Rural America’s data center boom hits a wall of local resistance

Clinton, Iowa, needs an economic boost. The city has struggled with deficits, its population has been shrinking for decades, and after a sewer upgrade, its debt load has doubled.

Blackstone Inc.-owned QTS has a solution: a massive data center that would bring thousands of construction jobs and provide nearly $200 million in property taxes in its first 10 years, a transformative sum for a place with a $25-million operating budget. Andy Sokolovich, the local economic development cheerleader, calls the project a financial game changer.

“We’ve bonded ourselves to the hilt,” said Sokolovich, the president of Grow Clinton, a nonprofit. “There is very little we can do to rectify our financial situation outside of a development of this caliber.”

But money isn’t everything. Many residents want nothing to do with the data center and view it as a potential source of noise pollution, environmental degradation and rising utility costs, even though QTS has vowed to pay its own way.

“We pay for 100% of the energy and infrastructure improvements needed, so our project costs are not pushed onto ratepayers,” the company said in a statement.

Still, local hostility threatens to end QTS’ hopes of breaking ground in the 24,000-person community off the Mississippi River.

Like Clinton, more and more of small town America is confronted with the choice of joining the artificial intelligence boom and reaping the promised benefits — assuming they actually do materialize — or rejecting what some fear will do more harm than good, even if that means sacrificing economic growth.

In the first quarter of this year, local pushback halted or delayed roughly 75 projects in the U.S. worth $130 billion, according to Data Center Watch. More recently, QTS and Brookfield Asset Management-backed Compass Datacenters both gave up on plans to build a 2,100-acre campus in Northern Virginia. And in Independence, Mo. — where the median household income is just over $60,000 — voters this month recalled a City Council member who supported tax breaks for a proposed data center.

More than two-thirds of new data center proposals are landing in rural America, according to Pew Research Center, and it’s not always easy to say no. Small towns and counties with few other sources of significant revenue often rely on volunteer or part-time leadership to make consequential decisions about complex, multibillion-dollar proposals, just as federal aid that filled local government coffers following the COVID-19 pandemic has dried up.

Some communities have accepted the projects, which credit rating firms say are boosting tax revenue for municipalities across the country. In Cedar Rapids, 85 miles west of Clinton, a QTS facility is expected to generate almost $500 million in net property tax revenue over two decades. Facebook parent Meta Platforms Inc. just opened a $1.2 billion data center in 32,000-person Kuna, Idaho. Alphabet Inc.’s Google is building a data center campus in West Memphis, Ark., where fewer than 25,000 people live.

“The fiscal pressure means that communities are weighing the potential economic benefits more heavily,” said Amy Colbert, a professor at the University of Iowa’s Tippie College of Business, who has built an online tool that helps local governments evaluate data center proposals.

Tough choices

The debate over AI infrastructure is also taking on fresh urgency for state and federal politicians, with U.S. midterm elections just a few months away. Republicans are balancing President Trump’s full-throated support of data centers — and lambasting of those who oppose them — with pushback from rural residents, while Democrats are weighing environmental concerns against union support for the construction jobs that the projects create.

Some states are now pursuing moratoriums to halt development, and governors who were once data center proponents have significantly cooled on them, including Democrats Josh Shapiro of Pennsylvania and JB Pritzker of Illinois, as well as Greg Abbott, a Texas Republican who is usually a staunch backer of Trump.

But grassroots resistance is rising at the same time that challenges for small municipalities are mounting. States are tightening the amount of funding they send to local governments as they expect to receive less funding from national programs such as Medicaid starting next year as the full force of Trump’s One Big Beautiful Bill Act begins to take effect.

This presents a conundrum for rural communities: Some residents may not like data centers, but small towns have fewer options for growth than big cities and their surrounding suburbs. In some places, internet access is sparse and hospitals are shutting down.

“While on the one hand it might seem to make economic sense, it doesn’t make cultural or social sense,” said Anthony Pipa, a senior fellow at the Brookings Institution.

Take Miles Crosby, whose family has lived on land in Colleton County, S.C., since the 1940s. His home is on a road named after his mother. He hunts deer, turkey and other game on the property.

Earlier this year, he and another resident sued to block a proposed 859-acre data center campus that would have surrounded Crosby’s home on three sides. The complaint, along with community opposition, helped to prevent the project.

But the community could’ve used the money. In July, S&P Global Ratings dropped the county’s credit grade to A+ from AA-, citing deteriorating finances and declining reserves. Colleton, which has a $40-million budget, would have net more than $100 million annually by the project’s fourth year, according to Brantley Strickland, executive director of the Colleton County Economic Alliance. It also would have created 500 permanent jobs with an average annual salary of $125,000, more than double the county’s median household income, he said.

On Monday, the county’s council is set to vote on legislation that would end a six-month data center moratorium passed in July, and replace it with guardrails that would give the developer an opening to build on a less environmentally sensitive site.

About 1,700 miles due west, opposition from locals in Socorro County, N.M., led to the cancellation of a proposed project that would have spanned 10,000 acres, even as the developer touted its high environmental standards and benefits for the community, where farmers and ranchers anchor the economy.

“It’s out of the question, it’s monstrously harmful,” one dissenter said at a public meeting in May. “It will damage our environment, it will damage our way of life.”

‘The right fit’

Back in Clinton, Mayor Scott Maddasion and City Council members are considering an ordinance intended to set more guardrails on data center development.

Maddasion said he broadly supports the legislation, but acknowledged that it’s difficult for the city to dictate the use of private land. The site QTS is considering has been zoned for heavy industrial use for decades.

However, “the actual development pattern in this area has also been agricultural and residential — not industrial,” said Amy Wisor, a local who opposes the project.

Some residents worry that a data center risks straining the city’s water and sewer infrastructure after it was upgraded in 2023. Clinton’s borrowings for those improvements is guaranteed by revenue from Archer-Daniels-Midland Co., which has a corn processing plant nearby.

Wisor, who relies on wells, fears that a potential 1,000-plus acre QTS facility will suck them dry. QTS said its data centers use a closed-loop system, which “do not consume water for cooling once they are operational.”

Sokolovich of Grow Clinton sees data centers as the answer to improving the city’s finances and reaching its goals, like building a sports complex and improving its roads.

“The financial demands of providing even basic services continue to increase,” he wrote in a letter about the QTS proposal. “What if the attraction of a data center could offset the costs and expedite the chance of turning these dreams into reality?”

Maddasion was more circumspect.

“Obviously there’s economic benefits of it. That tax revenue from a data center would be massive compared to what our current general fund is,” he said. “Is it the right fit for Clinton, though?”

Singh and Querolo write for Bloomberg.