Most states offering incentives to data centers don’t disclose which companies benefit, according to a new report.
At least 36 states — including Kentucky — have crafted subsidies specifically for data center projects, according to Good Jobs First, a nonprofit watchdog group that tracks economic development incentives. But only 11 of those states — Arizona, Connecticut, Illinois, Indiana, Minnesota, Nevada, Ohio, Pennsylvania, Texas, Washington and Wisconsin — disclose which companies receive those incentives.
In a new study, the organization examined a lack of transparency in data center deals, which are proliferating across the country as technology demands increase.
Despite data centers’ significant energy requirements, states frequently compete heavily to land the projects, which invest millions or even billions into new construction. But the study noted those projects often employ nondisclosure agreements, project code names and subsidiary names that hide the firms behind the new server farms.
“Only when governments disclose information on which companies get public money and what they do with it can there be meaningful analysis, greater public participation, and wiser use of public financial resources,” the report says.
Good Jobs First specifically examined sales and use tax exemptions that benefit data centers. The study does not account for local property tax abatements, corporate income tax credits, and discounts on electricity and water rates.
Virginia, the largest data center market in the world, forgoes nearly $1 billion in state and local sales and use tax revenue each year without telling the public which companies benefit or how much they receive, the study said.
Good Jobs First underscored state calculations that show data center subsidies do not provide a return on taxpayer investments. It recommends states eliminate or curtail data center subsidies. “At the very least, states should practice full transparency,” the report said.
Good Jobs First says states must reassess their investments in data centers with federal cuts looming that will strain state finances.
This story is republished from Stateline, a sister publication to the Kentucky Lantern and part of the nonprofit States Newsroom network. Stateline reporter Kevin Hardy can be reached at [email protected].
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