The Digital Gateway- Rezoning and Taxes

I have been tracking the bills that pertain to Data Centers in the current legislative session. Wednesday was cross over when the bills that passed the Senate go to the House and vice versa. In general the bills to control data center development have not been doing well. One bills in this group is a special interest tax code bill written to benefit the landowners of the Prince William Digital Gateway rezoning. It is carried by Senator McPike McPike, a Democrat, who represents a large portion of Prince William County but not the Digital Gateway corridor.

The PW Digital Gateway is a project in which QTS and Compass Datacenters are planning to develop over 2,100 acres of greenfield land adjacent to the Manassas National Battlefield Park for a massive industrial data center development consisting of up to 34 buildings and over 22 million square feet complete with fenced security, electric substations and backup diesel microgrid of hundreds of industrial sized backup generators and transmission lines.

Through a land acquisition entity QTS, has contracted to buy the Digital Gateway landowner's property for their development at life changing valuations of millions of dollars. Those purchases stand to drastically increase the value of the land, but the sale is contingent on two data center zoning approvals being declared final and unappealable. In the meantime, the current property owners are responsible for the property taxes and liens.

Several opponents of the  PW Digital Gateway have sued. The data center companies involved in the project, QTS and Compass Datacenters, filed a motion to dismiss the lawsuit, but the PWC Circuit Court Judge Kimberly Irving declined to dismiss the case. Saying she needed more evidence about a key argument: whether Prince William County fulfilled its legal requirements to properly advertise the public hearing before the vote on the PW Digital Gateway rezoning, she scheduled an evidentiary hearing for March 6, 2025. 

Under the current state tax code the tax rate goes up and deferred taxes for the five tax years of 2018, 2019,2020,2021 and 2022 become due immediately. The recovered taxes are due to losses in agriculture and open space exemptions that were previously granted. The Digital Gateway homeowners sued the county for tax relief. However, the Circuit Court found that there is really no remedy under the current tax code. Prince William County had already  discounted the tax due by 75%  for uncertainty though the increase in taxes was eye popping- tens of thousands of dollars up to hundreds of thousands of dollars due to the county.

Enter Senator McPike who despite not representing the property owners has carried a bill through the state senate to change the state tax code to benefit these property owners and others who may be engaged in having their properties rezoned and then banking the property.

The Prince William Times reports: “So far, the county is owed at least $1.9 million in real estate taxes from Digital Gateway landowners because they are refusing to pay the full tax bills on their recently rezoned land, according to Nikki Brown, a county spokeswoman.  McPike has received thousands in donations from data center interests, including the landowners who would directly benefit from his bill. In 2024, he received more than $20,000 from data center and construction interests. Since 2021, he has received an additional $15,000 from donors involved in the Digital Gateway, according to campaign finance reports.” 

Look, I am thoroughly unhappy with the development of greenfield agriculture land into industrial uses, the lack of management and planning for the electric demand and power infrastructure (and water) needed for this uncontrolled building of data centers and the intensity of industrial development. I am angry about the way the project seemed to be rammed through, and I am furious about the appearance that data center companies bought themselves supervisors and state senators. However, I do not feel it is right to bankrupt our neighbors who were tempted with life changing wealth to sign a bad contract. (Really, they should have had better legal representation.) I do not want to destroy their lives (though they seem not to care about the rest of us). I believe the bill will pass if the performance in the Senate chamber is any indication. The scope of this change in the tax code needs to be limited to this one project and let the courts settle it. The bill and summary appear below.

UPDATE: Well, I was wrong. The bill was laid on the Table in the House Subcommittee on Friday, February 14, 2025. 

SB 1305 - Local taxes; change to zoning ordinances, etc.
Patron: McPike
Status: Passed Senate< UPDATE Houses  Counties Cities and Towns - Subcommittee #3 Voted to lay on the table.

A BILL to amend and reenact §§ 58.1-3237 and 58.1-3285 of the Code of Virginia, relating to local taxes; zoning; assessments; ordinances.

SUMMARY AS INTRODUCED:

Local taxes; zoning; assessments; injunctions; ordinances. Provides that for purposes of real estate subject to a special tax assessment for land preservation by local ordinance, a change to the zoning ordinance shall only be effective following (i) the approval of the relevant modification in the zoning classification of real estate; (ii) the exhaustion of the challenge or appeal period; and (iii) if pending, the final determination of any challenge or appeal made within such period.

The bill also provides that for purposes of subdivided or rezoned lots, the assessment or reassessment required by law shall only be effective following (a) the approval of a modification in the zoning classification of the subject real estate, an exception to zoning or classification of the subject real estate, or a reclassification of the subject real estate; (b) the exhaustion of the challenge or appeal period for such approvals; or (c) if pending, the final determination of any such challenge or appeal made within such period.

The bill also authorizes the circuit court to issue an injunction to stay the collection of taxes during the pendency of any application to the circuit court for an assessment correction upon a showing of (1) a bona fide hardship caused by such assessment and (2) a bona fide financial inability to satisfy such assessed tax obligation. Any injunction so issued shall not remain in effect later than when a final determination is made on the merits of an assessment correction application. Under current law, no suit for the purpose of restraining the assessment or collection of any local tax shall be maintained in any court of the Commonwealth, except when the party has no adequate remedy at law.

Finally, the bill provides that any zoning ordinance enacted after December 1, 2023, shall not become effective until the later of either (A) the exhaustion of the period within which a decision of the local governing body may be contested or (B) if pending, the date of final determination for all actions related to a contested decision of the local governing body.