Data Center Growth Puts Local Control and Infrastructure Costs in Focus

Data centers are becoming a test of whether communities can capture the economic benefits of artificial intelligence while managing the infrastructure demands that come with it. At the American Property Casualty Insurance Association’s annual meeting in Boston, strategists David Axelrod and Karl Rove argued that local acceptance will shape where facilities get built as federal action on data centers and AI remains uncertain.

The stakes reach beyond technology companies. Data centers require substantial power and can place demands on water, land and local infrastructure. Their construction may bring economic activity to host states, but residents and local businesses may also question how costs are shared, where facilities are sited and whether communities have a meaningful role in those decisions.

Local consent shapes the economics

Axelrod, a former chief strategist and senior advisor to Barack Obama, described resistance as partly a response to residents feeling that projects are imposed on them. “It’s been a winning issue for people because they feel a loss of control. They feel that this is being done to them, and not with them,” he said.

That concern points to a practical challenge for developers: a project’s economic case may not be enough to secure public acceptance. Residents want to understand how a facility will affect their surroundings and whether local priorities have shaped the plan. Axelrod said data centers are needed to meet the power demand created by AI, while stressing that people need to feel they are participating in the process.

For communities weighing proposals, participation can mean having the questions answered before decisions feel settled: how much water a facility expects to use, what its power needs are, whether capacity can be shared, and what the project contributes to local finances. The discussion in Boston did not provide a formula for balancing those interests. It did suggest that a process residents regard as responsive can affect whether a state attracts projects at all.

Texas puts project conditions in view

Rove, a former senior advisor and deputy chief of staff to George W. Bush, pointed to Texas Gov. Greg Abbott’s moratorium on data centers. The pause is tied to developers showing plans for water and power use, sharing capacity, local support for locations and property tax obligations without tax incentives.

Rove said major companies in the sector would agree to those conditions. “And it is going to be a huge economic driver for the states that figure that out,” he said. His argument links the terms of development to the competition among states: places that address local concerns could still draw investment and the associated economic activity.

The conditions also reflect the issues that can affect a project’s long-term costs. Power and water availability matter to operations; siting affects nearby communities; and tax arrangements influence how much public revenue remains after incentives. The source does not quantify those costs or forecast how many facilities a given approach might attract. For local decision-makers, the terms attached to each proposal will determine how the benefits and burdens are distributed.

AI adds a second layer of uncertainty

The two strategists also discussed AI, where they saw little prospect of action at the federal level over the next two years. Rove argued that without federal action, rules would not apply industry-wide. He expects AI to evolve quickly during that period, which could make later efforts to set common standards more difficult.

Axelrod said the complexity of AI calls for presidents to bring stakeholders together to establish shared expectations. He also said the president had favored the industry and viewed state-by-state action as harder to coordinate. In the absence of federal leadership, he expects states to intervene in different ways.

That split matters for companies operating across state lines. Different approaches can create varying expectations from one location to another, while a common framework could offer more consistency. The speakers did not identify specific rules or predict what states would do. Their comments instead underline the uncertainty businesses face while AI develops and public authorities consider how to respond.

For data center developers, the immediate question is whether proposals can answer local concerns about resources, location and public revenue. For residents, the test is whether they have a real voice in decisions affecting their communities. The economic opportunity is significant in the strategists’ view, but where it materializes may depend on whether states can align infrastructure needs with local consent.