In an increasingly digital world, data centers are as crucial to communities as traditional infrastructure such as roads, electricity grids, and water systems.

While data centers don’t directly produce a large number of jobs, their economic benefits to surrounding communities run deep, extending far beyond their physical footprint. Data centers act as foundational infrastructure for the digital economy, powering cloud services, artificial intelligence (AI), and a whole lot more.

In the same way that highways and power lines drive industrial and commercial growth, data centers serve as the backbone for our information economy. Their influence also extends through a phenomenon known as the “halo effect,” where their presence attracts other high-tech industries and investments.

Historically, the growth of cities and economies has depended on infrastructure such as roads, bridges, railways, power grids, and communication systems. In the same way, data centers are now indispensable to the global economy. They are the digital equivalent of the roads and bridges that enabled the Industrial Revolution, facilitating the movement of information in our increasingly connected world.

For local communities, data centers provide the digital infrastructure necessary for industries like cloud computing, e-commerce, and AI to thrive. Without robust data center networks, businesses will struggle to function competitively in today’s data-driven environment. By ensuring fast, reliable access to data, data centers empower everything from financial transactions to healthcare services and government operations.

Though they require significant capital investments, data centers bring long-term economic stability, similar to a power plant or a water system. As more businesses and governments move toward digital services, the presence of nearby data centers becomes as essential as the utility services that support them.

Data centers are capital-intensive projects, often involving hundreds of millions or even billions of dollars in investment. This large-scale infrastructure translates into substantial tax revenue for local governments. Property taxes on land, facilities, and the expensive equipment housed inside data centers are key contributors to city and state budgets.

A prime example is Virginia, which hosts one of the world’s largest concentration of data centers. In 2022, Loudoun County generated over $600 million in tax revenue from its data centers, helping to fund schools, public services, and infrastructure projects. Many municipalities are able to leverage this tax revenue to improve public amenities without burdening their residents with higher taxes.

Moreover, due to the positive economic impact of data centers, states like Texas and Arizona actively offer tax incentives to attract data centers. These incentives are designed to lure substantial long-term investments, which yield consistent tax revenues and other economic benefits. Even with reduced tax rates, the overall fiscal impact on local governments is overwhelmingly positive, as data centers continue to pay dividends over decades.

One of the many significant advantages of data centers is their minimal impact on local infrastructure, especially compared to industries that employ large numbers of people. Data centers, despite their massive investments, typically employ less than 100 people per site. This low workforce footprint means that they generate far less traffic and stress on local services compared to large office complexes, factories, or retail centers.

For communities concerned about congestion, data centers offer an attractive alternative. While they demand significant resources such as power and water (depending on the cooling systems implemented), they require very little in terms of road infrastructure or public services once they are operational. This makes them ideal for suburban or even rural areas, where infrastructure might not be designed to handle the demands of large-scale commercial developments.

One of the most exciting aspects of data centers is the “halo effect,” where their presence fosters broader economic development, particularly in the high-tech sector. Once a data center is established, it frequently creates an ecosystem that attracts related industries, such as software development, cloud services, and AI research.

For instance, in Arizona, the expansion of data centers has sparked a tech renaissance. Companies in fields like artificial intelligence, fintech, and e-commerce are increasingly setting up shop in Phoenix (and surrounding cities) due to the availability of reliable digital infrastructure. This clustering effect turns regions into tech hubs, creating jobs and opportunities far beyond the data center itself.

In this sense, data centers act as magnets for innovation. Companies looking to capitalize on proximity to low-latency, high-speed data processing facilities are more likely to establish operations nearby. This ripple effect boosts local employment in high-tech industries, contributing to the diversification and growth of the regional economy.

In cities like Columbus, Ohio, the presence of major data centers has attracted investments from tech giants like Google and Amazon, further solidifying the area’s status as a technology hub.

While data centers may not provide a large number of direct jobs, their broader economic impact is undeniable. As essential infrastructure, they bring significant tax revenue, spur technological innovation, and have a minimal impact on local traffic and services. Through the “halo effect," they attract high-tech industries and investments, further boosting local economies.

Data centers, much like roads, bridges, and power grids, are now integral to the modern economy. As cities and states recognize their value, data centers will continue to play an increasingly important role in driving sustainable, long-term economic growth.