June 11, 2026 · and Senate Select Committees on Data Centers · 40,739 words · 11 speakers · 344 segments
This meeting of the Joint Data Center Committee will now come to order. Will the clerk please call the roll? Co-Chair Chavez? Here. Co-Chair Holmes? Here. Senator Reinecke? Here. Senator Wilkin? Here. Senator Blackshear's checked in. Representative Claggett? Here. Representative Workman? Here. Representative Glassburn? Here. As we do with all of our committees here, or all of my committees here, we're going to start with the Pledge of Allegiance, and I'd like to ask Representative Workman to lead us today.
I pledge allegiance to the flag of the United States of America and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all.
All right, we're going to just jump right into it. First, we have testimony from Director Lydia Mihalik from the Department of Development. Welcome to committee. You may begin when ready.
Well, good morning, Chair Chavez, Chair Holmes, and members of the esteemed Select Committee on Data Centers. Thank you for the opportunity to provide testimony this morning about specifically the data center tax exemption. My name is Lydia Mihalik. I'm director of the Ohio Department of Development. My full testimony has been submitted to you today, and so what I want to do is kind of just briefly summarize it before we get into questions. Last month I provided written testimony as well regarding development's role in administering the Davis Center tax exemption. But today, what I would like to do is to provide a little more context as it relates to how these agreements are developed, how the exemption itself functions, and how Ohio's approach has evolved with the industry as it has matured. More than a decade ago, Ohio began positioning itself as a very competitive destination for the growing data center industry, and the data center tax exemption became one of the many tools that Ohio was using to attract these large-scale investments. Amazon became an early adopter of the program in 2014, and this really helped demonstrate early on that Ohio had the infrastructure, the business climate, and the capacity to support major data center investments. Of course, since then, our friends at Amazon, Meta, and Google have all continued to invest and expand in Ohio, all drawn by our state's competitive costs, our energy availability, our strategic location, and our ability to support very large-scale technology operations. Development administers the data center tax exemption, and applications are reviewed by the Ohio Tax Credit Authority. It's an independent five-member board responsible for reviewing the proposed agreements. They approve the projects, and they also monitor compliance of these agreements over time. Today, development holds agreements with 18 of 18 companies across the state, And it's important to understand how these projects come before development and the tax credit authority for consideration. Like many economic development projects in Ohio data center investments typically begin through our friends at JobsOhio or through direct engagement between companies and local partners Development usually gets involved once the project reaches a more advanced stage. Our team reviews the proposals, evaluates assumptions, asks a lot of questions, and then works with the company to better understand the scope and potential impact of the project. When we determine that a project is ready for review, it's then presented to the tax credit authority for consideration. I think it's also really important to distinguish between a tax credit and a tax exemption. The data center tax exemption is not a grant. It's also not a tax credit. Rather, it allows companies to avoid paying certain taxes on eligible purposes related to the construction and operation of a data center. Specifically, as you know, it applies to state sales and use tax, county sales tax, and transit authority taxes on qualified equipment. This includes servers, cooling systems, and other infrastructure necessary to support operations. Unlike other programs like the Historic Preservation Tax Credit or the Transformational Mixed-Use development program, our friends like to call it T-MUD, which is the worst acronym ever, the data center tax exemption does not establish a fixed value or a limit on how much a company can be exempted from at the time the agreement is approved. And because of that, development does not assign an actual value to the exemption agreement. At the time that the application is reviewed, the companies actually provide us with the estimates regarding anticipated investments and purchases, and those figures are used to evaluate the project. However, they certainly remain projections. The actual value of an exemption can only be determined after those purchases occur and the tax data becomes available through our friends at taxation. As recent media reports have noted, the difference between projected activity and actual activity can be significant. In 2025, the actual amount of Oregon state revenue was about $1.6 billion, which exceeded earlier projections. And at the time, these companies reported substantial investments in Ohio. So as the value of the tax exemption grew, so was the amount of money that these companies were spending. Companies reported around $27.2 billion in capital investment. And these figures illustrate how dramatically the industry has really changed and evolved over the past decade. The scale of the investment has changed. The pace of development has certainly accelerated. And the competitive landscape has become increasingly dynamic. And as the industry has evolved, Ohio's approach has evolved as well. That evolution can be seen in the structure of Ohio's agreements. So, for example, Amazon's statewide agreement was approved in 2014. It provides a 100 percent exemption for up to 40 years, and under that agreement, individual sites do not require separate approval. Since then, Amazon has invested around $34.4 billion in Ohio and created thousands of jobs, and that far exceeds the original projection of $8 billion in investment over the life of the agreement. More recent agreements look very, very different. For example, the TCA recently approved a project for Cologix that provides a 50 percent exemption for a 10-year term. Should Cologix choose to seek the exemption for an additional location that would require separate tax credit authority approval These newer agreements reflect Ohio much stronger position in the marketplace today They also reflect a desire to balance competitiveness with the long-term interests of the state and local communities. As the landscape changes, future exemptions may not need to be so broad or in some cases may not be necessary in order to support continued industry growth. While development administers the state exemption program, we don't have visibility into every data center project in the state. In fact, less than half of Ohio's publicly reported data center locations have a data center tax exemption. That illustrates an important point that not every data center project depends on a state incentive. Communities frequently negotiate their own agreements and incentive packages based on their own priorities and circumstances, and we regularly work with local leaders as they evaluate the opportunities and challenges associated with large-scale economic development projects. Every community is different, and every community must determine what is best for its own future. At development, we are always available to assist local governments that have questions about the industry, about incentive programs, or project evaluation. Thank you again for the opportunity to provide testimony today. I would be happy to answer any of your questions.
Thank you, Director, for your testimony. And just let me point out a couple things. We gave you unlimited time because we were hoping to hear from you earlier so very important information but the few the subsequent testimonies are going to be limited to five minutes each thank you for that testimony and I think you illustrated the issues are far more complex than the talking points so with that being said I am anticipating a lot of questions from the committee so I will ask the committee if we can keep our questions and follow-ups in bursts of three and then we can keep rotating around you may have several rounds so
that's yeah get comfortable turn the air up co-chair Holmes yes and thank you director for coming in I didn't make an opening statement as you know we looked at working on a bill yesterday and last night and we're not successful yet that does allow us the opportunity to take your inputs and everyone else and that's valuable to make great opportunity. So the first three questions, the first one I want to ask, what we've learned through this committee and we've had a lot of locals, so that was one whole event, we've talked about the communication that somehow information and communicating with them on how to develop that there's at the local level there seems to be in some areas a breakdown and we have Jobs Ohio and other community developers. Can we talk about that? What's your thoughts about that. Some places like New Albany has been a champion, but other places there's a struggle. What do you think about that? Chair Holmes, thank you for
the question. I think what is transpiring over these last couple of years is really illustrative about how hungry local communities are for really big projects. As you know or may not know, the recent growth in the economy in the U.S. is being driven absolutely by AI. Of the 2% growth that we saw in the last quarter, 1.5% of that is attributed to AI So why wouldn a community want to be able to get the best deal and or the best amount of investment they could and take advantage of this opportunity I think that there are places around the state that are not necessarily experienced in these types of things, but candidly what I will say is that it's not rocket science at all. It's pretty simple. economic development is a team sport and is really best when everyone, local and state, are working together to put together the best deal. I think local communities should be thinking about these things as win-win engagements. The environment in Ohio, because of a lot of the work that you have done as a General Assembly, has completely transformed the landscape. The cost of doing business here is much lower. The availability of infrastructure is much better than it is in other states. The political environment is positive. And so I believe that there are communities that are faced with these opportunities. I mean, if you're in a small town in northwest Ohio and a major data center developer comes to you and says, I'm going to put $8 billion into your community, I mean, that's like having an Intel project in every community, potentially in the state. And so I think it's an opportunity for us to recognize that we know things because we've done this before, and we're certainly able to help. Okay, thank you.
Question number two, we have had a lot of discussion about sales and use tax and the media coverage of what you described, the return on investment. And just now you talked about the fact we were concerned about allowing business developers all the tools to not obstruct it, but what you've said now is that maybe sales and use tax isn't as important anymore. Could you be a little more detailed, or is it, or do you still need that tool, or what's the right way for us to understand that?
So economic development has evolved. The way the environment is today is not what it was when we first started doing this really well with Jobs Ohio like 12 years ago. And I think it's important for us as a state to continue to evolve the incentives and the tools that we have in our tool belt in order to make this work. And I think the data center tax exemption was really important at the beginning. I mean, think about what things looked like in 2014 here in Ohio. They are much different than they are today. And so it was necessary to prime the pump for data center expansion and development here, development and expansion here in Ohio. I don't believe that it is as much of a deciding factor in the state of Ohio moving forward, and I'll tell you why. Data centers are planning on spending almost a trillion dollars in CapEx next year. We certainly want to be able to take advantage of that, but candidly, the small amount of money, which in the grand scheme of things, I know when we talk about $60 million over 40 years, it seems like a lot of money. It's $15 million per year. That is a drop in the bucket in these really large-scale data center investments. And so it's not as necessary, I think. I think what they're looking forward to, and I'm sure you heard this from the hyperscalers who came before you and testified, they're looking to be able to go as fast as they possibly can. because candidly when they turn the lights on and the data center starts working, they're printing money. And there's such a demand for this technology and it's gonna get better, it's gonna get more efficient, but Ohio has done what it has needed to do in order to attract this technology investment. Thank you, Mr. Chair.
I'd like to follow up on that. So there's tons of questions, and I'm not trying to take anyone's questions. But we were talking about it, and I noted in your testimony where you said exactly what co-chair Holmes was asking you about. I want to be very careful and clear-eyed that we don't paint the entire data center industry with the same brush. They're not all hyperscalers.
Agreed.
Hyperscalers may be in here now because of the incentives, but what about the other ones that are coming, the not-so-big data centers or whatever other kind of operations are going to be coming? So I want to make sure that we're not saying everyone is one thing whenever we need to have an encouraging environment for all investment in Ohio.
Sure, Chairman. I absolutely agree with you. It's just a matter of scale. You know, most of the other non-hyperscalers are private equity driven. They're still trying to take advantage of the economy and the environment, and they should be treated the same way. Ohio's environment is conducive for investment. You've done a wonderful job. Jobs Ohio has done a wonderful job. We've put infrastructure in the ground to be able to support these things. And so don't take your eyes off of the opportunity to grow as a state, because our first and foremost responsibility at development, when we look at any deal, whether it's a data center or a chip manufacturer or a drone manufacturer, it doesn't matter, is the health of the state of Ohio. This is an opportunity for us to take advantage of this growth in the economy. We don't want to be left behind here. And there is so much we can do to make our state better. I think about, you know, from a big picture view, the growth in sales tax revenue helps you find money to pay for tax cuts in the next budget. So then you don't have to go into programs and cut them, similar to what we saw happen, unfortunately, with the All-Ohio Future Fund. So there is opportunity here, and we just need to think about this as a win-win. there's no reason for us to give up an opportunity to grow and do good things in the data center realm.
Thank you. Back to you, Chair Holmes. Thank you, Co-Chair. Last round from me. Really compelling testimony at our last hearing, Jennifer Kreisler and the rock stars in New Albany, the most experienced data center veterans in the state. And we talked a lot about this information toolkit that right now on their own initiative, or going to other communities as great Ohio neighbors, right, to give that pack. In the bill we had and looked at yesterday, we wanted to assign the Department of Development that role to maybe grow that and enhance that to be a help center and a way to communicate with those areas where they can get unprecedented agreements. How would you feel about that of being the burning bush for those kinds of things?
Chairman, we would love to. We would love to create a system that is supportive of local communities so that they can make informed decisions moving forward. I think it also helps them decide on whether or not data centers are right for them. Not every community, obviously, is going to want to do this type of development, but I think that there are a lot of communities in different parts of the state, maybe not necessarily in central Ohio, but they're ready to take advantage of the next big economic development deal. and we at the Department of Development want to be a partner in that.
Thank you co And I not going to follow up on everyone questions but we were going to give you 60 days Can you commit to doing a very accelerated implementation of a toolkit and maybe call center resource center and just the communication out that it available
Chairman, if you give me 60 days, then that's when we'll have it up and running for you. Thank you.
Other questions from the committee? Senator Wilkin.
Thank you, Chairman. Thank you, Director, for being here. Good to see you. I have a question. You know, we read and see where Ohio has given, we've given to the data centers $1.6 billion. So I'm curious, do those checks come from you that you write out for the $1.6? Or who writes those checks to the data centers?
So, Chairman, to Senator Wilkin, it's not a check or a grant. It's actually a sales tax exemption, so they don't pay sales tax on the qualified purchases that they make. And so the number that we have, and I've thought about in the last couple of weeks how we better rein in what these numbers are. And as I was saying in my testimony, we evaluate these deals based upon estimates that the companies give us on what they believe the value of the sales tax exemption is. And we use that to help calculate, you know, is it a return, is it a good return for the state and the locals? And typically it is, and it makes a lot of sense. But what has transpired, I guess we all know that things are a little more expensive now today than what they were a couple of years ago. But what we could do is institute some sort of internal control, whereby if a company tells us that they're going to forego $60 million over 40 years, well then it's $60 million over 40 years and you cap it. And I think that's an opportunity for us to make sure that the taxpayer understands what it is they're giving up to incentivize that development, and it keeps those massive dollar amounts under control moving forward. So if the data center tax exemption is to remain in place, I think that's another internal control that we should look at.
So you mean to tell me we don't write them checks?
We do not. No, no. No, sir.
Well, that seems to be polar opposite of what everybody wants to tell us, that we are giving them money. So hopefully the sarcasm on my question is noticed.
Through the chair to Senator Wilkin, it's why I try to explain the difference between what a tax credit is, what a grant is, and what a sales tax exemption is.
So if I may follow up. Follow up. Since we're not writing them checks, so simply by not charging the estimate of around $1.6 billion, that's the figure we've been given. The numbers that I can find in my research say they've invested about $37 billion. dollars. Quick math on my phone says that's about a 2,200 plus percent return on the 1.6. In your experience at development, how's that return rate on investment?
Through the chair to the senator, it's a really good return. And candidly, it could be a lot more. but I think the agreements that have been put in place prior to this administration have done their job and the state is still receiving economic benefit from it I think the question before us from a policy perspective today is whether or not that necessary because it appears to me although tens of millions of dollars is a lot of money to the average Ohioan, tens of millions of dollars to these data center developers, whether they're hyperscalers or small private equity groups, is a drop in bucket, sir.
Follow-up question? Mm-hmm. With the, you know, you projected, or the figure you gave was in the next year, there'll be a trillion dollars spent by the data centers. Some of the research I've done says, you know, companies are going to spend anywhere from another $40 billion in the next year to $50 billion more by 2030. the jobs numbers that I see are 95,000 roughly jobs of working so when we when we talk about that number and I know it's a big number and it's you know heck for for me a few hundred thousand is a big number but when we talk about that big number the one the 1.6 do you do you have any information or or any data and frankly I'm not really expecting you to because this would be hard to quantify, but when you take 95,000 construction jobs and people living in communities, living, working, playing, doing all the things, shopping, is there anything that says, hey, here's the income tax these guys are charged, their girls are charged from where they work? Well, use New Albany, for example, if they have an income tax or whatever city they may be or county where there's an income tax for them. Is there anything that shows, hey, this is what they're paying in income tax. This is our ballpark. This is the metrics of for every worker, they spend $100, whatever it may be, just in local sales tax that they pay when they're out living life when they're not working. Do we have any of that? And like I said, I don't necessarily expect, I know that would be very hard to quantify because everybody's bill probably spends more on sales tax than I do. But if there is a way, because I'm just trying to look at that number, first of all, to dispel the rumor that we are giving them money. We're simply not collecting in return for the investment, which I personally think is a good thing. But I'm just trying to figure out, is there a way to show, well, here's what you're getting as well when all these guys and their temporary 20-year jobs working at the data centers. Thank you. I know that was long-winded. I apologize.
Through the chair to Senator Wilkin, each community is different, and of course it would be difficult to calculate the different income tax revenues. What I would like to say is that while the AI industry is certainly driving the economy right now, we are still seeing a dramatic loss in certain industries of jobs. And so while we may be doing really well in the construction industry, there are other industries that are lagging behind. And so where we are seeing the benefit, certainly, of the jobs that are associated with constructing and or working in the data center industry, in some cases in most communities, not New Albany, for example, but in most communities, it's just helping them to stay afloat. And so, again, there's an opportunity here for us to take full advantage of this growth, this massive growth in the industry.
Senator Reinecke for a current question follow Thank you Chair Thank you Director As a follow to Senator Wilkins when the Department of Development and or the taxation looks at this you were talking about the exemption having a return. I guess my follow-up question is, what is your guidepost? What is the standard that it's got to exceed, or do you have one or why don't you have one to make it a little bit more universal? Because I think the issue we're running into is we go home and people think we're giving this money away. If there is a return, how can we better state that? So I guess the question is, what standard do you use?
And if it's below or above, is it easy to determine that? So through the chair to Senator Reinecke, every economic development project is very unique, even from data center to data center. So each application that we get, whether it is generated from the local level or for our friends at Jobs Ohio, every application is evaluated on its own merits. And that's whether we're talking about data center tax exemptions, job creation tax credits, mega project designations, so on and so forth. And candidly, there is not a one-size-fits-all formula for every project. However, we make sure that when the tax credit authority is making a determination on these agreements, we want them to consider all relevant factors. And those relevant factors include anticipated capital investment, the payroll commitment and the jobs numbers, the quality of the jobs that are being created, the project location and its regional needs. So, for instance, the ball is rolling very quickly down the hill here in central Ohio. It's not the case in every region of our state. Local government support and other incentive packages are certainly a part of the deal as well, as well as any necessary infrastructure requirements. So the deal is looked at comprehensively. That's a quick list of the things that we evaluate. But essentially, our goal is to ensure that the incentives help secure transformative investments, and then these investments ensure that companies can remain also accountable for the agreements that they've made with the state of Ohio as well.
Representative Glassburn.
Thank you, Mr. Chair. We've learned a lot in this committee. A lot we didn't know. There's still a lot we don't know. Having you, Hugh, or a representative of your office here before we were trying to make a deal last night probably would have been really helpful. So one of the things we've learned is that there clearly are at least 10,000 jobs in this state that are based on data centers. All this about the permanent jobs is missing the recurring maintenance, the construction, and everything else. But we can only offer those types of incentives if we have the trust of the public to do so. And so I have to know the answer to, in the budget, we have forecasted for this year $141 million and next year $148 million for the sales tax exemption. When did you know that it was going to radically eclipse that last year? What's it going to be next year? Tell us what happened.
So through the chair to Representative Glassburn, I certainly can't speak to the individuals that make the estimates that go in the tax expenditure report as part of the budget. But what I can tell you is that we at Development have been tracking the number of tax exemptions and the dollar amount of that growth for several years. In fact, I think before we heard this latest number from our friends at Taxation, we were anticipating and we talked as a team with Jobs Ohio and internally about the fact that $600 million in foregone revenue is a lot of money. And it certainly would have had a significant impact on the budget if it was available. Now, did we get benefit from that $600 million or $1.6 million? Certainly there's a benefit. But I think the question is, is there an opportunity for us to receive greater benefits from what we have in front of us today? Currently, the pipeline for data center tax exemptions at development is zero. There is no one in the pipeline currently that development is aware of that is asking for officially a data center tax agreement.
Follow up? Yeah. So you can say that it's zero, but we've got multiple companies that already have decade-plus agreements, and we have the big three that have site-wide, they can do new sites authority. So what is this number going to be next year? What's the real number?
Through the chair to Representative Glassburn, I'm unsure what the number is because I don't know the exact dollar amount that the company is spending. That number is not made public until after they claim the exemption.
Follow-up? I'm not sure what to do with that answer. We have contracted agreements that, I mean, if it was $500 million plus the previous year and $1.6 billion the next year, we know that the activity has continued this year. How can we be in the position of having no way to tell the public what it's going to be? I understand the point of my colleague that a dollar not paid is different from a dollar given as a grant. but everyday Ohioans don't get to just choose not to pay their sales tax. So this matters. We have to give the public information they can trust so that we can continue to do win-win situations like New Albany. But we can't do that without real answers. So can you even tell us if next year's number is going to be bigger than $1.6 billion or not?
Through the chair to representative, look, we have agreements that have been in place prior to this administration, and they were good agreements because it helped create an environment that is attractive to data centers. Those agreements, yes, are longstanding, and yes, we continue to have foregone revenue of very large numbers. one could use logic and the ever-increasing cost of things to assume that that number will probably be greater in the next year However it is not possible for us to go back on the contracts and agreements that we have had in place over the last 12 years. Now, the companies certainly could come back and renegotiate them if they felt they needed to do that. But candidly, they're going to make those decisions based upon the best movement forward for their business and their company. I understand the frustration around not knowing exactly what the number is. But like I said in my testimony overview, this is different from a transformational mixed-use development tax credit, which requires a fixed value. It's different from a historic preservation tax credit, which is a fixed value. There are certainly ways that we can move from this point forward to look at capping those dollar amounts. I think that would be the most prudent thing to do because then you know exactly what it is that you are exempting. But currently, as it stands with the legislation, they provide us an estimate, and that's the number that we use in order to make a decision on the tax exemption moving forward. If we would like to examine what is necessary in order to make that happen, I'm in full agreement with you. There needs to be some sort of certainty related to the dollar amount for the exemption moving forward.
So I'll give you that as a clarification of the previous one if you want to do one more new question or take a breather. I'll yield to the rest of the committee for the moment.
Okay. Senator Blackshear.
Thank you, Mr. Chair. Thank you, Director, for your testimony. Can you talk a little bit more about the deals with Amazon, Meta, and Google from 2014 to 2018 that has been made public recently in the news? And also, too, can you talk about the process behind those deals?
Through the chair to Senator Blackshear, would you like me to go through when the deals were, what the dollar amount estimate was, what the capital investment that they committed to do was, how many jobs they committed? I believe in my testimony I provided you with a spreadsheet with that specific information, but if it is of the interest of the committee, I'd certainly be happy to walk you through it. Just at a high level. Okay, so the details for each specific deal are listed there in the spreadsheet. What I can tell you is the way that we go about reviewing these particular agreements is we typically get the project deal to us from our friends at JobsOhio. At the time of the review for the particular data center tax exemption, companies provide us estimates, not only estimates about what their anticipated investments are, but what their purchases are, the jobs that they will create, etc. And then those figures are used to evaluate the project But again as we were just discussing those figures that were given in terms of the estimated value of the sales tax exemption are just projections, and the actual value of those projections or those exemptions can only be determined after the purchases are made, and again, this is an issue as a result of the statute that was created. We then take that information, make a decision and a determination on what we believe is the best exemption rate and term moving forward. We take that recommendation to the tax credit authority. It's reviewed by the tax credit authority. It's an appointed five-member body that meets once a month. And then the decision on the agreement is made at that point. and then we move forward into inking the deal, so to speak.
Thank you, Mr. Chair. So throughout this whole committee process, we've talked a lot about transparency. I guess my question is, why have the details of these deals not been made public until recently?
Through the chair to the senator, I do not agree with the premise that these deals were not made publicly available. The data center tax exemption has been publicly shared and reported on since its inception in 2014. Again, those agreements for the DCTE are voted on at the public tax credit authority meeting and subsequently announced in press releases from our department. Additionally, several members of the Statehouse news outlets and others have covered these agreements for years, as well as the information has been made available on data.ohio.gov. A very quick search of development tax incentives, looking specifically at the data center tax exemption program, will show you exactly the number of agreements that we have, the value, the estimated value of those agreements, and how long they stay in place. I will say that with the caveat that we have two new data center tax agreements that are not yet uploaded to the site.
Follow-up? Yeah, okay. Thank you. Shifting gears, when you say that the companies have invested $37 billion in Ohio, what does that investment look like? And then also, too, are the data centers buying Ohio cooling systems and servers, et cetera?
Through the chair, to the senator, that dollar amount represents how much the companies have invested in the state of Ohio relative to land acquisition, building construction, equipment purchases. I am certain that there are quite a few of them that use Ohio companies because what would be better than an Ohio company product? although certainly it's not visible to us, the specific suppliers to each specific site. That's just not something that we track. It's going to set the precedent.
Okay, all right. I'll put you down to come back to you, unless it's the same line.
Okay. And I just note for the members that the spreadsheet is listed in supplemental information and I seeing 21 exemptions for data centers since 2014 The committed investment is almost billion The total estimated tax exemption is $2.4 billion.
Representative Claggett. Thank you, Chairman. I think it's important to go back and set the stage a little bit so we can back up at the beginning of your testimony, so to speak, because data centers are not the only ones in the construction world that receive exemptions. And so if you could tick off, just for the record, how that works in development at the state level and whatever knowledge you have of the county level and so forth, because I think that's really important that people not begin to think that this is specific to this particular industry. And then maybe on a tail of that, let's look at the items in the construction process of some of those numbers that the chairman was referring to that are not part of the tax. So, for instance, labor is not a sales tax issue, unless it's lease labor, and that's in the weeds. But I'd like to reset the stage a little bit broader in regard to the sales tax issue, please.
Sure. Through the chair to Representative Claggett, certainly there are other industries, particularly the manufacturing industry, that enjoys a sales tax exemption. And it's not unique to the data centers, as you have said. I will also say that there are instruments within the Ohio Revised Code that local communities have been using for decades, for instance, with local port authorities that cut deals with potential projects that they have the opportunity to exempt the project from sales tax. So this is not specifically a data center thing, but I think the volume, because of the amount of equipment and the value of equipment that is placed in these facilities, has generated a lot of consternation. Well, but if you continue on with the types of purchases that are not subject to sales tax in all of those conditions. So you start with a little land and then you've got certain types of things. Materials are, but maybe you can enumerate that. I think that would help set the record more clearly. So through the chair, to the representative, I have not committed to memory all of the specific eligible expenses that would be subject to the sales tax exemption, but it is equipment, cooling, those types of things that are necessary to operate and do the function of AI.
Okay. Okay. Well, we'll revisit that. Can I follow up on that? Please, go ahead. Just to make sure, and I was writing notes, maybe you said it, But the servers and the computing power, that is tax exempt. Is that correct?
I believe so, sir. And it cuts both ways, right?
It's tax exempt, but it also incentivizes to keep retooling here in Ohio and keep these facilities current and going. So I'm sorry. No, that's a good point. Okay, again, we'll revisit that. But I just want to make it clear that if you had a billion-dollar project, that's not all sales-related tax issues is my point. And so that's very important in my mind to get out there as it relates to the total picture here.
Through the chair, I'm sorry.
No, go ahead. I didn't mean to necessarily cut you off.
Again, I think that illustrates my – it helps back up my comments that I made about how this is a very small portion of the total investment that is being made in each one of these sites.
Right. Okay, my last question for this. is related to some of the comments from county commissioners, township people. Again, you've heard it all, but I think it's important for the idea that the chairman will talk about in regard to standing up this toolbox thing. I want to offer, without even consulting my own county people, I'm Lincoln County, the Intel Project's in there, all these data centers, right? We did an extensive piece of work in Lincoln County in regard to what we call framework is it regards to the townships especially in their zoning. If you don't have a great program like that, I would be happy to help you or your department get that in your hands because, again, I feel bad for the county commissioners and township guys that are getting run over, what they describe as run over. I don't think they need to be. I think the governor made that clear yesterday. There's help available. I just want to put that as part of your process here. We did a lot of great work on that, and it helped the townships get in position to zones of work as they sell fit. And so just an offer.
Through the senator to the representative, I am very familiar with the framework. From its early inception to the multiple drafts, it actually is what I think a best practice would be for communities to use on how they want to see development moving forward. And it's a great, great piece of work that should be celebrated.
Senator Reineke.
Thank you, Chair. Thank you, Director. It has been portrayed to us by the business groups that were, Ohio is like one of 33 states that have these exemptions, and I feel like you're indicating we don't need the exemption anymore. How does that put us in a position with the other states, then, if you're advocating that we get rid of it?
Through the chair to Senator Reineke, I think you will find in a quick search using whatever AI system you want that every state is having these conversations relative to the future of their incentives. If I recall, I believe Illinois, Arizona, and Washington have all put their sales tax exemptions on pause. Also, I believe that Pennsylvania just retooled their exemption to include a demand for the cost of infrastructure to be fronted by the particular data center investment. As I was saying earlier about the evolution of economic development, the evolution of the Ohio economy, there is no reason why we should still be doing the same things that we did 10 and 15 years ago. It is time for the state of Ohio to evolve with the landscape and have a win-win situation when not only discussing data center development, but any future major industrial development moving forward.
Follow-up? Thank you, Chair. Thank you. So as a follow-up to Representative Glaspern's question, how do we know that we're there, though, if we don't have numbers to substantiate where we're at? So it seems to me that if there are projections that qualify a company to get this exemption, don't we know if they're living up to that or not? So wouldn't that help project in the future what still has to come?
Through the chair, to the senator, I understand the question that you're trying to get to. I think it quite frankly without having any real visibility and detail into exactly where the increased costs are coming with these particular hyperscalers that we had agreements now for 12 years with It is hard to project, and the taxation department is in a difficult, precarious situation because they don't know until they're told by the company what those expenses are. Candidly, the agreements that we have in place, particularly with the hyperscalers, are going to be in place until they're not. And so what we're talking about is the future. Like, there's nothing we can do at this point other than asking them kindly to renegotiate the agreements with us, which they're not obligated to do. The big numbers that you are seeing in the sales tax exempted are with the hyperscalers that have been doing work here for more than a decade.
Follow-up. One last follow-up. So we're giving exemptions without knowing if they're working or if they're being used?
No.
But why wouldn't we be able to track it then?
Through the chair to the senator, we certainly know what their expenses are when they make them and they report that information to us. In fact, they have spent much more. In fact, I think in some cases we thought it would be $8 billion, and it's actually closer to $35 billion. So we know because they're required to give us that number. but we don't know exactly what the dollar amount is of the equipment that they're buying and the sales tax that they're being exempted from until it happens. And I think there are a lot of variables that are happening right now in the economy. Increased cost of goods, increased cost of transportation and delivery all across the board. And so I think it's difficult. They're giving us an estimate, the best estimate that they had at the time, But times change, particularly over a decade. Things are different now than what they were when they first entered into those agreements with us.
Let me ask it a different way. So what if they're not exceeding? What's the tracking and the remedy if they don't meet their expectations?
To the chair, we have the opportunity to look at the agreement if they're not doing what they said they would do.
And what's the remedy?
The remedy would be to hold them potentially in default and look at clawback opportunities.
Thank you.
Representative Claggett.
Thank you, Chairman. I'm concerned we're talking past each other. I'm not sure we all understand how this mechanically works, so I want to lay out a scenario for you and see if you agree with me. In the construction contract world, when you issue an exemption for services that's covered by that form, the construction manager or the project manager, whoever, gets this form in and they send it out to the various suppliers that are going to be providing materials to the job site. That then is then used against all invoices that are subject for the monthly billings and so forth. And so there is no way to establish what those numbers are because it's based on the orders that are received on a daily basis for that particular project for the particular items that are covered by that. That's why I was trying to set the stage earlier in regard to what that even means. And so it's only when those invoices come in and are audited for tax compliance is when we establish what the total value of the spend was. And so I think we got to understand the mechanics of that in order to understand why you saying what you saying I want to be sure you agree with that Through the chair yes That correct So to be clear I think we understand that I think that been established I think the question was, in order for the exemption to be granted, you said it has to meet certain criteria. Number of jobs, quality jobs, location, etc., etc. I mean, you're welcome to go through that again. The question that I thought was being asked and that I was asking is, at the end of the day, when that's all ferreted out, is that being tracked? Are they meeting their obligations? Are they meeting expectations of what the tax credit was originally granted for? And if they're not, are we getting something back?
To the chair, yes. Every tax incentive that we have at the Department of Development is evaluated on an annual basis.
Are we still? Okay. Maybe just not understanding this, but if it's $300 million and they've only used $100 million, that would mean there's $200 million left to go to answer Representative Glaspern's, so that's $200, not $0 in anticipated exemptions to come forward. I'm trying to get the forecast of what the question he's asking is, how much more is there to be done yet that's supposed to be really good for us? and there's no standard rate of return. That's why it's confusing and frustrating.
Through the chair, to Senator Reineke, that's the issue with the sales tax exemption itself. They initially provide us an estimate. We make a decision on rate and term of the exemption because of the information they gave us. There is no cap associated with the sales tax exemption. There's no cap. And so it doesn't matter if they claim, if they had told us that they were going to claim $60 million over 40 years, and let's say, you know, the first couple of years they only got to $10 million. Well, even if they just give us what they've bought in terms of the eligible materials, and then they get to claim a sales tax exemption on those eligible materials. But the reason why it is so difficult is because the statute is written to only address the original estimate that the company has given us, and then they continue to claim whether it's 50% or 100% for the term of the agreement. There is no cap on that number, which is why it is so difficult to estimate it, because we don't know what exactly they're spending until they spend it. You're welcome.
Senator Blackshear.
Passing for now, Representative Glassburn. Thank you, Mr. Chair. So the sheet that you provided us today is different from the sheet that was provided on Friday. The amount invested, even between the two, the total investment is different by more than $4 billion on total investment. Some of the columns are not the same. how did this chart change in five days or however long it's been?
Through the chair to the representative if you could just give me a minute to take a look Yes Okay thank you Absolutely And unless it critical to your line of questioning maybe they can follow up through the chair
Well, what I'm getting at is we need to be able to trust the numbers and have credible information. And so we want to operate off of these things, but if we're going to get sheets that have meaningfully different numbers, it's hard to trust what any of them mean. But the larger point I was going to go with this is the sheet we got on Friday had a committed jobs column, and there's been reporting of the most extreme one is Google has 30 committed jobs and $8 billion of payroll for a $600 million sales tax exemption. That $30 to $600 million ratio looks like $20 million a job. Clearly, there were other jobs involved. I don't think there was $8 billion of data center built with 30 people. So why, when we're looking at this with the committed jobs, why don't we have information about the construction and the other elements of these projects so that we can make an evaluation about the value of the projects? Why are we only seeing 30 jobs for Google for $600 million of tax credit?
Through the chair.
And if you need to call anyone up to help answer, feel free.
Through the chair, to the representative. they are required to give us permanent jobs associated with the project. And so that's why you're seeing that number. Candidly, when these projects first came forward back in 2014, the amount of jobs was significantly lower than what it is today. And this does not discount the construction jobs. They're certainly a very important component of the development of these facilities. but the statute and the program requires us to only collect from them the permanent committed jobs that will be a part of the project moving forward. In terms of the differences in the spreadsheet, I don't see that right now, and so what I would like is an opportunity to go back and take a look at those numbers and then address your questions then.
So, yes, any responses, send it through Chair Holmes' office, and he'll give it to the committee. But I think the point was well made. We need to be able to trust the numbers, right?
Of course. Absolutely.
Follow up?
Yeah. So on that, before my next question, I just want to say I think there is a clear third category beyond just the construction of the initial site and the permanent jobs. There is the, for lack of a better term, the maintenance jobs, the replacement of equipment jobs. There are enduring jobs that are not the literal permanent employees of these sites that are substantial that we're not accounting for. So the second question for me for this round is I want to ask the other side of the equation, which is we as a state have a policy that I think is reasonable for agriculture, for manufacturing, manufacturing, we're agriculture, we don't charge sales tax on Farm tractors. We don't charge sales tax on an iron, on a steel plant for the iron that they're acquiring to make the product. We have a principle in taxation that you're supposed to be charged the sales tax once at the end of the road. And so this industry, what the end of the road is a really weird, awkward place, because I don't know if that's Claude. I don't know if that's scrolling on Facebook. I don't know where the end of the road is that would be the place where that sales tax, I think, is being collected in part, and I can't add that up. So could you discuss the flip side of this, of why isn't the data center industry treated like other forms of manufacturing or agriculture where we don't tax until the end of the road?
Through the chair, to the representative, I don't know what was in the minds of the legislature that enacted this some 12 years ago. And candidly, I am not an expert as it relates to tax. I think we've probably got somebody behind me and Mr. Lawson that would do a much better job at explaining this to you than I. But your point is well taken. I think the industry is evolving, and so too should the state policy. I think, again, I will make the comment that we do economic development different today than what we did a decade or two ago.
And I'll just throw a comment in there. I think Representative Glassburn is doing a great job to say, again, I mean, the issues are far more complex than the talking points. So we just want to get the big picture, the whole picture, understand everything that's going on so that we can go back and talk to folks and explain to them what we're doing in the state. So, yeah, what is the final product? Is it a cute cat video? I don't know. So if you have folks in the department that will help us figure that out, we'll know. We'll go. So follow up.
Yeah, one last one for this round is we've touched on a little bit the local partner issue. Seems to be consensus that New Albany has figured this out and that others are struggling. I have to ask this. I don't know if it's you. I don't know if it's Jobs, Ohio. But why are deals of this magnitude happening without the involvement of higher levels of the state helping the locals not navigate these deals so that they're making good deals? We had people come and testify that they had to get money from the hyperscalers to pay for their lawyers to advise them on how to do these deals. That is all kinds of conflict of interest problems with that. And I appreciate that the hyperscalers threw in some money to do that, but that is just asymmetrical dealmaking. So why don't we have your department, Jobs, Ohio, or someone else on the ground with these people already on these deals?
Through the chair, to the representative, not all economic development is created equal. in the state of Ohio. There are different levels of sophistication relative to the economic development professionals that are either in a state or in a county or in a city. There are some that are privately funded. There are organizations that are publicly funded as a part of the local government. And I think that there are also just deserts in our state that don necessarily have local expertise relative to economic development And candidly, it's that way because that's what they've chosen. We have always been at the Department of Development available to lean in, to help when asked, Even when not asked as deals, maybe not relative to a data center, but as other deals have come forward, I always ask my team, what do the locals think about this? Do they have skin in the game? Are they participating? What do they need from us? So it's not a matter of we don't want to help. It's just most times we wait for the call. because we don't always have visibility into everything that happens. Contrary to popular belief, Jobs Ohio and the Department of Development don't touch every economic development deal that happens in the state of Ohio. Jobs Ohio has its certain sectors and industries that they focus on. We get brought in, and sometimes we work on the same projects, and sometimes we don't. But I think it's a great idea to have a toolkit that's available for the locals to be able to look at a checklist of things and questions to ask to make sure that the public has time to engage on these particular deals.
Some people don't like that, but it's necessary in this instance, that the local government understands just exactly what they're getting into, what their responsibilities are, what the company's responsibilities are, what Jobs Ohio, if they're involved, is going to bring to the table, and what the state, if we're involved, could potentially bring to the table. I said it earlier, it's not rocket science, but it's just a matter of just going through the process and being willing to engage. So, just to put a fine point on that, I think it's probably our desire that it becomes more of a push versus a pull, because we here understand there's resources, but not everyone around the state understands those resources exist. We're not asking you to insert yourself in the process, but make sure folks know that there's resources available. So, before I go on, you've been at this for an hour. We're going to give you a five-minute break. OK. And we'll reconvene. We'll be at ease until 11.20. You get seven minutes. Understood. Thank you. The Select Joint Data Center Committee
will now come back to order. We're going to pick up with Senator Blackshear.
Thank you, Mr. Chair. And I just have one question for now. I think this should be the last one. But my question is, what safeguards are in place to ensure that companies are not able to abuse the sales tax exemption?
Through the chair to the senator, there is language within the Ohio Revised Code that we follow to ensure compliance with the specific requirements of the sales tax exemption. We work with our partners at the Department of Taxation. They handle the eligibility concerns relative to what they claiming And then we have the opportunity then to ensure that if they are out of compliance then we can take that information back to the tax credit authority and make either revisions to the rate and term of the agreement, or to request clawback of the funds that they have been exempted.
Chair Holmes. Yes, thank you, Chairman. Thank you for hanging in here. Like we were saying, this is just an opportunity to communicate with the public the best way we can. Of course. I had, so my three questions. So most of my life has been in competitive environments, and this seems like one of the most of all time for the United States, nationally and internationally. So the first thing, you had mentioned this in your testimony. We like to think about competitive advantages that Ohio has in leveraging them and growing them. And I've heard things before, our historic workforce and the things we do as the industrial nature of our state, the workforce that currently exists, our geographic location, logistics and transportation, that central location, energy that currently exists, the concept of latency inside, of being close to those businesses that need the data. But could you expand a little bit? What do you see from your – what are the competitive advantages of Ohio, and how do we grow them? That was question number one.
To the chair, we could take you on the road and help sell the state with your knowledge of our competitive advantage. But to add to your points, certainly the workforce component is an important piece of this. The cost of doing business in the state of Ohio is much less than it is in some of our other competitive states. The availability of energy and water and infrastructure in order to support these types of developments is another competitive advantage. The tax environment here in the state of Ohio, the low cost of living for the people that work in these facilities, the regulatory environment, which is fair but not overburdensome, and the ability to get to market. It's a lot quicker in terms of the local and state permitting to get up and out of the ground in Ohio than it is, let's say, in places like Virginia or in California. So these are all certainly not the exhaustive list, but the things that I think about when we're promoting our state as a great place to do business.
Follow-up? Yes, sir. Thank you. And House Bill 15 was focused on that to speed to market. is so indicative of this. One of the things we looked at, we really want to incentivize and look for ways to use our brownfields and looking at ways to incentivize data centers to look at them, the rural areas, of course, but then we think about urban areas and places, warehousing and things like that that might exist. Have you thought about that? What are good ideas we could use or tools we have in development
to incentivize brownfield use? To the chair, you know, of course, With your support in the General Assembly, we have done a lot of brownfield remediation in areas all across the state of Ohio, and we now have opportunity for development like data centers on these former sites. While I thought in the sub that was written that it was a good try in terms of trying to incentivize the behavior that you would like to see with a larger sales tax exemption for a company to locate on a brownfield that has a no further action letter on it I don't think it's enough to incentivize the behavior that you want. And I say that because we do a lot of things at development relative to tax credits, and tax credits are really valuable to certain entities in the state of Ohio, particularly insurance companies that pay an insurance premium tax, financial institutions that also pay a tax. There are still companies and corporations in Ohio that pay the cat as well, even though you've done some work relative to that. And so the tax credit programs that we have in place, particularly the Transformational Mixed-Use Development Tax Credit and the Historic Preservation Tax Credit Program, offer up a fixed value. so let's say $5 million or $10 million, up to $20 million in the TMUD program. But those values then, the winner or the awardee of the tax credit then sells that tax credit to an entity like an insurance company or a financial institution that typically gets anywhere between $0.84 and $0.89 on the dollar for the value of the tax credit. And so if you want to see that type of development in terms of brownfields and potentially having data centers locate there, which is a great idea, you have to provide something a little more valuable because it costs more to build on a brownfield, particularly if it's not remediated, than it would to go to a greenfield.
Follow-up? Thank you, Coach. Your last one. We built this forum because we recognized, Co-Chair Chavez and I traveled around the state and we went to data centers. We recognized the ballot initiative, the emotion and the energy from the public to even establish that, to get the signatures and the concerns that we had heard. And when we brought the citizens in to hear those concerns, comparing that to what we've seen and heard in testimony and seen when we've toured these sites, a vast disparity on the concerns and what's actually going on. And that causes me alarm. With your experience around this disconnect of information, why is it so wide? What is driving that? What's going on?
To the chair, I think all of us in the realm, in the public realm, have enjoyed a much more freer level of expression from folks online than maybe what they would have done even a decade ago. And as someone who probably is very proud, not probably, I am very proud to probably be the China hawk in the administration, there is definitely foreign influence in the social media that people are seeing relative to data centers. And it is doing exactly what it is meant to do, which is to drive misinformation and division so that these projects slow up. I'm sure you've had several members come before you and talk to you about the national security implications of not building these in the United States, and there are people who are watching very closely to what the U.S. is doing and how states and locals are responding. Thank you.
Thank you. Thank you for that. Senator Wilkin.
Thank you, Chairman. I want to go back to where we were previous, minus the sarcastic question. When you talked about a shifting jobs to AI and data centers versus other job loss, the increase in construction. Can you tell me about those? Like, what jobs do you see going away? And are they going away because of data centers coming in, or are they going away because of it's just the times are changing?
Through the chair to Senator Wilkin, my comments were not meant to infer that AI was creating issues relative to job loss. I think the overall economy and trade policy, amongst other things, is creating a chokehold, so to speak, on particular industries. I know in the manufacturing sector, you know, we're seeing a loss, at least in certain areas of the state. I can tell you that in my hometown, in Findlay, Ohio, we have about 2,000 less jobs today than we did when I left. to come take this job. And that's not because of AI. That's just a result of the market doing what it's doing and the economy responding to what is being signaled to it. But in no way was I inferring that AI was taking over jobs at this point.
Okay, thank you. Follow up? Follow up? Yeah, and hopefully I didn't mean to infer that that's what you inferred. I was just curious as to the other. and as the market changes, everybody's habits change. We put bookshelves in our house and my wife says, I can't wait to put the books on them. I'm like, when was the last time you bought a book? You read it on your computer or your phone. So my next question then becomes, and I go back to my days as a county commissioner and we were working through a site certification process and we had a site selector come in to walk us through to say, this is how we do it. And one of the things that they were very stern about and specific about was we are not looking for ways to keep you in the pool. We are looking for ways to kick you out so we don't have to deal with you. And we want to get down to five to maybe three sites, ideally three, and then they want to take their client, whomever that may be, for whatever that may be, to those three sites. I say, based on all the things you've given us, here's the three best sites we've found all over. The interesting thing that I remember, and I'd just like for you to talk about this a little bit, I understand economic development has changed. However, one of the things they told me was, you don't have to offer any incentives. Zero. But you better realize that other people are. And whether you like it or not, if there are things you want to get, there are things that companies are being offered to lure them to Texas, Georgia, Indiana, Ohio. Can you just talk about the value of incentives? And none of us have. I mean it would be great if – shame on the first guy who ever offered them to get somebody in because now everybody has to kind of follow suit if you want to get it. But, I mean, it goes all over of what you want to lure to your state. Can you just talk about that a little bit?
Yeah. Through the chair to Senator Wilkin, yeah, there definitely has been a transition, and a transition particularly in Ohio that I'm very proud of. We have worked with the General Assembly, with our friends at JobsOhio to create this environment that now you know has Ohio in the top five in the country for economic development And that doesn just happen because you know we paid somebody to tell them to call us top five It happened because we've been intentional about the incentives we offer, about the behavior that we want to see from companies, about the education and the workforce that's necessary to support the development. And certainly, Ohio is in a much better place today than it was even seven or eight years ago. And what's happening now, and, you know, J.O. will be able to speak to this a lot more eloquently than me later on, but we're winning deals that we didn't used to win before. And we're allowed to be a little more picky about what we chase, because not everything, saying not every shiny object is right here for Ohio. And we are blessed to be in a situation right now the way we are. And it's happened because of a lot of really hard work and very intentional investments and the right structure with the right incentives and the right regulatory environment and cost systems that are creating opportunities for not only expansion, grand expansions of existing companies here in Ohio, but the ability to attract these different sectors and defense, aerospace, microchips, etc. Things are going better for us. So I think while I can appreciate the comment about how you don't have to offer us anything, but other people are, there are other ways to differentiate yourself than to just throw cash at them. And I do believe that Ohio today is in a much stronger position than what we've ever been before, and that means the future is pretty bright for the Buckeye State.
Follow-up? After I say, I think we made it clear that we're not throwing cash at anyone. I think that was established earlier, right? Okay, follow-up. So a little different take, and I agree that not everything fits, not every shiny object. Our goal back home was mutually beneficial. If it's not mutually beneficial, then what's the point for me to try and do it? I don't know if you would have this or not, but when we got rid of the sales tax for product that manufacturers are buying to manufacture items or products, Is there any numbers as to what did our manufacturing and our economy look like prior to that? And now what's it look like now as we go into we have some exemptions for sales tax on manufacturing? You know, my colleague Glassburn mentioned, you know, farmers don't pay sales tax on equipment and rattle off several others. But is there anything – do you have anything – and I don't know if you would or not, and it's just kind of a random question, but it's more of a curiosity question, I guess.
Through the Chair, to Senator Wilkin, I do not have anything specifically in front of me right now to share, but I do know that our friends at the Ohio Manufacturers Association would have information about the rate of return on what that sales tax exemption has offered to particularly manufacturers in that space since its inception. Thank you.
Thank you, Chair. Representative Workman.
Thank you, Mr. Chairman. Thank you, Director, for being here. I just want to talk a little bit more about the foreign influence. You mentioned that there no doubt in your mind that there is some sort of campaign that being funded potentially by our adversaries and who knows who else Can you tell me how you know that Is there a way to confirm that Through the chair to representative, I think any quick view of publicly available information and reporting would help inform that opinion. Follow up. Follow up, chair. Thank you. So what I'm seeing in social media, we're very close to our communities, is that there truly is a lot of, I don't want to say misinformation, I'm going to say concern, because those concerns are warranted in our constituents.
There may be misinformation that is fueling those concerns that's hard for us to clearly identify whenever there's so much fear behind that campaign.
I guess my question is, how do you recommend that we as a body and the developers of these data centers continue to establish Ohio as top five in the nation and continue this development when there's so much concern that essentially these centers are just exploiting our communities?
Through the chair, to the representative, there's nothing like just having good old-fashioned one-on-one communication or in-person communication. having the opportunity to listen more than we speak about what people's real concerns are, and then actually repeating what you think the concern is back to the person who's relaying something that's causing them so much consternation. I think we have gotten away from actually dealing personally with folks, and that it's so much easier to text, to make a phone call or a Zoom call, or to just get on some chat board to express feelings as opposed to just having a good one-on-one conversation or within a group and a roundtable. And it's not to say that everybody... The soccer mom who is shuttling kids from one part of the community to the other any day of the week doesn't have time to worry about what's being said on social media relative to any type of development. or the time or the need, quite frankly. And so there should be an opportunity for people to actually engage with real individuals that can listen to what their concerns are, address them as much as you can, and I think that helps build trust. Marketing campaigns and so on and so forth are not an effective way to describe what is a data center. But having someone from the industry and or from the company in a public meeting to answer concerns, I think, is probably the proper way to help dissuade any misinformation or misunderstanding about the developments. Hello? One more? So on that note, of course we will do all we can to educate based on the findings of this committee.
Who else is available to assist that process at the state level? You mentioned that there are resources through the Department of Development. Can you, for the record, explain what those resources might be for our elected officials to navigate these development opportunities?
So through the chair, to the representative, I don't think we have anything publicly available right now relative to this toolkit that is being asked for, which I think is a great idea. But as always we anybody at the Department of Development is available to answer questions I you know for example was just down in Newtown yesterday meeting with the newly elected mayor and vice mayor and talked about a lot of things talked about the festivals that they want to continue to expand and the infrastructure that they need help with and the downtown redevelopment that they would like to see. Those one-on-one meetings with locals are extremely valuable and it opens a channel of communication that they didn't have before. And that happened because the mayor reached out and said, I would love to talk to you as a former mayor and the director of development about how Newtown can continue to evolve.
Representative Glassburn.
Thank you, Mr. Chair. First one this round is, I believe you mentioned in your comments to one of the questions earlier that one of the companies, when we were trying to get at this sheet, is not at $8 billion but is at $35 billion in terms of their total investment. If I understood that correctly, we're somewhat trying to, and I think the media is trying to, understand this by using this tax exemption project summary as a proxy for what's going on. If one company is at $35 billion, which I assume is one of the ones listed at $8 billion, what can you tell us about what's going on with the rest, and is there some other document that is the document we should be using as a proxy to understand what's going on?
So through the chair to the representative, I believe the information on the spreadsheet is what the company has given us in terms of an estimated value of construction or investment. I am not sure whether or not the actual number is on that spreadsheet or not. I think what we were trying to do was to inform you as to what the deal is, but not exactly what the performance metrics are. That would be in a different report, but it would not take us long to pull that from Salesforce and or data.ohio.gov to find the information that you're seeking.
Follow-up? Thank you. Next question, again, I'm going to ask you is your advisor role to us as the Director of the Department of Development. You've stated that we can't do anything in terms of the sales tax exemption for the big three. So if we make changes, those are going to impact everyone else. I want to ask the reverse of that question. of if we make changes to lower the sales tax exemption where it only impacts everybody but the big three, how are we not creating an unfair advantage for them and dictating that the only sites that we'll have in this state will be folks from the big three?
Through the chair, to the representative, I think the position that the large hyperscalers are in is a result of them taking a risk sooner and at a much greater level than any future development moving forward. The opportunity that we have here is to take advantage of the environment that has been created and make sure that the policy that we are using moving forward is consistent with what we want to see as a state for data center development. Thank you.
Follow up. Last question this round is, again, on another track. We were looking at reforms yesterday, and one of those discussed was requiring to get the sales tax credit behind the meter or a power purchase agreement like the meta-nuclear power plant deal. The reason we're looking at things like that is to try to protect utility rate payers, but when you're making an evaluation of what percentage to award with these sales tax agreements, that peri-nuclear power plant deal saved that plant, saved 1,000-plus jobs. How is that kind of thing weighed into your considerations as to the periphery beyond just the literal meta is building a data center? How does any of the other spillover related economic activity, does it get involved in your consideration? How does that factor out?
Yeah, through the chair to the representative, as I stated earlier, there is a whole host of influences and inputs that come to us that we evaluate in each specific economic development project that is presented. Certain projects, large projects similar to that, do get evaluated not only based upon power, but also the types of jobs that they're creating, how much they're going to be paying those individuals, what the regional need could potentially be. Again, the Department of Development is in a very, very important position in all of these aspects of different deals. It is our job, first and foremost, to make sure that these projects are beneficial to the state as a whole. We ensure and we stand there as kind of like the risk manager at a bank, so to speak. And we want to make sure that the projects are capable of being delivered and that they have the type of benefits that people in Ohio want to see. And so we evaluate all of these things. Of course, the list that I gave earlier was not exhaustive, but certainly a power purchase agreement with a nearby facility would be definitely on the list of things to consider as you're negotiating the rate and term of any data center tax exemption.
Yield for now.
Representative Claggett.
Thank you, Chairman. I want to go back to the advantage that Ohio has, because I want to be sure I got square in my mind where you believe Ohio is in regard to all those other things you laid out for Chairman Holmes in regard to Ohio. And so one of the areas you did not touch on specifically in your list, which you indicated is not exhaustive, and that's fine, but I want to talk about the business slash national security importance of data centers in regard to how that works across the nation, and specifically how Ohio stacks up in regard to the geology, the stability of our geology, I think I'll put it at that, the terrain, that's an important part, and the weather related here, and I'll even put in there military security. And so you not acting in a vacuum of Ohio you are undoubtedly part of a larger coalition of at least the Midwest Where do you personally place Ohio strategic advantage under those metrics in the overall scheme
Through the chair to Representative Claggett, I'm impressed by your knowledge of geology and terrain, etc. And respectfully, I am not the one to talk about those integral or intricate details relative to our natural resources. I would defer to my colleagues, Mary Mertz, who can speak more to those specific advantages. And I'm sure she is much more well-versed than I am. I'm just an old mayor representative. That's about all I got.
Any further questions from the committee? Looks like I've come to the end of my list I've been keeping. Seeing none, I hope we can appreciate why we wanted to hear from you. A lot of questions, a lot of great information. Thank you very much for your time.
You're welcome, Chair. We are happy to assist at any time, even beyond the time that we've been able to spend this morning together. Thank you so much for having me.
Thank you. So in order to keep the – not break the momentum going forward, we're going to take a 30-minute break now so we can talk to the media. Everyone can kind of catch their breath, and then we'll do a four-quart press to get this over with. Not over with. Get through the agenda. get through the agenda in a timely manner. We'll stand at ease until 1220 exactly. The Select Joint Data Center Committee will now come back to order. Next, we have testimony from Drew Cooper with Jobs Ohio. And as a reminder, all these testimonies will be limited to five minutes, and then questions will be unlimited. You may begin when ready.
Chairman Chavez, Chairman Holmes, members of the committee, thank you very much for the invitation for JobsOhio to participate in this important process. As the Chairman said, my name is Drew Cooper. I have the privilege of leading the Government Affairs team at JobsOhio. I'm joined by my colleague Dana Socie, who serves as Vice President and Head of Economic Development at JobsOhio. Today I'll be sharing remarks that focus on JobsOhio's role in data center development, as well as some perspectives on the industry's impact to our state's economy. After my remarks, Dana and I would love to take any questions you might have. So as I believe you all are aware, JobsOhio serves as the state of Ohio's private nonprofit economic development corporation. We were founded in 2011 by the state legislature, and our mission is to work to support companies that are in Ohio by helping them grow and expand and create jobs and also attract new companies to the state. Our funding and strategies are concentrated on attracting investments and jobs from within ten priority industry sectors. One of those targeted industries is the information technology sector, which has seen immense growth in Ohio in recent years. One example of that growth being, of course, the proliferation of data centers across the state. Data centers are also important service providers to nearly every other industry that we seek to support. Manufacturing, logistics, aerospace, finance, life sciences, and many more. As it relates to JABS Ohio's involvement with data center projects, our engagement is mostly advisory and somewhat indirect, at least compared to most of the economic development projects that we work on. That's the case because JobsOhio currently does not offer any financial incentives in support of data center projects We not done that in the last decade We did incentivize one project back in 2015 with JobsOhio funds that was Amazon Web Services first investment in Ohio But since then we have not provided any direct incentives to data center projects As Director Mihalik outlined in great detail, where JobsOhio does play a role is in the context of helping advise and provide information to the Department of Development and to the Ohio Tax Credit Authority as they are considering our state's primary incentive, as you all know very well, is the data center tax exemption. So we view our role, again, as helping to advise and share details about the potential projects that are on the table. Additionally, if requested, we invest our time, expertise, and systems to assist our regional economic development partners and local communities in coordinating with interested data center companies as we maintain relationships with all of those leaders. So as it relates to the industry more broadly, this committee has heard testimony from operators and stakeholders regarding the importance of these investments to future industries, national security, and Ohio's economy. Our written testimony, which you have before you, has some additional industry information and statistics. I'm not going to get into that verbatim in the interest of time, but hope that you review those at your convenience. So looking beyond the data centers themselves, JobsOhio's pursuit of investments from within the data center supply chain is yielding momentum and job creation in the advanced manufacturing sector around the state. These supply chain companies provide the power, cooling, fabrication, and infrastructure that make data centers possible. We wanted to highlight a few examples of companies with whom we've done work to help support their growth. You have several in the written testimony, but I'll just highlight a couple. Vertiv, who I know the committee heard from recently, has emerged as a leader in data center infrastructure nationally and recently announced the largest job creation project in southern Ohio, since Jobs Ohio's inception with the creation of 500 jobs in Senator Wilkins' district in Ironton, which we're very excited about. Another example is a company called Wastrofo. Wastrofo is an Italian manufacturer of transformers and other components that are critical to the energy industry. They recently announced a significant investment in Senator Blackshear's district in Trotwood, where they'll be manufacturing transformers and other key energy components that are in high demand from within the data center industry. Third example is a small business. I actually had the chance to tour recently in Senator Chavez's district in Athens called AC Green Metalworks. It's a woman-owned steel fabrication company that has seen immense growth and been able to invest in their business through support from Jobs Ohio to help expand their ability to respond to demand that they're receiving from a number of industries, including the data center industry. So we hope these examples serve as a reminder that this supply chain presents an opportunity for communities across the state to capitalize on the growth of the data center industry, regardless of whether they're in proximity to an actual data center development. So in conclusion, we applaud the committee's thoughtful and deliberate approach to collecting information regarding this important industry. Jobs Ohio affirms prior testimony that's been heard by the committee that has outlined the benefits that these investments can bring to our state. We recognize that policymakers are appropriately examining questions related to energy infrastructure, community impacts, and long-term competitiveness. Our perspective is that Ohio's challenge is not whether to engage with the industry, but how to position Ohio to capture its economic benefits while addressing legitimate community and infrastructure considerations. So with that, happy to take any questions you might have. Thank you.
With one second to spare. Thank you for your testimony, and we can appreciate how quickly five minutes goes. Absolutely. So I encourage the committee and the public to read through all of these testimonies, verbal and written. So questions from the committee?
Representative Workman Thank you Mr Chairman Thank you for being here today so I guess my question revolves around the structure of JobsOhio and how you recruit or get engaged in the data center development projects from the get and then I might have a follow
Sure. So as I mentioned, JobsOhio is the lead state economic development organization. We maintain relationships with companies across the 10 sectors that we focus on. Obviously, the information technology sector is one of those sectors. Dana leads that effort for us. And so in many cases, we may become aware of a data center opportunity through those relationships with those companies who understand that we, in many cases, are the front door to the state from an economic development standpoint. But data center projects are a little unique in that there are many projects, especially recently, where the developers are actually going directly to the locals, and so we may not necessarily be their front door or their initial touch point within the state, but in many instances it's because of the relationships we have within the industry that often they'll approach us and say, hey, we're thinking about this type of investment. We want to get connected to these local folks. And so at that point we may connect them with our regional partners. We have seven regional partners around the state that are sort of the conduit to local leaders and local economic developers. And so that's how most all projects flow, and data center projects are no different.
Thank you. Follow-up, Chair. Thank you. So I guess my question is, it sounds as though you're coming into these projects with the developer and or operator to the local communities. Are you working as more of a mediator in that role, or are you trying to assist the developer in selling the product at the local level?
Through the chair to the representative. I think most of the time, I would describe our role as connector. We never want to be in a position where we are attempting to convince a local community that they should be for a particular type of investment. But we view our role, particularly given the relationships we have within private industry, to help make those connections so that a company can get in touch with the right local decision makers to then have a conversation about whether that project makes sense for their community.
Thank you. One more, Chair. Thank you. Thank you for that clarification. So can you tell me, does JobsOhio ever sign an NDA?
Through the chair to the representative, we do frequently, almost on every one of our projects. That's a common expectation from our clients. And that's part of the reason why JobsOhio was created as a private entity, was because there is a significant advantage when we're competing with other states, and it helps us do a better job of creating incentives that are going to create a return on investment for the state, because we require from our clients pretty in-depth financial information and other details about their future plans that they would never share with us, if those could end up on the front page of the newspaper are in the hands of their competitor. So yes, I would say, Dana, almost all of our projects, our clients expect that from us.
Any other questions from the committee? Senator Blackshear.
Thank you, Chair, and thank you so much for your testimony. You said that Jobs Ohio essentially plays an advisory role when it comes to data centers. Do you all look to other states when you all are advising data centers here in Ohio, just to get you know the good and a bad in a sense yeah so through the chair of
the representative we absolutely are constantly monitoring what other states are doing I think the word we use most often in the context of economic development is competition is competition is fierce for investments across all industries all sectors and so yeah we're constantly looking at what other states are doing to either become more competitive or maybe policies that are being considered that will make I'm less competitive compared to Ohio. But yeah, that's something we do all the time.
Follow up. Where do you see this industry in the next five to 10 years in Ohio?
That's a great question. I'll take a stab, and then I'd love to have Dana give a point of view. I mean, the amount of capital through the chair of the representative, the amount of capital flowing is just remarkable. It's huge. And it seems clear that we are not going to be living in a world that is less digitally connected. It's only becoming increasingly so. And that requires, you know, when you have a thousand sensors on an EV so that it can drive autonomously, that requires computing power. And so the industries that we work with, I mentioned some of them that rely on that computing power to do everything that they do, tells us that this industry, these facilities, are going to be of increasing importance in the coming years. Anything you want to add to that?
Chair Chavez and Chair Holmes. Please identify yourself and then make sure you fill out a witness slip when you're done.
I will. My name is Dane Associates. I'm Vice President and Head of Economic Development for Jobs Ohio and through the chairs to the senator. You know, painting the future of AI and what's going on in data is, you know, if you even listen to the experts, we're seeing kind of, you know, a transformational thing that maybe none of us know. But if you look at how our economy runs and our companies work, they're relying on data. It used to be we'd have file cabinets full of our company data, and that has migrated to centralized data points. And in some ways, they don't manufacture a bumper or a tire, but their manufacturing floor is ones and zeros that they supply back to companies. And that's what allows you to get your medical records or file your taxes. And so that's why we, as we saw the digital economy shift from primarily manufacture and paper to a digital economy, we felt like being relevant in the digital economy was incredibly important for Ohio's future. And so I see it continuing to be a big industry, maybe one of the biggest. and as it's been spoken about, this is an industry that has to refresh itself every 18 months to 36 months because the equipment, as opposed to a bumper factory that puts a press in for 40 years, this is a constant cycle, and I thought Jennifer Chrysler did a great job in talking about the constant part of the refresh. So I think it will grow, and I think it will continue to be active because of those aspects.
Follow up? Thank you, Chair. My last question is, of course, with legislation in the works, we've heard from all over. I guess my question is, have you all recommended any policies to anybody? And if not, do you have any policies that you would like to see?
year. Yeah, so through the chair to the senator, Jobs Ohio really since its inception has not generally taken direct positions on public policy. That's an intentional choice that we've made as an organization that, you know, we didn't want there to ever be a perception that members that were advancing policies that were priorities of ours, you know, saw better outcomes. We want to be a step removed from the policy process. So in terms of formally recommending policies to legislators others no we have not But we always happy to participate in conversations and share perspectives perhaps on you know what other states are doing in relevant policy areas or even within the data center context But in terms of, you know, formal testimony before committees, formally proposing solutions, that's just not something we generally do as an organization in any context.
Senator Wilkin.
Thank you, Chair. Thanks for being here. I think I've got a couple that are probably relatively simple questions, but probably the easiest one, or maybe this is more of an idea than a question. But when a data center has identified a location, obviously you've got to be aware of it. You can't help if someone doesn't make you aware of it. But has there been any thought for Jobs Ohio as the main economic driver for the state, for projects that are typically as big as these are, to put together some information for counties? Because like a lot of us here that represent rural counties, you know, your commissioners, when they drop in and say, hey, we're going to spend $10 billion, you're kind of like, oh, my gosh. Yeah. That's my budget for the next 50 years. More than that, is there any help, how to contact legal advice? I go back to when solar was the big deal. A gentleman from the Farm Bureau would say, I promise if you sign the lease on the hood of your truck, you got taken advantage of. So I'm not insinuating that they are, but is there help that you're offering or you can offer? Is that an idea that Jobs Ohio would explore? Absolutely, yeah.
through the chair to the senator, a couple responses to that first. When asked, we have absolutely provided connections to legal advice, other resources to help communities navigate unprecedented deals, like data centers often are. Most communities may not need that for a 50-person manufacturing opportunity, but for these very large projects. I can think of even recent examples where communities have approached us and just said, we're in over our head here. how do we navigate this appropriately? And so we've made connections and recommendations to resources that they can avail themselves of. We are also in the process, it's good timing, of developing more or less a toolkit specific to data centers that would not be necessarily a you should accept these investments, but rather if you're approached about one of these, here are some of the things that you should think about doing. And so we're happy to work with the Department of Development. I know that was something you talked about with the director to make sure that whatever we put out is not duplicative and is in harmony with the desires of this committee and the legislature and the Department of Development. So short answer is yes. We see ourselves as playing that role and our regional partners. We try to make sure that the relationships between local leaders and our regional partners are very strong, and they often serve as a resource and a sounding board for local leaders as well. Follow up?
Follow up. Can you talk about when a data center comes in, and I guess in this case I'm talking about the hyperscalers that have all said, we'll pay for the infrastructure upgrades, we'll do this, we'll cover the cost, pay in their shares, they say. When that's done and that infrastructure is there, is there a way to put a number or tell us, how does that affect the rest of economic development in that area when that new infrastructure goes in?
Through the chair to the senator that a great question and that is something that we see that one of the benefits some communities have articulated to us related to data center projects is that the sewer or natural gas or electric expansions that are required can also create secondary benefits for the surrounding areas I don't know that we've ever attempted to quantify that, Dana. I don't know if you want to share a point of view on this question. Through the chair to the senator, as Drew alluded to, this is one of the most important things, because it takes so much to get new investment in infrastructure. And what often helps is a big end user on the end of that infrastructure because it generates water sales, which creates revenue that then you can bond against. So it's a resounding yes. It can be for communities that know what's going on, how much it's going to take to build that asset, and then to create some additional capacity that could be then used for additional economic development. And so there are countless examples of that where a new gas pipeline came in, and then all of a sudden there was a tremendous amount of additional interest by all kinds of other industries. And we've seen the data center industry actually stepping up in cases and actually writing checks to help close gaps or to fund some of that infrastructure. And so we're happy to see that collaboration with communities on that level. So last one, I think I know the answer to this, but I'll let you guys answer.
At JobsOhio, since you guys have been there, how many projects have you worked on where you simply didn't charge someone $1.6 billion and in return got a $37 billion investment? 2,200 percent, roughly, a little more.
through the chair to the senator? None. Just curious. Yeah. You know, it's an important sector. I thought, again, Jennifer, because of the almost 15-year history of living every aspect, including with them being up and running, it's a core asset to every one of our Ohio companies. the state has their data in a data center. You know, it's so, we think it's a, the tax exemption is a worthwhile investment. I would highly encourage, and I think Representative Blackburn brought this up earlier, is I humbly ask the accounting of what we get in terms of tax revenue holistically, not just one part of it, not just construction, labor, not just direct payments. I mean, this industry, when they provide our companies data center services, there's a sales tax charge to that.
If we could, as a state, fully load what the benefits of the data center industry are and then compare that to the tax exemption, I think that would be an incredibly eye-opening exercise.
That's my three.
I just want to note that if you guys are hearing rappers and stuff up here, the glorious light of a state legislator is choking down a vending machine lunch in between questions, so I apologize for that. Representative Workman.
Thank you, Mr. Chairman. So I'd like to know a little bit. I'm certain that you work with a large network of partners in the recruitment of these opportunities. What does that network look like? From what I understanding there may be one Columbus involved maybe some other partnerships or coalitions involved Can you speak a little bit about that Sure So through the chair to the representative Jobs Ohio model is such that Jobs Ohio exists
as a statewide organization located here in Columbus, but there was an intentional choice made that rather than having a Jobs Ohio Cleveland or a Jobs Ohio Cincinnati, we would contract with existing regional economic development organizations to be our representatives at the regional and local level. So there are seven of those organizations. One of those is One Columbus. They cover the central Ohio region. If you go around the state, southwest Ohio is Ready Cincinnati. In Dayton, it's the Dayton Development Coalition and surrounding areas. In northwest Ohio, it's the Regional Growth Partnership. In northeast Ohio, it's a group called Team Neo, which you're very familiar with. In the furthest, most eastern point of the state, it's Lake to River, our newest partner, which represents the Mahoning Valley and some of the surrounding counties. And then in southeast Ohio, it's Ohio-Southeast economic development. So they're the starting point in terms of the network and how we work on opportunities together. But there's all sorts of other organizations. There's site-selecting firms that are involved at times that are contracted by the data centers who help them identify available sites. Many other organizations are involved. But for us, the closest working relationships we have are with the seven regional partner organizations.
Follow-up?
Yes. Thank you, Chairman. Thank you for that clarification. So I heard a friend of mine attended an AI summit in Las Vegas, and he said he saw Jobs Ohio sponsoring an entire wing of the event. And we had NVIDIA there as the keynote. So this was a really big event. Can you talk a little bit about your recruitment and your sponsorships and your activity nationwide to really recruit this kind of activity in Ohio?
Yeah, absolutely. So through the chair to the representative, we view one of our roles as being sort of the chief marketers for the state of Ohio. We all know how Ohio's brand has evolved over the years. And so for a lot of folks around the country, they may see us as flyover country, rust belt. We all know the monikers that are not usually positive. And so Jobs Ohio has worked really hard in recent years to remake our image. One of the ways that we've done that is by being really aggressive in targeting specific events where we know there will be a high concentration of the companies that we would like to see come make investments in the state and by having a really significant presence at those events. Rather than peanut buttering all over every trade show that's out there across the country, we try to pick our spots really intentionally so that when we do deploy resources to have a presence at those locations, that results in leads that often turn into projects that sometimes turn into investments in the state of Ohio. So to be clear, though, 80 to 85 percent of the projects that we work on on an annual basis are with existing Ohio companies. So while that is a focus of ours, our primary focus is making sure that the companies that are here in the state continue to grow and make investments.
Representative Glassburn.
Thank you, Mr. Sharon. Thank you for being here. This whole matter with data centers strikes me as a, for lack of a better term, a gold rush situation of it is speed to market, it is moving so fast, no one understands what's going on. I might be vying off of the full agreement of the committee here, but to me, there should be someone, whether it's development or you or somebody else, with these communities when they are making these decisions. And if they choose to ignore or not use your advice, so be it.
Okay.
What if if the state was to go in that direction who is the right place for that to be who is the what is the team that is the right group of people for that to be beyond just here's the best practices yeah so through the chair of the
representative first of all we welcome those opportunities to help communities think strategically about what sorts of investments they want to attract to their community I think you outlined the team I think it's a it's a combination of of Jobs Ohio, the Ohio Department of Development, and then our regional partner that covers whichever locality that we're talking about. And if you have those parties at the table helping to advise and helping communities think about how to structure local incentive agreements, to me, that's where the most value would be derived. So I think that's the team.
Follow-up?
Yeah. So you mentioned and we've seen stories about your involvement with all kinds of projects in different ways, from incentives to trade shows and festivals and podcasts and whatnot. What resources, I understand you deliberately operate as a black box, but what resources beyond just time of your existing staff can be put towards this rapidly developing economic sector in our state?
So through the chair to the representative, I think we're always seeking to find creative ways to be a difference maker for the state. And so if the legislature and our partners feel that our resources could be used to greatest value by, you know, creating funds or making funds available to help communities plan, that's frankly something internally we've had a few conversations about because some of the communities where these things are happening, you know, may not have the resources or staff bandwidth to think strategically about some of these things. And so we're always thinking creatively about where we can deploy resources And if that's something that there becomes high demand for, that's something we could absolutely take a look at.
Thank you.
I want to take a little bit of a different tack here. I understand you have your 10 focus areas. I don't know if energy generation is one of them. But with the inflationary pressures, we don't all fully agree on what the cause of our energy increases are. But it's clear that both we need more energy for us to have job growth in this state, and we need it for relief for residents and our existing businesses. Is energy generation going to be one of your focus areas since there's the dual benefit to us? both in terms of job creation and the environment for everybody else who lives here.
Yeah, so through the chair to the representative, Dana spent 30 years in the energy industry, so I'm not even going to touch that one and have him take a crack at it. Through the chair's representative,
really energy and chemicals is one of the 10 industry sectors, has been since day one. So energy, frankly, has always been important to Ohio. It's what got us started and it's shifted over that time. Maybe a number that most don know but might find interesting is just since 2011 our shale industry alone has invested and we just released the latest update that we work on with Cleveland State of billion that been invested just by the shale industry itself So we have been heavily involved in the energy mix through that entire thing. While that was happening, we were also retiring perfectly good coal plants. And then there's things like renewables. There were nuclear threats to shut them down and all of those. And up until just a few years ago, Ohio was flush with a lot of excess power. And prices, maybe people wouldn't agree, but prices, if we look globally, have actually been very competitive. It's in part why we're attracting all this manufacturing and all these other industries. They're coming here because it's affordable, it's resilient. And so to answer your question on the power generation side, as coal had been retired, we built, I think, seven world-scale combined cycle power plants. These are big power plants just to put power on the grid. This group and the legislature owes a lot of – we owe you all a lot of credit – kudos for passing House Bill 15 because – And I speak nationally, and I get a lot of states come up and say, how are you getting this stuff done so quickly? We can't even get people to talk to each other, let alone pass. And allowing these big end users to bring their power plants with them is going to impart help because they're also picking up the tab for that power generation source that they're going to consume on site. And so, you know, more is needed, but it's a very important aspect. I would say that our energy and chemical sector, obviously, they have their own projects that we work on, but it's also a consultant, internal consultant, if you will, to our other industry sectors. So a data center might be a data center, but they're asking about energy. Our energy experts come in, and myself included. If it's a large manufacturer, guess what? But energy is also a key cost factor. So our energy people. So it's very integrated and not just the energy sector itself, but also across all of our other industry verticals.
Follow up? Nope.
Senator Blackshear.
Thank you, Chair. I want to just go back to the advisory role. Do you all reach out to these companies to offer your services or is it the other way around? they reach out to you all for advice and stuff?
So through the chair to the senator, I think when we talk about advisory role, that's more in reference to the role that we play with the Department of Development as they're considering data center tax exemptions and other activities. But more broadly, we do have an intentional strategy. We call it our business retention and expansion strategy, whereby we will regularly connect with companies, either companies that are already here or companies that we hope to come to Ohio to talk to them about what opportunities may be on the horizon and how we can help ensure that Ohio is being considered for those investments. So we do have a proactive engagement strategy as it relates to all businesses that we would seek to come to the state.
Yes.
Follow-up.
Follow-up. So in your testimony, you state Jobs Ohio does not offer financial incentives to data center developers. I guess my question is, even though you all don't offer those financial incentives, do you point them in the right direction to get them?
Through the chair to the senator yes If we were to have a company come to us and say we looking to make an investment in Ohio how do we get in touch with the right people to explore a potential data center tax exemption we would help make that connection to the Department of Development
Any further questions? Representative Workman.
Thank you, Mr. Chairman. I'm sorry for my third round. I'll make this my last, I promise. So I guess with the work that you do on a national scale, especially in Ohio, what do you see as the benefit or the economic advantage of Ohio over some of these other states? And also, are you familiar of what that looks like on a global scale?
So through the chair to the representative, I think, honestly, Representative Holmes and Representative Claggett articulated some of the differentiators that we use when we're selling to companies. Certainly one of them is energy continues to be a differentiator for Ohio. Abundant workforce, particularly in certain industries, is a differentiator for Ohio. But there's other things like lack of seismic activity that's really important to certain industries. Lack of natural disaster. So there's all sorts of things that it's a combination of a lot of pro-business policy that's been enacted by the legislature over the years, as well as God has blessed us with some attributes that make us attractive to industry. So we try to sell all of those things when we're competing nationally and globally.
Follow-up?
Follow-up.
Last one, I promise. So what would stop this kind of activity? What would disincentivize this kind of activity in Ohio?
Yeah.
I'm going to let Dana take that one.
Through the chair of the representative, of, I think, the tax credit or tax exemption. You know, if you look at late 90s when Ohio was very low ranked in terms of competitiveness globally and jobs were going offshore, you all, as a legislature, took up a very transformational where we were trying to attract investment and we were taxing all that investment. So we were trying to tax the very thing we were trying to go out. And no amount of incentives can overcome that. And so that itself was transformational. And if you look at what happened early 2005, 2006, and you look at our economy, we track this and be happy to provide it, it's completely correlated. Our economy started to turn around, and we were starting to compete. As my colleague Drew mentioned, the biggest thing was getting the word out about all the attributes of Ohio. and what's interesting about this drawing lines to the data center industry is, you know, if you're back to my bumper manufacturer, they get to come to the state, invest, let's say, $500 million in a factory. All that equipment, they don't have to ask for it. It's automatically abated, and that equipment goes in, and all of the refreshes that they go through, albeit much slower than data gets abated. And that's important because that's a big risk element that companies walk around and when they look at where to deploy capital, where's the lowest risk, where can I get to market fastest, and where will it cost me the least? And so now you have a data center industry, which by the way, when the exemption was created for manufacturers, the data center industry wasn't an industry. We're still putting things and filing cabinets. And so it's not a criticism. Who would have thought that we would be where we are today? But their product is not bumpers It ones and zeros that they providing back to all of our companies And so to say that it not important or it an overreach is I think would take away from our competitiveness And they're actually hurt even further because not only is all that plant and equipment, the servers and the energy infrastructure and all that stuff, which many billions are behind that. they refresh that every 18 to 24 to 36 months. So they're essentially remaking themselves every couple of years, which is very unique. And to take that away would put us at a tremendous disadvantage, especially when you have 30 other states or whatever that are doing that. And I thought, again, back to Jennifer Kreisler, she painted what's really coming, The upside of this, the construction jobs, that's why I'd ask a fully loaded accounting of how Ohio benefits and the ways that we get to collect some revenue and taxes, including all the way to the local level, would be incredibly eye-opening, I believe. But the fact that they – if every time they invest, they get hit with more taxes, I just don't think you're going to get more investment. Probably going to get less.
Senator Wilkin.
Thank you again, Chairman. We may want to claw back Dana up here for this question. As it pertains to these and the energy, but what are your thoughts on the tariff, the AEP tariff on data centers?
It's a, through the chair to the senator, it's a unique thing to carve out a particular class of customers in a tariff. candidly I know there's a lot of gives and takes that have been and I'm not sure I'm up to speed on every part of it but I think the data center industry is driving the build out of transmission, distribution, new power plants. House Bill 15 brought the tools to build their own power plants, things like that so that's That's all great progress. The thing I would say, though, is data centers aren't the only companies that are needing a lot of energy. You know, if you look over the history of JobsOhio projects, coming out of COVID, we saw a big jump in other companies that need a lot of power, too. So to carve out a certain industry, I think I would want to make sure that there's always this thing called stranded cost. Are people picking up their fair share, whatever that means? And those rate structures are very complicated to pull apart. My only comment there would be to make sure that if that's the direction that it goes, that they're not stranding costs on everybody else or having a certain industry pick up the tab for everybody else. And everybody wants the other side to pay for their – so a lot of caution there and a lot of analytics to make sure that you aren't driving an unintended consequence on either side.
Thank you. Follow-up? Follow-up. My call drew back up here. Thank you. With everything going on, and I know the Chamber's put out some stuff, the Roundtable, the Partnership has put out some things, but for use with your regional partners or counties, with Jobs of Ohio, would you be willing to produce? because we have these very emotional, passionate testimonies about what data centers do. And then we have others that say, yeah, but they use boatloads of water. And when Jennifer was up here, she said we budgeted for like 16.9 million gallons, and we're just now hitting eight. And they have 28 data centers, if my memory is serving right. is there would Jobs Ohio be willing to take on like coming up with a fact sheet like here's things that they do and here's things they don't do and they can all vary I get that depending on how they're put in and the size and all this stuff but just something that probably can't do a one pager but a
ten pager of here's questions to ask here's things to know So I know Senator Chavez was questioning about the chemicals or things that are discharged from it, and we found out, well, there's only one data center with a discharge permit in the state currently. Everything else goes to a sanitary sewer, and then it's, well, they don't test for this, but every other industry is going to the sanitary sewer. So I just help to know what is factual and what's not factual.
Yeah.
Yeah, so through the chair to the senator, I think that's absolutely a component of the toolkit that we're developing that we'll have ready in the coming weeks. You know, it's a little tricky because I think one of the challenges with this conversation is that there aren't very many trusted sources of information in this conversation. We're seeing that with some of the misinformation that was referenced earlier. We would love to be, you know, to help try to provide a trusted source of information. Admittedly, there are times where big bad Columbus coming in to provide facts. Sometimes that doesn't always create that. We may not be a trusted source of information in certain people's minds, but we would be happy to include some of those facts versus myths in this toolkit that we're trying to put together.
I think it would be great if we could get something like that from the head economic person.
Thank you, Chair. Any other questions? I just have a couple of comments. On that, the Department of Development is striving for 60 days to have their toolkit done, so let's see who can win, right? We need this information right now because we want to push the information to the local folks, right? We don't want them to have to pull because they don't know where to pull from, so we want to make sure everyone knows about it. A couple other things. Maybe you all can help us with Representative Glassburn's question earlier about what is manufacturing in a data center, right? So are there other ways that we can tax or not tax these data centers in terms of how they're manufacturing?
Tariffs, I appreciate the comments. The one thing I'm thinking about is data centers are unique, right? They are absolutely unique. And they've come in here, the hyperscalers have come in here and said they want to pay their fair share. So we've heard a lot about cost causation. And so rate classes and tariffs, you know, we're trying to figure that out.
So you guys deal with a bunch of different industries so you can help us with that And then my last question and then a closing comment was you mentioned a little bit about transformers It got me thinking about the ecosystem We talk a lot about data centers that are just the building right
But it's the whole ecosystem. So what is JobsOhio doing to help with the supply chain, to help vertically integrate, which is another anchor to keep them here?
Yeah, so great question, Chair.
And I highlighted a couple of those companies that we've, because of the activity in the data center industry that we've observed, You know, a company like Westrofo that is an Italian company that manufactures those things, there's a value to them to being in proximity to their customer. And so we're trying to aggressively market Ohio to some of those companies that are within that supply chain. And obviously that has a benefit to the end user as well. So I don't know, Dana, if you'd want to add anything to that.
Chairman, yeah, as Drew alluded to, we have probably 30 or 40 projects in our pipeline that are specifically making components that are directly going into data centers. But in the case of Westrapo, Italian company, so this is an industry that went offshore back in the 70s, 80s, is now coming back. In this case, then it's an Italian company bringing supply chain around transformers. transformers, and that's not just going to benefit the data center industry. It's Honda or, you know, anybody else buying a transformer, including the electric utilities that are also buying massive amounts of this thing. And so as we, the lesson I think we all saw during COVID, where when you have offshore supply chains and you have things disrupt that, having that here in our backyard is key. And so an earlier question was, you know, when we're working with the data center industry, one of the things, and by the way, this is not unique to just data. It's every industry. When we're working on a project, we're studying all of the materials that are going in and where they're coming from and all of their customers, who's on the other side of it. So we're not just fixated on just the actual project. We're saying, okay, how does that help other companies in Ohio? And in some cases, you know, it's something that we expect these companies that we're going to incentivize to buy Ohio as much as they can. And certainly the workforce and other things get lifted. But we do look at the holistic supply chain, and some of them are massive, as you can imagine. what goes into a semiconductor plant. It's actually one of the biggest. Automotive. We have Honda, but we probably have 40,000 other employees going to work making headlights and all these things. So we're not just myopic around the one opportunity. We are looking at that holistic supply chain.
Thank you for that, because I'm challenging Jobs Ohio to look two, three layers down, right? The thing that goes in the thing, the part that goes in the part that goes in the thing. Folks are saying, you know, it's only 10 jobs or whatever, you know, whatever industry. 10 jobs is meaningful to me, right, because Ohio is great, and that's going to be my closing comment. As co-chair Holmes always says, I don't know if Jobs Ohio has a tagline, but co-chair Holmes always says, Ohio is awesome. So please consider that. We'll get some T-shirts made. Seeing no further questions, thank you for your time, and be sure to fill out a witness slip, please. Thank you. Next, we have testimony from John Suriak with the Ohio Manufacturers Association. Welcome to the committee. You may begin when ready.
Good afternoon. Chair Chavez, Chair Holmes, and members of the Select Committee on Data Centers, thank you for the opportunity to provide testimony today My name is John Syriac and I here on the Ohio Manufacturers Association behalf to testify A critical set of energy policy questions is coming to a head in Ohio How many data centers will locate here? How much power do they need? And who will pay for the electrical infrastructure? These critical questions are answered by, first, electric utilities, who construct forecasts of data center power use that drives the infrastructure they profit from. Then by PJM, who's buying generation for everyone. A monopsony, the sole buyer of capacity. Their decisions are answerable to their incumbent power plant and transmission owner members. And finally, our regulatory and policy process here in Ohio. With all of this comes the false allure of central planning, the idea that once infrastructure costs are socialized, we'll be able to allocate the costs correctly through regulation, such as with the data center class and minimum demand tariffs. As you may have heard by now, transmission system upgrades needed for data centers driven by utility load forecasts can cost up to hundreds of millions of dollars per data center and into the billions of dollars in some cases and for clusters. Currently, all of this cost is socialized in the utility's transmission rate base. The utility is then guaranteed collection for these costs from Ohio's ratepayers who bear the risk. A better choice is before us that data center interests themselves have requested, which is that they pay for their transmission system upgrades up front completely. If data centers paid up front, then those costs are never socialized and ratepayers will not be put at risk. Having data centers pay for their own transmission and infrastructure upgrades is imminently doable for the following reasons. Data centers have money. Data centers have the financial incentive to pay their own way. They may build more quickly than the utility, consider more efficient technologies, and have access to their own competitive capital. Data centers may already pay for their own transmission if it runs to one of the gas plants allowed by House Bill 15. Consider that because of House Bill 15, data centers or their contractors will already be building the same type of transmission infrastructure from their facilities to the over five gigawatts of natural gas-fired power plants being cited meant to serve them. Competitive power generators similarly pay for the associated transmission project upgrades they trigger when interconnecting. And transmission needs and costs can be directly attributable to the data centers causing them. This is not a mystery. Regular businesses, like manufacturers, are currently required to pay up front for parts of their distribution system upgrades they share, a regulatory mechanism called contribution and aid of construction, pronounced kayak. Also, other states are taking action. Pennsylvania recently passed a model data center tariff that requires data centers to pay for their transmission system upgrades up front. Ohio has kayak policies actually already in its administrative code for distribution system upgrades. For example, if a manufacturer wanted premium service for oversizing or excessive standard construction, that manufacturer will pay 100% of the upgrade cost. Data center infrastructure needs are, if anything, oversized and excess of standard. But because they are transmission system supplemental project upgrades instead of the distribution system, data centers right now are paying 0% of that cost up front instead of 100% like a manufacturer. The solution is to treat data centers like other customers of the distribution system. Have the data centers pay for their extraordinary upgrades in full up front. This would substantially eliminate the risk to ratepayers I see I have a minute left I think you familiar of some of our issues with load forecasts We are very supportive of data centers building their own generation, paying for their transmission upfront, but we need to ensure then when they do that, that that is factored into utility forecasts. So for example, the five gigawatts of natural gas generation being cited in central Ohio should be having an effect on transmission planning and capacity prices. We're not seeing that. The LMA recommends the following should be included for action or further study. Evaluation of how utility load forecasts impact transmission and capacity costs. Evaluation of behind the meter generation cited for data centers and other large electricity users. Consideration of how data centers paying for their own transmission upgrades can lower transmission rates. In fact, finding of how PJM's stalled generation, interconnection queue, and capacity auction delays drive up electricity prices. Lastly, I'd like to point you to we provided some graphs in the material that underscore some of the points I've made. Thank you very much. Happy to take questions.
Even better than the last witness. You had two seconds to spare. Any questions from the committee?
Representative Glaspern. Thank you, Mr. Chair. Not every data center has its own generation. Not every data center that comes in will have its own generation. We have a lot of data centers here. already how are you proposing we undo or disaggregate the disproportionate rate increases from those um uh through the chairs representative glassbrum uh great question so one thing we would like to
look at first is getting load forecasts correct um so we are planning transmission upgrades with costs that will flow through to rate payers now. And there may be some aspect of needing to correct those load forecasts first to correct rate payers. Customers who have their own, let me put this, if they've already cited their plant, their data center, and they're already connected into the grid under that agreement, we haven't contemplated that yet on those issues. I will point you to, this might be helpful, the graph on page five of my testimony, which has transmission price increases. That is part of the price
increases we're paying today, but that started 10, 11 years ago, long before data centers came into play. So we have long viewed that as an issue and called for better scrutiny of supplemental transmission projects. To some extent, though, those costs are baked in, and that has been part of why we're seeing increasing bills and part of why we want changes to how specifically supplemental transmission projects are paid for and load forecasts, because we could see those prices continue to go up further. I should have been keeping track of great question comments. I think I was the last one to get on the board with a great question, and I'm being outpaced by the committee here, so I'll start doing that.
Follow-up? Thank you, Mr. Chair. So, again, I come back to the data centers, at least most of them, maybe my colleagues have different conversations, have said they want to have some of their own self-generation for speed to market, but that they ultimately do want to be connected to the grid either at the beginning or eventually. if we have them pay for... I guess I don't know. If we don't have a data center... rate or structure for them to be integrated into the marketplace, I don't know how we adapt.
Through the chairs, Representative Glassburn. So you can still accomplish what I've described here, like allowing data centers to pay for their own generation can be a term and condition applicable to all customers. It doesn't have to be class specific. So as I've outlined, we already have provisions like this for distribution customers that apply to everyone. So that would be a way to protect customers. I'm not sure I'm quite getting to your question. Maybe you could repeat it.
So I can see a couple of scenarios, and please indulge me here. Let's say for sake of argument, the data center hyperscaler builds their own plant. we all of a sudden get cheaper power some other way or demand goes down and they want to put their own supply back on the market and on the grid. I don't know how we untangle that if we're not somehow factoring them in already into the system.
Through the chairs, Representative Glassburn. Thank you. I don't know that that's an untangled situation. If they're paying for the power plant and they're paying for their transmission line up front, then those costs aren't socialized.
Okay, so rate payers aren't risk. That's fine with us.
If later that data center or that power plant, because they have gotten to speed to market quicker, they may have some advantages then to connecting to the grid. And again, that would be okay for if the power plant connected to the grid and then wanted to provide power regionally. That would be suitable. Again, we're not seeing in that scenario costs that are at risk to ratepayers so long as they're paying for them. Where a data center then wants the service line, I think what we could see is something that the industry handles with something called a standby tariff or backup feed. So I think you will have data centers that prefer grid connection. They're willing to pay for the grid connection in that case, have backup generation online in case the grid fails. and then vice versa where a data center pays for a gas power plant that's their primary source, they may likely still want a wire for backup power services. And in the industry, that's handled with something called the standby tariff, where there's some charge but not the full charge. But again, all that infrastructure can be paid for up front by the customers or developers. It doesn't necessarily need to be socialized amongst other repairs.
So let me see if I can understand what the question is. So they pay for their line to connect to the grid. So let's say they build a mile worth of line, they connect, and they pay for all that themselves. It comes out of their pocket. They sell power back into the grid. Do we pay them transmission fees now?
Mr. Chairman, no. We would not pay them transmission fees. It's their lines. We're using their line to supply our grid. They would like any, if that were to occur, sorry, Mr. Chairman, if that were to occur, they would receive payment like any other wholesale market generator. So for energy and capacity, generators don't receive payments for their transmission infrastructure unless it serves a customer. So for example OVEC the two coal power plants there a transmission line OVEC is more than power plants There also a transmission line you only paying for that transmission cost if you a customer of that wire So the generators aren't compensated for the transmission infrastructure.
Correct. But in the scenario, we're making them pay for their transmission line. They're paying for the generation and the transmission line. So they're not the generator anymore. They're the transmission line. So we're using their line. Do we pay them a transmission? fees? I think that's going to the question. How do we untangle this? And we had this conversation the other day, too. It's easy if it's just one mile worth of transmission line, but how do you figure out all this other stuff when they just hook in? Yeah, Mr. Chairman, I think, so you are
bringing up a concept of that the data centers or some future version of what gets cited where data centers are cited, turns out to become a generator. So right now that we are focused on the costs that the data center customer triggers, the transmission system upgrades, and the generation, seeing that they can and are willing to pay for that themselves, that is preferential to other customers because it doesn't socialize that cost. Then in the future, there's a plan B, and I agree that there's a plan B. if a data center doesn't come online, I think they will have an asset of value with the transmission line and property. And so you might see a power plant there or a battery plant, but then they're in a similar situation as a competitive generation provider who is also paid for that land and that wire themselves. They monetize that by selling energy into the market. So I think in that case, this plan B where a data center, or in this case a data center that didn't materialize but paid for the infrastructure, They could have a plan B as a generator in the future, and they would have paid for their costs like a competitive generator and able to incur the revenue like a competitive generator. And if data centers are thinking creatively that way, as if what if their future is not as a data center but as a generator, this would set them on the path to be paying for their own infrastructure and access to market like we have other wholesale generators today. I yield back to Representative Glassburn.
Thank you, Mr. Chair. I think this is also more nuanced than just if someday they want to put power back on the grid. I think this grows and grows in complexity as you think through scenarios because, again, take New Albany. They have 40 data centers. They have other things, biomed, that they're trying to co-locate there. This isn't just as simple as power plant, one line to one company and user. and I don't know how to get through all that. But let me come to a different question here, which is I'm not clear. You seem to be arguing to not have a data center class at all with our rate making, but EJM came here, told us they're going to do an emergency auction, And if you don't have a data center rate class, all your customers get charged. That was their testimony to this body. So what's your response to that, if I'm describing your position correctly?
Through the chair's representative, Glassburn. Excellent questions. Thank you. So a couple, there were, I think, two pieces here. One, the data center class. So we do not think a data center class protects other customers. I do not. I've looked at this math. When you have a class and what gets associated with a class in this case is not generation it not distribution cost it transmission That what we getting at And so you allocate a fixed cost to the class When you change how you build a class, such with a minimum demand provision, it only affects intra-class, it only affects the other customers. And so if you do this with data centers, you have data centers paying more or less for other data centers. It does not flow over to other classes. So I just don't think the math works out that there's protection from a class. I think it is actually can create the cost shifting problem worse. And I'm happy to come over with all the tables and spreadsheets to show you that. Second question on PJM and the reliability backstop auction. I'm gonna give you a somewhat complicated answer. I would say it's extremely disappointing that PJM came in here and offered that choice. PJM had two choices that they presented to their stakeholders. One was create bilateral agreements between data centers and power providers and let the data centers and the power providers with their at-risk capital figure out how much they were willing to build. We like that choice. The other option was PJM uses utility forecasts to buy power for everyone, which takes risk away from the data centers and the competitive power producers. Then they said they will allocate that back to the users of the state. So that is the decision on PJM's part, to pick something that puts rate payers at risk. And other consumer advocates have filed letters on this that have said, we're not the only ones that think this, that PJM's choice is completely at odds with the principles laid forth by the President's Energy Dominance Council and the list of bipartisan governors that signed on to this. So it does create risk. My advice would be that the folks who are interested in protecting Ohio ratepayers should be actively bringing this up to PJM. It is a poor construct for the reliability backstop auction. It then creates massive issues here in Ohio because PGM is saying they are going to procure capacity for this forecast. It is not data centers saying how much they want. It is based on the utilities. They're going to assign all those costs back to Ohioans. So it's a pickle, I would say, and probably needs to be addressed, but that is a PGM issue and there needs to be activity at PGM to correct that. I'm not sure how you fix that with retail billing of capacity. So it could mean increased prices to all customers because of the backstop auction here in Ohio.
This is more of a statement than a question, but just all of the data centers came to the president of the United States and signed a pledge saying they want to pay for all this and that we're not going to put these costs on ratepayers anymore. And I think that just is such a basic precondition of us being able to, in good faith to the public, go to them. And so I understand you have a different position. I know others have different positions. But we can't just do the Spider-Man meme of pointing at each other on this. Like, we need a solution to meet that pledge that everyone can sign up on. And so I don't know how we get to that agreement. I thought we were pretty close to it before. but I don know if you have any response to what I saying Through the chairs Representative Glassburn I appreciate that Just to clarify I not disagreeing with those principles of data centers should pay for their costs which you stated
I'm agreeing with that. What I'm saying is between principles and actions, a lot can go wrong. We've got two paths here. I'm saying the best way to align with those principles is you have those data centers pay up front. Just have them pay up front. We know you can see these transmission upgrades are not created but for the signing of a data center. We know who did it. There are some that are willing to pay. If you pay up front, you follow those principles, rate payers are protected. Where we get into trouble, where those principles can get screwed up, and I don't think we have to say it's the Spider-Man meme, if you socialize those costs, then you have to track through and do this allocation issue. That is where we're creating problems of getting down into this heavy math. How do you allocate by rate class? How do you charge them? They're socialized. When you socialize them, you inherently create risk for all the other rate payers. We are on the hook for any cost that gets socialized. And so in this case, there are clear options to have the data centers pay up front or those costs don't get socialized and you can follow those principles. That's what we're arguing for. I empathize with you all that it feels like finger-pointing, but my job here representing the OMA is to protect and grow Ohio's manufacturers, and this is what we need to do because right now manufacturers are at risk. Thank you for that.
I'm struggling with the same things Representative Glassburn is struggling with. I don't think you said it, but it sure sounded like your math is better than PJM's math. And so we are struggling to understand why your position is the only one that is diametrically opposed to what we're hearing from everyone else, that we need tariffs and we need rate classes.
Mr. Chairman, so on math, one of the issues I have brought up is on the record, we have seen very little math. So this includes here in Ohio. We did not have a cost of service study. We did not have a ratepayer impact analysis on the data center tariffs. The utilities who introduced that case, they have a duty and an obligation. The obligation of proof is on them. So it is an issue if they do not bring forward any data to support their position, then that becomes an issue of the obligation of proof being on them. PGM. Similarly, we would have loved to see an analysis on their two auction options. I think this is a critical issue of why there's disagreement on how to properly proceed is we we have a we're bereft of analysis. I do not think our the OMA's position in my statements here are alone. we have a lot of agreement on load forecasts. On the tariff question, in other states, you are seeing other states, as I mentioned, that are looking at the options of having data centers pay for the upgrades themselves. And we have testimony from data centers here in Ohio saying they would be willing to pay for the upgrades themselves. That is a term and condition within a tariff book. So there's some term of art here. But I don't think our concept of here of having the data centers pay for their infrastructure upgrades up front is new or novel. And there's other parties that support it. And I think it's common sense. And as we explore, I expect more parties will find that that's an agreeable path forward. And I'll shut up after this, but I'm I'm reminded of my father-in-law saying promises are like babies. easy to make, hard to deliver.
So, Senator Wilkin. Nicely done. I'm getting tired. So, I may, thanks for being here. I may disagree. I think PJM is probably, or not probably, I think PJM is doing exactly what the White House has told them to do in regards to this issue. But I'm curious on the data center tariff. It would seem you're opposed to the data center tariff because, as you said, they're flush with money. So should we have a tariff that says if you're successful and flush with money, a different set of rules apply to you, including your manufacturers?
Through the chair, Senator Belkin, that's not my contention.
That's what you said. That is a statement.
I'll clarify for you. That is a statement that is a reason to believe that data centers will pay for their own transmission system upgrades. They will pay for the enormous cost of building their data centers. They will pay for the enormous cost of building their own power plant. They have enough money to pay for their own transmission line. By the way, it's maybe about as much money as they would pay through for rates. So that is a reason to believe and ask the data centers to pay for their own infrastructure upgrades up front. We're here to talk about how did the data centers pay and how do we ensure they pay for everything they need? Have them pay for the costs they triggered up front. It's that simple. OK, our opposition to the data center tariff is based on a number of things, some legal precedential issues. From my point of view, though, when I saw the data center tariff filing, my analysis and review is this is going to create risk of billions of dollars of stranded costs on Ohio's rate payers. And it risks triggering infrastructure upgrades that may not be needed and will pay for. And I see the roots of that with the minimum demand provision in the class. And I have testified to that here in Ohio and other states. that is a data-driven position to protect Ohio's manufacturers from bill increases that they did not incur. So that is why I'm testifying on concerns in opposition to the data center tariff. That the data centers have money, those companies have money, I think is obvious. And I brought that forward so that we don't have to feel bad about asking them to invest in their own infrastructure.
Follow up. I think they've been pretty clear that they are willing to invest. Do you have data center members in the OMA?
Through the chairs, Senator Wilkin. So the OMA has about 1,300 member manufacturers. My job at the OMA, I'm a consultant. I respond to staff, and it's to protect and go Ohio's manufacturers. We have a set of policy principles on how to do that that include markets where we very interested in fairness As you know manufacturing is a homogenous heterogeneous class So a lot of our positions create benefits for other ratepayers This was true of decoupling of the MOPRA issue in House Bill 6. So our pro-manufacturing stances often benefit other ratepayers, including data center interests. Data centers within the manufacturing community. I've been in probably 120 different manufacturing plants to do energy assessments, manufacturing companies. Many of them have data centers, have had data centers. I've evaluated their data center use for energy savings. Manufacturings are businesses that have a number of different services. That includes data centers. Some of the most prominent data center companies right now also manufacture. Vehicles would be a great example of where you have the manufactured product. and the data centers driving those, those interests are within the same company. I have not cataloged all the data center locations within manufacturing. I do not. I'm not in charge of the homemade membership. But I can tell you there are data centers at manufacturing facilities, and we need to keep in mind that as industry innovates that we will likely see other data centers co-located at manufacturing plants, owned by manufacturing companies, data center companies that become manufacturing facilities. And so those interests are reflected in the discussions at the LMA. Follow up?
I guess I have no idea what that answer was, other than my question was simply, do you have data centers as members? If you don't know, you don't know. If you do, you do. If you don't, you don't. It was just a simple question. Through the Chair of Senator Wilkin?
No, I don't know of OMA's membership list. Follow-up.
What's the OMA's position on the sales tax exemption for data centers?
Through the Chair of Senator Wilkin. I'm glad to report I'm not a tax expert, and I do not know. So you'll have to follow-up with someone else from the OMA.
Okay, follow-up. Trying to see the questions I've jotted down here. Do you think we could make the argument that you would claim that the transmission needs, the infrastructure needs, were overinflated originally by the utilities, correct?
Through the chair, Senator Wilkin. Our concern is that the utility load forecasts are overestimating what's actually needed, and that will trigger transmission upgrades, correct?
Okay, follow up. Follow up. So if the number was like 30,000 was the megawatts they were saying they might need, and then after it came down, it came down to like 5,700, you don't think you could credit the tariff for saying, hey, if you're going to claim the need, you better be ready to pony up the money? Didn't the tariff work?
through the chair, Senator Wilkin. In my testimony, the last page, I'll show you here. We have a utility load forecast. Data centers, tariff was put into place after the 2024 load cast. If you check that graph, you'll see the 2025 load forecast is significantly higher. There was never a load forecast of the 30,000. That was never an official load forecast. That is a number that has been thrown out to the media that used to contrast against the official load forecast It was never used as a load forecast So that number has never had a bearing on planning It did not come down. These are AEP's numbers from their own filings at the PUCO, our PUCO. Their load forecast went up once they put the data center tariff into place. The 30,000 has never been in the record. It's never been a load forecast. It's just been a number bantied about. The 5,000 of customers that have signed up for the data center tariff, while they were signing up for the data center tariff, there was another 12,000 of data centers that AAP signed up that are not on the data center tariff. That happened in conjunction, so it's 17,000. That is why when you look at this graph, there's that increase. Only about a third of that was actually on the data center tariff. As we were all talking about the data center tariff, there's another 12,000 signed up off the tariff. And so that is why there is an—we see and we are pointing out there has been an increase in the load forecast during the time of the data center tariff. We can attribute some of it to the minimum demand provision of the data center tariff. The 30,000 to 5,000 that's been in the media, and we've heard this argument around, that is not a—it's not a thing. 30,000 was never the load forecast. 5,000 is not what we have now. So you would contest that the tariff is not helpful at all.
Why do you think the data centers are okay with it?
Through the Chair, Senator Wilkin, I'm not here to represent those specific data centers or even say if they are okay with it. I'm aware they're here at the State House.
And last one. If you say to the tariff, we don't want to single out anybody, don't we single out people all the time through rate classes and things like that when it comes to electric? So should we have no classes at all?
Through the Chair of Senator Wilkin? No, I don't think we should single out customers based on how they use the electricity behind their door. I do not think we should have utilities, regulators, governments saying, this electron should be sold differently to you versus this other business based on your operations behind that door. Where there can be difference is what on the infrastructure that is served. And so classes are generally based on that. So residential, secondary, primary, transmission services is based on how the electricity gets to the customer. It's how we differentiate that pricing, not what the customer does behind the door and behind their own meter. And that follows regulatory principles. It follows cost causation. So that's why there's classes, and that sort of class differentiation we think is okay.
Representative Claggett. Thank you, Chairman. A couple things. First off, we appreciate your input. It's helpful. But just a critique. You put out a key vote yesterday. I think it was yesterday. I know we're moving along on this process relatively expeditiously. That's what we're trying to do. I'm going to tell you that was unhelpful. The timing of that and the lack of education to this committee before putting that out was unhelpful because we didn't even know about it, about what your position was. and then to put that out to other members without some technical background about why you disagreeing with that was hard to deal with So asking for going forward that you be a little more proactive with the people who are trying to make the decisions and we can make a unified discussion about how to do that. Because that was kind of a shot in the dark and that's not really how we want to do it. We're trying to make progress, not trying to throw roadblocks. So please help us with that. Secondly, I want to try to simplify this PGM thing you're talking about here and use an illustration from developers. If we're going to develop an industrial park, for instance, the industrial park roads might be built and paid for by the owner and then subsequently deeded over and given to the city. That's a pretty common process. Is that a model for how this PGM problem could resolve itself in regard to the issues you're trying to untangle for the questions that we're asking? Through the chairs, Representative Claggett, I'm not sure I understood your question on the industrial park conversion.
Maybe I'm not trying to be difficult, but if you can. The road is the power line. It's the transmitter. And so if you give the asset that you've paid for over to another entity, then that way they own the transmission, if you will. Transmission of vehicles, transmission of electrons. Is that a better model to think about?
I'm not trying to fix the problem today. I'm just trying to simplify it because it's hard to get our head around in real time what you're trying to even say. Because we've heard so much about the other approach to this problem. I'm trying to get you to put it down into a different metric that we can think about it different ways. Maybe that's not even the best metric, but I'm trying to get you to simplify that a little bit.
Through the chairs, Representative Claggett. Could, if I can restate, see if I understand, I'll attempt to answer your question. If a data center interest paid for their own transmission line, could the community benefit from that infrastructure? Sure. I mean, I think so. I think that would be a conversation between the data centers and the communities. I would not be surprised if some of them are looking for ways to create community benefits, but it's investment in infrastructure. We've had a conversation about how that infrastructure, we're already seeing power plants coming in. We might see generation. There's a whole lot of other innovative electrical things that could happen, especially if you are working with a highly advanced, sophisticated technical company that's open to those ideas. So in my testimony, I had mentioned advanced transmission technologies, but if you have your own generation batteries, you're investing in that. Could other customers benefit from that increased capacity or the reliability benefits that system provides? I think so. I don't think that that needs to be precluded from the conversation.
Representative Glassburn. I'll just say that I more or less share most of Senator Wilkins' concerns. Any other questions from the committee?
Seeing none, thank you for your time.
Thank you.
Next, we have testimony from Andy Hardy with the Columbus Chamber of Commerce. Welcome to committee. You may begin when ready.
Thank you so much. Chairman Holmes, Chairman Chavez, and members of the Select Committee. Thank you for the opportunity to testify today, and I just want to say thank you from the broader business community for holding these hearings. I think the amount of information that has come out of this and the positive path forward that you guys plan to make our journey and go on is going to be pretty incredible, and I think this is key to what you're doing. Again, my name is Andy Hardy. I serve as the Vice President of Government Relations and External Affairs at the Columbus Chamber of Commerce. Our organization represents over 2,600 small, medium, and large businesses throughout the central Ohio region and ultimately represents about a half a million people. For the employers we represent, the central issue before this committee is not just how we structure incentives, but whether Ohio will build and sustain the digital infrastructure our economy now depends on. Data centers are that infrastructure. They are the unseen backbone for manufacturers, optimizing production hospitals, delivering modern care, schools using digital tools, logistic firms, moving goods efficiently, first responders relying on secure communications, and researchers driving innovation. Every business that relies on cloud computing, cybersecurity, e-commerce, or data analytics is relying on data centers. They make possible not only our artificial intelligence and advanced computing, but basic day-to-day operations across every sector. In that sense, computing capacity has become part of Ohio's modern industrial base, just as roads, rail, and utilities were for earlier generations. The question is whether we will have enough high-quality domestic digital infrastructure in Ohio for our growing workforce to remain productive, resilient, and competitive in the decades ahead. The Columbus region is already showing what leadership in this space can look like. National research identifies our 11-county region as the leading hub for the AI economy, citing our talent, innovation, and business adoption of new technologies. The presence and growth of major cloud and data center operations in central Ohio are central to that success. We've heard it a lot through the course of these hearings about the different data centers and Amazon Web Services offers a clear example. A decade ago, as you know, AWS chose central Ohio as a strategic location in cloud AI infrastructure. The company now reports nearly $40 billion in data center investment in our state, and many other firms have followed. And demand for computing power accelerates. Ohio has emerged as one of the country's leading, attracting, and hosting digital infrastructure. This activity is not abstract. independent analysis commissioned by the Ohio Chamber of Commerce Research Foundation found that Ohio's data center industry generates more in state and local tax revenue than it receives in incentives. In approximate terms, every public dollar through the incentive returns about $2 for every $1 invested. Tens of thousands of jobs across construction, skilled trades, professional services, and ongoing operations. These are long-lived assets. Once-built data centers generate value year after year in the form of property taxes for schools, townships, and counties, income taxes for construction workers, tradespeople, suppliers, and full-time data center employees. Ongoing business for local companies that build, maintain, retrofit and serve these facilities including in skilled trade jobs That is why our business community views data centers as critical to Ohio long growth strategy They enable the technologies our employers need today and will be the platform for the future industries we cannot yet fully see. Within that broader context, the data center sales tax exemption is one important tool. But it's a means to an end, not the end itself. It lowers upfront costs on equipment and construction materials that has been a significant factor in site selection decisions, signaling that Ohio is serious about competing for this infrastructure. The higher than expected fiscal cost of exemption reflects the scale of private investment and the activity that has already been unlocked. We also recognize that the communities are right to ask how this growth can be managed responsibly and how benefits can be shared locally. The Columbus Chamber shares the committee's interest in addressing electric grid capacity, water use and environmental impacts, clear performance standards, reporting and clawbacks where commitments are not met. Many states are still searching for durable growth.
Okay, that's been five minutes. Thank you. But I'll give you a couple moments to stick to dismount if you want to come out.
Thank you, sir. I appreciate that. I've been practicing my dismount.
Okay.
Many states are still searching for durable growth engine.
That doesn't mean continue reading the whole thing.
Yep. We encourage you to continue this path forward, and we look forward to supporting you and helping you in this journey for responsible growth. I'm happy to answer any questions you may have.
Thank you for your testimony.
Thank you.
And again, we realize how quickly five minutes goes, So we appreciate the effort that goes into these testimonies. Questions from the committee? Seeing none, I think we wore ourselves out on the previous witnesses. Thank you so much. Thank you for your testimony. Next, we have testimony from Greg Lawson with the Buckeye Institute. Welcome to committee. You may begin when ready.
Thank you very much. Appreciate the opportunity here. and since I'm a, I appreciate having a five minute clock too, so it keeps me a little more disciplined here. So thank you. You've obviously got my testimony written before you, but there are several things I do kind of want to drill down on that are important. And first of all, the sales tax exemption. And so I'm going to talk about it more from a purely economic standpoint. And as I was actually chatting a little bit during one of the breaks with a couple of members of the of the committee. Our view of the sales tax exemption is that it is very similar in structure and should be to the manufacturing one because of the input, business input, and the issue that's related to pyramiding. And I got some work from the Tax Foundation, well-known organization out of Washington, D.C., that's done a pretty decent piece on taxation relative to data centers. I'd be happy to share that with members. It was done in December of last year, so it's relatively recent, and it makes the basic same case. It says, you know, servers and other data center equipment are exempt from sales tax in most states, consistent with the principle of avoiding the taxation of business inputs. Now, in many cases, obviously, as it mentions here, they're obviously contingent, sometimes upon the development targets or different kinds of targets, which is how we have done it here. I would make an argument, though, that in some ways, which is contra to what I know is probably acceptable out there in the political world in a sense, but it really ought not to even be tied to the economic things because it's a business input. And from a purely economic standpoint if you going to say that we don want to have the pyramiding effect on those inputs we don want to tax those because what is the output of the data center It could be a lot of different things It could be a streaming service It could be the hosting of a cloud data and a variety of those kind of things as well. It could be the training of AI systems and things like that. That is where the sales tax should be applying, is to the ultimate user and where the user is being located. Now, there are some nuances here because of social media and things like that. it's advertising is how they get their revenue streams, and so you're not usually applying sales tax to advertising. But that's a broader question about digital and how we do taxation and sales tax with services versus goods, and this is something that as the 21st century moves forward with, we're going to continue to have to navigate that. So that's actually a broader question about sales tax and even with the data centers. But my argument would be that it should be on what the end user is doing, because in many ways the data center is providing that service, And so it's that in-service rather than all the other inputs, the servers, the cooling of the mechanisms, all the other things. So that is the broad-based position that we have relative to the sales tax exemption. So that's one point that I wanted to make very clear. I did hear Representative Workman was asking some questions of some earlier witnesses here. And so everybody knows I talk a lot about China and the issues of the national security implications. But I do think those are extraordinarily important. And I do think we need to do everybody. You know, I think the data centers need to do a better job. The industry needs to do a better job. policy makers need to do a better job folks like us at Buckeye and other organizations need to do a good job of putting this information out there so people understand that this is not, yes this is about jobs yes this is about innovation too it's about how do we use AI across the board and how that's going to integrate with all kinds of other things but it's about national security as well and just yesterday OpenAI had a post and I copied it out and I can send it to members that are interested but from the Politico, this is an article that's in other news sources too, but OpenAI admitted yesterday that they had, China had launched influence campaign to shape U.S. attitudes on data centers. This came straight from OpenAI. They had to actually shut down people who were utilizing it that appeared to be from China. That was directly manipulating. And it's not about so much money going into the hands of the actual people who are coming here and testifying or doing anything else. It's about taking a legitimate concern that people have and then ginning it up with a lot of other information and misinformation to get people really, really excited and really, really hopped up on this. We've seen this in other contexts. And so this is not really a new thing, but it is something that is a very cost-effective way of getting people engaged in this. And why? Because it is a strategic issue. For example, data centers in the Middle East have been attacked by Iran. Why? Because they're actually strategic assets. There's a reason they were being attacked. Well, if you start to think about these as strategic assets here, you can see that you don't want to build more, you want to win the AI race, you want to be able to have information, you want to have propaganda control, information flow control. How do you integrate this into your weapon systems for autonomous weapons, which is inevitable and capping? This is why they want to be engaged in this. So I do want to press that there is a key strategic reason here for why data centers are important in America. And if we have an opportunity to take advantage of that here. Now, some of the other complexity that is in here deals with the data center tariff. We've been on the record saying we would prefer to see more of an industry agnostic one, like what I perceive other states are trying to do, where it's based more on the triggering mechanism of the usage that you have. But we do share the concerns that we need to make sure that the data centers are paying for the infrastructure elements. So there we go.
Thanks for your testimony. Any questions from the committee? Senator Wilkin.
Thank you, Chairman. Thanks for being here. I want to ask you a little bit just a couple of quick questions do you see where we are accounting for I would say Mr Uncollected Money such as the billion and any other where the sales tax for manufacturers, the exemption for farming, are we accounting for that like we do data centers?
Thank you. And so welcome to the chair.
I think that's actually a great question. I didn't get a chance to really make this case, but this is so I'm going to be the nerdy think tank guy. So this is the unseen aspect of things. There's a French economist, Bastiat, who talks about this. There are things that you wouldn't be capturing at all. There's a perception here. And I think you've brought this up a number of times with other witnesses, Senator Wilkin, is this one point six. It's not like we cut the check. It's it's it's revenue that wouldn't have been here was development that wouldn't have been here. You wouldn't have had it. So if you didn't have this exemption, it wouldn't be here at all. Now, that's separate from the principles of taxation and neutrality. But just from a practical standpoint, we would have never gotten the industry started here in Ohio, as the director said, as some of the jobs in Ohio has said. So I think one of the problems is it's difficult to get our heads around. I think the short answer is I'm not really aware that we do do it that way, to the question you were raising. But the broader question is people, I think the public needs to better understand what never would have happened, this idea that, oh, we lost all this money. Well, you wouldn't have gotten it in the first place because they wouldn't have been here in the first place. So it's just it wouldn't have been here. And that does not get, I think, articulated probably nearly enough out into the general public, and it really needs to be.
Do you have a follow-up? I think I'm more out.
Any other questions? Representative Glassburn.
I just wanted to briefly say that my line of questioning on this, as lovely as the Buckeye Institute didn't come from the Buckeye Institute, it came from looking at the tax expenditure report and seeing how we do tax expenditures. And I don't have a good answer, whether it's right or wrong, I don't have a good answer as to why data centers are different from manufacturing, other than they make ones and zeros and the others make physical products. And so as Chairman Holmes knows, I try to provide a list of of amendments of things I think we can do. And I didn't want to drop this on us as, you know, while we were trying to get something done yesterday. But I'm increasingly of the belief that we're looking at this all wrong and that the taxation should exist at the end product, not at the beginning of the procurement of these sites. And that that is part of the actual real answer when we have more time to do this in our second round of looking at this.
and if you wish to respond.
Well, thank you, Representative Glassburn, through the chair. I think that's a very astute point. I would generally agree with that. I also think one of the things that is important, I try to articulate in my written comments, is looking at the local and how we can navigate local tax. The development options there, I know that's another piece of this, is making sure that locals feel like they are getting it. I think that's a separate question from the sales tax. We want to make good economic decisions and we want to make good decisions that get buy-in or we're going to have other problems. But that's almost, it's interrelated, but it's distinct enough that it deserves its own question. I think the sales tax exemption is very much separate and very much in line with some of the questions you've been asking previously.
Representative Plaggett.
Thank you, Chairman. Why don't you do us a favor and give that some thought, because we've been talking about that subject, and you can get back to us as a committee, to Holmes, right? because how we might think about, and whether... Anybody else in the 50 states are doing something in that regard because that would be interesting.
So let's leave it at that. But if you'll get back to him on that, how do you deal with that output piece?
And, you know, where's the fingerprint?
Thank you very much, Representative Klan, and through the chair.
And we will work on getting that and staying in communication with you. Thank you for the favor.
Representative Workman.
Yes, thank you, Mr. Chairman. This may be another component that maybe you can put some thought into and report back. But even some of our most opposed residents really are still just asking for responsible development. I'm wondering what that means to Buckeye Institute.
Thank you, Rep. Soorgman and through the chair. I think one of the things is, you know, we need to make sure that there's benefits at the local level. I mean, Virginia, now it's a little different than Virginia because I believe they have tangible personal property tax. We don't. We shifted that to the commercial activities tax a long time ago. So they have had just an exorbitant amount of revenue coming in. In fact, they're seeing property tax reductions because of data centers in Virginia, especially Loudoun County, which is the data center capital of the world. It's one of the few areas that have been better than Columbus. But we probably would not get that kind of revenue because obviously there's that tangible. But you will still get a decent amount of revenue there, and I think that message needs to be really put out there. In some ways, this is happening. New Albany, I think, I was very, very impressed with the testimony you heard. And they are the example of how things are being done well there and some of the templates that do need to be distributed and educated to folks who are in different parts of the state. But, I mean, in some ways, that's evidence that it can be done. It has been done. And there are models that are replicable in other places. And I know that's what you're working on with the toolkit and various things and what the department is guaranteed to do within, I think, 60 days. And so I think more of that is how we can benefit that. Talk about what can we do to the school, how to help your schools, and all these other services that you could need, and any road upgrades and things like that that you might need. Very, very important, and it's doable.
Any other questions from the committee? I did have a clarification. So at the end of your testimony, you were talking about tariffs, and I think you were saying you would propose a load tariff versus an industry-specific tariff? Thank you.
And Senator, yes.
So probably more in line with something like Pennsylvania, what Indiana has done in that way. And one of the things we'd probably like to shift is making sure that, and whether you put it into the statute, to make sure this is clarified or not, but just to make sure that there's the contractual arrangements regarding whoever's building is doing all the stuff you need to do for infrastructure and transmission and things like that, that that is made very clear that that principle of the cost causation principle is there, but probably could be better done through contractual arrangements provided there's a backstop to make sure that it in fact is being done, because we definitely agree with that. But we would strongly not like to have, I think, it be a specific industry-focused tariff alone.
Thank you. And just for those keeping track at home, we've had excellent questions, great questions, and now an astute point to Representative Glassburn. So creating a new category. Thank you for your testimony. Next, we have testimony from James Dunn with the Ohio Blockchain Council. Welcome to committee. May we begin when ready.
Good afternoon Chairman Holmes Chairman Chavez and members of the committee My name is James Dunn and I serve as Strategic Advisor for the Ohio Blockchain Council a non trade organization representing companies at the intersection of digital assets digital infrastructure, and energy here in Ohio. Our membership includes a variety of infrastructure and data center companies, all of which are active in the state. In recent years, energy has become central for our work, and it is through that lens we present this testimony, which is an abbreviated version of the written. The infrastructure before this committee is about far more than data storage and computing capacity. It is the foundation of artificial intelligence, advanced manufacturing, energy innovation, financial technology, and healthcare applications, technologies that will help define this state's future. It also matters for national security, as has been mentioned in previous testimony. Having strong advanced computing here at home makes the systems that businesses, government, and communities rely on more secure and resilient. The question before Ohio is not whether this transformation will occur. It is already on the way. The question is whether Ohio will continue to be a leader throughout. Fortunately, Ohio enters this moment well-positioned. As we all know, we have skilled workers, a strong manufacturing base, world-class research institutions in a business climate that has already attracted major investments. Our members are putting that to work right now, creating jobs, training local workforce, reusing old industrial sites, and building infrastructure that serves both today's economy and future growth. Rather than viewing infrastructure grow solely through the lens of increasing demand, policymakers can also view it as an opportunity to build a stronger, more modern, and customer-centric system. Investments in generation transmission, advanced grid technologies, and flexible load resources can strengthen reliability, support economic growth, and deliver lasting benefits here in Ohio. These facilities aren't just electricity consumers, they are grid assets. Blockchain Council members Mara Holdings, who you've heard, testify previously, and Bitdeer have demonstrated this directly. For example, during winter storm Fern, Mara curtailed approximately 770 megawatts across multiple regions. Ohio alone accounted for 120 megawatts of that, concentrated at their Hannibal, Hopedale, and Finley facilities. This wasn't an accidental occurrence. It was by design. When managed correctly, these systems are a tremendous positive to the electric grid. Moving forward, we are asking the committee and General Assembly to consider three key concepts. Recognize flexible loads differently. Bitcoin mining and similar operations deliver real grid benefits. Policy should reflect that through whether it's interconnection, treatment, incentive structure, or utility tariff program design. Create a path for customer-led investment. A clear framework for large customers to help finance transmission and infrastructure improvements while insulating other ratepayers. Make grid data more accessible. Broader access to capacity, cost, and constraint data helps customers, communities, and developers make better decisions and increases accountability across the board. In closing, and I think I'm on track to be pretty quick here, Ohio is already a national leader in this industry and our members are committed to staying here for decades to come. We appreciate the committee's time and look forward to contributing constructively as policy develops. Thank you and I be happy to answer any questions you may have Thank you for your testimony You gave us a minute 12 back so thank you very much I knew where I stood in position here Questions from the committee Representative Workman
Thank you, Mr. Chairman. Thank you for being here today and for your testimony. You spoke a bit about the benefits to the electricity grid during periods of unpredictability and what these centers can bring. Can you expand a little bit about that, maybe even in the reverse, as maybe data center demands are decreased? Does that also feed back to unpredictability back into the grid?
Sure. Through the chairs, through the representative. So we have a unique membership in the Aha Blockchain Council. We have everything from a small type of data center or a Bitcoin mining facility all the way up to a hyperscaler. So we see a broad range of what the benefits that our members can bring. I'll kind of drill down on the flexibility as it relates to some of our Bitcoin mining operations, such as what Mara has explained earlier, they have the ability to very, very quickly curtail their load in comparison to other data centers, such as whether it be a hyperscaler or another data center that doesn't have that capability. Being able to count on them as an electric grid or PJM to be able to do that just provides stability and reliability across the board in Ohio. So it's something that should be encouraged because they're able to do that quickly and it benefits everybody, including rate payers, when sort of the rates get worked out as they come out on the bills later.
Follow-up? Yes, thank you, Mr. Chairman.
Because you mentioned BitDeer, I'm familiar with this organization, with this operator, and I believe that their founder is a Chinese national that is founded in Singapore now. In Texas, the BitDIR took a little bit of controversy, I suppose, around their operations because of this very issue. Because of the Chinese influence, is there a possibility that there might be a vulnerability in the grid when we're talking about BitDIR in particular?
Through the chairs, to the representative, I can't comment on all of, I don't have specific knowledge to that. I know that their founder has been in Singapore for a while now. They estimate in the next two and a half years from an investment standpoint, due to the climate here in the United States and in Ohio, that they plan on or are projected to invest $20.8 billion. And half of that is going to come to Ohio based on some of the plans they have for potential projects, which may be around your district. I will say they've had a lot of great feedback from their up and running project that's in Maslin. The mayor of Maslin have come out in public and really support how they've went into the local communities, done it the right way. They're not seeking tax exemptions. They have water solutions that have been beneficial as well to the community. So working with them, just speaking personally, it's been a great experience. I can't comment on the additional commission.
Thank you. Last follow-up, Chair?
Follow-up. Thank you. So I guess as we talk about, you know, this benefit to stability of the grid, is there a potential opportunity here in the future for these data centers to actually be independent sources of energy for these communities?
Through the chairs to the representative, I don't want to speculate too much, but I can say that we're seeing it in real time how there's been comments how they have to refresh every 18 months or 24 months or 36 months. I know that the innovation and solutions are going to come fast and I would not be surprised that that could be a solution going forward for most data centers Any other questions from the committee Seeing none thank you for your time Appreciate it. Thank you.
Next, we have testimony from Steve Delbianco from NetChoice. Welcome to the committee. You may begin when ready.
Thank you. So, co-chairs Chavez and co-chair Holmes, members of the committee, My name is Steve Delbianco. I'm president and CEO of NetChoice. That's a national trade association for the tech industry based in Washington, D.C. And we are the industry, the companies that make your phone work, that make all of the cloud work. And I think you realize that all the cloud lives in a data center. So our industry, the tech industry, is number one when it comes to investing in America's communities and America's future. There's not another industry. It is even remotely close. And here in Ohio, the benefits are very impressive, as you heard from witnesses last week and again this morning. So we actually should be here to celebrate how data centers have delivered billions in investment, six-figure jobs for high school grads, and massive amounts of property tax relief for Ohio. But we're not celebrating here today. I know that. So what happened? What happened? The data center narrative is now about fears over electricity rates, about water use, about noise and land use. Even while the actual experience here in Ohio and elsewhere shows that large data centers are responsible consumers of electricity and water, and they comply with all zoning ordinances regarding land use setbacks and noise. Please visit, if you haven't already, one of the new Albany area data centers not far from here, run by the companies that I represent. Ask the data center neighbors what they think about living near one.
Ask the operators who work there. Ask the business community that services them. And make sure you talk to a few property taxpayers in the county to see what they think of the benefits they've received. The facts in Ohio simply don't support this new narrative of fear. So I've heard you talk about it today. So what is driving the fear and citizen resistance? Two factors, anxiety over AI and its unknown impact on their jobs, families, and culture. And number two, the public does not trust government organizations, business. It doesn't trust the media. At this point, they seem to get their views from social media and podcasts. I think some of that's an effect of the COVID experience that we went through. So those two factors, the anxiety and the social media, means that people are particularly susceptible to fears that are shared on social media. And those fears are then amplified by out-of-state activists and by a few who do not want America to build data centers, energy, and AI. European climate groups who fear for the planet catching fire if we burn more electrons. And the Chinese Communist Party, which avowedly wants to stop President Trump from his signature initiative to beat China on AI by building American energy and data centers. I have three of his executive orders in my written testimony. We work with the White House on helping with that. So 20 years ago, this General Assembly faced exactly the same moment you're in today. There was a new energy industry coming into Ohio and into my native western Pennsylvania that used fracking for oil and gas exploration. Communities were very anxious and very frightened. The predictions were very dire. Poisoned wells ruined farmland and industrialized neighborhoods. And Russia's oil and gas industry had documented amplification of those fears so that we wouldn't compete with Russia. State of New York reacted by banning all fracking at the time. In Ohio, you took a different approach. You passed HB 278 to create an expert agency, ODNR, to be in charge of statewide rules. So look at the scorecard 20 years later, $117 billion of investment, $117 billion. Half a billion in property taxes from oil and gas. You had record oil and gas production last year, and none of the predicted catastrophes have occurred. So data centers are your generation, our generation's version of the same choice. Moratoriums at different patchwork level. That is the New York approach that is not the Ohio approach. The Ohio path is one you've already proven. Put facts over fear and design statewide standards to protect communities and give my industry the certainty we need to spend billions more here in Ohio. So I'll close by suggesting two things. First, to direct your ODNR to do a statewide study on data center water use. Not predictions, but actually how it's going. Second, please think about directing your Public Utilities Commission to study the actual effects of data centers on residential electricity bills. They designed the AEP data center tariff. They can actually show you real data. and let's see whether data centers make bills go up, or, as in Virginia and nearly every place studied, electricity bills go down because my industry absorbs more and more of the fixed costs. So if electricity, water, and noise are real concerns, then regulate them based on the facts that you learn. If the fears are exaggerated and amplified by our opponents, well, let's still protect citizens by giving them the assurances that they will not suffer from those fears. So Ohio chose evidence over fears 20 years ago. Let's do the same thing now, and I look forward to your questions.
Thank you for your testimony. Questions from the committee? Senator Wilkin.
Thank you, Chairman. Thank you for being here. As someone who deals with multiple data centers, that's correct? All over the country, sir. Can you tell us the effect of the sales tax exemption here in Ohio and how they view that, whether it's important, not important, how they view that. Please.
Through the chairs. Senator, I testify in state capitals all over the country for the last 17 years. I also testified in the last one year in dozens of city and county meetings, and most of that has been about the fears that are here. But prior to the last 12, 14 months, we really did talk about whether states should expand their sales tax exemptions to include the stuff that goes into a data center. Of all the states with sales tax, all of them exempt fence posts that a farmer puts in a farm or a paddock. They exempt machinery that goes into a business from sales tax from $1 without having to qualify or ask the state for a certificate. And you heard Dana talk about that earlier today. So I went from state to state and enacted dozens of laws where they added to their sales tax exemptions, which had been written prior to data centers, and they add an exemption for the stuff that goes into a data center, the equipment, the business, machinery, and equipment. Those statutes are not a tax, well, they're a tax exemption on sales tax. They're not a tax giveaway, as the chairs have noted. You don't write any checks, and it happens every day. The oil and gas industry has exceeded expectations. So, oh, God forbid, if you ran the numbers, the oil and gas industry probably has used its blanket sales tax exemption for far more than maybe there was a prediction. It's because they spend more money. When the oil and grass industry and my industry spend more money, they have a greater amount of the sales tax exemption. That 7% then is something they don't have to pay, and it puts data centers on par with other industries. So, Senator, your question really was, does it matter? And I heard your director of development this morning say that when you look at a trillion dollars in investment from my industry the sales tax is trivial She called it a drop in the bucket Quite surprised to hear that because when you think about a billion data center here in Ohio that's $140 million in sales tax on the initial construction. And you have to understand that every three years, we replace half of that cost, half of that $2 billion data center, which means a billion dollars in servers. We upgrade the servers that store your photos and videos, so they store more, retrieve faster, burn less electricity, and run cooler. And we bolt on a lot of NVIDIA's latest set of chips, maybe some Intel chips that will be made here in Ohio. All of that spend amounts to about half of the initial cost. So there's constant reinvestment. So an initial sales tax lug of $140 million is going to be followed up by at least $60, $70 million every three to four years. That means sales tax matters more than a drop in the bucket. and if Pennsylvania, who enacted a sales tax exemption recently, or Indiana's, or any of the other 27 states that have them, they become a more competitive choice. And if I'm running a publicly traded corporation whose equities are the basis of your retirement portfolios, as my companies are, it is imprudent for me to pick a state and have to incur an extra 7% cost over states that are offering the same energy, the same availability, but 7% less. It does matter. Just a quick comment to go along with. There's a very large data center proposed in my district to the tune of $550 billion. So I figured if you just did half of what that cost would be that would be taxed, it's right around $20 billion, which I would tend to think would get someone's attention at a company. Through the chairs, I wanted to congratulate you guys on securing the OpenAI data center. That's going to be a major boon to Ohio. We're awesome. Yes, we are.
Representative Workman. Ohio is winning. Thank you, Chair. Can you talk to us a little bit about the long-term plan for these data centers? We know right now that it's bringing an incredible amount of jobs. You know, there's tons of investment as where these buildings are being built and the developments are coming to fruition. What happens when all this building is done? What happens to the jobs? What will the servers be storing in the future? How will this evolve? Right now we're in a boom of development and activity. What happens in 10 or 15 years, and where will we be then?
Through the chairs. Representative Workman, thank you for the question. First on the notion of construction to operating jobs, and then we'll talk about the long-term future. Data centers take a few years to get sited, take two to two-and-a-half years to construct, and we put 2,000 union trade workers on the site for basically two to three years, and they build the data center. That job and income is a giant shot in the arm for the community and for the state and the surrounding counties. But after it's completed, what typically happens is we will build another building on the same campus. I think if you look at New Albany, you're going to see the same experience there, that if we buy several hundred acres, it's for two reasons. We want to make sure that we can stay far enough back, that you have noise attenuation at the border, And we want to buy enough acreage so that we can build multiple buildings on the same site. So the construction typically goes nine to ten years, not just three. And it's one of the reasons the trades are huge supporters of data centers, because they can stay in the same community for nine or ten years. Now when it done and the construction dust is gone we put about 200 operators full employees to work in a data center of a roughly billion size Those are employees enjoying full benefits They are high school and trade school grads who we train They aren college grads And the average salary, you probably know this from New Albany, is six figures. These are jobs that enable somebody to not have to leave Marriott, Ohio, but stay there. Have a living, grow a family, and stay part of the community they grew up in. It's a unique opportunity that they don't have to head off to Cleveland or Cincinnati or someplace else. So that is why high school guidance counselors, for instance, and shop teachers, if they're still around, really love the idea of letting people work from high school to trade school and get six figures. So those jobs are excellent jobs, and they're permanent jobs. Now, I also think that you asked for maybe some prognostication on the long term. Just six years ago, I was testifying in Idaho, and the committee chair was so concerned. He said, I don't really think you're going to need this many data centers. You were overbuilding, and this was six years ago. And I asked them all to pull out their phones and look at their photos and videos and scroll back a little bit to see if they've ever deleted any old photos and videos or the messages that make copies of the photos and videos and send it. So they asked me, why do you need so many data centers, Mr. Delbianco? And I told them, why do you need so many data centers? We are not building them for us. We're building them for the customers that we serve. And what we keep in our own personal inventory is paltry compared to what businesses, government, educational institutions store in the cloud. So that demand, Representative, is going nowhere but up. And over time, it will probably get to the point where it gets too expensive to store. Right now, everybody just bumps up their $2 a month to Apple for more storage. At some point, people are going to reexamine that and maybe get rid of their old fireworks videos from 4th of July seven years ago. but the trajectory has all suddenly gone onto steroids because of AI and I do hope all of you have used AI chatbots, AI search from Google, AI from all of my companies. It is transformative and it requires so much more computing power, electricity and more data because the raw material for AI is electricity plus data. So as perhaps our own personal storage might diminish the cloud storage for companies and for the AI to drive our new economy will increase. I think you can be confident that those data centers will be refurbished and refreshed, they don't decay, refurbished and refreshed. It is one of the risks to diminishing the sales tax exemption. If you start to force data centers to pay sales tax on business machinery and equipment, while no one else does in Ohio, and other states maintain the exemption, then maybe every three to four years they don't really upgrade a data center. This is not a prediction. but it's possible that over time as the data center becomes less and less competitive, too expensive to run, the companies could close it down. And they need to be held to remediate the site completely, restore it to its prior condition, and ensure that they clean up any mess if they leave. But I don't think that is likely to happen.
Follow-up? Follow-up, Chair. Thank you. Thank you so much for that clarification. Great response. So I guess then my question is, It sounds as though we're building a massive neural network of memories of everything that we've ever done in our lives. What will AI do with that?
Through the chairs? You're certainly right. We have built a network of it. And when it comes to AI regulation, that's the other half of my life, is regulating that where I live in Washington, D.C. We are pushing very hard for Congress to give a national standard establishing that the contractual promises that are made when you using ChachiBT or using Claude or Meta or Gemini that the contractual requirements are met and that when you use that AI there needs to be a firm disclosure of whether any of what you're loading into your AI will be used to retrain the model. On the storage of data for, for instance, your Apple photos, Apple does not allow those photos to be used for any training by AI. But if the company were to begin to change that policy, we need to require that they transparently tell all of us that that data might be used for AI and give us the opportunity to opt out of any such thing. It is actually daunting to consider what AI could do if it actually looked at everything I have ever written, said, or looked at. I mean, a profile of me that I'd probably like better than myself, but I don't want that to happen without my full consent.
Any further questions from the committee? Senator Blackshear.
Thank you, Mr. Chair, and thank you so much for your testimony. In your testimony, you said that data centers have proven to be good neighbors and economic engines in Ohio. I just want to just touch on the good neighbors part. You talked a lot about the disinformation campaigns that are out here. Have you all gone directly to the people who actually live in these communities in which these data centers reside? One of the things we've heard in past testimony from the data centers themselves is that they feel like they can do a better job of getting information out to the community and having those interactions. So I guess my question to you is, from your perspective, from your role, are you all actually going out into the communities and having these conversations?
Through the chairs. Thank you, Senator, for the question. So two elements to it. The answer is yes. I make my living in state capitals and towns and town councils and county commissioner meetings. Prior to last year, I didn't have too many of them. Because when a data center went into New Albany, New Albany Town Council doesn't need to meet and hear complaints from neighbors. There are no complaints. There are, however, huge complaints if there's a new data center proposed for a county, a town, or an area that doesn't have one yet. And in the past year, that is where, I wouldn't call it just disinformation, but amplification of false information. That is where my industry has had to wake up. And they're not done waking up yet. They need to show up in force and try to address and listen carefully to what you say you're scared of. You're scared of electricity. You're scared about noise. Don't want to see all the farm land used up. And you might be concerned, representative, about water use. So whatever they are, we have to hear it and then present facts calmly. But I can tell you after long, late nights of county meetings just south of here in Kentucky, that the room was full of people that were frightened. They had the AI anxiety. They were listening to what they'd seen on social media. They had color-coordinated t-shirts. They were playing videos of the noise they said would come from a data center. And after the second night, it became clear I wasn't going to change any of their minds. All I did was focus on the county commissioners at the front of the room, giving them clear conscience to vote the way they wanted to vote, based on the facts. Before they voted, however, this is, you've got to hear this, they were concerned about visiting one so they could say personally they've been to a data center. They got in a van, Mason County, Maysville, Kentucky, crossed the Ohio River straight up to New Albany, spent only a few hours there. They talked to people that work there, they talked to the neighbors, the business community. They listened to their own ears as to what you could hear at the edge of the property. They concluded that the fears were unfounded, that Ohio had done it right, got back in the van, and the next day voted unanimously for new zoning to allow data centers in a community that desperately needs jobs and investment. So that ended up, Senator, being what tipped the balance. Is visiting an actual community where data centers are changes all the narrative about what bad things might happen in a community where a data center might be. So my industry is engaging more and more in communities where we are visiting to propose a data center, but we aren't spending much time in the communities that already have them, since they are happy enough to have more.
Just a quick point of clarification. So I know you come to state houses and you go to council meetings, but do you actually talk to residents as well outside of elected officials?
Through the chairs? Yeah, that's a great question. I wouldn't be doing my job if I just simply thought that a lectern was the place to deliver and communicate. So I'd spent time at breakfasts in a town hall meeting. I talked with the residents that are in the room. And if you have a calm conversation with one-on-one, surprising progress can be made. But where more than one are gathered in the name of stopping a data center, they inflame each other. You guys knew where I was going with that. They inflame each other. That was close. It was very close. They inflame each other with more and more stories to say we can't have a data center. And some of the anxiety shows up, and I'll ask them questions. Water, electricity, noise, all solved. Would you still be okay with a data center? Most say no. They're scared of AI. and two women in Kentucky said, if we stop the data center, maybe the AI won't come. And I did not laugh, Representative, although I thought I might, but that happens all the time, and the only way to deal with it is to listen carefully and understand what they're going through. I can't make everyone happy, but they need to know that they were heard.
Any other questions? Seeing none, I'll ask the committee to help me remind the Department of Development to look for opportunities for data center tours for folks. Put that in the toolkit. That's a good idea. I got a good idea from the committee. I think I'm ahead now. Astute point. Okay, so we have five more. Next up, we have testimony from Sarah Hippenstiel. Sarah Hippenstiel Hall with the Miami Conservancy District. Welcome to committee. You may begin when ready.
Thank you so much, Senator Chavez, Representatives Holmes, the rest of the committee. Thank you so much for having me. My name is Sarah Hippensteel-Hall. Thank you for you did it perfectly. And I'm the Manager of Communications Outreach and Stewardship at the Miami Conservancy District. For more than 100 years, the Miami Conservancy District has served southwest Ohio through flood protection, watershed management, groundwater monitoring, and regional water stewardship. Our role is to provide technical expertise, data, and long-term planning to help our communities make informed decisions about water. We are an initiative, our watershed stewardship program is an initiative that's specifically funded for many decades by communities across 10 counties in southwest Ohio. We're testifying because water is foundational to Ohio's future. We recognize that data centers are becoming an increasingly important part of the modern economy. and as this conversation continues, the Miami Conservancy District really is here just to encourage one principle above all that water resources should be part of the conversation early Water considerations are easier and less costly during planning than after development decisions are made. In southwest Ohio, our communities depend heavily on the Buried Valley Aquifer. It's one of the most productive groundwater systems in the United States. It is a sole source aquifer that provides drinking water to more than 1 million people. That's more than 99% of our communities in southwest Ohio. It supports manufacturing, agriculture, recreation, economic development throughout the Great Miami River watershed. That's parts or all of 15 counties in southwest Ohio. Sole source means that there is no reasonable alternative if the aquifer is no longer available, either by degradation of quality or loss or misuse of the quantity. This resource has supported our region for generations. It is our greatest regional asset. It is also a resource that requires careful stewardship. We have a lot of water, but only if we use it properly. Some facilities rely more heavily on water than others. Wastewater can vary significantly. For these reasons, understanding local conditions to us is extremely important. A one-size-fits-all approach across Ohio will not fully reflect the differences between sites, watersheds, or water resources. We see what happens in other places when water is an afterthought during planning and or taken for granted. Miami Conservancy District believes that thoughtful planning begins with good information. So here's some principles that apply to, and these are principles applied to any kind of water user, especially large water users. That includes understanding projected water demand and withdrawal volumes, evaluating potential impacts to groundwater and aquifer recharge and water's limitations, assessing wastewater discharge and receiving water impacts, considering cumulative effects where multiple facilities operate in the same watershed, identifying opportunities for water efficiency, reuse, recycling, and innovative cooling technologies, and preserving the long-term function of recharge areas and sensitive water resources. These are not barriers to growth. They are part of planning responsibly for growth. Candidly, like I said, it's not a secret, we have a lot of water, but only if we manage it properly. Water infrastructure and water cycles often operate on timelines that are much longer than development cycles, and the decisions that we make today can influence our clean and plentiful water and community resilience for many decades into the future. Ohio's strength has always been its ability to grow while planning ahead. We are currently conducting a long-term groundwater vulnerability study focused on the Buried Valley Aquifer. Thanks to funding by the Ohio Water Development Authority, we kicked this off a couple years ago. It is a study intended to help our communities better understand our region's water and better prepare for future demand. We kicked it off long before data centers were part of the conversation. We knew that water demand was going to be part of our future. Our goal is not to determine whether a specific project should not move forward. our role which is entrusted to us by those communities across Southwest Ohio is to ensure that communities have access to reliable information accurate data and a regional water perspective as decisions are made Ohio economic future and Ohio water future are connected So thank you for your time and opportunity to provide testimony.
The Miami Conservancy District appreciates your thoughtful work on this important issue. Thank you for your testimony. Questions from the committee? Senator Blackshear.
Thank you, Mr. Chair, and thank you so much for your testimony. Tony. My question is, there are a number of data centers in your watershed. Are you already experiencing strain on the water supply as a result of data centers? I think there are a few planned in our watershed. We have not, I do not believe that we have experienced or are tracking that kind of question right now.
Just a follow-up on that. Follow-up. Do you believe that it could eventually become a problem in the future? And I guess I should say through the chair. We don't want any water user to challenge our water conditions so that they are a problem for future resilience. I would say that. And we have long done studies on water use across our watershed for that very reason. Follow-up?
Yes. Thank you, Mr. Chair. Many of the data centers have claimed that they use very little water and have also claimed that they can become water positive over the next few decades. Do you believe that to be true?
I know that if properly managed, specifically our Buried Valley Aquifer, and if the water user is using water recharge technology or water recharge practices, our aquifer is practically renewable forever. If we're using our water and then returning it to its source as clean as it came out, then we are a renewable resource.
Any other questions from the committee? Seeing none, thank you for your time. Thank you so much. Next, we have testimony from Anne Aquillo from the Columbus Partnership. Welcome to committee. May begin on ready. Thanks.
Good afternoon, everyone. Mr. Chairman, Mr. Chairman, members of the committee. Hi, I'm Anne Aquillo. I'm the chief policy officer for the Columbus Partnership. I am – oh, I thought I was going to get a timer up here. I'm not going to read my testimony. It's been a long day for everyone here, so I'm just going to make a couple of points. You can read it in the record. So the Columbus Partnership has a couple of different verticals. Mr. Holmes is laughing. He knows me well. We are a family of brands. So the Columbus Partnership are headquartered companies here in the 11 county central Ohio region. We also house one Columbus that was referenced earlier. So we play economic development as a team sport here. And economic development, I have a couple messages for you today. One is economic development is a puzzle. There are big pieces, so we think about the large investments, we think about data centers, but we also think about the small investments, those small things that give our communities their vibrancy, their character. All of those pieces are important to the puzzle, and we believe that economic development should include all of those aspects. The one thing that was talked about today was the idea of what data centers can bring to communities. Yes, we can talk about tax revenue. We can talk about all of those great things. But it clear from all the testimony you heard today we all depend on data in different ways whether you the nurse in Lancaster the teacher in Marysville whether you sitting around your family table looking at those memories We all depend on data. So the importance of having that here in the central Ohio region is really important to the vibrancy of our business community as well, because just as we individuals depend on data, so do our many different sectors that are here in the central Ohio region. The one thing I would like to take a moment to talk about is what data centers can bring to those communities.
And I have two great examples, and that's where I really want to spend my time. One is you've heard a little bit about Marysville. There is a planned data center development up in that direction. They, because of that development, will include a $6 million roadway and a $20 million railroad overpass. That's part of the development, and the data center project is bringing that to the community. It's kind of invisible infrastructure. Millersport is another data center development that has a $30 million upgrade to their local water plant and an entirely new wastewater treatment plant. Again, that is something that's coming with a development, not on the back of the taxpayers. So this is a great way that we talk about a lot of very tangible things, but some of these are the intangibles that we're seeing inside the communities in central Ohio. And then I think the most important thing is, you've heard it from some of the witnesses, economic development is different in every instance. If there's something that I can bring, and I joke that I am not an economic development specialist, I just play one on TV, so I have lots of smart colleagues that I work with. And what they would say to you today is, it's important to preserve as many tools as we can. Each development is different, each community is different, each project is different. And what we want to see is as many tools preserved as we can to allow each one of those deals to develop in the right way. And we work really closely with all of our locals to make sure that it's done in a way that respects the community and gives us the best chance to succeed. Mr. Chairman, Mr. Chairman, I'm going to give you two minutes back. I'm here for any questions.
Thank you so much for your time.
Thank you for your testimony.
You gave us 145 back. Okay, sorry, sorry, sorry. But that is still the winner so far. Okay. Any questions? Questions from the committee, Senator Reineke. Okay.
Thank you, Chairmans, and thank you for being here today. We have had many conversations. I represent Marysville, and I think it's been a really good plan over there. Originally visited the New Albany plan and got a lot of the information six to eight months ago before this became an issue and never heard a word out of Marysville about how well planned it was. So a couple of the conversations I was hoping you could maybe share with the committee in response to how do we tell our people who are the naysayers. You're dealing with all the 11 counties around, which three or four of those are mine. But we've had these conversations. What do you suggest is a good way to kind of overcome some of that when we can show really good planning works?
Mr. Chairman, Senator, thank you for that question. The Marysville planned development is a great example of a group that went into that community early on and spent a lot of time really just building those relationships. I think what was important about that project specifically is just how much upfront conversation there was through the development organization. and then as they brought things through to council, through to the county commissioners, to really build those relationships up front and make sure that there was a lot of, as much transparency as there could be as that program came together. And there were lots of questions. One of the great that that city has done is put an FAQ up on their website. I believe that's shared with both of the chairmen. That's a great example of how you can get the information out there, but I think it really goes back to long-term relationship building, which I'm going to say it is very much the Columbus way. How do we make sure we have those ongoing relationships, stack hands, and try to talk through issues and share as much information as we can?
Follow-up? Yes, thank you. Just for the benefit of the committee, one of the things that they pointed out to me that I was surprised to learn about, and we've had this conversation about the numbers of jobs that come to the community and all of the construction jobs that maybe disappear after, you know, it's gone from two years to six years to ten years now, but there was a new thing that was presented that is like an unemployment tax based on the number of people who were in those, that could be at a big-sized facility. Could you just explain that a little bit for the benefit of the community?
Well, and I was going to say, Mr. Chairman, Senator, I don't know that I could get into a whole lot of granularity on that today. I think that's a great point to really sort of unpack all the aspects of when you bring a development like this. What we can tell you, too, is there's the ecosystem of other companies that will want to co-locate around these areas? I think that's a really good question, Senator, and I, for the brevity of time, did not submit a lot of that data, but I would like to follow up with the chairman if that's okay to provide some additional data points when it comes to that economic base.
And just to let you know, the chair has determined that great point is not as good as astute point. Okay, any other questions? Representative Workman.
Thank you, Mr. Chairman. Real quick, and I'm hoping I'm asking you the right question here. Okay. But we had some concerns in my district about private property rights as it applies to maybe data center development and economic development in the area. The local trustees are concerned about the potential of being sued if they reject the development. Do you have any thoughts on that or ideas of how to navigate that situation?
Mr. Chairman, Representative, I don't know that I would have a whole lot to talk about. I'm not an attorney, so I don't know that I could really speak to litigation. What I would tell you is we have a great group that works from everything from business retention and expansion to how we actually bring our New Deal flow. I know we work really closely with our local economic developers in each one of those counties and cities. And we would, I'm certain, be working through concerns if they were coming from elected officials to help them kind of understand that. I'm sorry I don't have a more precise answer for you, but I understand what that concern would be, and I would tell you we would try to approach it in a way that would balance those concerns and help those folks come together and work on it.
Seeing no further questions, we thank you for your testimony.
Thank you very much, committee.
Thank you. Thank you for the 145 back. Let's see if we can beat that. Next up, we have testimony from David Aaron Burlkamp with Double Think Tank. I should put my glasses on. David Aaron Burlickamp with DoubleThink Solutions. Welcome to committee. May you begin when ready.
Thank you very much. Co-chairman, co-chairman, committee. Appreciate actually going toward the end here because I got to hear excellent questions from you guys. Amazing information that I got to learn from here. As you were able to say, my name is David Burlickamp. I live here in Columbus. and last year with the help of Ohio State University, I founded DoubleThink Solutions an on AI development company The whole point is to run AI off the data centers and entirely on hardware that you own The AI demand is not just one wave. Organizational load, research, business, government, power users like myself, folks throughout Ohio should keep competing for it. But personal usage, the everyday AI that millions of households don't necessarily need a data center at all. I know because my own daily assistant keeps its entire accessible memory, tens of millions of words, or tokens if you know them, on my own consumer desktop right here at home. In one sentence, if you guys can aim to reduce the workload, you can and recover the usage that you can't. For reduction, a household whose AI runs on its own device never shows up in the load forecast. It never draws gallons of cooling water and it never asks a neighbor to subsidize the transmission line. The heat, a few watts, lands in the room where the device is being used. Maybe we're in Ohio. That's practical warming. The same family owns that AI outright at purchase with no monthly fee attached to their own thoughts. We talk about how to give people hope and a reason to like these data centers. The ability to own what they're using would be an excellent talking point. The recovery piece, something that I've not heard yet, although one person did talk about novel water use, is the amount of heat we are throwing away. We consider it a byproduct of data centers when it should be considered a resource. Both Denmark and Germany have developed what they consider green data centers where they reuse the share of their energy that they use to run the data center. This helps avoid power spent on cooling itself, and it enables closed-loop systems so that you don't have to return the water hot either to the aquifers or to the environment. The heat pumps that they have made in tire facilities, providing even more jobs, can amalgamate heat from multiple facilities and get it above 150 degrees, which allows for district heating. That's people's homes, their hot water, preheating oil at restaurants, getting it to the kilns that are making cement and steel. The ability to turn what everybody considers waste into its own product. And Ohio, if we're going to put this many data centers here, the ability to say we're not wasting water and we are not wasting electricity continues to put us ahead because Ohio is awesome. So far, no bill that I've heard of yet connects any of this data center heat to our systems, leaving an untapped incentive structure for the multiple ways that that could come back to us. I did drop four asks that I left back at my chair. That was included in the submitted testimony. but ultimately count the heat in your reporting standards, reward heat reuse ready siting in the incentive tiers, pilot data center to a district heating project, and count on-device AI as headroom for the grid that you're about to protect. Right here in Columbus, Ohio State University already has their own district loop for the majority of the campus and even their own AI facilities on the campus could be contributing directly to that water A couple of things that were not part of my testimony but came up and what other people said The boutique data centers, smaller ones, not hyperscalers, could plug right into the local communities. If you've got a data center in the middle of town, again, you can just spread that heat to the industry right there. And then one final thought that again came from another witness here, something that I think gets left behind. Last year's amendment that was dropped from the Big Beautiful Bill Act got enacted in an executive order in December with the concern that if you say AI around regulation, we have to go to the federal level. When we say just data centers, that's fine, but the moment we involve AI and start making decisions, we are subject to those bills.
Thank you for your testimony. Good concepts that just shows that there's a lot more to it than the talking points. Questions from the committee. Representative Claggett.
Just real quickly, thank you, Chair. We are very familiar with those things you're talking about. We've been asking those questions. We're actually working on it. We actually got very similar things for other industries that use their heat and go somewhere else. So I think we're on board with that. We just got to get the rest of the engineers to get it done. Thanks for bringing it up. Ohio is actually the most set up in the country. We've already got the most district heating as far as I've researched. Forgive me, you probably know better than I do. Forgive me, through the chair.
Any other questions? Seeing none, we agree that Ohio is awesome. Indeed. Next, we have testimony from Alexandria Denny from the Ohio Business Roundtable. Not seeing her here, we will move that testimony to written only. And last but not least, we have testimony from Rick Cofagna with the Ohio Chamber of Commerce.
Thank you for hanging in there all day with us. You may be getting one ready. Co-chairs, select committee members, you've been incredibly gracious, and I do appreciate the opportunity to provide condensed remarks. As I said the other night, our competitive position is at a tipping point. Last year, CNBC ranked Ohio fifth in the nation for business. It's our highest ranking ever, number one in infrastructure. That didn't happen by accident. It happened because Ohio made deliberate policy choices to compete. The uncertainty surrounding our data center sales and use tax exemption puts that progress at risk at precisely the wrong moment. Ohio is our home, as biased as I am about the attributes that I think make our state unique. the fact is that data centers aren't necessarily attracted to Ohio, but rather to our region. Our neighbors have similar highway systems, similar topographies, have the same temperate climate, free from earthquakes and hurricanes, and by virtue of belonging to the broader PJM electric grid, have access to the same low-cost electricity. Those electrons are going to flow from point A to point B, whether it's within or beyond our borders. It's a question of whether we want to capture the jobs, the tax revenues, and all the other economic benefits. because when all things are equal, any business, just like electrons, will follow the path of least resistance when deciding where to locate. And as it relates to data centers, every neighboring state is still open for business. Indiana has 100% exemption at a $10 million threshold with terms of up to 50 years. Michigan enacted a new exemption in 2024 and is actively marketing it to the same site selectors considering Ohio. Kentucky kept its million threshold exemption intact Pennsylvania is attracting hyperscale investment under a million threshold lower than Ohio And West Virginia passed major data center traction legislation in 2025 and is actively recruiting in the same southern Ohio corridor where some of our important projects are planned. The economic case for restoring our exemption is overwhelming. Our Research Foundation study last year found that the industry supported 95,000 Ohio jobs, contributed $11.8 billion to GDP and generated over $1 billion in state and local tax revenue, and that's just in 2024 alone, against an estimated public cost of $2 to $3 billion over seven years and yielding a net fiscal benefit of approximately $2 billion. We did do some updated data for 2025 that shows $27.2 billion in qualifying capital investment was generated, supporting up to 111,000 construction jobs and 8,600 permanent operational positions. This program pays for itself. This week we released a water readiness study that directly rebuts any premise that water concerns justify a pause. Ohio has more than enough capacity to support projected data center growth through 2030. The real constraints are infrastructure timing and coordination, not scarcity. Those are arguments for better planning, not for pausing the incentive. This is a national security issue, as you've heard. Amazon Web Services, Google, Microsoft, and Meta are American companies building sovereign digital infrastructure. The same logic that drives support for on-shoring semiconductors, energy production, and defense manufacturing applies here. Our state's financial institutions, insurance companies, health systems, manufacturers, and numerous other employers rely on cloud-based storage and computing to operate and to house their intellectual property. we cannot let current and future data center investments migrate because Ohio blinked. This growth is landing where Ohio needs it the most. Power purchase agreements between Meta and Vistra guarantee the continued operation and future expansion of our two nuclear power plants for at least 20 years. Meta and Eaukla are planning a 1.2 gigawatt advanced nuclear campus in Pike County, where median household income is $52,736, well below the state median. SoftBank's $100 billion U.S. commitment is generating supply chain activity across the state. And, of course, just yesterday we heard OpenAI is in talks to lease a proposed 10-gigawatt data center campus on federal land in Ohio involving at least $500 billion in investment. Do we want these generational opportunities, or do we want to forfeit them to our neighbors or, worse, other countries? Director Mihalik, earlier I heard her mention how other states are revisiting their offerings. And what I want to say is we are presented with a clear strategic advantage, particularly with the energy assets that we have and the new energy commitments that are coming, largely because of what you guys have done with House Bill 15. The opportunity is ripe for Ohio to take control of our destiny and to capture the lucrative jobs and financial benefits, direct and indirect, while other states are hemming and hawing, frankly. The business community is not asking for a blank check. We support modernizing the exemption with power supply commitments, water efficiency reporting, local site assessment tools, and enhanced disclosure. But we must restore certainty. We have the water, the land, the fiber, and the workforce to lead this industry for decades. We just have to choose to compete.
Thank you. Thank you for your testimony. Questions from the committee? Representative Glassburn.
I'll do the reverse open-ended question. You've been here all day? You know what we do here? Any feedback on any of the themes that we've thrown out here?
Co-chair Chavez, Representative Glassburn, having sat in your seats for a time, I admire your stamina. I think what you're doing is providing a forum for anyone and everyone to come in and present all sides. And that's all you can do in this republic that we live in. You are elected to make decisions on behalf of your constituents. People look to you to do the homework for them and to arrive at the best decision based on the information you have. And so I appreciate that you are hearing from the Bob and Betty Buckeyes of the world. You're hearing from the business organizations. You're hearing directly from the operators and everyone in between. All we can ask for is a forum to state our case, to provide data to all of you. and then you take that back and you ruminate on it and you make the best decision that you can. So I just say thank you to all of you for giving me an opportunity. I was lucky to testify two nights ago on the legislation and kind of present kind of a package of things we would have liked. Some things are in there, some things are not. We're going to keep communicating with all of you. And again, I'm just, I'm grateful.
Thank you, that's a great point. This is a collaborative effort. So that's why we're seeking input. Any other questions from the committee? Seeing none, thank you for your testimony. Have a good evening. Thank you. Members, I'll note that we received written-only testimony, so please look at that as well. With no further business before the...
Senator Wilkin. Chairman, I have about a six-page written statement I'd like to read into the record on behalf of policy staff, if you guys want to stick around.
Yeah, yeah, let me get out of here and then you'll get in. With no further business before the committee, we are hereby adjourned.