Your city got a data center. Here's what it cost.

The $1 Billion Hiding in Plain Sight

In January 2023, the Texas Comptroller projected that a state sales tax exemption for data centers would cost the treasury about $130 million in fiscal year 2025. Twenty-three months later, the same office revised that same figure to $1.015 billion. The forecast hadn't climbed over time. The original number was off by roughly 680%. Per the April 2026 Stateline report on Good Jobs First's April 2025 study, 14 other states don't disclose what their own data center exemptions cost at all.

The Scale Nobody Told You

The Lawrence Berkeley National Laboratory's 2024 report to the Department of Energy (LBNL-2001637) is the authoritative federal baseline. U.S. data centers consumed 176 terawatt-hours of electricity in 2023, or 4.4% of everything the country produced. In 2018, that figure was 76 TWh (1.9%). The growth rate jumped from about 7% a year over 2014 to 2018 to about 18% after that. The driver is AI workloads specifically: GPU-server energy went from less than 2 TWh in 2017 to more than 40 TWh in 2023. LBNL projects 2028 consumption at 325 to 580 TWh, or 6.7% to 12% of all U.S. electricity.

Now put that next to the employment side. Food and Water Watch's January 2026 analysis found that roughly 23,000 people in the United States hold permanent jobs at data centers. That's 0.01% of national employment. A typical 250,000 square foot facility runs with about 50 full-time people on site, half of them contractors. In Virginia, the capital investment required to produce one permanent data center job is nearly 100 times the ratio for other industries. Local governments are subsidizing each of those jobs to the tune of more than $2 million.

Data centers are the largest recipients of hidden public subsidy in the U.S. right now, and the communities hosting them are paying twice: once in tax revenue they were never told the real cost of, and again in the electricity bills footing the grid buildout the industry required.

Broken Promise 1: The Jobs

The ribbon-cutting press releases talk about billions in investment and "hundreds of jobs." The public filings and independent labor analyses tell a different story.

A Microsoft data center in Illinois received $38 million in state sales tax exemptions and created 20 permanent jobs (OpenSecrets and Food and Water Watch figures match). That's a public subsidy of $1.9 million per permanent position. In Lancaster, Pennsylvania, often held up as a success for community bargaining, the $10 billion two-campus proposal announced about 350 permanent jobs while local critics estimated the realistic total at 75 to 100 per site. Construction labor counts toward the promise, but those jobs disappear when the building is finished.

The industry's defense is that construction jobs still count, and property taxes and electricity sales still generate revenue. That's true as far as it goes. What it doesn't address is the ratio. Virginia, the biggest data center market on the planet, runs its own accounting on this. Its tax incentive program for the industry now equals 42% of all economic development incentive spending by the Commonwealth, per the JLARC legislative audit. Almost half of every dollar Virginia spends attracting any business of any kind goes to one industry that directly employs a sliver of the state workforce.

Broken Promise 2: The Clean Image

Tech companies market data centers with solar panels and green logos. Direct water consumption at U.S. data centers was 17.4 billion gallons in 2023, up from 5.6 billion a decade earlier. That's the number companies occasionally report. The bigger number, the one no company discloses, is the indirect water footprint: the water burned at power plants to generate data center electricity. LBNL puts that at 211 billion gallons in 2023, roughly 12 times the direct cooling figure. The 12x ratio is the part I keep coming back to, because it means every sustainability report with a water section is missing most of the footprint.

Google disclosed 6.1 billion gallons of data center water use in 2023, the most transparent of the hyperscalers. Meta reported 776 million gallons. Amazon publishes only efficiency ratios (no total volume), and Microsoft provides no facility-level figures at all. Per The Invading Sea, indirect water is excluded from every company's sustainability report.

Where the data centers are sitting matters. A September 2025 Ceres report found 32% of U.S. data centers are in areas of high or extremely high water stress. In Phoenix specifically, Ceres projects data center cooling water use to increase 870%. For context, that increase alone would equal Flagstaff's total annual municipal water supply for 1.75 years. In Loudoun County, Virginia, facilities consumed about 900 million gallons in 2023, a 63% jump from 2019.

Then there's the air. Diesel backup generators emit 200 to 600 times more nitrogen oxides per unit of output than natural gas plants. Virginia has roughly 9,000 of them statewide, with 4,700 in Loudoun County alone, per NBC Washington. In Southaven, Mississippi, xAI's Colossus facility has installed 27 gas turbines with a planned 41-turbine expansion. The NAACP filed a federal Clean Air Act lawsuit against xAI on April 14, 2026, in a community already flagged for high childhood asthma rates.

Broken Promise 3: The Community Wealth

The Texas revision is one data point. Good Jobs First found at least 10 states each lose more than $100 million a year to data center tax exemptions. Virginia's state-only loss was $732.8 million in fiscal 2024. Illinois lost $370 million in 2024, up from $10 million in 2020 (a 3,600% jump in four years). Georgia lost $296 million in 2025. Stateline's April 15, 2026 reporting names Georgia, Virginia, and Texas as losing $1 billion or more a year each, and 14 states that don't publicly disclose their loss at all, in apparent violation of GASB Statement 77 accounting standards.

The exemptions are typically uncapped and automatic. No state limits the total any single company can draw. Server equipment replaced on a 2-to-5-year cycle qualifies for a fresh exemption every cycle, and so does every new facility that comes online after it.

Residents are catching the cost on the other side of the ledger. EESI reports utilities requested $29 billion in rate increases in the first half of 2025, double the first half of 2024, affecting about 40 million customers. Bloomberg's investigation found Virginia wholesale electricity costs near data centers rose up to 267% over five years.

The Union of Concerned Scientists identified $4.3 billion in grid connection costs approved in 2024 across seven PJM states, recovered through ratepayer bills, plus another $9.3 billion in data center electricity costs being paid by 65 million PJM customers between June 2025 and June 2026. In December 2025, Senators Warren, Van Hollen, and Blumenthal opened a formal investigation into whether those costs are being passed to residents. Their letter names the trigger stat: in Virginia, South Carolina, and Georgia, data centers account for 65% to 85% of projected future electricity demand growth.

Who Benefits

Four parties are getting something they wouldn't have gotten without this arrangement.

Hyperscale tech companies capture billions in uncapped sales tax exemptions. Texas alone is worth over a billion a year to the industry. Amazon, Microsoft, Google, and Meta are the primary beneficiaries. The structure (90% exemption rates on server equipment replaced every few years) means the subsidy compounds.

Utilities get rate base expansion. New transmission lines, substations, and generation capacity are all billable assets that earn utilities a regulated rate of return. Dominion Energy spent $2.4 million lobbying in 2025 alone. The company's service territory projects 13,353 MW of data center load by 2038, per Brookings. More infrastructure means more allowable earnings, and the cost is socialized across residential bills.

Politicians get the ribbon-cutting photograph. Tax deals structured as forgone revenue instead of checks written mean the cost is invisible while the "billions in investment" announcement runs in every local paper. The cost shows up later, in a legislative audit, if anyone asks for one.

Revolving-door lobbyists run the regulatory conversation. OpenSecrets' November 2025 analysis found 53% of lobbyists for the electric manufacturing sector (which includes data center infrastructure players) are former government officials. The sector spent over $226 million on lobbying in 2025. The Data Center Coalition, headquartered inside Data Center Alley in Leesburg, Virginia, spent $360,000 in Q3 2025 alone. OpenAI went from 3 registered lobbyists in 2023 to 18 in 2024. Billions a year in exemptions for hundreds of millions in lobbying spend is a ratio the rest of corporate America does not get to run.

The Independence, Missouri Receipt

Independence, Missouri approved $6.26 billion in tax breaks over 20 years for a Netherlands-based AI company called Nebius. The facility will occupy nearly 400 acres and draw up to 1.2 gigawatts. The exemption rate is 90%. Without incentives, KCUR reports, the project would have generated $6.9 billion in taxes. With incentives, the city will receive $651.5 million in payment-in-lieu-of-taxes over 20 years.

Residents organized, collected referendum signatures, and tried to put the deal on the ballot. A judge ruled they couldn't. In April 2026, two council members who voted yes were voted out of office. A residents' lawsuit is still pending.

The counter-evidence is real. LBNL documents that data center electricity use was essentially flat from 2006 to 2020 despite the compute explosion; the efficiency story holds up for that window. Amazon commissions research arguing that data centers generate surplus utility revenue rather than net costs, and UCS and EESI dispute the methodology without fully rebutting it on a national basis. Loudoun County draws 38% of its revenue from data centers, keeping property tax rates low for residents willing to live with the noise. A George Mason University Schar School analysis from November 2025 found homes near data centers tend to sell for more, not less. The broader pattern still stands: the cost accounting is hidden, and the people paying are not the people making the decision.

Before Your Council Votes

The Texas revision is what happens when a subsidy program is designed to be uncapped and automatic, with no disclosure requirement bolted on. You don't see the real number until somebody goes looking for it, and even then, 14 states will tell you they don't know. The Senate investigation, the NAACP lawsuit, the Independence election, the shareholder resolutions filed against Amazon, Microsoft, and Google by institutional investors in early 2026: every one of those is visible only because a specific person forced it into the record.

So if your city has a data center proposal in front of its council, the questions worth asking are the ones the NDA is usually designed to prevent. What's the total exemption amount and when does it expire? Who wrote the rate case and who pays for the transmission buildout? What did the legislative audit find, if there is one? Who stands to draw a consulting fee or a lobbying contract off this deal? The documents that answer those questions all exist. The question is whether anyone gets to read them before the vote.