Multi-billion-dollar data centers planned for Arkansas have been touted as significant sources of future tax revenue for local governments and schools. However, the projects are set to receive property tax abatements, a standard incentive for large industrial projects under Arkansas law, that will wipe out over half of the potential revenue.

Local Impact

The planned Google data center at the Port of Little Rock is expected to generate over $5 million annually in new property tax revenue and fees if the development is valued at $1 billion, according to an analysis from the Little Rock Regional Chamber of Commerce. That money will primarily flow to the city, Pulaski County government, the Central Arkansas Library System, and the Pulaski County Special School District.

However, if the same property were taxed at the standard rate, it would generate over $12.8 million in property tax revenue alone, not including other fees. Additionally, officials at the city of Little Rock have agreed to eliminate or greatly reduce utility-related taxes for Google’s data center.

PILOT Agreements

Arkansas law allows companies to receive property tax abatement of up to 65% for up to 30 years for projects that are financed using industrial development revenue bonds issued by a city or county. Under a payment in lieu of taxes, or PILOT, agreement, a company transfers ownership of a piece of property to a local government entity, which then leases it back to the company.

The cities of West Memphis and Little Rock each are expected to issue up to $60 billion in industrial development revenue bonds to finance the development of Google’s data centers. The data center at the port is poised to generate $4.5 million in new property taxes, of which $2.9 million will go to the Pulaski County Special School District.

Original reporting: Texarkana Gazette — read the source article.