New York pauses data centers over water and power concerns

New York just became the first state to enact a moratorium on new large-scale data centers. Governor Kathy Hochul signed the one-year pause yesterday and also said she wants to repeal sales tax exemptions for data centers in the state.

Meanwhile, Louisiana is offering big tax breaks to try to attract AI companies, and Governor Jeff Landry just announced a massive expansion of a data center supercluster that Meta is building there.

It’s an issue that has gained a lot of attention across the U.S. — and not a lot of agreement.

More than 70% of Americans oppose the idea of a data center being built in their community, according to Gallup. Hochul said one of her big concerns is how much energy they use.

“These hyperscale AI data centers consume massive amounts of power, truly threatening to outpace our grid's capacity,” she said. “And they drive up costs for local ratepayers.”

That’s a big point of contention around the country, but Dany Bahar, a senior fellow at the Center for Global Development, said there’s actually evidence that data centers can reduce electricity costs.

“Now this is super counterintuitive, but one way to think about this is that, these data centers are picking up some of these fixed costs for the infrastructure of the grid,” Bahar said, “and that actually allows consumers to pay less.”

Though, he said, that’s not necessarily the case everywhere. New York is an outlier with this new moratorium.

“A lot of states right now are pursuing data centers in hopes of economic development,” said Kasia Tarczynska, a senior research analyst at the nonprofit research and policy resource center Good Jobs First.

But Tarczynska said it’s not clear what the economic benefits are, if any. There’s evidence data centers don’t create many long-term jobs, and in most states, they get all sorts of exemptions from sales tax, property tax, and income tax.

“For every tax there is that data center companies should be paying across the country, most likely they're receiving quite big tax breaks,” Tarczynska said.

And she said all that money data centers aren’t paying is money local communities aren’t receiving for things like schools, roads, and other services.