This morning, I am going to reveal something to you that no one else has been talking about.  And let me put it out there with the hopes that good people in good places around Oregon listen to me and take action. Not just any action, but equitable and meaningful action.  We are being fleeced as a Hillsboro community, as a County, a Region, and a State.  In the ultimate shell game, we have allowed Data Center developers to take our best land, our water, and our power, to fill their pockets with all the money flowing out of the State.  Who are they?  Major private equity firms and investment groups, like BlackRock, own most of them, and their money isn’t staying in Oregon.

Data Centers Are Like Hotels-

Every day and every night, hotels in Hillsboro welcome travelers, hire housekeepers, staff their kitchens, and contribute to our community. For that privilege, they pay a 13.5% Transient Lodging Tax (TLT) on every room rented. That money has been earmarked for projects like the Hillsboro Hops’ new ballpark and local tourism. People rent rooms, cash flows into the economy, and Hillsboro is very much like an equity or silent partner.  It’s a win-win!

Now compare that to the data centers rising all over our city. They consume staggering amounts of land and power, ship in hundreds of millions in tax-free servers and equipment, and leave behind noise, emissions, and infrastructure costs.  Companies like T-5 have built massive structures along NE Huffman and Starr Street, which they, in turn, rent to companies like Flexential– a Co-Location agreement.

A retail colocation agreement is very similar to renting a hotel room, as companies lease  specific spaces (racks) within a shared facility to house their equipment (servers). Both models provide guests/users with the necessary infrastructure (power, cooling, security) and amenities (connectivity, amenities, offices, meeting rooms, lounges) without requiring them to own or maintain the entire building, allowing them to focus on your core services rather than the underlying hardware. 

The difference for communities like Hillsboro is that the growing number of Data Centers (20) pay no lodging tax, no franchise fee, and not even property taxes for their first five years, thanks to the state’s Enterprise Zone giveaways.

Actual hotels (dozens of them) have come to our community; we have welcomed them, they have paid their way, and employed many people, and numerous businesses have benefited from their guests.

Data centers came, we dropped our pants, waived taxes, and they haven’t even left the change on the dresser. Few, if any, jobs, no recurring revenues, and no community benefits beyond property taxes, which we all pay.

The Money We’re Missing

The City of Hillsboro collected $24.3 million in franchise fees in 2024 from utilities, cable, and solid waste. Those fees are charged because companies use our rights-of-way and infrastructure.

Data centers use far more — hundreds of megawatts of power, new substations, diesel fuel contracts, and police and fire response — yet pay very little.

Market rates tell the story. In late 2024, Hillsboro’s colocation asking price hit $167.50 per kW per month. That’s $2,010 per kW per year. At 500 Mega Watts of total load — a conservative near-term estimate for the Hillsboro Data Center cluster — data centers here are grossing over $1 billion a year.

If Hillsboro charged a 3.5%–7% franchise fee, just like it does for other utilities, the city would net $35–$70 million annually. That’s two to three times what we collect from every other franchise combined.

Here are the current Hillsboro Franchise Fees.  And while the Franchise fees for “Communications” show a 7% fee, the Hillsboro staff at City Hall has assured the Herald that Data Centers do not meet the definition of a Communications entity. When we pressed for more as to why that is, no additional responses were offered.

Using the figures above on the amount of megawatts of power that the current Hillsboro Data Centers use, we arrived at this estimate of annual revenue —money that is just waiting for us to extract from these corporate interlopers.

I do not know about the rest of you readers, but our schools have all but eliminated special education, art, and a bunch of other necessary support we need for our kids.  Hundreds of citizens in Hillsboro get their power cut off every year.  Homlessness is rampant and is affecting all of us.  So, wouldn’t an extra $20 million a Year help right now?  At a reasonable 7% franchise Fee, we would have an additional $100 million a year.  We can base it on the megawatts used, the gross revenues (harder to track), or some other reliable methodology.

Like our Hotel partners, it is time to ask Data Centers to pay their fair share.

Prineville Shows the Way

Prineville, Oregon, home to Apple and Meta’s data centers, recently woke up and passed a similar law. Their utility franchise ordinance requires a 5% fee on electric revenue. In 2024 alone, Prineville collected $8.19 million in franchise fees — 63% of its entire tax base- and that number is rising fast.  The city will have more revenue from the Data Center Franchise fees than it will have from its entire property tax income!  That is meaningful.

Here are the details:

Franchise Fee Talking Points

City Council, where are you?  Mayor Pace?  We have brought this up more than once.  Our poll shows that the readers of the Herald want a fee imposed.  About 70% of the 700 respondents think we need a fee and want Data Centers to pay their share.  An Initiative Petition is being discussed amongst some of us.  The Herald is happy to lead this discussion and to put the idea into the ethos.  But we are beyond the point of maybe needing this.

Finally, if Hillsboro does not move, using a home rule to be first to the plate, Washington County or the State of Oregon, which are both starving for revenues, will.  So I suggest we lead, rather than take the table scraps after bigger players step in.

Hillsboro could replicate that tomorrow. Oregon law (ORS 221.420) explicitly gives cities the power to charge franchise fees on utilities. Prineville proved it works.

The Data Center 101 Money Play

Here’s how the industry wins big while our schools, ratepayers, and neighborhoods lose:

• No Sales Tax: Oregon is one of five states without it. Hundreds of millions in servers and networking gear roll in tax-free every year.

• Enterprise Zone Giveaways: Every data center gets a five-year property tax holiday. Hotels never got this.

• Co-location Loophole: In places like the Flexential centers, customers own their own servers. That keeps taxable value off the operator’s books and shrinks the local tax base even further.  And it means the State of Oregon has no revenue to tax, as the real money is leaving the State via the digital work being done over the wires.

The result? Hillsboro shoulders the infrastructure burden while multinational corporations pocket the profits.

Who Really Pays

Residents and small businesses pay their franchise fees and property taxes. Hotels pay their lodging tax and hire local staff.

Data centers? They get breaks, exemptions, and silence from leaders more eager to cut ribbons than to balance the books.

A Modest Proposal

We don’t need to reinvent the wheel. We need to treat data centers the same way we treat hotels and utilities. Charge them a franchise fee — 3.5%, 5%, 7% — and earmark that money for schools, utility relief for struggling families, and the infrastructure costs these facilities impose.

It’s not radical. It’s fairness.

I had a Data Center Manager speak with me during a site visit in Hillsboro, which I had as part of my real estate career (my paying job), and share something I will never forget, which has a profound impact on this very topic.  Here is what he said as he stood in the parking lot and pointed at the 75-foot-high cement goliath rising from the Tualatin Valley~

“You see that son of a bitch right there?  When that is done, and we fill it up with machines, they will be humming 24 hours a day.  From the floor to the ceiling.  When that happens, you can put on a 10 Gallon Texas Hat and walk out there on the floor, take it off and hold it upside down towards the ceiling, and fill it with gold coins, dump ’em out, and do it again and again, forever.  That is why I love this business!”

The company he works for helped drive Industrial land prices in Hillsboro from $250,000 per acre five years ago to well over $800,000; some sales have eclipsed $1 million.

So, who is ready to step up to the plate and get that change on the dresser?

“Hotels pay 13.5%. Data centers pay 0%. It’s time to even the score.”