Salem data center’s three-year property tax abatement seems suspicious

Verrus, the corporation wanting to build a 75 acre, $5.1 billion data center at the Mill Creek Corporate Center in Salem, has already received a three-year property tax abatement. Meaning, if the data center is built, for three years neither the City of Salem nor other taxing districts would receive any property tax revenue from the project.

However, there’s a special meeting of the Salem City Council next Monday, August 3, where a moratorium on data centers will be discussed. If this applies to the Verrus project, the property tax abatement may be a moot point. Still, I want to point out some suspicious aspects of the three-year property tax abatement.

The city’s web site says:

We understand the company may be eligible for an enterprise zone tax abatement, having submitted to the Marion County Assessor on May 27, 2026.  Their request was approved for three years abatement. A standard three-year enterprise zone application does not require Council approval.

Seems straightforward. But a July 28 story by Mike Rogoway in the Portland Oregonian, “Salem residents rage against proposed data center and city NDA that kept plans secret,” contained a section on the property tax abatement that rang some alarm bells in me.

On May 27, while the nondisclosure agreement was in effect, Verrus applied for and received a 3-year property tax break from the city through the state’s enterprise zone program. By filing then, Verrus beat the state moratorium on new enterprise zone incentives that took effect in June by a matter of days.

On the city’s website, Salem said Verrus’ project will flow onto the tax rolls after three years and generate millions of dollars in public revenue. That’s not the way the enterprise zone program operates in other jurisdictions, including Hillsboro, where data centers have extended their tax breaks for many years by installing new equipment.

Salem said this week that it interprets state law governing enterprise zones differently than officials in Hillsboro did but did not respond to questions about its legal rationale.

So by applying for the property tax abatement on May 27, 2026, Verrus barely beat the clock on a state moratorium on this sort of incentive. And the story by Rogoway, an experienced business reporter with an MBA, casts doubt on whether property tax revenues from the data center really would start flowing after three years.

As the Oregonian story notes, Verrus applied for the property tax abatement during a period when a NDA (nondisclosure agreement) with the City of Salem prevented citizens from knowing what was going on. The NDA was in effect from April 10, 2025 through July 8, 2026. During this time city officials engaged in what they call a Pre-Development Application Process. Quite a bit went on outside of the public eye, but all of this preceded an actual development application.

Which makes me wonder how Verrus could obtain a three-year property tax exemption for a data center project that not only hadn’t been revealed to the public, but hadn’t even gotten to the stage of an actual development application. One reason for applying for the property tax exemption at such an early stage apparently was to avoid the looming deadline mentioned in the Oregonian story.

UPDATE: I got this message from someone who seems familiar with enterprise zone (EZ) property tax exemption applications.

Hi, Brian! Applications for EZs are required before any construction begins. There was also a rush across the state with data center companies to get in applications. There’s really nothing unique to their particular application in this instance. Their abatement period only begins in the calendar year after the facility is ready for use. Meaning that if their land sale does not go through, they don’t meet land use conditions, they don’t meet permitting conditions, etc., then their abatement never starts.

To shed some additional light on all this, I turned to Claude, my favorite AI model. Here’s what I asked Claude tonight, along with the responses I got. My queries are in italics.

Tell me about the enterprise zone property tax exemption Verrus received for its data center planned to be built in Salem, Oregon.

Here’s what’s known so far about the Verrus/Oakline at Mill Creek data center’s tax exemption:

The exemption itself
Verrus already received approval for a standard three-year enterprise-zone property-tax exemption, with the request submitted to the Marion County assessor on May 27, 2026, which did not require a City Council vote. This was confirmed by the city as well: the company may be eligible for an enterprise zone tax abatement, having submitted the request to the Marion County Assessor on May 27, 2026, and it was approved for three years. SalembusinessjournalCity of Salem

Why only three years, not longer
Oregon’s enterprise zone program normally allows three to five year property tax exemptions on qualifying new capital investments, and up to 15 years in rural zones. However, the legislature recently intervened specifically on data centers: newly built data centers are temporarily barred from new project authorizations under ORS 285C.140 until after the 2027 regular session, and data-center property cannot receive the extended exemption period otherwise expanded by HB 4084. That HB 4084 provision came from a floor amendment — under an amendment to Governor Kotek’s House Bill 4084, new data centers would not qualify for at least a year for the expanded benefits that would otherwise change the standard five-year exemption to 10 years, so that a new Data Center Advisory Committee could weigh in before the 2027 session. That’s why Verrus got the baseline three-year term rather than a longer one. SEDCOR + 2

Context on state enterprise zone data center abatements generally
Data centers are a disproportionate user of this program statewide: in the most recent tax year, companies owning data centers received two-thirds of the $68 million worth of tax breaks offered from the state’s Standard Enterprise Zone program, despite making up less than 10% of the 155 participating companies. yahoo

Local reaction
The exemption has become a flashpoint alongside broader concerns about the project. At a recent council meeting, speakers raised questions about electricity demand, water use, wastewater, noise, backup generators, traffic, emergency response, wildlife, and the project’s three-year property-tax exemption. Some residents have argued the tax break isn’t warranted, with at least one public comment suggesting there’s no reason for a large out-of-state corporation to get tax breaks in Salem. Salembusinessjournal

Worth noting: the city has been clear that this abatement was an administrative/assessor-level approval separate from the actual development review — the city has not yet received a formal development application from the company, and the proposal would still need to go through Salem’s planning,

Isn’t there a state moratorium on new enterprise zone incentives in oregon that took effect in June?

You’re right, and it makes Verrus’s timing pretty important here.

Yes — the moratorium is real, effective June 5/6, 2026
Effective June 5, 2026, new data centers in Oregon were barred from accessing the state’s largest property tax incentive program — the Enterprise Zones program — under a moratorium included in House Bill 4084. That moratorium stays in effect until 90 days after the 2027 Oregon legislative session adjourns, potentially stretching into fall 2027 or later. Davis Wright TremaineDavis Wright Tremaine

Why Verrus wasn’t affected
This is the key point: data centers already receiving tax breaks, and new data centers that are in the planning or construction phase but were already approved for such tax breaks, will still collect them. Verrus submitted its application to the Marion County assessor on May 27, 2026 — about a week before the June 5 cutoff. So it appears to have squeaked in under the wire, similar to what happened in Hillsboro, where a wave of applicants rushed to file before the deadline. Davis Wright Tremaine

Hillsboro is the cautionary parallel
Hillsboro saw exactly this dynamic play out at larger scale: the city stopped accepting new applications after May 7 to allow officials time to review proposals before the statewide moratorium, and the same law places a one-year moratorium on new tax breaks for data centers after June 6. That pre-deadline surge is now facing legal challenge — politicians and a teachers union sued Hillsboro and Washington County, alleging in one case that local officials approved five new data center tax incentives for one company in a single application. Separately, 1000 Friends of Oregon and other petitioners filed a Washington County Circuit Court writ-of-review petition on June 22 challenging Hillsboro and Washington County’s approval of 17 enterprise-zone applications. KATU + 2

Worth watching for Salem
Given that Verrus’s application landed just before the moratorium, similar to the Hillsboro batch, it’s plausible that opponents of the Salem project could raise the same kind of procedural or legal challenge to the timing/validity of the approval — especially since the property-tax exemption question was already one of the issues residents raised at the Salem council meeting. I haven’t seen anything yet indicating a legal challenge has been filed specifically against Verrus’s Salem exemption, but it’s a live pattern in Oregon right now and worth watching if you’re tracking this locally. Salembusinessjournal