Understanding the Impact of Data Centers on Local Communities

when the data center comes to town

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Data centers are arriving in towns across the country with promises of economic growth and technological advancement. Local officials often hear the same pitch: these facilities will bring jobs, tax revenue, and infrastructure improvements. Yet, the reality of hosting a data center is complex and far-reaching. This post breaks down the key impacts data centers have on communities, focusing on power consumption, water use, noise, tax arrangements, and employment. The goal is to provide clear, factual information so communities can make informed decisions when a data center comes to town.

Data center facility in a semi-rural area, showing cooling units and power lines

The Common Pitch to Local Commissioners

When a data center company approaches a county or city, the message is consistent. They highlight the potential for:

• Job creation: Promising dozens of new positions.

• Tax revenue: Offering payments in lieu of taxes (PILOT) or other incentives.

• Economic development: Attracting related businesses and improving infrastructure.

  
  

These pitches often emphasize the benefits while downplaying or omitting the costs and challenges. Understanding the full picture requires looking beyond the initial promises.

Power Consumption and Its Effects on Local Rates

Data centers require massive amounts of electricity to operate. Typical power draws range from 100 to 500 megawatts (MW), enough to power tens of thousands of homes. This demand can strain local electrical grids and increase costs for residents.

For example, in Virginia, studies have shown that the addition of large data centers has contributed to an average household electricity rate increase of about $22 per month. This rise results from the need to upgrade infrastructure and meet the high energy demand.

Communities must consider:

• Whether the local grid can handle the load without significant upgrades.

• How the increased demand will affect electricity prices for residents and businesses.

• The source of the electricity and its environmental impact.

  
  

Water Usage for Cooling

Data centers generate enormous heat and rely heavily on water for cooling. They can use millions of gallons of water per day, depending on the size of the facility and the cooling technology employed.

This water use can:

• Stress local water supplies, especially in drought-prone areas.

• Compete with residential, agricultural, and industrial water needs.

• Raise concerns about long-term sustainability.

  
  

Communities should assess their water resources carefully before approving data center projects and consider the impact on other users.

Noise and Infrasound Concerns

Data centers produce noise primarily from cooling equipment and backup generators. While the noise level is generally low-frequency and continuous, it includes infrasound, which is sound below the range of human hearing.

Currently, there are no federal regulations specifically addressing infrasound from data centers. This lack of oversight means:

• Residents near data centers may experience disturbances without clear recourse.

• Local governments must decide whether to impose noise limits or monitoring.

• The long-term health effects of infrasound exposure remain uncertain.

  
  

Understanding these factors helps communities weigh the trade-offs of hosting a data center near residential areas.

Tax Incentives and Revenue Impact

Data centers often negotiate Payments in Lieu of Taxes (PILOT) agreements to reduce their tax burden. Examples include:

• Google in Ohio paying about 75% of the standard tax rate.

• Meta in Ohio also at 75%.

• Google in Oklahoma paying 100%.

• Longview in West Virginia paying between 75% and 80%.

  
  

In Ohio, House Bill 2014 redirects 50% of PILOT payments to a state fund, reducing local revenue further.

Additionally, many data centers are located in Tax Increment Financing (TIF) districts, which capture growth in property tax revenue for 20 to 30 years. When combined with HB 2014, this can result in an effective revenue loss of 60 to 75% for local governments.

This means:

• The expected tax revenue from data centers is often significantly lower than standard rates.

• Local governments may receive less funding for schools, roads, and services.

• Communities must carefully evaluate the financial trade-offs of incentives.

  
  

Employment Numbers and Economic Impact

Data centers create jobs, but the numbers are modest compared to their size and investment:

• 30 to 50 direct jobs are typically created, mostly filled by external hires.

• 200 to 250 indirect jobs may arise, often in lower-wage positions such as maintenance and security.

  
  

These figures contrast with the large footprint and resource demands of data centers. While the jobs can benefit local economies, they may not provide the broad employment boost communities expect.

What Happens When the Data Center Arrives?

Once a data center is built, the question becomes whether the county or city truly benefits. Key considerations include:

• Infrastructure ownership: Does the community retain control over power and water infrastructure, or does the data center operate independently?

• Long-term costs: Are there ongoing expenses for road maintenance, emergency services, and environmental monitoring?

• Community input: Were residents involved in planning and decision-making?

  
  

Documented cases show that without careful negotiation and oversight, communities may face increased costs and limited benefits.