COLUMBUS, Ohio – Power-hungry, stadium-sized data centers are popping up across central Ohio, earning hundreds of millions of dollars in state and local tax breaks each year, but grid operators worry the facilities will soon strain available power supplies.
The data centers are owned by consumer brands like Amazon, Google and Meta, as well as lesser known names like Quality Technology Services and CyrusOne. Though they may look like large factories from the outside, they often employ just 20 to 30 workers when in operation, and some companies even receive tax breaks for pledging just 10 new jobs.
Big tech’s renewed interest in what politicians are calling the “Silicon Heartland” has come at a price. Data centers are expected to apply for about $123 million in state sales tax exemptions this year and $127 million next year. Some data centers are also applying for new job creation tax credits that would cut their state commercial activity tax bill by 75% for 15 years. Meanwhile, cities and counties have given dozens of data centers generous property tax abatements, amounting to up to 100% over their 15-year lives.
Those benefits flow to utilities driving surges in electricity demand across the US, raising concerns about grid reliability at PJM, which operates the grid in 13 states, including Ohio. There’s also a lack of transparency about how the benefits are distributed, with Ohio refusing to disclose the full extent of the tax breaks, including how much they are, who applied, or what local tax breaks state officials have approved.
The rise of artificial intelligence and cryptocurrencies is causing a surge in demand for data processing. Data centers are the home of computers, routers, networking equipment, and hundreds of millions of gallons of water to cool it all; they are, in Google’s words, “the engine behind our digital services” that “help keep the internet running.”
The Ohio Development Agency, which until last year was responsible for approving local property tax breaks, has refused to say how many local tax transactions its officials have approved, and the Ohio Department of Taxation, which administers Ohio’s sales tax exemptions created specifically for data center operators, has refused to say which companies are receiving the exemptions or how much revenue they are costing the state.
“Due to confidentiality agreements, we cannot disclose the actual tax credit amounts associated with this credit, nor can we disclose the total amount due to the limited number of taxpayers,” said Andrea Rannom, a spokeswoman for the tax department.
Kasia Tarczynska, a research analyst at Good Jobs First who has written critically about big data subsidies in Ohio and elsewhere, said the huge public costs don’t make sense compared to the modest job gains.
“These are capital intensive so the number of jobs they create is very limited,” she said.
Zach Schiller, an economist at Policy Matters Ohio, a progressive policy group, said data center subsidies haven’t received enough scrutiny and that Ohio is losing tax revenue to the world’s largest companies for a pittance, he said.
“In terms of cost-benefit, we’re spending hundreds of millions of dollars on a small amount of work by companies that are anything but second-rate,” he said. “These companies are big, wealthy organizations.”
Increasing tax exemptions shrinks the overall tax base and shifts the burden to everyone else, said Leah Hederman Jr., an economist at the conservative Buckeye Institute. She said taxes should generally be kept low but equal across all political parties.
Data centers require huge amounts of electricity. PJM said in a 2023 report that the influx of data centers and the retirement of aging coal-fired power plants “currently[s] “Increased reliability risks” during the transition to renewable energy.
A Goldman Sachs study found that after a decade of flat electricity demand, the nation is expected to see a 2.4% increase, with data centers accounting for about 40% of that. Data centers used 3% of U.S. electricity in 2022, but that’s expected to jump to 8% by 2030, according to Goldman.
American Electric Power, the utility that powers most of the data centers, has suspended service requests for new facilities since March 2023, warning that electricity demand in central Ohio will soon rival Manhattan. AEP is now asking state regulators for permission to treat data centers as their own customer class and require them to pay for all of the energy they project to use, even if they end up needing less. The lawsuit, which the data centers oppose, is pending. In northeast Ohio, FirstEnergy CEO Brian Tierney likened today’s data center demand explosion to the invention of air conditioning.
“This is going to be a big thing,” he told Crain’s Cleveland Business.
Subsidized Data
New Albany, a wealthy suburb northeast of Columbus, is home to 17 data centers, all of which receive property tax abatements of 65% to 100% from the city, typically for 15 years, according to city spokesman Josh Poland.
The tax abatements are provided through Ohio’s Community Reinvestment Areas program. In these CRA agreements, local governments give developers up to 100% of their property taxes for 15 to 30 years. These abatements are funds that would otherwise flow to the district’s schools, but some agreements also redirect income taxes from the developer to the schools, which are dependent on the property tax revenue.
Amazon’s cloud services subsidiary, Amazon Web Services, operates a data center campus in New Albany, as well as others in Hilliard and Plain City, all of which receive local property tax abatements, up to a 100 percent property tax abatement, as well as state sales and use tax exemptions.
The company did not disclose the amount of the exemption but said it has spent $10.3 billion on capital and operating investments in Ohio and plans to spend another $7.8 billion through 2030.
The search giant operates three data centers in Lancaster, Columbus and New Albany out of 17 across the country. The facilities serve companies such as Nationwide Insurance, Victoria’s Secret, Wendy’s and Huntington National Bank. Google declined to provide information about the tax break but did acknowledge the CRAs in New Albany and Lancaster.
In March 2021, the City of Columbus granted a 100% 15-year CRA to Magellan Enterprises LLC. According to local television news reports, city council members did not learn that Magellan was a Google subsidiary until several months later. According to NBC4i, the tax abatement is worth $54 million over its life and is expected to create 20 new jobs for the project.
Facebook’s parent company, Meta, operates a $1.5 billion data center in New Albany that has received a 100% property tax abatement for 15 years. The company declined to say whether the facility is applying for a sales tax exemption.
Nearby is the QTS data center campus, which consists of four buildings. Under an agreement with New Albany, all of these facilities receive a 100% property tax abatement for 15 years. But because the facilities will create 10 new jobs, the state also granted QTS a New Job Creation Tax Credit, which exempts the company from paying 100% of the commercial activity tax it pays to the state for 15 years.
Other subsidized data centers in New Albany are operated by AEP, Discover Financial, Encova Insurance, TJX and Google. Statewide, a Liames-owned data center in Wood County recently won both a property tax abatement and a tax increment financing deal, and two Kroger data centers around Cincinnati received a 15-year 75% sales tax credit for the purchase of data center equipment.
Facilities are concentrated in central Ohio, but not exclusively: Cleveland and Cincinnati are each home to about 30 data centers, while the Columbus area has 95, according to Data Center Map, a site used by industry insiders.
This photo taken Sept. 4, 2015, shows a data center under construction in Hilliard, Ohio. It’s one of three data centers being built outside Columbus by Amazon subsidiary Vadata Inc. Vadata is currently investing about $1.1 billion in building the data center, attracted in part by $81 million in state incentives and about $20 million in local incentives, including free land at one site. (AP Photo/Kantele Franko)
Data Centers Speak
Cleveland.com and The Plain Dealer reached out to several data center operators for interviews. None responded, but some did provide written responses to questions.
Roger Wehner, director of economic development at Amazon Web Services, said such grants are a common way to encourage investment and job creation. These projects take years and require long-term vision and commitment. Additionally, the company owns 23 wind and solar projects in Ohio that are expected to generate a staggering 3.2 gigawatts of carbon-free electricity for its operations, enough to power about 650,000 homes.
“Since 2015, AWS has invested more than $10 billion in Ohio, supporting thousands of local jobs,” he said. “We’re proud of our long-standing partnership with the state of Ohio, and last year announced plans to invest an additional $7.8 billion through 2030. This long-term investment will continue to bring new, high-paying jobs and boost the state’s gross domestic product annually.”
Amber Tillman, Google’s data center public affairs manager, said in a statement that economic development incentives play a “critical” role in making these projects possible and that the company is “grateful,” but did not provide details about the tax breaks.
Facebook’s parent company, Meta, did not respond to written questions, but the company provided a two-page marketing document touting the New Albany facility’s $1.5 billion cost, the 1,200 workers on-site during construction and the 300 jobs that will be “supported” once complete.
QTS, a Canadian company, operates 35 data centers in the U.S. and has two under construction in New Albany. The company declined to disclose the terms of the facility’s CRA but said it was happy to work with state and local officials to “develop a competitive market offering that benefits QTS, the city of New Albany and the state.”
CyrusOne did not respond to inquiries.
When data centers are built in the state, they will provide high-paying jobs and additional construction work over the life of the 40-year contract, all of which will generate significant income tax revenue, said Matt Englehart, a spokesman for JobsOhio, the state’s semi-private economic development agency. The presence of big names like Amazon and Google is a plus for the state, attracting other large companies and drawing skilled employees.
“Companies also invest in the communities in which they are located by contributing to workforce development programs, schools, training centers and other initiatives with the goal of being good corporate citizens,” he said.
Jake Zuckerman covers state and local politics for Cleveland.com and The Plain Dealer.