of spread that message.

Awesome. Buddy, thank you for joining us. And, man, we look forward to you already pre-booked it. We'll be doing this again next year. Love hearing what you're doing there in the county and love hearing how things are going. And if we sunset that 2035 date, that'd be awesome. We're doing our part. We're doing our part.