Data Centers, Local Debates and Potential Federal Action

Key Takeaways

Land use has historically been governed at the local level, but data centers are challenging that paradigm. Their growing importance to the economy and national security, combined with intense public scrutiny, has elevated what was once a local issue into the national debate. As congressional candidates in the upcoming election call for data center regulation or even bans, greater federal involvement and congressional action may lie ahead.

Data Center Expansion

An unprecedented construction boom has thrust data centers into the national spotlight. Private spending on data center construction is up more than 28% from last year and roughly 16 times what it was a decade ago. That is more than federal, state and local governments spent on airports, seaports, transit and rail in the same period.

This spring, the Pew Research Center counted more than 1,500 data centers in development, on top of roughly 3,000 already operating. In addition, 39% of planned facilities are slated for counties that have no data center today, a sign of significant geographic expansion. Effective opposition is bound to stop some projects. But even if only a fraction of the planned facilities are built, state and local governments will still face major land use, infrastructure and budget challenges.

Shifting Public Sentiment

Given the national affordability crisis, one major issue drawing policymakers’ attention is the link between data centers and rising energy costs. Noise, water and transparency are also on the list of community concerns.

Energy: The independent market monitor for PJM Interconnection, a regional electricity transmission organization serving 67 million Americans, found that data center demand drove about 63% of the price increases in its 2025/2026 capacity auction.

Noise: Cooling equipment, transformers and backup generators can produce a constant, low-frequency hum, estimated at 40–59 decibels. A 2024 Virginia legislative report found that there were relatively few noise complaints about existing data centers because they are in remote locations. However, the report noted that noise complaints are likely to increase if data centers are developed closer to residential areas.

Water: Lawrence Berkeley National Laboratory estimated that data centers directly consumed 17.4 billion gallons in 2023, a threefold increase since 2014. The lab’s estimate rose to about 211 billion gallons when it included indirect water use associated with electricity generation for data centers. That’s nearly the same amount consumed annually by 6.4 million people, the population of a mid-sized state like Maryland.

Transparency: Residents surveyed say they are increasingly uneasy about what their state and local elected officials may agree to in trying to attract development.

Revenue Impact

On the positive side, data centers can offer municipalities a new revenue stream. Loudoun County, Virginia, which is believed to host the largest concentration of data centers in the world, is a case study that other local governments may try to emulate. The county reports that it collects about $26 in tax revenue for every $1 it spends providing services to data centers. The industry now generates 38% of the county’s general fund revenue and nearly half of its property tax revenue, while occupying about 4% of its commercial land. The county says this new revenue allowed it to cut its real property tax rate by almost 30%, from $1.145 per $100 of assessed value in 2016 to $0.805 for 2026.

Gaps in Understanding

Public polling shows broad opposition to data centers but may also reveal significant gaps in understanding.

This spring, Gallup found that 71% of Americans oppose an AI data center in their area, with 48% strongly opposed. That is one of the highest opposition numbers Gallup has recorded on a local land use matter.

Opposition numbers alone do not tell the whole story. An August 2026 poll conducted for the Information Technology and Innovation Foundation revealed that respondents backed data centers built for online banking and video streaming but reversed course when told the facility would train AI models.

States and Local Governments Respond

This wave of public skepticism has prompted many state and local governments to adopt policies that regulate or restrict data center development. Legislators in 46 states filed data center bills this year, and 16 states have enacted 30 new laws. Most share one idea: a data center should pay for its own power and make a range of other concessions to the community. Oklahoma, Tennessee, Alabama and Virginia now shield residential ratepayers from data center utility costs, while South Dakota, Indiana and Florida have passed legislation specifically protecting local control over data center siting and development, including the right to negotiate incentives. Other states have pulled back on incentives, with Arizona, Illinois and Ohio pausing tax breaks. In July, New York became the first state to impose a statewide moratorium on permits for large data centers. In a similar vein, Pennsylvania pulled data centers out of its fast-track permitting program in August.

In all, more than 500 counties and cities now restrict or block new data centers, a number that is growing by the day, and roughly 40% of the projects that drew organized local opposition this year were ultimately canceled.

Congressional Action Ahead

Congress rarely displaces state and local land use authority, but data centers may be the exception. Given how active the states have been, and how vital data centers are to the national economy and possibly national security, few would be surprised if the new Congress moves quickly to federalize aspects of data center development.

Manatt’s data center team combines consulting, policy, regulatory and legal experience to help public and private clients see the changes that are coming and position themselves to succeed. As rules are rewritten at every level of government, especially as a new Congress reacts to election results shaped by public sentiment about data centers, Manatt can help clients see what is coming and secure a seat at the table as the decisions are made.

U.S. Census Bureau. (2026, April). Value of Construction Put in Place Survey (VIP) (Construction Spending). 

Pew Research Center. (2026, April 13). Most new data centers in the U.S. are coming to rural areas. .

Institute for Energy Economics and Financial Analysis. (2025, July 30). Projected data center growth spurs PJM capacity prices by factor of 10. .

Virginia Joint Legislative Audit and Review Commission. (2024, December). Data centers in Virginia (pp. 75–76). .

Lawrence Berkeley National Laboratory. (2024, December). 2024 United States data center energy usage report (p. 55).

Loudoun County Government. (n.d.). Data Centers: Tax Revenues & County Budget. .

Gallup. (2026, May 13). Americans oppose AI data centers in their area. .

Information Technology and Innovation Foundation. (2026, August 26). Data centers are Americans’ least favored form of development, new research from Public First and ITIF shows. .