The tax breaks that help bring data centers into existence are attracting tighter scrutiny from state legislators who believe the lost revenue may not compensate them for the broken promises of jobs, economic development, and public outrage.
"At least 25 states introduced bills to repeal or restrict data center tax subsidies, but such legislation passed in only eight states," according to research by the Center on Budget and Policy Priorities.
"Maine was the only state to enact legislation fully repealing all available tax subsidies."
Maine appears to be an outlier in the movement as the CBPP reveals that "forty states provide some sort of subsidy for data centers. The most common type is a sales tax exemption for the materials and technology purchased, either initially or on an ongoing basis."
States are attracted to the construction jobs created during the build-out of the data centers but they generate few permanent jobs once construction is complete.
According to the National Conference of State Legislators, "a single hyperscale data center can support upwards of 1,500 workers," during construction, but not many after.
"In Illinois, where state law requires that data centers create 20 jobs to receive a tax incentive, 22 out of 27 subsidized data centers created exactly 20 jobs."
States also bank on economic multiplier effects on local businesses during the construction phase but research points to $100 million in lost revenue resulting from the tax abatements.
According to CBPP, "legislation to scale back subsidies for data centers was considered and failed in the most recent legislation session in 17 states."
In some cases the backlash has migrated to the governor's mansion. Illinois, Massachusetts, and Ohio are all pausing their tax subsidy programs via executive orders. Nebraska's governor nixed data centers from accessing subsidies through the state's main business incentives program.
States are also examining infrastructure pressures created by cooling needs of the buildings. The NCSL highlights six states that have introduced or already enacted measures that tightens regulations on water usage by data centers.
Virginia already requires monthly reports on water usage, while California and Iowa are considering similar regulations.
Illinois is considering annual energy and water consumption reports and a ratepayer-impact study.
South Carolina is considering rules that would require "impose closed-loop water/liquid cooling requirements and limits on public incentives."
Georgia is looking at rules that "would prohibit local governments from entering nondisclosure agreements that conceal electricity or water usage."
Friction often occurs between states, counties, and
Texas is looking to take control of the playing field by excluding local taxes from state exemptions.
Alabama has tightened the time limit for tapping subsidies to 30 years from 20 years.
Several counties in Maryland have hit the pause button on data center development.
Political debate in Virginia's formally fertile data center environment is increasingly requiring candidates and public officials to take a
Opposition to data centers increasingly looks bipartisan as at least 20 counties or municipalities in Florida have passed or are considering temporary or permanent moratoriums on data centers.
Tulsa Okla., Birmingham Ala., and New Orleans have also passed temporary moratoriums.
