Site Selection Just Got a Third Variable

A 500-megawatt facility in Northern Virginia now owes an extra $48 million a year it did not owe on June 30. Governor Spanberger signed the $0.011/kWh charge on June 30; a 500-MW facility owes $48 million annually. Not a rounding error. A site-selection variable.

On June 30, 2026, Virginia Governor Abigail Spanberger signed the Commonwealth's 2026 biennial budget bill into law, establishing a Data Center Electricity Consumption Tax beginning July 1, 2026. Virginia, particularly Northern Virginia, is the largest data center market in the US and a bellwether for the industry — known as 'Data Center Alley,' the region hosts a significant portion of the world's internet traffic and is home to major hyperscale facilities. Taxing the world's densest concentration of compute was never going to be symbolic.

Meanwhile, Monterey Park voters took a different approach. Preliminary election results show more than 86% of voters supported the measure, making Monterey Park the first city in the nation to enact a permanent voter-approved ban on data centers. Local leaders don't have much power in overturning the law themselves, as only another citywide vote can overturn the measure. This is the critical distinction: not a zoning board decision to lobby or a moratorium to lift, but a municipal code amendment locked in by direct democracy.

Two Mechanisms, Same Direction

The Virginia tax and Monterey Park ban operate through entirely different channels, which is precisely what makes them dangerous together.

The Virginia measure applies to electricity supplied by utilities, competitive retail providers, and self-generated power sources, including behind-the-meter generation. That last clause closes the escape hatch operators have used elsewhere. Because the charge is metered per kilowatt-hour rather than assessed on property or income, an operator cannot escape it by siting equipment differently or by building behind-the-meter generation. On-site solar, deployed by AWS and others to sidestep utility rates in other markets, is taxed identically to grid power. The tax is scheduled to expire June 30, 2028, absent legislative extension — but that two-year window is long enough to reshape greenfield capital decisions being made now.

For colocation operators, the math is brutal. For colocation operators — companies that lease rack space, power, and connectivity to tenants rather than running their own workloads — the path from tax to customer invoice is direct. Under most colocation contracts, power costs are passed through to tenants based on metered consumption, often at a marked-up rate per kilowatt. Tenants signing new Virginia leases need to reprice immediately.

Monterey Park is smaller in absolute terms, but its precedent value is outsized. A decisive vote in Monterey Park is reverberating across the San Gabriel Valley. Just days after voters overwhelmingly approved Measure NDC, residents in neighboring communities are hoping to build on that momentum as they push back against a growing wave of AI-related infrastructure projects. The coalition that drove the campaign is already targeting adjacent municipalities. Coalition members span multiple San Gabriel Valley organizations, and together they describe their work as local and regional, arguing that decisions made in one municipality can carry environmental and infrastructural consequences across city boundaries.

The trigger was concrete: the proposed facility would have tripled the amount of electricity used in the entire city of Monterey Park, driving up prices and pollution. That ratio — one building consuming three times a city's existing load — will resonate in every dense suburban jurisdiction fielding a data center application. The ballot-measure playbook is now written.

What Operators Must Model Now

The Virginia tax is marginal for hyperscalers with owned campuses and locked power contracts. It is potentially fatal for edge and colocation operators running 10-15 percent margins on Virginia deployments. At $0.011 per kWh, a 500 MW facility running around the clock would owe about $48 million a year, and a 1 GW campus close to $100 million, an increase of roughly 10 percent on a data center's effective electricity rate. A 10 percent rate hike hits a hyperscaler absorbing it as SG&A differently than a regional colo pricing competitive leases against Georgia or North Carolina.

Monterey Park matters because it routes around the state and utility layer. A ballot measure requires no governor, no public utility commission, no legislature. More than 25 states are now watching.

Operators running 12-18 month site-selection cycles built around power availability and real-estate cost now have a third variable: tax and zoning risk. That variable does not resolve in a single due-diligence call. It requires ongoing political monitoring in every target jurisdiction, extending timelines and adding overhead that did not exist two years ago.

What to watch: Whether Virginia's tax draws an interstate commerce legal challenge before first payments come due in September 2026. Whether San Jose, Los Angeles, or other California metros see Measure NDC-style ballot campaigns in the next election cycle. Whether cloud operators begin building regional latency premiums into service pricing for Virginia-restricted zones — the first signal that fiscal constraints are reshaping capex and product architecture alike.