U.S. communities weigh data center tax gains against rising local costs

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Data center tax gains vs local costs

Highlights

New Albany generated about $10 million from data center project charges in 2024, nearly 20% of its general fund revenue for the year.
Ohio's paused data center sales tax exemptions cost the state nearly $1.6 billion in forgone revenue for 2025, almost 12 times initial projections.
Rising local opposition and regulatory reviews are giving communities increased leverage to demand stricter terms or restrict new data center developments.

New Albany model ties incentives to local revenue

As first reported by Axios, New Albany has built its data center strategy around property tax abatements paired with requirements that projects generate annual revenue comparable to office or manufacturing development. The Columbus-area suburb, which now hosts about 40 facilities, also uses special charges on projects to help fund infrastructure, parks and other public improvements.

Those charges generated about $10 million in 2024, equal to nearly one-fifth of the city's general fund revenue for that year. Jennifer Chrysler, New Albany's economic development director, says data center-related revenue has helped school districts avoid asking voters to approve new property tax levies for years, including one case where a hyperscaler's land purchase generated enough added tax revenue to delay a levy request for three years.

A single hyperscale data center generated as much revenue for the city as local income taxes from a company with $178 million in annual payroll, according to the article. City officials also restrict water and sewer use through agreements with developers, reflecting how the fiscal return depends heavily on locally negotiated terms.

Public opposition reshapes the industry debate

Even in communities benefiting financially, resistance is increasing as residents raise concerns about health, environmental effects and household costs. At an Oct. 22 state hearing on a proposed gas-fired power plant for a New Albany data center, 32 of 37 speakers opposed the project, while the five supporters represented construction trade unions.

Residents have also complained about noise from Google and Meta facilities, leading both companies to take steps to reduce it. Brookings Institution senior fellow Darrell West says residents may see their community receiving money while they bear the costs through higher electricity bills, a tension that is sharpened by the sector's limited permanent job creation after construction ends.

At the state level, Ohio Governor Mike DeWine earlier this year paused consideration of new data center sales tax exemptions as lawmakers review the industry's footprint. Local news reports cited in the article say those exemptions cost Ohio nearly $1.6 billion in forgone revenue in 2025, almost 12 times initial projections, while a September Urban Institute analysis warns that even large developer payments may not fully replace tax revenue communities might otherwise collect.

That pushback is giving localities more leverage in negotiations with technology companies than they had a year ago. Voters in nearby Pataskala, Granville and Sunbury are set to consider measures in the Nov. 3 election that would restrict or ban new data centers.

Our earlier report on the U.S. AI data center boom highlighted how rising financing costs, construction delays and power constraints are making many planned projects less credible. We also noted that growing local opposition and stricter expectations around securing power supply are adding another hurdle, raising doubts about whether developers can deliver on aggressive buildout timelines.

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