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A conversation on data center subsidies and economic development in El Paso<\/a><\/p>\n Diego Mendoza-Moyers: Today, a conversation on data centers, public subsidies and the future of economic development in El Paso.\u00a0<\/p>\n In late 2023, with little fanfare, the city and county governments in El Paso gave generous subsidies to Meta Platforms, the parent company of Instagram, Facebook and WhatsApp, in exchange for the tech giant spending a lot of money to build a data center in Northeast El Paso.\u00a0<\/p>\n The incentives the city and county gave to Meta mostly include an 80% break on property taxes for decades and $12.5 million to repair the road infrastructure immediately around the data center.\u00a0<\/p>\n As I look back, the data center deal escaped major scrutiny. Maybe the artificial intelligence boom and related data center build-out weren\u2019t as frenzied and as much of a topic at this time two years ago. In truth, it\u2019s something I look back on as a miss on my part as a reporter. And local organizers and even people working in our local governments have also told me the deal with Meta flew under their radars as well.\u00a0<\/p>\n Now, in late 2025, the topic of data centers in the borderland is among the major issues facing our region \u2013 maybe the biggest one.\u00a0<\/p>\n To supporters of Meta\u2019s data center deal, the company\u2019s $1.5 billion investment here is a huge victory, something that will boost the tax base in El Paso and have one of the world\u2019s biggest companies establish a footprint in our city. Even with the tax breaks in place, the city\u2019s economic development department has said Meta will still be paying millions of dollars in local taxes annually over the life of the deal. And the data center is expected to employ 100 workers.\u00a0<\/p>\n But to critics, the subsidies are a handout from a low-income city to a mega corporation that doesn\u2019t need to be subsidized and that will come here and consume, on average, hundreds of thousands of gallons of water per day. For perspective, Meta generated a profit of $2.7 billion in the three months spanning from July through September, and the company is sitting on a $44 billion cash pile.\u00a0<\/p>\n I\u2019m Diego Mendoza Moyers, a reporter with El Paso Matters. And for this episode of the El Paso Matters Podcast, I\u2019ll be talking with Andy Vargas, a veteran of the technology and finance industries and a managing partner of the venture capital firm No Border Ventures.\u00a0<\/p>\n Data centers appear to be an increasingly integral part of our local governments\u2019 plan to improve El Paso\u2019s economy and job market. But Andy has been critical of the subsidies that local governments awarded Meta, and he shares his thoughts on what the future of economic development in El Paso should look like.\u00a0<\/p>\n LEARN MORE: \u2018We can\u2019t do this a lot\u2019: El Paso Water CEO warns as questions grow over Meta data center\u2019s water use<\/a><\/p>\n I do want to note that the topic of data centers\u2019 water and electricity consumption is important, and we didn\u2019t touch on that in detail in this podcast. But check out elpasomatters.org to read a story we\u2019re publishing about Meta\u2019s water usage, which El Paso Water estimates could average 400,000 gallons of water per day.\u00a0<\/p>\n And before I bring Andy on, I want to mention that this El Paso Matters Podcast episode is brought to you by our podcast title sponsor, Tawney, Acosta and Chaparro, truck crash and injury attorneys. Their team of local, seasoned trial attorneys are ready to help if you\u2019ve been injured in a crash.\u00a0<\/p>\n We\u2019re also sponsored by the Greater El Paso Association of Realtors. If you\u2019re looking for a realtor or for a property to buy or rent, visit ElPasoTX.com.\u00a0<\/p>\n And you can sign up for El Paso Matters\u2019 free newsletter and read our reporting on data centers and many other topics at our website, elpasomatters.org<\/a>. While you\u2019re there, you can also sign up for the inaugural El Paso Matters 9.15K<\/a> run on December 7th. Registration for the run is open through December 6th.<\/p>\n Now, on to our conversation.<\/p>\n Andy, thanks for joining me.<\/p>\n Andy Vargas Hernandez: Thank you for having me.<\/p>\n Diego: So, before we start, can you just share a little bit about your background and who you are and what you do?<\/p>\n Andy: Yeah, absolutely. So, I\u2019m a 17th-generation Tejano. I\u2019m also a first-generation college graduate who grew up on the Eastside and who was raised by a hard-working family. My mother worked for one of the most iconic manufacturing companies in the \u201970s, \u201980s, for El Paso, back when manufacturing existed and when fabricas existed on this side of town, of the country, of the line. She worked for Farah. She worked for Farah for 25 years.\u00a0<\/p>\n And I attribute a lot of her work with, basically her entire life, career, to Farah because it shaped how I thought about economic development and how I thought about the impact that a big company can do for the community. It also helped me understand more about workers\u2019 rights and much of what a binational company is all about, and much of what manufacturing once was to the United States. I am noticing a renaissance of manufacturing, of American dynamism. I wrote a piece for El Paso Matters,<\/a> which talks more about that.\u00a0<\/p>\n And as I\u2019ve moved back, right, after 15 years of being away from El Paso, this has very much influenced how I\u2019ve gotten involved with the community and how I think and my perspective. I graduated with a master\u2019s last year, and I returned to El Paso, my hometown, and I co-founded No Border Ventures, which focuses on investing in the Southwest and also in creating regional competitiveness. And my background in those 15 years has been a combination of energy trading, investment banking, capital markets, cloud infrastructure at AWS, and now venture plus civic involvement in the Borderplex.\u00a0<\/p>\n And I also have served, and I\u2019ve had the privilege of serving on the Regional Renewable Energy Council. I\u2019ve worked with data center-adjacent companies, and I\u2019ve mentored tech founders all over the country and in Latin America. And, today, I helped train some of the top AI labs in the world as a finance expert.\u00a0<\/p>\n So, all that to say, Diego, I\u2019m very much interested in how do we make sure that the Southwest, right, isn\u2019t just a place where AI gets built, but a place where our people share in the upside?<\/p>\n Diego: Yeah. And I appreciate you going through that. You have kind of an interesting background, which is why I wanted to talk to you about this data center issue and this development of AI and so forth that we\u2019re seeing here.\u00a0<\/p>\n I guess just to get into it, I mean, can you share your general perspective on particularly the Meta data center that\u2019s coming here to Northeast El Paso and what you make of it, both as a project and also the deal \u2013 the incentive deal that the city and county agreed to with Meta. Curious for your thoughts on that.\u00a0<\/p>\n And I\u2019ll just add, I think it\u2019s an interesting project because I think that there\u2019s a really massive gap between the perception of our elected officials and sort of developers and so forth versus just the public that I think has a fairly negative view of it. And, so, it\u2019s been interesting to see that gap. So, I\u2019m curious your thoughts on the project generally?<\/p>\n Andy: Yeah, absolutely. And before I jump into answering your question, I will say that these opinions are my own and they in no way are representative of any organizations or companies that I am affiliated with.\u00a0<\/p>\n But, with that said, I think it\u2019s very important to keep context of how this deal originated before we jump into more of the details. But this deal was in large part made by a previous city manager, and a previous mayor and city council, Dee Margo, at the time. And also in large (part) by Governor Abbott, who at the time, we can think of where, as tech companies approached the state of Texas, where did they want a place? And he had a big \u2013 he had a big effort to move these data centers (to) West Texas. And, so, we found, as we found data centers in Abilene and Midland in that region, we found one in El Paso.\u00a0<\/p>\n But the truth is that city officials love these deals, right? But the public doesn\u2019t. And both sides aren\u2019t necessarily wrong. I do think that they\u2019re just talking about different outcomes. And the question doesn\u2019t necessarily become whether or not data centers will be built. The question is how they will be built and where. And those answers can be driven largely by utility commissioners, and we can delve into that. I think we have an outdated policy that could, if updated, could largely benefit the tax rate, the taxpayer at large. We can delve into that later.\u00a0<\/p>\n LEARN MORE: Meta to build $1.5 billion data center in Northeast El Paso<\/a><\/p>\n But I do believe that cities grow through diversified industries. And as we talk about the Meta data center, El Paso shouldn\u2019t chase the deal, right? I think that the deal should meet El Paso\u2019s standards and every city\u2019s standards. And, so, the city is seeing the promise, clearly, the promise of investment. But the public is feeling the pressure on resources, right? And understandably so. And, so, how do you reconcile the two, right? How do you prepare what I think is the next phase? The data center is coming, right? But how do we prepare the community for what\u2019s to come? I think that becomes the bigger question.\u00a0<\/p>\n And data centers can absolutely help a region, right? They can expand the tax base, they can modernize the grid, they can signal that a community is ready to compete in AI, in the AI economy. But they also come with real costs. They strain power, they require water, and the benefits only materialize if they are structured well and if these deals are negotiated well.\u00a0<\/p>\n So, I think the key is not to be for or against them. I think that the question here is to be more thoughtful, right, and tie the incentives to actual performance, require companies to fund their infrastructure, prioritize efficiencies throughout the data centers, and make sure that the community sees the real value. Not just the headlines and not just some of the leaders praising a data center and a big name company coming to town. There\u2019s more things that should be touched upon.\u00a0<\/p>\n But to, I think, first to understand \u2013 like, it\u2019s important to understand what are they? And I think a lot of the public may have different versions of what they believe. But for the El Paso people, data centers, as someone who has worked, at one of the last roles that I held, the responsibilities at Amazon and at AWS was the location, the co-location, the design, and the valuation of data centers.\u00a0<\/p>\n What are data centers? Well, they\u2019re warehouse-like facilities, right, that house computing, and they house networking equipment. Probably every website that you, Diego, and every other El Pasoan uses, anywhere from social media to Netflix to ordering groceries if you do, to using a website, any website, that all is hosted through data centers, right? And they generally have very special infrastructure for cooling, for high throughput networking, for fire suppression and reliable power delivery. And some data centers are the size of large warehouses. And some are as small as just a floor in an office building.\u00a0<\/p>\n And then there\u2019s some much bigger ones, hyperscalers, some that we will be seeing around the state line of New Mexico and Texas rather soonish, and others built around the country. I mean, you look at Midland and the West Texas region and what Stargate is doing.\u00a0<\/p>\n But I will touch on these two points, on these two sides, why the praise exists. And, well, it\u2019s because Meta brings large capital expenditures, right? In this case, $1.5 billion. Typically, they do an average of about $2 to $5 billion, and data centers pay for what? Construction wages. The cities rely heavily on the headlines to show momentum. And El Paso has one of the cheapest grid lines, electric grids in the country. And certainly in Texas. We benefit from the fact that we don\u2019t share our grid with the rest of Texas, with ERCOT, that is.<\/p>\n Diego: Sure.<\/p>\n Andy: We have our own independent grid, and, well, that\u2019s an upside to infrastructure development. Jobs, especially \u2013 not necessarily software jobs, but the full-time jobs that they bring to data centers are mostly in IT. And they\u2019re mostly in energy management, right? And, to some degree, tax base \u2013 to some degree. And I say that because there\u2019s a place in Virginia called Loudoun County where they\u2019re the prime example of how data centers now generate 50% of the county\u2019s property tax revenue. And they\u2019re allowing, basically, large municipal benefits like those to effectively lower the tax rate. However, as we all know, that only benefits homeowners. It doesn\u2019t benefit the lower class and the lower-class renters who are still on the hook for a living situation. But that\u2019s a different story. And there\u2019s a reason why it\u2019s called Data Center Alley, right? It\u2019s a cluster of data centers. That\u2019s not El Paso\u2019s story.\u00a0<\/p>\n And, so, now what I want to touch upon is the public frustration, right? Residents feel like they\u2019re giving up tax breaks to companies that don\u2019t hire locals and drive electricity prices up. Certainly so.<\/p>\n Diego: Or need tax breaks, right? These high-value companies generating a lot of profit and so forth.<\/p>\n Andy: Absolutely. Right. And there\u2019s also a point of taxpayer exposure from incentive management, right? That\u2019s important. And there\u2019s a misalignment there. Whereas Virginia, the example I just brought in earlier, is now proposing a 14-year customer contract to prevent exactly the type of public risk, signaling that earlier deals may have been overly-generous. And new state revenue for every dollar spent on the exemption, well, it turns out that you lose more than you gain. And that\u2019s true.\u00a0<\/p>\n There have been numerous studies that show that providing large-sized tax abatements, or, synonymously, tax exemptions, result in a loss for communities. Water and power stress in hot, arid regions like El Paso is very real.\u00a0<\/p>\n In this case, I know \u2013 and I don\u2019t know very much of the details, I wasn\u2019t part of the negotiations or have read any of the documents \u2013 but I do understand that it\u2019s running on a closed-loop system. A closed-loop system, you typically just fill up once, right? And the data center is able to treat the water, recycle the water, and use it once again. Yes, and I\u2019d say, there\u2019s definitely pros and cons, a little bit more pros that you\u2019re only able to fill it up once, but people should be wary. I think the most important part is the makeup rate, the rate at which, essentially with the hot summer days, some of that evaporation that happens inside these buildings, any building, the makeup water that is being used, right?\u00a0<\/p>\n PODCAST: Meta\u2019s El Paso AI data center: Our journalists talk tax break deal, water, energy usage<\/a><\/p>\n And, as we know, these data centers use millions of water usage. And El Paso, I mean, as you know, El Paso receives 50% of their water through their annual allocation, through the (Rio Grande) through Colorado and through northern New Mexico. And it flows into our city, into our infrastructure here. And the rest is done through basins like the Hueco and the Mesilla aquifers, right?\u00a0<\/p>\n We also benefit from the fact that we have a state-of-the-art (desalination) treatment facility, right? I\u2019ve had the opportunity to visit the treatment center and it\u2019s quite impressive. But there\u2019s still more work to do. There\u2019s still more infrastructure updating that needs to be done here. Even if we have some of the cheapest electricity prices per kilowatt in the country, there are still many other projects. Meta, Alphabet, Microsoft, ByteDance, X, and Snap, they spent, just on data centers alone, $61.5 million on lobbying in 2024.\u00a0<\/p>\n Diego: Wow.\u00a0<\/p>\n Andy: Yeah. That\u2019s up to a 13% increase from the year prior.<\/p>\n Diego: To overcome public backlash?<\/p>\n Andy: Exactly. Yeah. And data centers aren\u2019t necessarily job-creators in abundance, right? Like, the data center itself. It\u2019s the tertiary and the adjacent industries that are, right? In Meta\u2019s facility, this data center maybe is going to have 15 to 20 full-time jobs expected here in El Paso. But, every tech company, unless it\u2019s strictly carved out, a lot of those jobs become remote. And a lot of those jobs are filled by out-of-towners. That\u2019s the reality. They won\u2019t necessarily be filled by local El Pasoans. That\u2019s a big frustration, of course, for the El Paso people and the people who reside in the Northeast.\u00a0<\/p>\n I think that there should also be a policy reform by commissioners, utility commissioners, where that regulatory mindset needs to evolve where they allow utilities not to just be cost centers, but to be strategic partners, right, in enabling the digital economy infrastructure. And I think El Paso Electric has done a good job. There\u2019s a fund that\u2019s able to fund and provide capital to many of the city\u2019s needs. But we need more of that, right?\u00a0<\/p>\n And that is another topic, which I\u2019m happy to cover another time. But, another example, one quick, one more example is like Nebraska. Nebraska is learning from Virginia\u2019s examples. A lot of data centers are going into Nebraska. Now, the state of Nebraska is requiring large industrial customers to pay for their own substations and other infrastructure, as Google did with the Lincoln Data Center.\u00a0<\/p>\n So, these data centers, there\u2019s a reason why the public is very frustrated. I mean, they require massive amounts of electricity. I mean, data centers are expected to triple their energy usage in a few years by 2028. And ERCOT\u2019s 2031 forecast has jumped to 218 gigawatts, right? That\u2019s half of the U.S. daily demand. Let\u2019s think about it for a second. That\u2019s, you know \u2013 it\u2019s the enormity of the situation. And 1 gigawatt, for perspective, 1 gigawatt is enough to power 250,000 Texas homes on a hot summer day.\u00a0<\/p>\n My last point here, just on the public\u2019s frustration, and as I weigh in on this deal, there\u2019s a problem between capacity keeping up, demand keeping up with capacity, right? And there\u2019s, with data centers being built across the United States, we are entering a very outdated electricity grid. There\u2019s going to be a lot of updates and, of course, restorations and repairs. But we\u2019ve been seeing power outages, right? And perhaps it\u2019s not anything new, but the more we operate as consumers on the cloud and through computing, the more it interrupts services. Power outages have interrupted the services of many companies, Fortune 100 companies, right? Because we rely on supercomputing and because we rely on this type of technology.\u00a0<\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/us-tx\/wp-content\/uploads\/2025\/12\/Andy-Vargas-Hernandez-e1747497164963.jpeg\")
Andy Vargas-Hernandez<\/p>\n