Data Centers What Makes a Good Neighbor… and a Good Investment?
By Michael Austin
Lecturer
Brenneman School of Business
Washburn University
In 1956, IBM’s RAMAC computer occupied much of a room and stored just five megabytes of information.¹ Today, a computer fits in a pants pocket, connecting us through the internet to vast libraries of information wherever we go.
In 1903, the Wright brothers’ first powered flight lasted just 12 seconds.² Today, we cross continents in hours. In 1983, Motorola received approval for its pioneering handheld cellphone.³ Today, we use a phone to watch a grandchild take her first steps a thousand miles away.
Between those beginnings and today’s conveniences lie decades of investment, infrastructure and experimentation. In other words, a technological breakthrough became part of ordinary life.
Artificial intelligence is opening a new economic chapter with data centers turning possibilities into reality. Its growth raises concerns about electricity, water and neighboring impacts, but also offers opportunities to grow the economy, lower taxes and utility rates, and enhance well-being.
THE DATA CENTER DEMAND BEGINS WITH US
Consider how much of your morning depends on a data center. You check your bank balance, stream music, order groceries or join a video meeting. Your family photographs are backed up somewhere. So are the records that allow a business to track goods delivered to your home.
Contrary to its namesake, the “cloud” does have a physical address.⁴ Behind this digital convenience are buildings filled with equipment that processes, stores and transmits information.
Economists call this derived demand: demand for a product or service because of the demand for a related product or service. Translation: most people do not shop for servers; they want reliable banking, entertainment, communication, etc. Our demand for those services creates demand for the buildings and equipment behind them.
While the latest commentary on data centers isn’t trivial and should be heard, our everyday choices do signal companies to keep investing in them. The key now is how to meet this demand while respecting the communities data centers serve.
GROWTH GIVES TAXPAYERS ROOM TO BREATHE
For a host community, a data center can create something homeowners and businesses badly need: lower property taxes.
A property-tax base is the total taxable assessed value subject to local tax rates. When local spending outpaces this base, owners pay more, households have less for other needs, and businesses have less to hire or expand. A slow-growing tax base burdens taxpayers.
In the reverse, an expanding tax base means more taxable value, allowing the community to spread its revenue needs across a broader base, potentially lowering the rate.
Topeka economist Paul Byrne highlighted this opportunity in his column for The Topeka Capital-Journal about a proposed Shawnee County facility. Serving customers beyond the county, such a business can bring new investment rather than primarily competing for dollars already spent locally.⁵
Loudoun County, Virginia, shows the scale of that possibility. Data centers added $13 billion in value to Loudoun County’s real-property portfolio, according to its proposed fiscal 2027 budget announcement. The county separately credits data-center revenues with helping lower its real-property tax rate nearly 30% between 2016 and 2026.⁶
Loudoun’s scale and tax system are far from Kansas’s, but the economic principle still travels: adding a data center can reduce the burden existing homeowners and businesses bear.
SHARING THE COSTS OF ELECTRICITY
Electricity introduces another concept: fixed costs, expenses that do not rise with every additional unit sold within a system’s existing capacity. Like a tenant joining a shared office, if the tenant pays for its additional needs and contributes toward the existing rent, the other occupants can pay less.
A data center can play that role on the electric grid by helping finance new generation and grid improvements, giving communities more reliable power without requiring existing ratepayers to shoulder the entire investment.
Mississippi offers a concrete example. In August 2026, Entergy reported that data-center revenues helped prevent a $4.87 monthly increase under its July rate plan. Customers kept money they otherwise would have paid on their electric bills.⁷
Entergy also reported construction of three natural-gas plants totaling more than 2,100 megawatts. The utility expects the plants’ greater fuel efficiency to generate further savings, with large customers helping finance the improvements.⁸
Securing those benefits requires cost causation: assigning costs to the customers responsible for creating them. A data center should cover the generation, transmission and connection costs it creates while contributing toward shared expenses.
State and local policymakers should welcome that opportunity and make the ratepayer benefit an explicit part of the agreement.
INNOVATION IS CHANGING THE WATER EQUATION
Kansans have good reason to care about water. In western Kansas, communities and agriculture depend on the Ogallala Aquifer. The Kansas Geological Survey identifies heavy pumping and slow natural replenishment as central concerns in its depletion.⁹ Therefore, any discussion of a new water user must take that concern seriously.
Data centers need cooling because their equipment generates heat. But cooling methods differ, and the evidence gives us reason to look beyond the assumption that every facility requires extraordinary amounts of water.
Virginia’s Joint Legislative Audit and Review Commission found that, based on available 2023 data, most data-center buildings used about as much water as, or less than, an average large office building, approximately 6.7 million gallons annually.¹⁰
Microsoft’s newer designs illustrate the potential for further improvement. Water circulates in a closed system, eliminating evaporation for operational cooling. Microsoft also reports a 10% decline from fiscal 2024 to 2025 in water used for cooling and humidification per unit of electricity consumed by computing equipment at the facilities covered by its reporting.¹¹
Economists call the response to changing resource costs induced innovation: businesses develop better methods to economize on expensive inputs. Research on energy prices and invention supports this relationship.¹² Cooling advances show how engineering can reduce water requirements as computing develops.
For Kansas, this presents a practical opportunity. Western Kansas’s Ogallala constraints differ from Topeka’s, so decisions should reflect the water source and cooling system. However, protecting water rights, requiring companies to pay costs and allowing engineers to improve can help communities grow while conserving a vital resource.
A MORATORIUM CAN CLOSE THE DOOR ON GROWTH
Across the country, many governments are responding to data centers by closing the door.
Programs.com’s October tracker reports active bans or moratoriums at the state or local level in 45 states, and 294 local measures adopted between January and July 2026.¹³ The National Conference of State Legislatures monitors moratorium proposals in 16 states.¹⁴ Some communities have gone beyond a pause: Monterey Park, California, adopted a citywide prohibition.¹⁵
These decisions raise a question larger than any proposed facility: should government protect people from identifiable harms, or decide which technological advances people may pursue?
Markets enable discovery: businesses experiment, consumers choose, and both learn which innovations improve their lives. Neither investors nor elected officials can know every application a discovery will eventually make possible. However, a blanket ban prevents that discovery before its benefits can be understood.
Policymakers should not confuse preventing harm with preventing progress. Write the rules that make a data center a good neighbor, then let businesses and consumers discover what comes next.
WHAT IS THE ROLE FOR GOVERNMENT IN ADDRESSING DATA CENTERS?
Keeping the door open to investment gives government an important responsibility: establishing conditions under which businesses can grow while respecting the people around them. Four principles should guide that work.
First, protect neighbors through clear rules and timely decisions.
Establish understandable standards for siting, water use and noise. Give businesses a predictable process for demonstrating compliance and residents enforceable protections for their property. Clear expectations help communities address legitimate concerns while allowing suitable projects to proceed.
Second, give supply and innovation room to respond.
Remove unnecessary barriers to reliable electricity generation and infrastructure. Price scarce water responsibly and allow competing cooling designs. Set standards for the outcomes communities need while giving engineers room to find better solutions.
Third, make companies responsible for their costs.
Apply cost causation in utility agreements, back long-term utility commitments, and require companies to make long-term commitments and provide financial guarantees protecting other ratepayers if a project closes.
Finally, turn fiscal opportunity into taxpayer relief.
Publish expected revenue, exemptions and public costs so residents understand a project’s contribution. When new taxable investment allows rate reductions, explain how officials will use it. Residents should be able to find promised relief in the budget.
CONCLUSION
The computer, airplane and cellphone became part of everyday life because people kept investing, experimenting and finding better ways to serve customers. Data centers support the next stage of that process.
Their growth brings challenges, but it also creates reasons to solve them. Data centers can help finance shared infrastructure. Scarce resources encourage engineers to find more resource-efficient designs. An expanding tax base gives elected leaders room to ease the burden on households and businesses.
Kansas should welcome that problem-solving capacity and hold companies to their obligations. A good neighbor respects the community around it. A good investment creates value while paying its own way. We should expect both.
