Small Towns Are Betting That the Data Center Boom Will Never End

What happens when data centers come to town? A whole lot, wanted or not. Tech firms are promising to pour trillions of dollars into building new data centers to continue powering the rapid growth of AI models, which means they are asking communities across the country if they are looking for new neighbors. According to a Wall Street Journal report, nearly three-quarters of all US data center capacity currently comes from just 33 of the nation’s 3,143 counties, and residents of those communities are starting to wonder if the current economic boom is worth the looming risks that come from living next door to a big box of computing power.

The concentrated investment in a small pockets of the country has created modern boomtowns in places that have spent the last few decades reeling from other industries pulling up roots. WSJ highlighted Umatilla County, Washington as one of these regions that has suddenly been flooded with both workers and cash—so much so that the city of Umatilla, where Amazon is constructing a data center hub, has resulted in the city government’s annual budget ballooning from around $7 million in 2011 to $144 million in 2024.

Amazon money has poured into the local high school to fund new robotics and other tech programs. Home constructions and sales have skyrocketed, and nearby cities have seen an influx of new customers at restaurants, bars, and other businesses, per WSJ. Similar things are happening across the country, in places like Richland Parish, Louisiana, which will be home to Meta’s $10 billion data center buildout. Washtenaw, Michigan is bracing for a similar windfall as OpenAI and Oracle have tapped it to be home to a data center project that is slated to be the largest investment in state history.

So what’s the problem? Well, an influx of people living in these small towns means a housing squeeze. Umatilla County has seen its home prices double, per WSJ—which might be affordable for folks pulling in Amazon money, but most of the existing community is not. A report from the local publication the Hermiston Herald earlier this year found that the county is building homes at a record pace and still has a shortfall of available units to support residents. That has led to some cities lending developers money to build faster, with plans to recoup funds as the homes sell—which banks on development not slowing down.

That is a pretty significant element of the bet being made by these local governments, as they are often offering companies major tax incentives to set up shop in their borders. Umatilla County, for instance, has given Amazon a total exemption from property taxes for 15 years, per local NPR affiliate KUOW. Similar tax breaks have been offered by communities across the country, resulting in about $6 billion in exemptions over the past five years, according to a CNBC report. A recent study from the University of Michigan found that those tax breaks provide far more benefit to corporations than to communities, which end up forgoing significant potential revenue.

While construction of these centers may be a boon for these towns, life after breaking ground isn’t always great. Earlier this year, the New York Times highlighted how communities in Newton County, Georgia, experienced water shortages after Meta started building its data center in the region. The energy demands of these data centers also tend to keep fossil fuel power sources online for longer, exposing communities to the health impacts of burning natural gas and coal—all while residents foot the bill for the growing energy demand. Bloomberg recently reported that areas near data centers saw their electricity costs jump as much as 267% compared to five years prior.

Increasingly, communities that are subject to proposed data center build-outs are pushing back. Residents in Tucson, Arizona successfully pushed back against a proposed data center in August, and defeats have been dealt to Big Tech in places like Racine County, Wisconsin; College Station, Texas; and Indianapolis, Indiana. Per Data Center Watch, $64 billion of data center projects have been blocked or delayed by local pushback.

Big tech firms certainly seem to know what the math is here. They’re just hoping they can continue to sell the boom before the bust.

“Nobody really wants a data center in their backyard, I don’t want a data center in my backyard. So you do get a lot of push back, and you need buy in from the community because have to get permits to do that work,†Lyndi Stone, Principal Corporate Counsel at Microsoft, said during a recent webinar with law firm Norton Rose Fulbright. “Data centers, once they’re operational, don’t bring a lot of jobs. They do on the construction side, but you’re not really getting a ton of that community benefit from having a data center really, truly in your backyard.â€