The artificial intelligence revolution, cloud computing, streaming services, financial networks, healthcare systems, and nearly every other component of the modern digital economy depend on an infrastructure most Americans rarely see: data centers. These facilities have become as necessary to the information economy as factories were to the industrial economy. Yet municipalities increasingly face a difficult question. How do they welcome the economic opportunities created by data centers without forcing existing residents and businesses to absorb the costs of the enormous amounts of electricity, land, water, and infrastructure they can require?
The answer begins with recognizing that neither extreme is particularly sensible. Municipalities should not reflexively reject data centers because they consume significant amounts of electricity. Nor should local governments approve every proposed project simply because developers promise investment and tax revenue.
The proper objective is growth with accountability.
Data centers can provide communities with substantial economic benefits. Large projects can represent hundreds of millions or even billions of dollars in private investment. They can expand property-tax bases, create construction employment, support skilled technical jobs, and stimulate investment in electrical and communications infrastructure. A municipality that establishes itself as a dependable location for digital infrastructure may also attract related businesses.
For communities struggling to replace disappearing manufacturing or commercial tax bases, that opportunity should not be casually dismissed.
But data centers are unusual economic-development projects because their infrastructure demands can be enormous relative to the number of permanent jobs they ultimately create. A factory consuming large amounts of electricity might employ thousands of people. A hyperscale data center can consume enormous amounts of power while employing considerably fewer permanent workers.
That changes the calculation.
Municipal leaders should therefore stop judging data-center proposals primarily by the size of the investment announcement. The more important question is what the community receives relative to what the project requires.
Electricity is at the center of that calculation.
Modern data centers, particularly facilities supporting artificial intelligence, can require extraordinary amounts of power. When several facilities are concentrated in one region, utilities may need new substations, transmission lines, generating capacity, and other infrastructure. Those investments cost money.
Residents are justified in asking who ultimately pays.
The conservative principle here should be straightforward: the party creating an extraordinary infrastructure demand should bear the extraordinary costs associated with satisfying it.
Homeowners and small businesses should not effectively subsidize multibillion-dollar technology companies through higher utility bills or publicly financed infrastructure. Municipal agreements and state utility regulations should be structured so that data-center developers pay the costs reasonably attributable to connecting and serving their facilities.
That does not mean punishing them with arbitrary taxes or discriminatory electricity rates. It means applying the same principle conservatives traditionally favor throughout the economy: prices should reflect costs.
If a project requires a new substation, transmission improvements, water infrastructure, road construction, or other specialized improvements, officials should negotiate those obligations before approving the development rather than discovering them after construction begins.
Municipalities also need to resist the temptation to treat tax incentives as an automatic component of economic development. There may be circumstances where incentives are justified, particularly when competing jurisdictions are offering them. But local governments should remember that electricity availability, fiber connectivity, land, regulatory predictability, and proximity to customers already have enormous economic value.
A community possessing those advantages does not necessarily need to give them away.
The political problem becomes more complicated when residents begin opposing data-center projects. Public opposition should neither automatically kill a project nor automatically be dismissed as NIMBYism.
Residents have legitimate interests.
They bought homes, established businesses, and paid taxes under certain assumptions about their communities. If a massive industrial-scale facility is proposed nearby, they are entitled to ask about noise, generators, transmission lines, water consumption, environmental effects, property values, and electricity rates.
Government’s responsibility is not to guarantee residents that nothing around them will ever change. No community can prosper under that standard. Its responsibility is to ensure that development does not impose unreasonable uncompensated costs upon people who had no role in creating them.
Transparency can resolve much of the conflict.
Before approving a major data center, municipalities should require clear estimates of projected electricity and water consumption, infrastructure requirements, expected permanent employment, anticipated tax revenue, emergency-service requirements, and potential effects on residential utility customers. Those figures should be publicly available before major zoning or incentive decisions are made.
That allows residents to debate an actual project instead of rumors about one.
Municipalities should also distinguish legitimate concerns from attempts to prevent virtually all development. There will always be organized opposition to large projects. If every objection becomes an effective veto, communities eventually become economically stagnant.
Local government exists partly to balance competing interests, not merely to count which side produces the loudest crowd at a public hearing.
The larger solution may require municipalities, utilities, states, and developers to think beyond individual projects. America needs dramatically more electricity generation if it intends to dominate artificial intelligence, advanced manufacturing, semiconductor production, and other strategic industries. Data centers are exposing a weakness that has been developing for decades: electricity demand is beginning to collide with a power system that has not expanded rapidly enough to accommodate the country’s technological ambitions.
The wrong response would be rationing growth.
The better response is producing more power.
That means permitting additional natural-gas generation where appropriate, maintaining reliable existing nuclear plants, accelerating development of next-generation nuclear reactors, expanding transmission capacity, and allowing renewable sources to compete where they make economic sense. Energy policy should focus on abundance, reliability, and affordability rather than forcing politically preferred technologies onto the grid.
Data-center developers can be part of that solution. Large operators increasingly have both the financial resources and economic incentive to support new generation. Municipalities and states should encourage arrangements in which major electricity consumers help finance the additional generation and infrastructure their operations require.
Such an approach transforms the debate.
Instead of asking whether residents or data centers deserve scarce electricity, policymakers should ask how the private investment accompanying data centers can help create additional electricity.
That is a fundamentally different philosophy from scarcity politics.
America does not have to choose between prosperous communities and technological leadership. But achieving both requires municipal officials to abandon the idea that every large development is automatically beneficial while also rejecting the notion that consuming substantial resources makes an industry inherently undesirable.
Data centers should be welcomed where they make economic sense, required to pay the costs they impose, and encouraged to contribute to expanding the energy infrastructure upon which they depend.
The guiding principle should be simple: build more, generate more, and make those creating extraordinary demands responsible for extraordinary costs.
If municipalities follow that standard, they can protect taxpayers without closing the door on investment. They can respect residents without surrendering economic policy to organized opposition. And they can participate in America’s technological future without asking ordinary citizens to finance it through higher taxes or higher electricity bills.
The data-center boom does not have to become a battle between technology and the communities hosting it. Properly managed, it can become an opportunity to expand both America’s digital infrastructure and the physical energy system required to sustain it.