Data Centers are Embedding Themselves in American Communities. Who Will Pay?

Data center developers are offering towns and cities across the country tempting reasons to allow them to set up shop. It’s leaving local officials grappling with a decision: decline what could amount to millions of dollars in revenue, or jump on a building spree that some increasingly see as unsustainable.

Tech giants like Meta, Microsoft and Google told investors this fall they expect to spend hundreds of billions of dollars on new data center developments by the end of next year. The tech industry is projected to spend roughly $7 trillion on data centers by 2030. These staggering investments could be transformative for many small towns and rural communities that for decades have struggled with slow economic growth and aging populations.

Developing artificial intelligence models requires an enormous amount of computing power, and tech giants are under enormous pressure to keep innovating. However, even the most successful AI ventures like OpenAI are a far way out from turning a profit, and are going into massive amounts of debt to build these data centers. That’s casting doubt over the long-term viability of the market.

Sen. Bernie Moreno, an Ohio Republican, sees both opportunity and risk.

“It’s economic development,” Moreno told NOTUS. “They bring construction jobs that are clearly very important; there is also a lot of material that goes into data centers, and those jobs are also localized.”

But he added a warning.

“Safety is important here,” Moreno said. “You’ve got to be careful. Because it’s possible [that we’re overdeveloping].”

“Things sometimes feel a little bubbly,” he added.

The data center boom of recent years presents communities with a unique opportunity that few other industrial projects can match. These facilities bring temporary construction jobs to a town and once they’re up and running, usually employ a few hundred highly skilled, highly paid workers. And, above all, these facilities might result in millions of dollars in property taxes.

The data center development craze led by tech giants in the U.S. has been welcomed in many circles in Washington as an opportunity to expand the domestic economy. Republicans in particular are enthusiastic about its alignment with President Donald Trump’s goal of bringing back manufacturing to the U.S. and stopping the reliance on the global supply chain.

Ohio, for example, is one of the states with the most data centers in the U.S., with roughly 200 facilities across the state, according to data aggregator Data Center Map. The state provides a 100% sales tax exemption for equipment and construction materials for qualifying data center developments. The state also allows local governments to provide additional property tax incentives that, in some cases, have translated into decades-long tax credits.

“Almost all data center projects in the United States have some component of economic subsidy to them,” Anthony Elmo, a strategist at Good Jobs First, a nonprofit that advocates against economic subsidies to data centers, told NOTUS. “The fact that we are subsidizing to the tune of billions of dollars to build something that they already need and they’re going to build anyway, I think that is extremely wasteful use of taxpayer dollars.”

Other states like Texas, Oregon and Virginia also have tax incentive structures that make it more attractive for potential developers to build in their region. And advocates like Elmo warn that states are leaving money on the table while opening the door for local economies to lean into a market that has yet to prove its profitability.

A November report by Good Jobs First estimates that states like Ohio are losing upward of $100 million a year to sales and property tax incentives to attract these developers. The report warns this might leave towns with long-term commitments that companies might not be able to fulfill.

Ohio’s Chamber of Commerce estimates that large-scale data providers like Amazon, Google and Meta have invested roughly a combined $40 billion in data centers in the last decade. They project this figure will double by 2030 if demand remains constant, which would translate into an 800% increase in energy demand.

“In 2024 alone, we had 95,000 jobs supported through construction and other operations from data centers,” Tony Long, Ohio Chamber of Commerce’s director of energy policy, told NOTUS. He argued that while adapting the energy grid to meet demand has been and will be a challenge for Ohio, the long-term benefit in local economies will be worth it.

“I’m optimistic that the investments are well spent, and we’re going to need these chips and these data centers for a while,” Long added.

However, Ohio officials say that they don’t have reliable data to know if the state’s tax incentives will pay off in the long term.

“That’s a very fair question,” Democratic state Rep. Bride Rose Sweeney, ranking member of the Ohio House Finance Committee, told NOTUS when asked if she thinks Ohio is investing too much in the data center economy. “Are we overrelying [on data centers]? Probably no, if you’re talking holistically. But local communities? Maybe.”

Earlier this year, the Republican majority in the Ohio state Legislature voted to eliminate this tax incentive, but the effort was vetoed by the state’s Republican governor, who argued that data centers continue to bring economic opportunity to the state. Sweeney is concerned that the Legislature has yet to carry out an independent analysis of the long-term benefits of these credits, leaving lawmakers like her to rely on activists and industry projections.

“The [state] Legislature has not given them enough tools to be able to even out that playing field so that they could be making the best decisions for their communities, and that they’re not negotiating against themselves, or have an ability to hold these companies accountable,” she said.

While many populous communities can adapt to the needs of data center projects relatively easily, small or rural towns might need tens of millions of dollars to be able to satisfy the facilities’ water and energy demands.

Sidney, a city in west-central Ohio, gave Amazon a 30-year tax credit for the construction of a $3 billion data center project, in exchange for a $50 million payment to the city over 15 years.

“I know that there are people who believe that data centers use too much electricity, but, by the way, every person who has expressed that has had at least one cellphone in their hand,” Mike Barhorst, Sidney’s mayor, told NOTUS. “The fact is that there’s a need for [data centers].”

Barhorst said that tax incentives are part of making the community attractive for business and that the project, which would be finished by 2030, complements Sidney’s industrial legacy and current manufacturing base.

“If you want jobs to come to your community, you’ve got to offer something,” Barhorst said about the tax incentives the city provided Amazon. “Nobody wants to go someplace where they’re not wanted. And I think that includes even big companies with big reputations like Amazon.”

“Have we had those conversations? Of course, it would be foolish not to,” Barhorst said when NOTUS asked about where he thinks there is over-investment in the AI industry. “It is a concern, of course it is … but we have the world’s largest manufacturer of air conditioning compressors located here. I’m sure there was a time when people said ‘air conditioning, that’s just a fad.’”

“I’ve looked at everything I think we need to look at. And I don’t see it as being a bad thing for the community, I see it being another niche in the local economy,” Barhorst said. “I don’t see data centers going away.”

An Amazon spokesperson told NOTUS in a statement the company “carefully chooses” data center locations, and spends significant time “listening to and understanding community needs and priorities so our data centers drive job creation, economic investment, and programs in those communities that specifically benefit local residents.”

Some advocates, like Elmo of Good Job First, however, argue that companies like Amazon that report billions in yearly profits don’t need the help.

Joe Flarida, executive director of Power A Clean Future Ohio, an advocacy group supporting clean energy, told NOTUS the rapid growth of data center infrastructure has led communities to rush through the permitting without scrutinizing environmental and economic concerns.

“For many folks, when a data center comes to them, it’s an opportunity. But the scale of the growth has caused some folks to raise issues of concern,” Flarida said. “And that’s happening simultaneously with significant increases in energy prices.”

“Then the question becomes, is the value proposition for local governments going to play out in a positive way? And then, what’s the trade-off that either the local governments or certainly the state government is providing those companies in order to bring them there?” Flarida said.

There’s also a question of the shelf life of the technology in these facilities. Data centers are not like railroads, power lines or other infrastructure projects from the past. The chips that these companies use to train their AI models become obsolete as chip makers come up with technological advancements.

“The industry features extremely high depreciation rates. These computer chips have relatively short lifetimes compared to, say, other typical industrial facilities,” Tyson Slocum, director of Public Citizen’s energy advocacy program, told NOTUS.

“Within the AI industry, they are very upfront that, ‘Hey, we’re in a bubble, right?’ Slocum said about tech executives. “When a speculative bubble pops, whether it’s in real estate or whether it’s in tech, you’re going to have a lot more losers than winners — and communities need to be smart about making sure that they don’t become a loser.”

The financial health of these towns could be intertwined with the success of Silicon Valley tech giants, and if data center developers are not able to fulfill their long-term commitments, those on the losing side might face serious consequences, researchers warn.

Will Rinehart, a senior fellow at the American Enterprise Institute, told NOTUS that a sudden collapse on data center investments might leave localities paying for infrastructure improvements that might not have been necessary without a data center — possibly translating into property tax hikes for locals.

“I don’t think that this current development and deployment is sustainable,” Rinehart said. “The metrics aren’t there. And unless you see some wild takeoff in AI, I just don’t think you can maintain this level of infrastructure investment over the long term.”