Data centers are flooding into Northern Nevada so quickly that Reno’s planning commission has asked the city council to hold off on approving more until it can fully understand all possible effects.

The city council in February approved its first data center in the North Valleys. The city argued the Webb Data Center has low water usage, but the development plans to use 28.5 megawatts of power, which is enough to power 17,000 homes on average

Proponents say data centers will provide significant government revenue and diversify the economy, while opponents say they stress the region’s resources and receive undeserved tax breaks.

Nevada has already reported 40 data centers as of October, and more coming with the PowerHouse center breaking ground in Storey County.

What is a data center?

A data center is a dedicated facility designed to house collections of computer servers that store and manage data, and provide services to other computers.

Melanie Sheldon of the Nevada Governor’s Office of Economic Development told the RGJ that data centers are there to support healthcare, real estate, finance, professional services and transportation organizations. 

Sierra Club Toiyabe Chapter Director Olivia Tanager told the RGJ that because these data centers are running many computer servers, they require loads of energy and power. They also use power for the cooling, ventilation and fire suppression systems to keep the technology from overheating.

The U.S. Department of Energy reports that data centers consume 10 to 50 times the energy per floor space as a typical commercial office building.

Why are they coming to Nevada?

Heather Wessling Grosz of the Western Nevada Economic Development Authority said Nevada has a lot of open land where data centers can be built away from residential areas.

“I think it’s a positive, especially in some of the rural communities where there is land to be able to develop a large data center,” Grosz said.

However, it’s also the tax incentives that drive businesses like data centers into Nevada.

Data centers in Nevada can receive a 75% personal property tax abatement for 10 or 20 years and a sales tax reduction of 2% for 10 or 20 years, according to Sheldon. 

The data center would submit an abatement application, then go in front of GOED’s board for approval. If approved, they would have a contract with the state and undergo a two- and five-year audit by the county assessor and the Department of Taxation.

“I think a lot of people think we’re giving away taxes, but we are not,” Grosz said. “Nevada really is standing apart by being more affordable in the long run, but not really putting itself at higher risk by putting a grant up in front.”

For example, Grosz said it’s like getting a discount on something at the store — the product is still being bought, but the discounted rate encourages customers to come to their store.

Tanager argued this tax abatement is too much when Sparks, Reno and Washoe County are expecting deficits in the new year due to lower tax revenue. 

“That’s a really big problem because at the Legislature every other year, we’re rubbing pennies together trying to get basic funds,” Tanager said. “We never have any money, and so this bringing a new industry here and abating basically anything that they would pay into the state is a giant problem.”

However, Sheldon said abatements are always limited and will generate “ongoing” revenue through property taxes, sales taxes and other forms of business taxation.

“In Nevada, a tax abatement does not fully eradicate a company’s tax liability. The data center (or other company) will still pay taxes despite a reduction,” Sheldon said in an email.

The Apple data center parcel in Washoe County, for example, pays the highest amount of real property tax in the county, according to spokesperson Bethany Drysdale.

Water, electricity usage

Tanager’s primary concerns are with energy and water usage, as she believes data centers will take valuable energy and water from residents.

Assistant Director of Development Services Angela Fuss told the council at last month’s meeting that Reno’s incoming Webb Data Center’s plan uses less water than other Reno developments and uses less power than other Nevada data centers.

The Webb Data Center uses 2 acre-feet per year, which is more than a single-family home at 0.5 to 1 acre-foot per year, but much less than an average casino which uses 300 acre-feet per year, according to Fuss. The Truckee Meadow Water Authority confirmed these numbers are accurate.

TMWA also told the RGJ that the requirement for water service is the same for data centers as any other development: developers are required to obtain water rights on the open market and dedicate them to the water authority.

Developers are also assessed for the fees needed to activate the water and are required to pay for any new infrastructure needed such as pipes and pumps.

“This ensures existing customers do not pay for growth,” TMWA spokesperson Danny Rotter said by email.

Rotter also confirmed there isn’t a notable difference in growth now compared to the last few decades, and their resource plan expects there will be sufficient water resources for decades.

As for energy, Fuss called the Webb Data Center a “boutique” data center in comparison to larger-scale centers like Switch that use much more energy than the Reno center is planning to.

NV Energy spokesperson Meghin Delaney told the RGJ via email that NV Energy has a planning process that projects the numbers for Nevada’s future load growth, or increased demand for electricity. This takes into account the state’s projected economic growth, residential growth, increased use of electric vehicles, data centers and other large projects.

“Our planning is designed to meet the projected load forecast to ensure the company can accommodate new customers without sacrificing service to existing customers,” Delaney wrote.

She added that any change in rates will have to be considered by the Public Utilities Commission before it shows up on a customer’s bill.

NV Energy currently serves approximately 25 data centers.

What are the positives?

Grosz told the RGJ some economic advantages she believes data centers can provide include:

• Increased construction and electrician jobs during the building phase.
• More high-paying jobs for a center’s long-term operations.
• Increased tax revenue for the government from occupying the land.
• More security for businesses who store their data in local centers.

What are the fears?

Tanager told the RGJ the cons are going to be more damning than the pros:

• Data centers may not use 100% renewable energy, increasing fossil fuel or coal reliance.
• Nevada, the driest state in the U.S., may lose valuable water to water-intensive centers and cooling systems.
• Concern for future power impacts including increases in blackouts and higher customer rates.
• Fear of potential wildfire if safety measure technology is flawed or fails.
• Loss of revenue for cities and the state with such a large tax abatement.

Jaedyn Young covers local government for the Reno Gazette-Journal. Her wages are 100% funded by donations and grants; if you’d like to see more stories like this one, please consider donating at RGJ.com/donate. Send your story ideas and feedback to Jaedyn at jyoung@rgj.com.