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Majority Whip Donna Oberlander Details PA Data Center Legislation

Pennsylvania House Bill 952, establishes a sales and use tax exemption for certain equipment purchased by data centers and their tenants. The proposal is similar to sales tax exemptions for other industries in the state such as dairying, farming, manufacturing and mining.

Today, we welcome the bill's sponsor Majority Whip Donna Oberlander (D-63) along with Jonathan H. Rosenson, Senior Vice President, Chief Operating Officer at Expedient, and Scott Gracie, Vice President at Etzel Engineer and Build, to detail the importance and impact of this legislation on Pittsburgh's tech ecosystem.

This tax exemption will provide an additional incentive for companies to locate their data centers in Pennsylvania, rather than surrounding states. Join us for more information and details on this legislation.

 

 

 

Transcription:

No, no, no. So good afternoon, everyone. It's Friday, really thrilled to have our three guests today on the show. This is Audrey Russo, President and CEO, the Pittsburgh Technology Council, and joined with Jonathan Kersting. He is vice president of all things media and marketing for the tech Council. And today, we are actually recording from my house, he is with me. And it's exciting that the both of us have been vaccinated even though we're taking our precautions. But we are very excited with our guests and the importance of the discussion today. So I want to thank, as always Huntington bank for the work that they do in supporting our work, doing this work each and every day, telling stories, highlighting issues, making sure that the tech community is actually cognizant of all the things that are impacting them, as well as what other people are doing. So today is pretty thrilling because we have representative Donna overlanders. And we're going to talk about Pennsylvania data center legislation, she'll get involved in that we also have dear friend Jonathan Rosen son, he's a senior vice president and chief operating officer of expedient. And also Scott grazie vice president of operation at Edsel engineer and build where he actually is beating the building of data centers. I also want to thank at&t for being our sponsors in all things that are related to public policy and Community Affairs. They've been tremendous partners, they've helped this community in ways that many people might not even be familiar with, particularly during the onset and during COVID, making sure that people have access to what they need. And they were really leaders during that period of time. Then there's also a logo in there called 40 by 80. That's the longitude and latitude of Pittsburgh, and that is the Pittsburgh tech Council. See, okay, we've got to make sure we have our controls in place here. So we have muted your microphones, hopefully, appropriately. So because I think I just heard something. But on, I want to welcome our three guests, and we're really going to dig into, you know, the matter at hand and issues around data centers. And the first person I want to bring up is representative Overlander, and she is going to tell us a little bit about who she represents and the legislation that we're talking about right now. So representative Overlander, thank you so much for joining us, tell us a little bit about who you represent in the work that you do, as well as this bill. So someone needs Yeah, you're unmuted. Okay. Very good. Well, thank

you, Audrey, for the invitation to join the Pittsburgh tech Council and, and the others on this call. I do represent the 63rd district and the Pennsylvania House of Representatives. That's all of Clarion County, part of Armstrong county and two townships in forest County. And if you're not familiar with the 63rd district, it's very rural. And obviously, during this covid, 19 year, we've found, and we knew that we needed broadband, we knew that we were lacking in that infrastructure. But this year really made it crucial that we have that that's not really the reason that I'm offering this bill, but it actually it absolutely builds into the bill, and the need for broadband. The bill that I'm offering is House Bill 952. And it would change our current tax credit for data centers, to a sales tax exemption on the equipment that they use to actually store the data. It is a leveling of the playing field for Pennsylvania against its competitors in our our neighboring states and across this nation. And I'm looking forward to our conversation.

Yeah, I'm looking forward to this. And I want to thank you and applaud you what I mean, while you represent a rural communities, which is a big part of Pennsylvania, what were some of the glaring issues that you had seen during these last 14 months.

So some of the glaring issues that we saw, were literally, I think, seen across the Commonwealth, not just in my district, but the need to be able to work from home have school from home, and we actually have areas that do not have broadband coverage at all. Not Not even a little bit. We also saw a if you did have broadband that it wasn't capable of allowing you to do the things that I just mentioned you couldn't have individuals on for school and for work. You couldn't you Just couldn't operate. And so we had kiddos come home from college who were sitting in the parking lot at McDonald's trying to do their homework because you could catch up, catch the broadband, while they're sitting in the sheets parking lot, because you can catch the broadband. That's no way to do school or work. And so we've been working very diligently as many are to really bring that up to speed. And the reason why this builds into that is that we know that we have the fiber backbone, it comes right through my community, it comes across our Commonwealth, and hopefully this will help to make the exit ramps for for that service. So it's really a win win. In my my opinion, I

think it's really crucial. We can't we, the people who live remotely remember what people think about working from home and working remotely, one of the things that is attractive to them in working in more rural areas is the fact that if there's access to broadband, they can really contribute to a lot of the beautiful parts of Pennsylvania, that many of us don't think about often enough in terms of urban living, so thank you for heralding this. And so don't go away, because we're gonna come back to I want to jump to john Rosen sin, I introduced him a moment ago. So if we can highlight, john, thank you so much for joining us today. You know, our teams happened to be neighbors, they're just gonna we're co located in Nova place. And, you know, we know your company well, but talk about expedient talk

about let everyone know about Expedia, and maybe a little bit about the history of where you know why expedient is actually located in Nova place? Yeah, sure. I've been with the company since we had a different name back in the early 90s. So we're a Pittsburgh born and bred company. And we're a digital infrastructure company. So expedient actually has 11 of its own data centers spread across the country, two of which are in Pittsburgh, and that's primarily because of growth. Originally, originally, our first data center was based in green tree. And as we outgrew that facility, which was formerly owned by an enterprise company that moved out, we were looking for a place that would have the right conditions for a data center. And at the time of the former Allegheny center, as Nova place used to be called, represented all of those things, including maybe most importantly, network connectivity to the rest of the world. in Pittsburgh, Nova place is the hub of internet connection. So expedient is a digital infrastructure provider. And we focus on providing cloud services, and we do that out of our own data centers.

You know, data centers, really, I mean, they're a pivotal part of the growing ecosystem in terms of tech. I mean, sometimes, you know, you know, that when things are going great, you know, we take it for granted. Right? And well, you know, talk about how you really have supported the growth, I mean, not just in companies, but the amount of data that people are processing right now.

Yeah, so and I'd really like to highlight that we are a, we are an infrastructure company. So think of us as a utility, or computing just as if you have utility for Internet service, or for water or cable television, your servers, and your data platform is a utility in the context of companies. So having digital infrastructure providers like expedient in, in your city or your town is essential to digital transformation, this cultural change and data explosion that the world has been going through for the past couple of decades that's being led now by this transformation to cloud services. So providing an on ramp locally, from businesses to cloud services that might even be delivered like software as a service. And you all were using one right now is critical to accelerating business.

Well, the thing is, you're also part of economic development strategy. So that the more the more we have your presence, and the more that it's growing as the more attractive this region becomes for people that are building their tomorrow,

up right, and we're gonna work. We're grateful for the legislation such that representative representative Overlander is pursuing here to help attract more businesses of our type because this is going to be a very high growth area. It's only going data is only increasing it's not declining.

Right so now let's bring up or don't go away either review, but now I want to bring up Scott, Scott, Scott Gracie and we talked about So a moment ago, but tell us about your company, and how this fits into this jigsaw that we're talking about right now.

So we're so engineer and build. We are a design build contractor that specializes in high reliability. We've been in business for 15 plus years. between 80 and 90% of our clients are repeat clients. And we've done work up and down the East Coast. And as far west as Kansas City, we do ground build up construction for data centers, as well as fit outs of existing spaces for existing clients as well as new clients. We also complete some successful projects that are what we call tos kind of referring to is open heart surgery in active data centers. So we go into active data centers. And we can replace key electrical components and key utility components, like your electrical service systems, your ups is your air conditioning, we have a great team that works with us develops creative solutions to those situations where we can go in and we minimize the the impact on the data center, as well as the operators and the end users. So that the uptime is maintained, and we understand that uptime and how important that is to the data center and the infrastructure. So that's a little bit about who we are, ultimately, the bill in place here with with trying to get some tax reductions in the state of Pennsylvania for opening up construction, the data centers, you know, it's a huge impact for us, and everywhere else. There's a great presence in the area for tradesmen, and that keeps those people working. It also has great impact on local markets, you know, once you build a data center, you have to support that data center. And obviously, there are clients that the data center supports to travel into that area. So that builds infrastructure like hotels, restaurants and those items as well.

Well, you're purchasing millions of dollars worth of equipment to?

That's correct. That's correct. I mean, when you look at the average cost of a data center, you know, you're a lot 1000 to 12 $100 a square foot. And here's another good example of where taxes can be a hindrance to datacenter growth. We have neighboring states, and john can attest to this, that they charge upwards of 8% use tax and that use taxes charged against the labor of installation for everything associated to a data center. So there are states nearby that are costing a lot more money. You know, when you're looking at a $10 million a megawatt, you know, that's a significant investment that could just be going to taxes. And it has deterred companies from expanding in that region, as well as even developing in that region. So tax incentives are huge as operators are concerned, they're looking for those breaks, they're looking for reasons to come here. other neighboring states offer great tax incentives, and hence the reason they're booming. You look at Manassas, West, Virginia. It's a booming area. And that's because they're enticing people to come there and build.

What about the other states? What about Ohio? New York? What about other places? So this

is the one I'm referring to of the use tax Ohio is kind of a deterrent, more than it's really making it an avenue for development. New York, I don't know much about New York and what their incentives are. Again, john Rosa may be able to speak a little bit more of that nature. Yeah, well, I

can tell you from a demand standpoint, we actually have four data centers in Ohio, two in Columbus and two in Cleveland, and taxes have been a quagmire.

Okay, all right. That's good. So we have some experts here. So representative Overlander, so obviously, this is really important information and advocacy that's needed for your bill. Where does the legislation stand today? I mean, where and you know, if people want to support this, and they want to call, what what can we do to be helpful?

That's a great question. Audrey, the bill actually passed out of the Finance Committee on Tuesday of this past week, this week. And so it comes to the floor when we come back the first week of May. I think that in terms of advocacy, calling your local representative explaining to them the value of the program, the reason why this bill is is necessary, would be helpful. One of the hindrances that we've seen in the past and that we're trying to get over now is the fiscal note that may be attached to it. And so I'll just be right up front with with you the if you were to only capture what we may lose in the sales tax, you're not looking at the entire picture. The reality is, these are dollars that we will never capture in Pennsylvania, if we do not have a an open door and a welcoming policy for data centers. So the the return on our loss of that sales tax far exceeds what we would what it would cost. And so that's the message that I would love to have your folks send to your your reps and to your senators, because that's the that's the bottom line, this is an opportunity to create a family sustaining long term jobs with so many other benefits. And so that would be my message.

So what's the sentiment right now? What's what can you give us the pulse in terms of this being passed? What's the sentiment,

I believe it's going to be passed. And I believe that it will be passed before June 30. In the budget, I think that it it's got momentum, it has the support of not only the chambers and the industry that has the support of the trades, who will be building the centers. For the for the most part. I mean, they're the folks with the expertise and in doing that, as Mr. Gracie had mentioned, and so I think it has a very good opportunity to pass this year. It has taken it has taken some some time to get there because of the hurdle that I just mentioned. But I think that we're starting to see movement on that as well.

So that doesn't mean we should let up. That's why I want to tell everyone, just because that's the sentiment that Representative overlanders articulating that does not mean we need to let up, it means that we need to continue to push ahead. So appreciate that. But so let's Can we talk about green energy a little bit? I'm my my pick on john, and then go on to Scott as well as representative. I mean, what's the impact here? You know, in terms of clean energy, you know, data centers use a lot of, you know, a lot of energy. And there's even a question in here about cryptocurrency and you know, some guidance around that a lot of this does take energy and the more data that we are creating, that's compounding each and every day. What are you doing from the experience standpoint,

but I think the good news is that there there are a lot of

there are options for energy, you know, generation sources and and solar is is definitely one of them from from the expedient perspective, you know, we have, generally our centers are, you know, a couple of megawatts or below. And we've got, you know, lighting efficiency programs inside of our facilities, where we're continuously upgrading the equipment that conditions the power to get our PE number down over time, so that we're more efficiently using the energy that's being delivered. And everything in a data center. Well, everything that's mechanical, for the most part, uses electricity. And what a lot of people don't know, is that equal amounts of energy are used to cool the IT equipment, as are used to run the IT equipment. So getting that balance and manipulating the physical conditions inside the data center to make the most efficient use of the environmental conditioning equipment, the better. So while while you can, you can source the energy from from multiple different sources, and you know, reduce your carbon footprint, you can buy carbon credits, a really significant thing that you can do is ensure that the facility is running as efficiently as possible. And there's a big incentive for businesses to do that. Because it's also a big cost savings to do. So.

The end, the clean, clean energy community really is an advocate of data centers, because they can they can leverage all sorts of energy.

Yeah, I think one reason there in Scott might chime in on this as well, you know, when you when you can centralize the consumption, you know, you can get a better control control around it. And you can also do things like, partner with the power company to handle you know, peak load and things like that. Scott,

would you add anything to that?

Yeah, absolutely. I

mean, if you can centralize the data centers in a certain area it helps with, with the infrastructure that needs to support them. There's also you know, there's a lot of avenues for green energy. Even in Pennsylvania, you know, solar can be very prevalent, even though we see a lot of cloudy skies, that solar still generates power and and when you're not consuming that power, you can sell that power back to the grid, which helps reduce the cost on the electrical side of things as well, as well as wind. I mean, there's just a ton of avenues A lot of data centers are starting to explore geothermal. For the cooling capacities. It's a little expensive on the upfront to put it in. But over the long haul the data center, it certainly reduces the cost and consumption of those energy sources.

I think our rule of thumb is you know that the bigger the data center, the more efficiency you can get from those different sources. Yeah, absolutely.

Absolutely. Representative, did you want to add anything in when we talk about energy? Sure,

I'm happy to. I will tell you that in some of the conversations that we've had, there have been companies who were very much willing to sign agreements with the solar, they're willing to sign with, you know, Hydro and nucular. those are those are other options. And then I see in the chat, there's also as Mr. Gracie had mentioned, geothermal. So. So the potential is, is very much green energy. But it also balances the need of continuing with the coal and gas because at night, the sun's not, the sun is not shining, and the wind is not always blowing. So it's really a balanced approach.

So yeah, Jonathan, there's some questions in the chat. Can you save them? He's on right now. It's just

we're building data centers because of their geothermal and so forth. So. Okay, good.

So what what else we talked about the importance of public policy, that's one of the things our priorities at the tech council to make sure that we're advocates and we're moving the agenda forward. This, to me is an issue in terms of data centers really matter to the to our economic development across the region, there is someone in here and I don't know if you can see it, Jonathan, because you're on your phone, they're talking. Let's see, they're talking about giving away the this is from Justin saying, given the wave pandemic highlighted the stark inequality that we talked about earlier, how can we both connect communities to broadband and pay for it, regardless of the availability of subsidy? And so what role can municipal broadband play in meeting those needs? Do you have any thoughts about that representative? And then I really want to talk about the importance of the building trade. Scott, we'll get that we'll get back to that in a minute.

So I'm happy to address the question. And I think that every single community that I represent, the counties are involved, the local development districts are involved. The ISP are involved DC Ed and Sherry Collins, who I see is on the call is involved. The reality is, we're in a, we're in a time when money doesn't seem to be the major hurdle that it used to be, because, you know, you find an ISP or a provider, but you didn't have the money to help build out and, and so that doesn't seem to be quite the issue. It's really, what's the best workable solution for you. Because Pennsylvania is a very diverse Commonwealth. And what works in one rural area will not work in another rural area. So So we really have to address, you know, the specifics, I think that we we will see some direct benefit from the reverse option that the FCC had. And I know in my particular area, Windstream and SpaceX were the winners are local development districts are providing some some additional service and, and I think that you'll see some of the mobile services start to step up to the plate, for example, T Mobile came into my district, it's it hasn't been a big player before, but it's certainly, you know, stepping to the plate. So I think that it's a variety of solutions. And what what we see is that people want it and they're willing to work to make it happen.

Yeah, we've there's, there's lots and lots of solutions. I think that's really the takeaway from this and lots of partners. So Scott, there's a lot of new jobs out there that are created the end and talk about those jobs, too. I don't want to label them a particular color. But there's lots of different jobs that are created through building these data centers.

Yeah, that's correct. I mean, there's a whenever data center breaks ground, whether it's a ground up, build up, or even a fit out, for that matter, there's a ton of jobs as it creates, it creates jobs all through all the trades industries. I mean, you have electricians, you have carpenters, you have fitters and so on all the tradesmen are there, but it also creates jobs that some people may not necessarily consider, you know, there's there's infrastructure that needs to support these data centers. So, you know, again, the utility companies may have to build another substation. They may need to But new infrastructure in place to provide the power, therefore the data centers. There's also connectivity in these data centers. So there's fiber that has to be built back out, to be able to get out to the rural areas that maybe these people were working on, or the small mom and pop businesses are at that are trying to backhaul their information to somebody like Expedia. The other thing that, you know, a lot of times people don't really think about, but there is manufacturing that it creates as well. You have universal electric, which is starline busway, a lot of data centers use that material that is made and manufactured right in Canonsburg. So again, if we can support data center growth in our market or even across the state, for that matter, through Harrisburg out to Philadelphia, if we make Pennsylvania an attractive spot to build in, all of those tradesmen go to work every day. And all of those made starline maybe manufacturing a lot more bus and locally for our market as opposed to shipping it to other parts of the country or the world for

that matter. Right. So Jonathan tells me there's one last question he wants to sneak in before we wrap up.

Scott Harshman has a great question here wants to talk about how Becca NorthPoint is a great example as to how rural communities can compete as it being a location for a first race server and data center.

Anyone have any comments on that?

I think

I think that the challenge with with rural locations can be met if the connectivity can be brought to the locations. Typically, you have two concerns, you know, can the workers get their workers needed to operate the data center on a day to day basis, they have the skills, and then the connectivity to the rest of the world. So making sure the fiber networks are there and that they're diverse path, meaning that there's more than there's at least two if not three or more pathways, because those wire lines are either on poles or in the ground. And as I'm sure you all have experienced before, if the cable goes out of the power goes out 50% of the time, it's because someone took a poll. So to build really highly available and resilient data centers, you need that quality infrastructure. So while the land is available, and typically power as well, there will be a lift to get the power and the connectivity to the facilities.

Is there anything representative Overlander that you think that you want to that we over, looked in this conversation that you want to make a point about?

No, I think that you that you've covered it, but I did want to just address the rural versus urban versus suburban, I really think that House Bill 952 has the potential to really touch every corner. And and then some of Pennsylvania. And as the gentleman mentioned, about Armstrong County, we've all we have to do is look at at Butler County, really close to the Armstrong border with the with the Iron Mountain, right? I mean Iron Mountain is is really in the middle of nowhere. And there are 1000s of people that work there and have have, you know, it's a data center, it's a it's a huge data center. So I think that, you know, we've had some individuals who don't believe that this will will be helpful to rural Pennsylvania. I disagree. And I think that that's why it has broad support, and it has brought opportunity. So with that, I would just say, I think you've covered it. And I again, appreciate the time that you've given me today.

Thank you, thank you for your leadership on this, we will follow up, we'll make sure that we reach out to the right people share the information with our membership, I applaud you for taking the lead on this, this is something that really matters to all of us in Pennsylvania, not just in Pittsburgh in the immediate area. So thank you for your leadership there. And Scott, thank you for the work that you do. And hopefully we're going to keep you busy. And that Edsel will be you know a leader in providing all the support that one needs to build data centers.

That would be great, we would highly Look forward to

it. And john Rosenstein thanks for being such a great friend to the tech community, being a leader being at the helm of the expansion efforts and you know, making making this place the you know, who we are in terms of the support for all the companies that are here locally the expansions that they've had, and just being an anchor in terms of building Pittsburgh.

Thanks. Appreciate that. And thanks to you and Jonathan and Brian and your team for putting these together every day. Thank you.

Thank you. So everyone if you want to know more about expedient, easy to find you want to know more about x, x x all run with petrol. You can find info about them. I know that they are accessible and Representative Overlander easy to locate her, and you can reach out. And if you want more information about this bill, despite the sentiment, we still need to be active. So I am going to save that we're signing off on a Friday. And Jonathan with this is something near and dear to me, a lot of these are near and dear to me. But you know, Monday, I have a lot of sentiment because of the passing of my own mother, who was fluent in Yiddish. On Monday, we are having the lead for the Yiddish language from Duolingo. And they are going to be taught that the last language to 14th 14th language, and they are going to talk about what they have done to bring the Yiddish language to do a lingo. So if you have any interest in Duolingo, any interest in Yiddish or you just want to have a good time, and want to find out what Duolingo is up to, we're having them on Monday. So I want to thank everyone, thanks for your support. Thanks for your leadership who are on the call today. And stay safe, get vaccinated, and we'll see you on Monday.

Thank you. Thank you.

Transcribed by https://otter.ai