As more data centers are being built across the country than ever before, several Colorado Democrats are introducing a bill to make the state more attractive to companies looking to build these facilities in an effort to prevent Colorado from being left out of the rapidly growing industry.
In a press conference on Tuesday, the bill’s sponsors, along with industry and labor representatives, explained how it would work in detail.
House Bill 26-1030, or the Colorado Data Center Workforce, Clean Energy, Grid Modernization, and Consumer and Environmental Protection Act, is being sponsored by Rep. Alex Valdez (D-Denver) and House Majority Leader Monica Duran (D-Jefferson), as well as Sen. Kyle Mullica (D-Adams).
“It’s no secret that other states have faced challenges implementing hasty policies to attract data centers, understandably eager to benefit from the jobs and the investment without ensuring proper guardrails were in place. Here, we will not be making the same mistakes,” said Rep. Duran during the conference. “Our bill creates a strong and protective framework that will bring data centers here, but on our terms — the Colorado way.”
Data centers are large computing facilities housing servers, hard drives, network infrastructure and other hardware needed for high-speed data storage and processing all over the world. Given the massive computing power needed to handle the digital traffic, these centers use enormous amounts of electricity, as well as water to cool the machines. Colorado currently has 56 data centers, all located along the Front Range from Fort Collins to Walsenburg. Most are relatively small, but the artificial intelligence boom is driving the industry’s need for larger, resource-intensive data centers.
The bill would create a development and incentive program, offering a full exemption from the state sales and use tax for 20 years to qualifying projects, with the opportunity to apply for an additional 10-year extension for the exemption. The bill also establishes a governing authority to ensure that projects receiving support through the program meet the criteria laid out in the bill. The nine-member group includes four people from the data center industry and those who build the facilities, two with water and clean energy experience, the director of the Colorado energy office, and two chosen by the Governor.
To qualify for the incentive program, proposed data center projects must commit to breaking ground within two years, investing at least $250 million in the community within five years, and maintaining certain environmental and energy efficiency standards. Additional commitments needed to qualify include “working to ensure that the data center will not cause unreasonable cost impacts to other utility ratepayers,” and the implementation of a closed-loop cooling system or other cooling technology that does not use water.
Critics of the bill, including a number of climate justice and community organizations in Colorado, point to the potential impacts it could have on both the environment and the state’s budget.
“Colorado can’t afford to be giving some of the wealthiest companies in the history of the world a major tax break at a time when our state is facing a nearly $1 billion budget shortfall, and Coloradans are struggling with today’s high cost of living,” said Kathy White, director of the Colorado Fiscal Institute, in a press release for a coalition of advocacy organizations for a coalition of environmental and low-income advocacy organizations on Tuesday. “Other states with these incentives in place are now struggling to roll them back because they have been so costly. Data center companies should have to pay their fair share, just like the rest of us.”
While a fiscal analysis of HB-1030 has not been released, an analysis of a bill from last year, which was set to offer similar tax breaks but did not make it into law, estimated that the exemptions would decrease the state’s general fund revenue by $38 million annually.
HB-1030 doesn’t appear to be the only bill tackling data centers this legislative session, as Sen. Cathy Kipp (D-Larimer) and Rep. Kyle Brown (D-Boulder, Broomfield) plan to introduce what appears to be a similar piece of legislation later in the session. While it isn’t clear exactly how Reps. Kipp and Brown’s bill will stand apart from HB-1030, environmental groups such as the Natural Resources Defense Council and Earthjustice have indicated support for the as of yet unintroduced proposal over Reps. Valdez and Duran’s.
“Colorado has the opportunity to lead in ensuring that data centers develop without harm to our residents,” said Megan Kemp, state legislative representative with Earthjustice’s Rocky Mountain Office, in the Tuesday press release. “Now is the time to advance legislation that truly puts Coloradans’ health, well-being, and wallets first.”
