By Chloe Sieman and Katya Spear, Mayors Innovation Project
As municipalities across the country are courted by tech giants promising innovation and investment, a growing body of data suggests the long-term reality may not match the pitch decks. Before breaking ground, local leaders must weigh these 5 Major Considerations regarding the rapid expansion of AI data centers.
1. The 2030 Water & Energy Forecast: The “Cloud” has a heavy physical footprint.
- Energy Forecast: Global data center electricity demand is projected to double by 2030, reaching over 1,000 TWh. In the U.S., these facilities could consume between 9-17% of total power by the end of the decade. As each new data center is constructed, the energy demand stresses existing public infrastructure, increasing energy bills for communities.
- Water Stress: Large hyperscale facilities can draw up to 5 million gallons of water per day for cooling—equivalent to the daily usage of a town of 50,000 people, placing data centers in direct competition with local farmers and residents, particularly in drought-prone regions.
2. The “Negative Jobs” Economy: A temporary construction boom vs. a permanent employment desert.
- Displacement: In rural areas, data centers often displace agriculture or housing developments that historically provide a more sustainable tax base.
- Minimal Permanent Staff: A $1 billion facility may employ as few as 30–50 permanent staff (mostly security and specialized technicians), while the majority are short-term positions associated with construction and development.
- Public Funds Redirection: Billions in sales and property tax breaks are often traded for these few jobs. Research indicates this can result in a net loss for municipalities, as the cost of upgrading grid infrastructure to support the facility often outweighs the diminished tax revenue received, weakening public funding for schools, roads, and emergency services.
3. Public Health Harms: Invisible risks with visible consequences.
- PFAS Warnings: Fire-suppression and cooling technologies for data centers contain PFAS, frequently called forever chemicals. These pose extreme health risks such as increased rates of cancers and birth defects. Researchers warn that even though PFAS from data centers have not been intensively studied, there are warning flags for airborne PFAS released during cooling processes.
- Diesel Dependency: To ensure 100% uptime, facilities rely on massive banks of diesel generators. Regular testing releases Nitrogen Oxides and Particulate Matter, linked to increased asthma and respiratory issues in neighboring communities.
- Exacerbating heat islands: New research demonstrates that data centers may raise surface temperatures around them by an average of 3.6 degrees F, impacting areas up to 6.2 miles away.
4. Navigating Public Opinion: From NIMBY to NIABY (Not In Anyone’s Backyard).
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- Transparency Deficits: Public trust is often eroded by the use of Non-Disclosure Agreements (NDAs) during site planning, hiding the project’s scale and identity until it is too late for public input.
- Unified Dissent: Many data center developments have been or are likely to be blocked or cancelled in 2025-2026 due to bipartisan opposition and unreliability of electrical component supply chains.
5. The AI Bubble & Valuation Risk: What happens if the growth rate stalls?
- The “CapEx” Wall: Tech giants are spending hundreds of billions on infrastructure with no guarantee of proportional revenue. If AI monetization lags, we face a potential valuation crash.
- Stranded Assets: Specialized AI data centers are custom-built concrete shells designed for specific high-density racks. If demand softens or technology shifts, these facilities risk becoming “stranded assets“—unlikely to be repurposed and costly to demolish.
Actionable Insights and More Information:
- Some cities, counties, and states are pressing pause on consideration of data center proposals. The City of Madison, WI Common Council recently passed a one-year moratorium on data center development as they consider the impacts to land, water, and energy use.
- Data center moratoriums are not always feasible. Here are three resources on what you can ask for to mitigate negative impacts:
- From Climate Mayors: “Define data centers as their own class within zoning codes or as “large-load customers” or “high impact facilities”, enabling cities to craft tailored rules for these uses. Learn more from their Jan. 2026 resource, Data Centers and the Climate Landscape: An Actionable Resource for US Mayors.
- Our partners at The Water Center at UPenn recently hosted a virtual forum that featured Mayor Kate Gallego of Phoenix, AZ. While the Phoenix metro has many data centers established and planned, Mayor Gallego shared about Phoenix’ extensive work to bring data center developers and operators – as well as other large users – to the table, for example an ordinance requiring data centers to get a permit to prioritize sustainable water use, and to share up front information about how much water and energy they expect to use. Mayor Gallego is speaking nationally about the need for sustainability directors to be involved in these negotiations and planning efforts. Read more and listen to the recording here: When AI Comes to Town: Water Infrastructure and Community Readiness.
Photo by Taylor Vick on Unsplash