I took part in a press conference with Governor Pillen last Monday to discuss his executive order placing a hold on large data center applications to participate in the state’s business incentive program called the ImagiNE Nebraska Act. The ImagiNE became law in 2020 through LB1107, replacing the previous state incentive program known as the Nebraska Advantage Act.

All 50 states have one or more business incentive programs. Both ImagiNE and Advantage were passed to help make Nebraska competitive when it comes to attracting, retaining, and expanding businesses that will make significant investments and create good-paying jobs in Nebraska.

Two of the incentives included in the ImagiNE Act allow for a refund of all sales taxes paid by the business and a refund of personal property taxes paid on equipment investments. Investments over $50 million have no employment requirements. Taxes paid for the land and buildings stay with the local political subdivisions, but the sales taxes and personal property taxes go back to the applicant as an incentive along with other state incentives.

I generally support targeted incentives when we are competing with another state to attract or retain a project or when the project needs initial support but will bring large future tax revenues or a large employment base. In today’s environment, I see no need to provide any incentives to attract large data centers. Nebraska naturally has many things that make it attractive to data centers, if we want them here, and it is important to prioritize the tax revenues they offer over incentives to move here. The intent of the Governor’s executive order and the bill that I intend to offer in the next session is to make certain that any large data center development in Nebraska would result in the maximum tax revenue benefits for the state and the local political subdivisions, which means no refunding of sales and personal property taxes.

The executive order is not intended to stop development of data centers if they can reach agreement with local governments, along with complying with state and federal regulations, to locate in Nebraska. Preserving local control and allowing cities and counties to make decisions that are right for their constituents remains a key component of all economic development. The Governor’s order is simply designed to avoid any loss of new tax revenue at both the local and state levels. With the current state budget shortfall and the need for property tax relief, it is important to preserve all available sources of revenue.

There currently are five data centers operating in Sarpy County. It is my understanding that the Springfield/Plainview School District has reduced its property tax ask by 30%, even after building a new school, with the revenues generated by these data centers. Some of these data centers received benefits under the Advantage Act (Neb. Rev. Stat. § 77-5701 to 77-5735), which included a tier of incentives specifically for data centers. The logic at the time was simple: data centers required sizable capital investment, generated significant property tax revenues, and employed high-salaried individuals while not requiring so many workers to create a drain on local services paid for with property taxes. Although there are still businesses in Nebraska that benefited from the Advantage Act, the state stopped taking applications for the program in 2021 when it was replaced by the ImagiNE Act. The ImagiNE Act places no special emphasis on data center recruitment, and instead categorizes benefits solely based on investment and/or employment base.

I’ve received some questions about why the Executive Order was necessary when an amendment was introduced during the session to prohibit incentives for data centers. The amendment in question was AM2123, offered by Senator Danielle Conrad during floor debate on LB1261. LB1261 was offered by Senator Barry DeKay, chair of the Natural Resources Committee, to allow construction of energy plants using private capital for energy users requiring over 1,000 megawatts of power. It requires the energy user to cover project and utility costs while preserving public power’s retail role. This ensures the cost of energy development is not borne by ratepayers. The bill enjoyed broad support from public power entities during its committee hearing.

Although large data centers are the most likely industry to reach the 1,000-megawatt threshold, other heavy manufacturing sectors also approach or exceed this power need. AM2123 was introduced by Senator Conrad during floor debate on LB1261 and would have barred a privately owned generation facility from receiving benefits from the Advantage or ImagiNE Acts. This amendment was one of almost a dozen amendments, including one to require the facility to use renewable energy and battery storage to the extent feasible. Many of the concepts raised by Senator Conrad’s amendments did not have a committee hearing, so there was no opportunity for Senators to hear testimony and weigh the pros and cons. Had AM2123 been a stand-alone bill, it would have gone to the Revenue Committee – not the Natural Resources Committee – so there was also a question of germaneness. Since her amendment was not limited to future application, there was a very real and unanswered question about the impact the amendment’s provisions would have had on existing data centers approved for Advantage Act incentives. All of these procedural questions are what led to the amendment’s failure, not necessarily an objection to the concept.

I am pleased to see that the state is joining local governments in evaluating what economic development projects are right for Nebraska. I am hopeful that the task force’s review of state rules and regulations regarding water, energy, and other resources will provide comfort that Nebraska is growing responsibly.

It is a privilege to represent you in the Nebraska Legislature, and I look forward to hearing from you regarding issues that are important to you. I can be reached at 402-471-2729 or by emailing me at mike.jacobson@leg.ne.gov.