Business Resources

A data center is a large facility that houses computer servers and the infrastructure needed to support them — including power systems, cooling equipment, and network connections. Data centers store, process, and distribute digital information for businesses, governments, and consumers. The rapid growth of artificial intelligence applications — from consumer tools to enterprise software — has significantly increased global demand for data center capacity in recent years. They are a major and growing sector of the American economy, including in North Carolina.

Commonly cited concerns about data centers include:

• Water consumption — Data centers use significant amounts of water for cooling systems, which can place demands on local water supply infrastructure.
• Energy demand — Large-scale facilities require substantial electrical capacity, requiring coordination with utility providers on generation and transmission planning.
• Environmental impacts — Sites may involve wetlands, require erosion and sedimentation permits, and involve a large land footprint. On-site power generators can be a source of noise and air quality concerns, as well as increased traffic.
• Jobs-to-investment ratio — The number of permanent positions created by a data center is not as large relative to the scale of capital investment when compared to other industries, which is an important consideration when comparing data centers to other industry targets.

These factors are part of any thorough due diligence process and should be weighed alongside the potential benefits.

Data centers are capital-intensive projects that can generate significant economic activity, including:

• Property tax revenue — Large-scale data center campuses involve billions of dollars in real property (land and buildings) and personal property (servers and equipment), all subject to local property taxes. In some North Carolina communities, data centers have become the single largest taxpayer in their county.
• Construction activity — Major projects typically involve multi-year build-outs with hundreds of construction jobs at peak employment, generating sales tax revenue and local spending.
• Permanent employment — Data centers do create skilled, permanent positions. While the number of jobs is not as large relative to the scale of capital investment when compared to other industries, these are well-paying roles that represent a meaningful addition to a community’s employment base.
• Indirect economic activity — Permanent employees spend locally, and data centers require ongoing procurement of goods and services, including large-scale equipment replacement cycles every three to five years.
• Infrastructure investment — In a growing trend across the industry, developers are increasingly expected to fund the utility and infrastructure upgrades required to support their projects — including water, sewer, and electrical improvements — at no cost to taxpayers.

Counties in North Carolina rely heavily on property taxes to fund public services — schools, emergency services, roads, and more. The amount a property owner pays is determined by two things: the assessed value of their property and the county’s tax rate.

Data centers are among the most capital-intensive investments in today’s economy. A large campus can represent billions of dollars in total investment — including land, buildings, and the servers and equipment inside. Because property taxes are assessed on that full value, a large data center project has the potential to generate millions of dollars in annual property tax revenue.

What about incentives?

Incentives are a common tool in North Carolina economic development. In the past, data center developers commonly requested local incentives in the form of tax refunds as a condition of locating in a community. A growing trend in the industry today has developers foregoing these requests, meaning communities stand to receive a greater share of the tax revenue that a project generates.

Large data centers require substantial electrical capacity, and supporting them sometimes requires upgrades to the power grid — new substations, transmission lines, or generation resources.

A common concern is whether those infrastructure costs get passed on to local residents through higher electricity rates. In North Carolina, electric utilities are regulated by state regulators. Any rate changes must go through that oversight process, and the cost of infrastructure improvements is generally spread across the utility’s customer base — not charged only to the local community where an upgrade occurs.

A growing trend in the industry also has data center developers entering into direct agreements with utilities to cover the cost of site-specific infrastructure upgrades themselves, which can reduce the impact of a given project on ratepayers. It is worth noting, however, that large data centers place significant new demand on the overall power grid, and meeting that demand over time — through new generation, transmission, and storage — is a cost that could flow through the energy system broadly. State regulatory oversight of this process is the primary protection for consumers.

Data centers require significant amounts of water, primarily for cooling systems that keep servers from overheating. Each community considering a data center project will need to assess whether its local water supply and infrastructure can support that.

As for who pays for any needed infrastructure upgrades, a growing trend across the industry has developers taking on direct financial responsibility for the water and sewer improvements required to serve their facilities. This is not universal, and the specifics would depend on the terms negotiated for any given project. Local decision-makers and the public would have the opportunity to weigh those details as part of the review process.