Communities Take Charge:
Data Center Policy Toolkit
Opening Summary
As a result of the rapidly increasing use of artificial intelligence across industries and crypto-currency mining, large-scale data centers are cropping up across the country to provide the massive computing power needed for 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 as a small city.
With the Trump administration continuing to encourage development, Congress refusing to conduct oversight of the industry, and the federal government abdicating responsibility to create any federal regulation, this explainer delves into 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 our power grid, water resources, land use, noise levels, and energy costs. Because there is no meaningful federal regulation of data center development, state and local policies play a disproportionate role in shaping how this rapid expansion impacts communities.
You can find We Build Progress’ report on data centers and database of state policies broken down by location, policy type, and legislative status here. This spreadsheet will be updated periodically.
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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, though data centers are notoriously low-employment relative to their footprint and tax breaks.
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 toolkit is meant to serve as a guide for organizers, and state and local leaders to use to fight for data center bans, moratoria, and regulations. We strongly recommend that you consider a ban on data centers and/or a moratorium on data center construction to give your community time to research the impacts a data center would have on your community. If your community is unable to secure a ban, that is when the rest of the toolkit should come into play.
The groups who worked on this toolkit do not necessarily endorse these regulatory actions in a vacuum. They are meant to come into place when stronger action is unavailable.
Technically
[TBD]
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.
County-level tax abatement or PILOT agreement approval.
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 — requiring data centers to pay for their own dedicated grid infrastructure, rather than spreading costs to other ratepayers (New Jersey did this in mid-2026).
Water use disclosure and permitting requirements specific to data centers.
Requiring state-level community benefits agreements as a precondition to permitting (Massachusetts did this via executive order in 2026).
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, Run on Climate, Friends of the Earth, Public Citizen, Rooted Futures Lab, Climate XChange, and the Model Climate Law Initiative.
Special thanks to the following groups for their contributions: AI Now Institute, Alliance for Affordable Energy, Climate Justice Alliance, Environmental Law Institute, Good Jobs First, Houston Advanced Research Center, Local Progress, Memphis Community Against Pollution, National Association of Clean Air Agencies, State Innovation Exchange, WE ACT for Environmental Justice, 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.
