City Finances
The Financial Impact of Data Centers
- $10,000,000 — Community development charge revenue generated in tax year 2024
- $178,000,000 — Payroll equivalent generated by a single hyperscaler in tax year 2024
Frequently Asked Questions
Do data centers in New Albany receive tax incentives?
Sometimes “tax incentives” are referred to as “tax breaks,” which implies that a company might have no tax obligation at all. This is not the case. The City of New Albany often grants real property tax abatements as tax incentives for new and expanding companies. A tax abatement reduces a company’s tax responsibilities for a set period to encourage investment – New Albany’s tax abatements never permanently excuse a corporation from paying taxes. Tax abatements are usually applied to a company’s first 10 or 15 operational years to shorten the timeline to profitability. They are primarily used to level the playing field when competing with other states across the nation that offer economic incentives to induce economic development opportunity.
Under the Ohio Revised Code, municipalities may establish Community Reinvestment Areas (CRAs), which allow local governments to grant real property tax exemptions on qualifying improvements. The Ohio Revised Code permits municipalities to offer real property tax exemptions of varying percentages for up to 15 years, or up to 30 years if a project is designated a “mega-project” by the State of Ohio. Mega-project designation requires investment exceeding $1 billion and/or the creation of more than 1,000 jobs and is subject to state-level review and approval.
When development occurs within a CRA, the value of newly constructed buildings may be exempted from real property taxation for the term of the abatement, subject to the conditions of the agreement. The increase in value assessed on the land is not abated under the CRA statute. Abatement agreements are negotiated before construction begins and are not enacted until a building is complete.
What oversight mechanisms exist for real property tax abatements?
Each year, every active CRA real property tax abatement is evaluated by the Tax Incentive Review Council (TIRC), a statutory board that engages all stakeholders in local tax revenue, including the applicable county auditor, the City of New Albany, school superintendents and/or treasurers, and township trustees. Every spring, the City’s Finance and Community Development departments partner to collect performance data from every company with an active CRA real property tax abatement in the City of New Albany. This information is assembled and presented to the TIRC in the early summer; the report compares the terms of each company’s abatement agreement with that company’s actual performance against those variables during the past tax year. Each county’s TIRC recommendations are delivered to City Council as a resolution through which the City makes its formal decision to maintain or deny the continuation of real property tax abatements.
How are data centers taxed in New Albany?
Data centers are subject to all non-abated taxes and must meet the City’s minimum revenue generation formula, which can be satisfied through a combination of municipal income tax revenue, TIF service payments, New Community Authority (NCA) charges, and, where applicable, a direct payment in lieu of taxes.
While NCA charges are collected by a separate legal entity, the New Albany East Community Authority, the City retains control over the use of those funds through a cooperative agreement. State law outlines how these funds may be used for public purposes. A portion of the revenue is applied to annual loan payments for infrastructure serving the business park, while the remainder supports public amenities such as municipal facilities, parks, and infrastructure projects that directly benefit community residents and support the strategic plan.
Some data center campuses in New Albany are utilizing tensile structures to scale data facilities faster than traditional construction projects allow. Under certain newer data center abatement agreements, semi-permanent tensile structures are valued at the same rate as permanent data center buildings for purposes of calculating New Community Authority (NCA) charges. The City’s minimum payment formula was designed to offset any payroll or property tax shortfalls regardless of building type, ensuring consistent revenue to the City and schools. Exact annual taxes paid to local entities by any commercial development can be found on the applicable county auditor’s website.
How does New Albany’s minimum annual service payment formula work?
New Albany uses a consistent formula to establish a minimum annual service payment that data centers must make to the City to maintain a real property tax abatement. To address the relatively low job creation in a typical data center, the City benchmarks data center developments against the average payroll generated by a like-sized office or manufacturing campus. Per the terms of the City’s CRA agreements, data center companies can generate revenue for the City to meet their minimum annual service payment through four potential revenue streams defined in each agreement:
- TIF collections: “TIF” refers to tax increment financing, whereby the incremental assessed value generated by new improvements and land value increases is captured and allocated to a designated fund for the financing of public infrastructure.
- New Community Authority payments: A New Community Authority (NCA) in Ohio is a public/private entity, created by developers and local governments (like cities or townships), to manage and fund large-scale, mixed-use community developments, allowing for focused economic growth, infrastructure, and facilities through special charges (like property fees or retail surcharges) and bonds, essentially acting as a public-private partnership for planned development. Although the New Albany East Community Authority (NAECA) collects the NCA charge, the City maintains control over how those funds are used through a cooperative agreement. State law outlines how these funds may be used for public purposes. A portion of the revenue is applied to annual loan payments for infrastructure serving the business park, while the remainder supports public amenities such as municipal facilities, parks, and infrastructure projects that directly benefit community residents and support the strategic plan. For tax year 2024, collected in 2025, data center projects generated approximately $10 million in community development charge revenue.
- Municipal income tax: New Albany assesses a 2% employee withholding income tax on all employees within city limits. Most New Albany residents pay no income tax to New Albany because they are provided with a 100% credit for income taxes paid to the communities where they are employed.
PILOT cash payment: If the three revenue streams above do not add up to the minimum annual service payment, a company can preserve its abatement via a cash payment in lieu of taxes (PILOT). Once they have completed construction, many data center companies pay a PILOT every year to maintain their real property tax abatements.
Data Centers are a Financial Benefit to New Albany
Recent financial analysis proves that operational data centers generate revenue equivalent to (and often surpassing) established corporate office developments in New Albany. For example, in tax year 2024 (payable in 2025), a single hyperscaler data center investment generated revenue equivalent to $178,000,000 of payroll earned in New Albany at the city’s 2.0% income tax rate. This revenue is not only significant, but stable; per the terms of the City’s abatement agreements, minimum payment amounts are guaranteed over the course of the abatement. This insulates the City’s financial future from unexpected industry downturns.
As CRA real property tax abatements “burn off” over time, the taxable value of data center real property will increase, creating significant long-term revenue potential. Moreover, New Community Authority payments will be collected in perpetuity. The resulting financial security has enabled the City of New Albany to attain a AAA bond rating from both Moody’s and S&P. Revenues from resulting City bond issuances are currently being deployed toward the construction of a new park, the expansion of the New Albany Police Department, and more. Data center investment in New Albany enables the City to build tangible assets that enhance the quality of life for our residents.
