Data Centers Can Benefit Communities if Policymakers Get It Right, Report Says

As demand for artificial intelligence and digital technologies continues to grow, data centers

are becoming an increasingly important part of the nation's infrastructure. But along with the economic opportunities they bring come questions about water use, energy demand, taxes and local impacts.

According to a recent report from the National Taxpayers Union, communities can benefit from data center development if policymakers take the right approach.

"Taxpayers have a big stake in the development of data centers from aspects that range from the energy usage to water usage to the property tax base," the report's author said. "Yet not a lot of analysis and commentary has been gathered all in one place to express the taxpayers' concerns and help taxpayers and policymakers work through all these questions."

The report examines how local governments can maximize the benefits of data centers while addressing concerns that often arise when new facilities are proposed.

Managing Growth Responsibly

One of the key recommendations focuses on fiscal responsibility. Data centers can significantly increase a community's property tax base, but the report argues local governments should be cautious about how that revenue is spent.

"It would be too easy to just spend the money all at once on some flashy government project and then have nothing left to show for it afterwards," the author said. "It's very important that governments have fiscal discipline when their property tax base is increased."

The report also emphasizes the importance of tax policies that encourage investment in data center facilities and equipment.

Energy and Water Remain Top Concerns

As data center projects continue to expand across the country, including in states like Kansas, energy consumption and water use have become major topics of discussion.

The report argues that governments should focus on creating efficient permitting processes that allow companies to connect to the electrical grid or develop alternative power sources when appropriate.

"As for electricity, it's important for governments to get permitting processes right," the author said. "Whether that means allowing large-scale users to plug into the electricity grid or letting them build their own power sources off the meter."

Water use is another area where policymakers must strike a balance between economic development and resource management.

"So many kinds of other economic development, whether it's a factory, whether it's a new cattle processing facility, whether it's a mine or whether it's an oil extraction facility, come with water rights," the author explained. "Making sure that the water rights are properly negotiated from the start is as important for data centers as it is for other industries."

The report also notes that newer data center technologies are becoming increasingly efficient.

"Data centers that are being built today are more efficient with water and more efficient with energy," the author said. "They can even be more efficient in terms of providing a reduced footprint so that concerns of land use can be addressed."

Permitting Reform Needed

Beyond local considerations, the report highlights permitting reform as one of the most important policy issues facing infrastructure development.

"At the federal level, permitting has got to be streamlined to allow one decision, one review, and not a lot of involvement from multiple federal agencies and litigation that can take years on end," the author said.

The report argues that lengthy approval processes can delay projects at a time when demand for computing power continues to increase.

"We are in a race to make artificial intelligence and data movement more efficient in the United States and, in so doing, lead the world," the author said. "They are counting their development timelines in months, not years. And the permitting process has to catch up with that."

Looking Ahead

As artificial intelligence, cloud computing and digital services continue to expand, the report suggests policymakers should focus on long-term planning for infrastructure needs.

"Everything depends upon the efficient flow of information going forward, and data centers are the key to it all," the author said.

Ultimately, the report concludes that communities can benefit from data center development when policymakers balance economic growth with responsible resource management.

"Taxpayers have a stake in many aspects of data center construction, from how it will contribute to the property tax base to energy usage and water usage," the author said. "All of these questions can happen to the benefit of taxpayers if policymakers have answers that stress economic growth and development, but restraint when it comes to government permitting processes or government spending a lot of the proceeds from data center development right up front."