The Secret Cost of Data Centers
Corrupt nondisclosure agreements hide Big Tech's impact on communities.

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The Tucson, Arizona, city council last week unanimously voted to pull the plug on a data center development nicknamed “Project Blue,” after facing mass resistance from the community. A key sticking point that led to the project’s demise was how little residents — and even local elected officials — knew about who would be operating the data centers or the strain they would put on local resources.
“Giant corporations prefer to operate in the shadows, but Tucson is not for sale. We deserve transparency and accountability,” said Council Member Lane Santa Cruz.
This lack of transparency was due to nondisclosure agreements, often referred to by the shorthand NDAs, which regular readers here will know are a common feature of economic development deals. These NDAs — which have been signed by governors, mayors, state legislators, and state and local economic development officials all across the county — keep community members, as well as policymakers who don’t sign them, in the dark about key details, up to and including the identity of the corporation that is in line to benefit from public resources. And they prevent those who do know the details from divulging them to the community.
Not only has Project Blue been shelved by the council, but Tucson and Pima County officials are reportedly examining ways to reform their nondisclosure agreement processes to ensure a repeat episode doesn’t occur.
More states and localities should consider doing the same, because economic development NDAs are corrupt under any circumstance. But they’re proving particularly problematic when used in development deals for data centers — which house the servers that store and process the data that keeps the internet running — as those deals can be especially costly for local communities due to the power and water data centers require, as well as the large and growing amount of state and local tax incentives data center operators receive.
In Tucson, the identity of Project Blue’s owner — which turned out to be Amazon Web Services — wasn’t disclosed until a document was mistakenly sent to a local journalist in response to a public records request. Even after the supposedly mistaken release, local officials refused to confirm Amazon Web Services was indeed behind the project, or send the relevant document to other journalists.
As one county official put it, the NDAs make it so that “protecting the interests of an entity that wants to profit off of our water, our energy — profit off the backs of sustainability — that their interests in privacy, protecting their name, supersedes our obligation as policy makers about the long-term interests of our community.”
Of course, Tucson residents managed to surmount the challenges posed by the use of NDAs and ultimately block the project in question. Plenty of other communities, though, have had NDA-covered data center deals plow through with little opportunity for feedback, in places as diverse as Indiana, Virginia, and Oregon.
Other communities are currently in the same place as Tucson, with residents looking for answers about data center developments and finding none because NDAs are keeping salient details out of public view. (And it shouldn’t be lost that Pima County officials approved their portion of Project Blue, before sufficient outrage built and the city council stepped in.)
In a survey by researchers from James Madison University, of the 31 Virginia communities with existing, approved, or proposed data centers negotiations in 25 were covered by NDAs — and that’s likely an undercount. These agreements are very broad and remain in force for years, binding elected officials to keeping corporate secrets no matter what their constituents ask.
And again, while every economic development deal involves important details about public dollars, job quality, land use, and other factors, data centers also bring up key questions regarding water and power use.
Already, there has been a lot of news coverage regarding recent or pending spikes in utility costs caused by data centers. One study found that 70 percent of increased electricity costs last year can be attributed to the growth in data centers.
This is only going to get worse, as AI-related data centers are more energy-intensive than those not meant to sustain AI operations. And local officials often compound state or local tax breaks for data centers with discounted utility costs — meaning residents are on the hook for higher utility bills from which the data center operators themselves are exempt.
Data centers also require significant amounts of water. Project Blue’s data center complex would have been Tucson Water’s largest customer and consumed more water than four golf courses once fully operational. As Grist reported, data center operators have consistently pledged to keep their operations from draining local water supplies, but the promises haven’t lived up to the reality.
Finally, more than 30 states provide tax breaks to data center operators, and in none of them is the cost of those tax breaks capped, either in terms or overall spending or how much can be collected by an individual corporation. So, as we reported a few weeks ago, costs are going to explode across the country (where they haven’t already) as more AI data centers come online.
But NDAs are going to prevent communities or policymakers from understanding the true scope of those costs until it is likely too late.
And remember, these subsidy deals can be massive in scope, with hundreds of millions or even billions of dollars going to individual tech corporations such as Amazon, Meta, and Google, to build new complexes.
Legislators in several states, including New York, Indiana, Illinois, and Michigan, have attempted in recent years to ban nondisclosure agreements in economic development deals. Bills have successfully passed the New York Senate and the Michigan House on bipartisan votes. But if Tucson or Pima County get something over the finish line, they will be the first to slam the brakes on a practice that just about every normal person understands is corrupt and anti-democratic.
With AI-related data centers proliferating and utility costs skyrocketing, the urgency to bring transparency and accountability to the what is swiftly becoming a data center industrial complex simply can’t be overstated.
SIMPLY STATED: Here are links to a few stories that caught my eye this week.
Arkansas Gov. Sarah Huckabee Sanders called for the state insurance commissioner to reject premium hikes requested by Centene and Blue Cross Blue Shield.
A new study finds that nursing homes routinely ramp up staffing levels ahead of state inspections and cut them immediately after.
Colorado Gov. Jared Polis wants the state legislature to delay or cut back a state law regulating how AI is used in consequential economic or health decisions.
A group of 51 state attorneys general is attempting to crack down on robocalls.
A New York City program that provides business tax breaks for investing in commercial property is a revenue-loser and undermines the city’s housing goals, according to a recent audit.
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— Pat Garofalo
Thank you for another informative article.