Companies building data centers in Oregon already have a pretty good deal—and new economic development legislation pushed by Gov. Tina Kotek was poised to make that deal even better before an intervention of a legislative subcommittee this week. 

Kotek has in recent weeks been pushing a series of bills including HB 4084, legislation that would extend an enterprise zone program dispensing tax exemptions to companies making new investments in the state from five years to 10. 

The bill has, thus far, garnered general support in multiple legislative committees. But extending what could be hundreds of millions of dollars of tax breaks to data centers has proved controversial—so much so that, on Monday, a budget subcommittee added a provision to the bill blocking new data center projects from eligibility for the tax breaks until the summer of 2027. 

The subcommittee’s decision faced pushback from some Republicans, but it gives legislators additional time to consider whether the state should be subsidizing new data center construction at a time when the massive server storage facilitiesdata centers are facing heavy scrutiny over their environmental and economic impacts. 

Kotek said last week that HB 4084 is “not about data centers” and is instead aimed at supporting small manufacturers, but until Monday it contained no provision to prevent companies running data centers in the state—including Amazon, Meta, Apple, and Google—from benefitting. Last year, data centers received two-thirds of the program’s tax incentives. 

Given how many data centers already exist in Oregon and how favorable the current tax climate is for them, Kotek’s support for a bill that could have doled out hundreds of millions of dollars in further tax breaks has rankled budget watchdogs, environmental activists, and local government officials alike. 

“It’s been a little baffling why we’re investing our time extending tax breaks to an industry that’s already extremely profitable and that doesn’t really provide a lot of benefit to the state,” Nellie McAdams, executive director of the Oregon Agricultural Trust, said.  

Kotek has not been uniformly pro-data center in her public comments. In January, she formed a seven-member data center advisory committee and charged it with providing her and state legislators policy recommendations by October. She has said she will reevaluate the tax breaks next year once she has received the recommendations. 

Until the budget subcommittee’s intervention, however, the governor appeared ready to push ahead with a bill that was running into opposition from numerous corners of the state. Kotek’s office did not return a request for comment on this story. 

McAdams is not alone in questioning why the legislation is necessary given the tax breaks already on offer for data center construction. Because the state has no sales tax, building and equipping data centers in Oregon is cheaper than building and equipping them in almost any other place in the world—and that will remain true whether or not data center operators end up benefitting from HB 4084 and other tax incentives.

Wiser said that Oregon’s tax climate for data center construction is particularly favorable in comparison with neighboring states. 

“California has no tax breaks for data centers… they don’t give any property tax breaks, they don’t give sales tax breaks,” Wiser said. “Washington State gives partial sales tax breaks, and not in every location.” 

The world’s leading tech companies have long been aware of the opportunities on offer in Oregon for data center construction. 

Amazon, for instance, built its first data center in the state back in 2011 and has constructed four new data centers in Eastern Oregon since 2021—claiming it and its affiliates have invested a total of $39.2 billion in the region and created more than 8,000 jobs. 

Amazon’s rapid growth in Morrow County has been encouraged by local elected officials, who have handed the company a variety of tax breaks—including a package of tax breaks worth around $1 billion in 2023. That tax break was reportedly, at the time, the largest in Amazon’s history. 

Concerns over the presence of data centers, which have been bubbling up in communities around the country, are myriad: activists and elected officials have opposed further tax incentives for data construction on economic, environmental, and energy consumption grounds.

A bill introduced by Sen. Janeen Sollman, in particular, has troubled Wiser and other watchdogs. The bill, which is a version of the same bill Sollman has introduced repeatedly in recent years, would expand Hillsboro’s urban growth boundary, rezone some 1,400 acres for industrial use, and offer tax credits that could lure further data center development.

“If we don’t figure out how to grow very modestly in this state, our future economy is going to feel that,” Sollman told OPB in February.

But Catherine Thomasson, lobby coordinator for Mobilizing Climate Action Together (MCAT), said municipalities like Hillsboro can’t afford to be losing property tax revenue at a time when they are already dealing with budget deficits and are reliant on an increasingly strained state general fund to backfill gaps. 

“The more property taxes are lost, the less goes into the schools, and the more is needed to backfill from the general fund,” Thomasson said. 

The addition of some jobs may make up for some of that lost revenue, and though there are debates over the true economic impact of data centers, that is one of the reasons why Wiser doesn’t favor a ban on data center construction across the state. Instead, she wants to know why the state isn’t taking a more proactive approach in determining where the centers might be built.

“Not all land is of the same value,” Wiser said. “We would decry putting solar panels over the same soil unless they’re still farming under the solar panels. To use up the land that way would be inappropriate as well.”

Wiser is not alone in her sense that the state must take a more active role not only in ensuring that data centers are not a drain on public resources but specifically in regulating where they can be built. 

“Right now, we are paving a lot of our best agricultural land—especially in Hillsboro—for an industry that will probably rapidly innovate to take up a lot less surface area in the future,” McAdams said, noting that in some East Asian cities data centers are increasingly being built vertically to minimize land usage. 

As more data centers are built in the state, the accompanying resource strain may increase as well. Data centers already consume 11 percent of the state’s electricity, and an effort to get their architects to pay for a share of increased energy costs has reportedly been met with resistance.  

Meanwhile, McAdams said the environmental impacts of data centers are still not clear—though the data center boom in Eastern Oregon has been accompanied by a sharp increase in water pollution. 

Given that, and the many other issues at play, McAdams said she can’t understand why the governor supported legislation like HB 4048 without first exempting data center construction. 

“It’s difficult for me to comprehend why a politician would be supporting data centers and policy at this time,” she said. “There’s a lot of backlash around the country against this industry, and if you look at other places where they’ve proliferated without regulation, like Virginia, people are trying, finally, to organize—and it’s almost too late.”