Communities Take Charge:
Data Center Model Policy Guide
Opening Summary
As a result of the rapidly increasing use of artificial intelligence (AI) across industries and crypto-currency mining, large-scale data centers are being proposed and developed across the country to provide the massive computing power demanded by generative AI processing. There are currently over 5,400 data centers operating in the United States, with more than half of those coming online in the last four years and another 1,800 expected by 2030. Of those, roughly 613 are hyperscale data centers, warehouse-sized facilities hosting at least 5,000 servers that have become critical to the growth of the AI industry. These hyperscale facilities are mostly owned by major corporations, such as Amazon Web Services and Oracle, and use ten times the electricity of smaller data centers – as much energy as a small city.
Data centers are placing increasing demands on communities' power grids, water supplies, and other vital resources. With the Trump administration continuing to incentivize and encourage development and abdicating responsibility to create any federal regulation, along with Congressional leadership refusing to consider proposed regulations or conduct meaningful oversight of the industry, this resource examines the range of state and local government responses, including both those incentivizing data center construction and those attempting to rein in their escalating harms to local communities, including to the power grid, water resources, land use, noise levels, and energy costs. Particularly without any meaningful federal regulation of data center development, state and local governments must play a significant role in shaping how this rapid expansion impacts communities.
This interactive resource is designed to help communities respond to the rapid expansion of data centers across the country and equip policymakers with practical tools to address the harms of data center development. It provides expert-informed, customizable legislative templates addressing issues including energy and water use, pollution and environmental impacts, permitting and zoning, worker rights and job training, subsidies, transparency and reporting, and approaches to development moratoriums, restrictions, and prohibitions. Its flexible approach is designed to help communities respond to data center harms based on local priorities, whether they are addressing proposed data center development or facilities already operating.
You can find We Build Progress’ explainer on state policies addressing data center development and our expansive database of local, state, and federal policies broken down by location, policy type, and legislative status here. This database is updated regularly.
A Note on State vs. Local Interventions
How a data center comes to be
1. Site selection and land acquisition
Data center developers (often through anonymous LLCs) scout sites based on cheap/available land, proximity to fiber lines, and access to electricity and water. Land is often optioned or purchased quietly, sometimes before local officials know what’s coming.
3. Incentive negotiation
The developer requests state and/or local tax incentives, usually in the form of sales tax exemptions on servers/equipment, property tax abatements (like PILOT agreements), or enterprise-zone status. This is the point where local governments have the most leverage, because incentives are usually optional and negotiated case-by-case.
5. Community Benefits Agreement (CBA)
A growing number of states and cities now require developers to negotiate a formal community benefits agreement — covering things like local hiring, infrastructure upgrades, or payments — before final approval.
2. Utility and grid negotiations
The developer negotiates with the local electric utility for a power interconnection, which can require new substations or transmission lines. This is increasingly the longest point in the timeline. Grid capacity, not permitting, is now often the common bottleneck.
4. Zoning, permitting, and environmental review
The project goes through local planning/zoning boards for land-use approval, plus environmental permits (stormwater, air permits for backup diesel generators, sometimes new water permits). This is typically the only stage requiring public hearings.
6. Construction and operation
Once approved, construction typically runs 1–3 years. Once operating, the facility pays property taxes (net of any abatement), utility revenue, and sometimes payroll/sales tax from ongoing operations.
What communities are supposed to get in return:
Property tax revenue (often reduced via abatement for 10–20 years), utility infrastructure upgrades, some construction jobs, and a small number of permanent operations jobs. In exchange, communities take on water/power strain, noise from cooling systems and generators, and land use that provides little community benefit compared to other development.
How to Use this Toolkit
Practically
This interactive toolkit is meant to serve as a resource for both community-based organizers and state and local leaders seeking practical, customizable policy tools to regulate proposed or existing data center development and protect their communities from harmful impacts. The toolkit’s flexible approach is designed to help communities respond to data center harms based on local priorities, whether they are addressing energy and water use, pollution and environmental impacts, permitting and zoning, worker rights and job training, subsidies, transparency and reporting, or approaches to development moratoriums, restrictions, and prohibitions. Communities can also combine strategies, such as passing a moratorium on data center construction while researching and advancing a comprehensive approach to data center regulation. For communities that are unable to secure a ban, do not want a ban, or already have data centers operating, the toolkit provides many options for regulating impact and reducing harms.
The groups that worked on this toolkit recognize the significant harms of data center development, as well as the significant power imbalances, private deals, and lack of transparency that can shape where and how they are developed. Given the scale of data center impacts, we do not generally recommend relying on narrow or piecemeal regulations alone. We encourage communities to pursue comprehensive approaches, including bans, moratoria, restrictions, and other strong safeguards.
The range of options in this toolkit reflects the reality that local needs, political realities, existing development, and community priorities may require different approaches across localities and over time. This toolkit provides communities with tools they can adapt to their own context.
Available Interventions
Local (city/town council, planning & zoning board)
Zoning approval/denial — data centers can be zoned out of residential/agricultural areas outright.
Conditional use permits with specific requirements (setbacks, noise limits, screening, generator restrictions).
Require a community benefits agreement and a Project Labor Agreement as a condition of approval.
Local moratoria (many municipalities have paused new approvals to study impacts before deciding).
Local tax incentive approval/denial (many abatements require a council vote).
Public hearing requirements before any agreement is finalized.
Impact fees for infrastructure (roads, water/sewer capacity).
County
Land use/zoning authority in unincorporated areas.
Coordination on shared infrastructure (water utilities, roads) that cross municipal lines.
Notification/consultation rights when a municipality's PILOT affects the county tax base.
State (legislature and governor)
Sales/use tax exemption eligibility and criteria (can be tightened, paused, or sunset — several states have done this).
Statewide moratoria or pauses on new incentive applications.
Utility/ratepayer protection rules
Water use disclosure and permitting requirements specific to data centers.
Requiring state-level community benefits agreements as a precondition to permitting
Transparency requirements — banning NDAs between state agencies and developers.
Environmental review standards (air permits for backup generators, emissions rules).
Economic development agency review/approval of incentive packages.
State utility regulators (Public Service/Utility Commissions)
Approval of new rate classes for large industrial power users.
Requiring "self-generation" or dedicated power sourcing rather than drawing on the shared grid.
Interconnection queue prioritization or fast-tracking rules.
Group Endorsements and Contributions
This guide was developed with contributions from organizations bringing diverse experience and perspectives. Organizations contributed to specific policy sections; their participation does not imply review or endorsement of the Guide in its entirety or agreement with every recommendation. The organizations that helped develop this guide include: We Build Progress, Climate XChange, Friends of the Earth, the Model Climate Laws Initiative, Public Citizen, Rooted Futures Lab, Run on Climate, and WE ACT for Environmental Justice.
Special thanks to the following groups for their contributions: AI Now Institute, Alliance for Affordable Energy, Climate Justice Alliance, Good Jobs First, Houston Advanced Research Center, Memphis Community Against Pollution, National Association of Clean Air Agencies, State Innovation Exchange, and Young, Gifted, and Green. Acknowledgment does not imply endorsement of the guide or its recommendations.
Future Versions of this Guide
This toolkit is a living document. The first publication is meant to serve as an initial draft. Future versions will be published. If you would like to receive future versions of this guide, or have feedback, suggestions, or questions about this document, please fill out this form.
