Data centers are easy to love — or despise. Why they’re so divisive

Article originally posted on AZ Central on February 2, 2026

It didn’t take long for tensions to boil over as hundreds of people packed into the Tucson Convention Center last summer for a meeting on a controversial data center.

Many residents carried signs decrying the proposal, known by the code name Project Blue. A cacophony of “boos” rang out during the first minutes of panelist introductions.

Andrew Squire, a spokesperson for the city, attempted to calm the crowd.

“Let’s get to the presentation,” he said. “Allow them to introduce themselves so you can hear what they have to present. You can still boo your hearts out afterwards.”

But community members weren’t having it. They continued to loudly protest the project’s developers throughout the night.

Their message was clear. Arizona might be a hot spot for data centers. But as one resident had shouted at a similar meeting just days earlier: “We don’t want it.”

It was just the beginning of a monthslong — and still ongoing — fight over the facility, which moved forward after the Pima County Board of Supervisors narrowly voted to sell land to its developer last year. It’s just one of many such battles raging in Arizona, which technology companies view as fertile ground for data centers amid a digital infrastructure boom.

Such facilities have flocked to the desert for years. They form the backbone of social media platforms, e-commerce sites and artificial intelligence, which is driving a chips frenzy and benefitting companies that serve as some of the state’s largest employers.

That connection puts data centers at the heart of Arizona’s economic momentum. Plus, they could bring big money for public services in communities struggling to keep up with population growth without raising taxes, particularly in light of recent federal cuts.

“It goes back to that business ecosystem standpoint,” said Dan Diorio of the Data Center Coalition, a membership group for the industry. He added such facilities supports construction firms, advanced manufacturing plants and the semiconductor industry.

But data centers also present a unique conundrum. Accommodating them means reordering the power grid, a costly endeavor. It requires bringing more energy generation online — including resources that use fossil fuels, which are linked to climate change. It necessitates using massive amounts of water to chill the facilities.

It’s all for an industry that provides few permanent jobs compared with manufacturing campuses — and for years has been building its digital warehouses unchecked in local communities.

Dozens of data centers have set up shop since 2000 in Maricopa County, and at least another 20 are planned in the region, according to a review of air quality permits, industry databases and other public records. The building spree began in Phoenix and the East Valley, but the facilities now span the region. Over time, records suggest they have grown bigger and more energy-intensive.

The region now touts the country’s highest concentration of data centers outside of Virginia. That state was ground zero for data centers, with hundreds of facilities. Some of the largest operators locally include Microsoft, Meta, Amazon, Aligned Data Centers, Compass Datacenters, Vantage Data Centers and QTS Data Centers.

Local officials and utilities are now fighting to catch up to the surge. Phoenix, Mesa, Tempe and Chandler have passed ordinances creating new zoning procedures, design standards and other requirements for the facilities.

Meanwhile, existing energy infrastructure is struggling to keep pace with data centers’ energy demand as the facilities grow larger. Arizona Public Service Co. and Salt River Project — the state’s largest utilities — are now beginning to implement rate redesigns and hand operators hefty bills for transmission and generation projects necessary to serve electricity to data centers. Officials say they are worried residential ratepayers eventually could bear the costs of tech giants’ energy infrastructure if such steps aren’t taken.

Meanwhile, data centers are still coming to Arizona, drawn by its reliable power grid, land availability and state-level tax exemption program.

Phoenix Mayor Kate Gallego said she is increasingly concerned about how many data centers are in her city’s development pipeline, noting the facilities can bring “good jobs” if planned as part of a larger employment campus but are resource intensive.

“All things are good in moderation,” said Gallego, a Democrat. “Right now, we are seeing demand far beyond what is a sustainable level of investment.”

Some are shifting to different parts of the state. Project Blue is slated to be built in a semi-rural area southeast of Tucson. Several other data centers are in the works in Pinal County, a fast-growing region sandwiched between the state’s population centers. Another is planned for Page, a remote city at the top of the state that borders Lake Powell, Horseshoe Bend and the Navajo Nation.

There, the facilities are being met with mixed reactions from local officials. Project Blue was rejected by the Tucson City Council and inspired local officials to create a new ordinance aimed at regulating data centers. Its developers still hope to build on county land.

But several data centers recently cleared an early hurdle in Pinal County, receiving approvals that precede the formal rezoning process to allow new development.

Officials there asked questions about the facilities’ energy use, water needs, fire risk and potential noise but appeared swayed by developers’ economic arguments. The majority of residents in the region have long traveled across county lines each weekday for work.

“Even if it’s only 100 jobs — it’s 100 jobs that are here,” Board of Supervisors Chairman Stephen Miller, a Republican, said before granting one of the projects a preliminary approval.

Dozens of data centers have set up shop since 2000 in Maricopa County. The building boom began in Chandler, Phoenix, Scottsdale, Tempe and Mesa, but the facilities now span across the Valley — and nearly 20 more are planned in the coming years. Take a look at where the digital warehouses are located.

What is a data center?

From the outside, most data centers resemble simple warehouses — giant boxes with little signage and blank, expansive walls.

But inside, they house rows of physical equipment needed for modern computing. Large data centers can span hundreds of thousands of square feet. Many contain thousands of servers and millions of chips.

The machinery overheats easily. So, the facilities boast massive cooling systems. Some are cooled primarily with water, others with electricity.

Either way, both resources are ultimately used. Energy is needed to circulate liquid, and water is required for most forms of power generation. Most data centers also host backup generators on site to ensure that their computers are never without electricity.

Some are traditional, single-tenant facilities — shops owned and operated by one company. Others are known as “colocation” facilities, where businesses can rent space to house their own servers and equipment. Operators of these data centers act as landlords, providing power, cooling and security to a variety of clients.

The industry is increasingly seeing an influx of so-called “hyperscale” data centers that provide large-scale cloud computing services to organizations with vast digital infrastructure needs. Often, these are highly customizable, single-tenant facilities set up by technology giants. But colocation data center operators are also building hyperscale complexes that are leased out to one or multiple large tenants.

Regardless of the setup, the computers are always humming. They are pinged every time someone posts to social media, sends an e-mail or starts a conversation with a chatbot powered by artificial intelligence.

That new technology is at the core of the industry’s recent expansion into Arizona, as well as a surge in connected consumer devices, increasing adoption of cloud computing systems and general growth in data collection. Those trends all require the facilities to manage unprecedented amounts of data. That means more of them are needed, with larger footprints and more powerful computers.

“Data centers aren’t just AI,” said Diorio, of the Data Center Coalition. “It’s the backbone of the 21st-century economy.”

How Arizona courted digital giants

The rise of massive data centers is a relatively new phenomenon in Arizona — but smaller versions of such facilities have long been integral to its economy.

Christine Mackay, a longtime local economic development leader, said the state was heavily focused on drawing in companies that would bring back-office and customer-support jobs for local residents in the 1990s and 2000s.

Back then, data centers were often viewed as a good way to draw in company executives who might be impressed enough with the area to set up a local office.

“It really did work,” Mackay said, adding that many business leaders viewed Arizona as “cowboys and cactus.”

“I think that the groups that would come in to see their asset just saw greater Phoenix in a different light.”

But Arizona’s economy remained overly dependent on the real estate industry — and it suffered deeply during the Great Recession. The downturn left hundreds of thousands of residents without jobs.

Meanwhile, Gallego, of Phoenix, said utilities that had predicted continued residential growth began panicking as power generation and transmission resources went unused. At the time, she worked for Salt River Project.

She said officials began focusing on attracting technology companies to the state as a means of diversifying its economy and using up energy capacity, preventing residents’ bills from skyrocketing.

Thus, a state-level data center tax exemption program was born.

The initiative provides sales tax exemptions for equipment purchases to operators that hit a minimum level of capital investment within five years of applying for the program.

To qualify, data center owners must invest at least $50 million into projects in Maricopa County and Pima County, or at least $25 million into projects in other areas of the state. The exemption lasts for up to a decade for most projects. The program is currently authorized by state law through 2033.

Patrick Ptak, a spokesperson for the Arizona Commerce Authority, said 63 data centers have been approved to receive exemptions related to the program. Operators of those data centers include massive out-of-state corporations like Apple and Microsoft, as well as companies owned by international private equity firms.

Ptak said participating operators have reported more than $8.1 billion in qualifying investments since the program’s inception.

Some say that demonstrates the program has been successful and that data centers would not have come to the state without it. Diorio said the equipment inside a data center is typically replaced every three to five years as technology evolves, and the state’s program allows operators to reinvest money into their facilities they otherwise would have spent on sales taxes.

“The tax exemption really ends up being key to helping Arizona stay competitive,” he said, adding that 36 other states have similar programs for data centers. “It’s a reason why it has been one of the top markets in the country.”

But the economic impact of the program is unclear. Ptak said the statute that established the program doesn’t require companies to report exactly how many jobs resulted from their projects, what average wages were attached to those positions or how much money they saved with the tax deductions.

That means there’s no reliable way to quantify how much sales tax revenue was lost to the program, or how Arizonans directly benefited from it.

The Arizona Department of Revenue estimates that the transactions exempted by the program last fiscal year would have generated about $38.5 million in sales tax for the state, a figure that doesn’t include the municipal or county share of that revenue. The facilities still contributed an estimated $863 million in total state and local tax revenue in 2023, according to a study prepared by accounting and consulting firm PwC for the Data Center Coalition.

The same study estimates that data centers provided about 14,400 jobs statewide that year. The Arizona Republic reviewed self-reported employment figures from air quality records and found that operating data centers appeared to support at least 1,795 jobs in Maricopa County.

The region is home to most of the state’s data centers, but not all operators reported employment numbers. It’s also unclear what type of workers were included in the figures, and whether the numbers were up to date for all data centers.

As certain areas of the state are flooded with the facilities, some officials question whether existing tax deductions for the industry need to be revised or eliminated.

Gallego said she’s frustrated the exemption program attracts companies that use huge amounts of water and power but don’t provide many jobs for her constituents. She called the industry “mature,” and said technology giants don’t need a tax break.

“We need to either modernize it for the types of outcomes we want or eliminate it,” she said of the exemption program.

She isn’t alone in her concerns. State Rep. Neal Carter, R-San Tan Valley, is sponsoring a bill that would end the state’s tax exemption program this year. State Sen. Priya Sundareshan, D-Tucson, said during a recent news conference that members of her party would introduce bills targeted at data centers and their energy and water use this legislative session.