Will a Data Center Help Close Fredericksburg’s Budget Gap? Officials Say It’s a ‘Long Shot’—For Now

As Fredericksburg city officials weigh budget cuts, tax increases, and federal funding uncertainties, one possible source of future financial relief came up during a joint City Council and School Board budget work session: a data center under development in Celebrate Virginia South.

Councilman Jon Gerlach (At-Large) asked whether the city could receive advance personal property tax payments from Stack Infrastructure, the company behind the project. The goal: explore whether Fredericksburg could tap into future revenue sooner to help offset current budget pressures.

City Manager Tim Baroody said such relief is unlikely in the near term.

“It’s a long shot… but we may have clarity by the end of the year,” Baroody said during the April 1 meeting.

The city is negotiating a water services agreement with Stack Infrastructure, which is expected to continue through the end of 2025. Even if the agreement moves forward on schedule, Baroody said any infrastructure-related prepayments would not translate into operational revenue for the city for several more fiscal years.

Assistant City Manager Mark Whitley added that while early payments are not off the table, they would require a highly specific and favorable alignment of circumstances.

Josh Summits, Fredericksburg’s Director of Economic Development, is reviewing how other Virginia localities structure data center agreements, including options for revenue-sharing and the timing of tax collections.

The conversation surfaced amid a challenging fiscal outlook. The city has proposed a 3-cent real estate tax rate increase to maintain essential services and fund public schools. At the same time, city and school officials are navigating a $1.5 million funding gap and the threat of reduced or eliminated federal grant support.

The Fredericksburg City Council approved the Stack Infrastructure project in early March. At the time, questions were raised over whether Dominion Energy would prioritize this data center’s power needs over those of new residential or commercial developments in the region.

Despite the uncertainty, council members and school leaders pledged to continue working together to meet the needs of Fredericksburg’s residents.