Don’t call it a comeback

Project Blue’s new plans … Someone's gotta pay ... And who owns those acres?

True to their word, the developers behind Project Blue are sticking with their plans to build a data center here in Tucson.

Well, technically, just outside of Tucson since the city council refused to annex the land.

But because Project Blue won’t be built in Tucson proper, the city will lose out on $10 million in annual tax revenue that the project would have brought.

On the bright side, because the city refused to supply the water that Project Blue would need, the company now plans to use better technology that needs far less water.

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It’s been roughly six weeks since the Tucson City Council rejected a complex proposal to annex the 290-acre parcel near the Pima County Fairgrounds in exchange for providing reclaimed water for the planned data centers.

From the ashes of its first proposal, Beale Infrastructure has worked with Pima County¹ to hammer out a new plan that doesn’t need the reclaimed water — at least not on an industrial scale — and will use “air-cooling technology” in a closed-loop system.

Beale pledged that the cooling system for its data center will use “minimal amounts of water” that is continuously recirculated, thereby eliminating water loss.

We’ll circle back to talking about the power needed for the planned data centers in a moment, but Beale officials also said they will use the 286 megawatts they had asked Tucson Electric Power to provide in their initial proposal.

People protesting against Project Blue at the Tucson Convention Center last month.

Water was the issue

In at least a half-dozen public meetings, residents continuously hammered home that their biggest problem with Project Blue was how much water it would use: an estimated 6% of the city’s reclaimed water supply.

The public was never sold on the idea that the project could be “net water positive,” as Beale claimed, meaning it would pay for infrastructure improvements to save more water than it uses. One example touted was fixing the city’s leaking underground water pipes.

And few Tucsonans felt they were getting a fair trade from Beale's offer to pay for a $100 million plan to upgrade the city’s water infrastructure and cover all the costs of building an 18-mile water pipeline to connect the data centers to existing city infrastructure.

But after the city council refused to annex the land — and therefore refused to provide the needed water for the data centers — Beale is focusing on different cooling technology that needs far less water. It'll mostly need water on the same scale as any other business — for things like kitchens, bathrooms and fire suppression.

Water wasn’t the only reason why the Tucson City Council voted unanimously to reject the proposal, but it was the most common one we heard.

Multiple councilmembers said they were disappointed that Beale is moving forward with a new plan, but their reasons vary.

Councilwoman Nikki Lee, who at one time had 117 questions for the developers, said she wanted Project Blue to use a closed system from the start.

“This is exactly the situation I warned about. I asked Beale Infrastructure in my first meeting why a closed-loop system was not being used and was told it was not feasible because it would require so much more power,” Lee said. “I wish the closed-loop option had been on the table when Mayor and Council considered Project Blue because it could have addressed community concerns about water use.”

Less tax revenue

But now that Project Blue won’t be coming to Tucson, the city can wave goodbye to the $10 million per year in tax revenues the project would have provided.

The original plan was estimated to bring in $97 million in tax revenues over the first 10 years of operation, but that estimate was based on the city annexing the land. Now the City of Tucson will only see ancillary revenues — for example, someone filling up their truck at a gas station inside the city limits while commuting to the job site.

The developer estimates that Project Blue will still generate $60 million in revenue for Pima County, and another $93 million for the state over a 10-year period.

The developer did not ask for incentives, but it does benefit from an existing tax incentive offered by the state known as the Computer Data Center (CDC) program. Under the program, the end user— which is still believed to be Amazon Web Services — won’t have to pay taxes on server equipment, cooling systems and other infrastructure.

The Pima County Board of Supervisors voted last month to add repealing the tax incentives to their legislative agenda next year, but repealing the tax is unlikely to win much support at the statehouse.

This chart mapped out the energy needs for Project Blue 1.0, but we know from the developers that the demands are the same for 2.0, at least initially.

Same amount of power

The announcement on Wednesday from Beale said their power needs for the data center remain unchanged, despite moving from a water-cooled system to a closed-loop system.

The filing from Tucson Electric Power with the Arizona Corporation Commission three weeks ago says Project Blue needs 286 megawatts initially, the same amount as under the previous design.

“This updated design and the selected cooling technology will not increase the energy ultimately requested by the project from TEP, for its initial phase, or for its full build-out. Simply put, less energy is made available for compute, as more energy is reallocated towards cooling,” Beale stated in a letter to Pima County Administrator Jan Lesher.

For the initial phase, TEP said it will rely on existing capacity to meet Project Blue’s energy needs. The energy needed for future phases of Project Blue would require a second agreement with TEP that would need separate approval from the Corporation Commission.

The same announcement reaffirmed that both Beale and TEP remain committed to clean energy sources.

Councilman Kevin Dahl, one of the first members of the council to oppose Project Blue, said the amount of power needed for the data centers is still a concern for him as a Tucson resident.

“I’m disappointed that Tucson Electric Power is partnering with Beale despite strong community concerns. The Data Center’s huge consumption of electricity will impact all Tucsonans,” Dahl said.

Dahl added that if TEP isn’t listening to its customers here in Tucson about their concerns, it might be time to take a closer look at the city buying the Canadian-owned electric utility.

“It certainly makes an argument for public power,” Dahl told us.

What has changed

So what did Tucson get for all that protesting?

On the one hand, Project Blue is still moving forward. And the City of Tucson lost out on an estimated $100 million in taxes.

On the other hand, protesters made meaningful changes to the proposal — and how our government conducts business — even if they couldn’t stop Project Blue.

Protesters successfully pushed the Tucson City Council to vote against Project Blue. That, in turn, forced the world’s biggest retailer to agree to use less water.

Opposition to powering the data center has forced a more serious local conversation about creating a publicly owned utility. That could put voters in the driver’s seat for future data center negotiations.

The public’s furor over the back-room nature of the deal forced local politicians to start revising the way they handle non-disclosure agreements. Future economic development proposals will be conducted more transparently.

Project Blue will move forward with the thousands of construction jobs it promised. And the company will invest a reported $3.6 billion in Tucson’s economy.

Perhaps the most important lesson from Project Blue is that showing up works.

You may not get everything you want. But with enough people, energy and persistence, you can nudge things in the right direction.

Safety first: U.S. Sen. Ruben Gallego canceled his upcoming town halls in Tucson and in Yuma due to recent security threats, the Republic’s Ronald J. Hansen reports. Gallego’s office said he’s receiving threatening phone calls and social media posts, which were reported to U.S. Capitol Police.

One race, two wallets: Adelita Grijalva raised six times as much as her opponent, Daniel Butierez, in the special CD7 election, and 82% of Butierez’s total campaign funding is his own money, the Tucson Sentinel’s Jim Nintzel reports. Grijalva raised $1.3 million and still has $108,768 in the bank.

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We are once again pleading with you to stop funding politicians and start funding local news.

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Election denial never dies: The Cochise County Board of Supervisors voted to ask the feds to investigate claims that the labs that tested the county’s voting systems weren’t properly accredited before the 2022 elections, Votebeat’s Jen Fifield reports. Those claims are part of the reason two Republican Cochise County supervisors refused to certify the election and were later hit with felony indictments. Tom Crosby, one of the indicted supervisors, is still on the board and trying to get his case dismissed or delayed.

Prison isn’t free: Cochise County is continuing its press tour, hoping to get voters to approve a half-cent sales tax raise that would fund a new jail, writes Alexis Ramanjulu for KGUN. Voters approved of the idea two years ago, but the county got sued for not sending ballots to certain voters, and the whole thing got put on hold until voters could again weigh in. The county said if voters don’t pass the tax this time, it will look at increasing property taxes to cover the costs.

Silent opposition: While the Ward 3 community meeting on the STAR Village pilot program was mostly civil, many attendees silently held signs protesting the proposed open-air homeless encampment, KOLD’s Raya Torres reports. During the Q&A portion, some attendees started booing city leadership.

“We’ll see if it works in our community. I really hope it does, and if it does, we’ll do it elsewhere,” City Council Member Kevin Dahl said.

A week out, the countdown to Arizona’s general effective date is almost over. By this time next week, hundreds of new laws will be in full force.

While some measures already went into effect because of emergency clauses and others won’t start until the new year, the bulk of the action is set for next Friday.

We’re doing a series of webinars you can pop into to hear from your colleagues about how Skywolf, our legislative tracking software, can help your legislative workflow.

• If you’re a lobbyist or policy pro for a nonprofit or advocacy group, join us today at 10 a.m. to hear from a lobbying pro about how they use Skywolf to stay on top of the madness at the Capitol.

• On Thursday, September 25, we’ll show you a workflow designed specifically for policy professionals working at municipalities, and on Friday, September 26, we’ve got a webinar designed specifically for associations.

So who, today, owns the 290 acres next to the Pima County Fairgrounds?

If you guessed Beale Infrastructure or Amazon Web Services, you’d be technically wrong.

This memo from Pima County Administrator Jan Lesher yesterday reminds all of us that:

a.) Humphrey’s Peak Properties, L.L.C. contracted to buy the land, not Beale (but they are developing it.)

b.) Technically, the County will own the land until December, when the 180-day review period ends.

c.) The contract allows Pima County’s sale of the land to proceed without the city annexing the land.

1. The Pima County Board of Supervisors is politically divided on Project Blue — Supervisors Jennifer Allen and Andrés Cano opposed the data centers, while the other three members of the board support Project Blue, which is why the county is continuing to work with the developer.