The hottest sector of the American economy right now is tech, with the increasing utilization of artificial intelligence and the development of data centers to support AI and the rest of our digital world.
Data centers have been under development across the country, including a few massive projects in Wisconsin. There are a lot of manufacturers in Wisconsin seeing increased business to serve the data center market. Without the impact of data center development, the economy would be in rough shape.
But for many reasons, there is now major pushback against the development of these facilities. Communities across the country, including several in Wisconsin, are saying ‘no.’
The list of concerns people have with data centers is long, including: their massive power needs, water usage, size and noise. There’s also the growing fear of how AI will impact our world and the economy, which is contributing to data center opposition.
But development of new technology isn’t going to stop and places that embrace it are the ones that will benefit most. The luddite approach hasn’t led to prosperity for anyone.
Opposition is also growing to public subsidies provided to attract data center developments. A sales and use tax exemption created by the state in 2023 has helped Wisconsin attract data center projects. Last year, a new state law gave Port Washington and Beaver Dam additional flexibility in providing tax incremental financing for large data center projects in those communities.
But now three Wisconsin counties – Dane, Manitowoc and Door – have passed data center moratoriums.
In contrast, Port Washington is an example of a community that has been aggressive in attracting data centers. But the backlash from many of its residents has been severe. Upset about local officials providing $456 million in TIF for a $15 billion data center being built for Oracle and OpenAI, residents in April approved a referendum requiring voter approval for tax incremental financing of more than $10 million.
Having voters directly responsible for determining the fate of complex economic development proposals is terrible policy and surely will make it harder for Port Washington to attract development. That’s a major hurdle that doesn’t exist in other communities.
Certainly, any development proposal needs to be scrutinized and carefully vetted by local officials. Provisions should be required to minimize any negative impacts on people who live nearby.
The power requirements for data centers are a legitimate concern. The last thing anybody wants to see is their energy bill skyrocket because of the huge increase in demand for power created by massive new data centers. We Energies is adding a special “very large customer” rate to make massive power users, including data centers, pay for the cost of infrastructure upgrades required to meet their energy demands. It remains to be seen if the very large customer tariff is effective in generating the revenue needed for energy infrastructure upgrades to serve data centers without having that cost passed on to other ratepayers.
As for water needs, many data centers use closed-loop cooling systems to minimize water consumption. Of course, any water used by anyone ultimately ends up down the drain, into a treatment plant and discharged back into waterways.
So, there are ways to address concerns with huge developments, including data centers. And in order to take advantage of the job creation and tax base growth benefits, leaders need to find a way to address issues with development proposals and find a way to make them work.
That’s not easy when public sentiment reaches a fever pitch in opposition. Plans to convert a portion of a vacant former Walmart store, which closed 10 years ago, at Midtown Center in Milwaukee into a data processing, computer services and computer research facility has been met with severe opposition from many residents, despite the fact that the size of the 19,000-square-foot facility pales in comparison to large data centers, such as the 2.5 million-square-foot facility that is being built in Port Washington.
Data centers are far from the only example of residents opposing economic development projects. In Big Bend, a homeowners association is suing the village over approval of a sprawling athletic complex planned along Highway 164. In New Berlin, some residents have expressed opposition to plans for a 1 million-square-foot Rockwell Automation plant. In Oak Creek, residents living near the site where a Buc-ee’s store is planned filed a lawsuit that was thrown out by a county judge. In Milwaukee, where Mayor Cavalier Johnson has declared this the Year of Housing, some apartment proposals have been met by opposition from neighborhood residents, despite the urgent need for new housing options in the city.
The burden of proof certainly lies with developers to demonstrate that their projects will make a positive impact.
But if we want to have growing, thriving communities and a prosperous state, we need to give developers a fair shake and try to find ways to get to “yes.”