Will Data Centers Gobble Up Wisconsin?

Aerial rendering of planned data center campus in Port Washington. Photo from the City of Port Washington.

At a press conference in Racine Monday Gov. Tony Evers joined officials from Microsoft to hail its decision to expand a planned data center project in Mount Pleasant by $4 billion, raising Microsoft’s total investment to more than $7 billion.

“Microsoft’s investment puts Wisconsin on the very cutting edge of AI power, not just in the U.S., but throughout the world, while creating good, family-supporting jobs,” the governor declared.

So how many jobs has Microsoft promised to create? It hasn’t. Wisconsin Economic Development Coordinator David Callender told Urban Milwaukee that “WEDC does not have a performance-based incentive contract with Microsoft, so there is no job creation requirement.”

Ah, but Microsoft will be paying taxes, won’t it?

Not sales taxes. A law passed in the recent two-year state budget by the Republican-led Legislature and signed by Evers granted a sales tax exemption to data centers. And there is no sunset to the giveaway, meaning Microsoft, a company with a net worth of over $2 trillion, will never pay a sales tax on purchases for its data centers, as Kasia Tarczynska, a research analyst at Good Jobs First, noted in a story by Wisconsin Public Radio. “Because there is no limit of how much companies can benefit from these tax breaks or for how long, these programs can become very expensive very fast,” she noted.

How about property taxes? That’s a sweetheart deal. Microsoft is building in a tax incremental financing district created to support Foxconn’s failed development and that calls for the Village of Mount Pleasant “to make annual ‘incentive payments’ to Microsoft that are around 42 percent of the revenue generated by the project’s first phase, but those payments cannot exceed $5 million and rely on the village receiving increased revenue after 2028,” as WPR reported.

What about the income taxes paid by Microsoft’s workers? That’s iffy. Data centers can employ more than 1,000 people in the several months or years it takes to build them, but rarely need more than one or two hundred workers once they open, as Synergy Research Group’s chief analyst John Dinsdale told the Wall Street Journal in a story entitled “The AI Data-Center Boom Is a Job-Creation Bust.”

And no one knows how many of those jobs are done remotely by employees working in other states.

Meanwhile these data centers are a massive drain on the resources of the communities and states where they are located. A report by the Lawrence Berkeley National Laboratory found that data centers used 4.4% of the nation’s electricity in 2022 and would use up to 12% by 2028.

In Washington, the data center industry’s demand for electricity is growing so much it could threaten the state’s efforts to transition to a carbon-free power grid, the Seattle Times reported.

But Wisconsin looks on pace to have far greater problems. Its two biggest projects — the Microsoft data center and the Vantage data center in Port Washington—“will require a combined 3.9 gigawatts (GW) of electric power, which is enough energy to power 4.3 million Wisconsin homes,” the environment group Clean Wisconsin warned. “According to census data, Wisconsin has just 2.8 million housing units in the entire state.”

In short, that’s 53% more energy than is used by all homes in Wisconsin.

Then there’s the amount of water used by data centers. The servers and routers in data centers generate a lot of heat. To cool them, data centers use huge amounts of water – in some cases over 25% of local community water supplies

A federal report estimated that the water consumption by data centers in the U.S. was roughly 211 billion gallons in 2023 and predicted the figure could double or quadruple by 2028.

“The water consumption of the 5,426 data centers nationwide is already impacting local communities,” said an analysis by the Environmental and Energy Study Institute. “Northern Virginia is considered the world capital for data centers, with over 300 operational data centers…Collectively, all data centers in Northern Virginia consumed close to 2 billion gallons of water in 2023, a 63% increase from 2019.”

“Technology companies are eyeing the Great Lakes region to host data centers, including one proposed for Port Washington, Wisconsin, which could be one of the largest in the country,” noted the independent news organization The Conversation. “The Great Lakes region offers a relatively cool climate and an abundance of water, making the region an attractive location for hot and thirsty data centers.”

A report by the nonprofit Alliance for the Great Lakes warns that the lakes, which contain 20% of the world’s freshwater, could be endangered by data centers. It estimated that data centers may withdraw as much as 150 billion gallons of water nationally over the next five years — the equivalent of water consumed by 4.6 million households.

Microsoft has said it will use 8.4 million gallons of water per year at its Mt. Pleasant campus, but data companies often underestimate usage or don’t include indirect usage, stories have noted.

Port Washington Mayor Ted Neitzke IV has said the Vantage data center being built there will use the equivalent of water used by 65 homes — up to 10,000 gallons per day. That’s an absurdly low estimate for what is expected to be one of the nation’s largest data centers. And the city has budgeted $6 million to build new sewer and water lines for the data centers.

Local governments across the county are often seduced by claims of new jobs and investment and hand out tax incentives for projects that have little economic payoff.

But a major force pushing for data centers are publicly regulated utilities who are looking to increase their revenues and profits. When the proposed Port Washington data center was announced in January, officials said it was expected to use a gigawatt of power — enough to power about 750,000 houses — but that number has more than tripled as Cloverleaf Infrastructure, the firm working to acquire the land and permits for the data, met with We Energies. “That’s the opportunity presented to us by We Energies,” Cloverleaf Chief Development Officer Aaron Bilyeu told the Ozaukee Press. “It will be one of the largest data center campuses in the U.S.”

Did We Energies encourage Cloverleaf to massively increase the size of the project? We Energies spokesperson Brendan Conway dodged the question, saying “I cannot speak for Cloverleaf.”

Conway insists that We Energies ratepayers won’t pay for any of the costs to provide for the data center’s massive electric power needs. But a report by Harvard’s Environmental & Energy Law Program says that’s just what is happening nationally. “Utilities tell PUCs [public utility commissions] what they want to hear: that the deals for Big Tech isolate data center energy costs from other ratepayers’ bills and won’t increase consumers’ power prices,” the report charges. “But verifying this claim is all but impossible. Attributing utility costs to a specific consumer is an imprecise exercise premised on debatable claims about utility accounting records… Hiding subsidies for trillion-dollar companies in power prices increases utility profits by raising costs for American consumers.”

In short, this could be another example of the wealth transfer from average Americans to corporate leaders, in this case mega-wealthy big tech companies, who will pay little in taxes and generate few jobs. And Wisconsin, as a result of these two huge data centers, is about to become a national leader in this trend.