Enviros push back on bills giving tax breaks to data centers

Data centers in Ashburn, Virginia | Getty Images

As legislation aimed at enticing data centers to set up shop in Michigan makes its way out of the Senate and heads to the House, various advocacy groups are sounding the alarm on the potential harms these sites would bring. 

On Monday, members of Clean Water Action, Michigan Climate Action network, Good Jobs First, Michigan Education Justice Coalition and other advocacy groups hosted a call to discuss the environmental and economic impacts new data centers would have on the state. 

Members of the Michigan Senate on Thursday voted to advance Senate Bill 237, which would extend the sunset period on a use and sales tax exemption for equipment used in data centers from 2035 through 2050, or 2065 if the data center is located on a brownfield or a location that was used as a power plant.

In order to receive the credit, the data center is required to make at least $250 million in capital investments and maintain at least 30 in-state jobs paying 150% or more of median wage in that prosperity region. 

The bill’s sponsor, Sen. Kevin Hertel (D-St. Clair Shores), touted data centers as an economic opportunity for the entire state. 

“The great thing about this policy is there are opportunities across the entire state where these can locate and bring real jobs and investments to those communities. When you talk about the local property tax revenue with these enterprise data centers, the investments they’ll bring to those communities, they are massive, sometimes doubling the school budgets if there’s a millage there on the table,” Hertel said. 

Hertel also challenged the notion that data centers do not provide the jobs that are often promised, pointing to the legislation’s requirements for “good paying jobs” and pointing to the construction and maintenance of the facilities as areas where jobs will be created. 

“Thirty other states have this policy. So the reality is if you do not do this, you will not have an enterprise data center locating in the state. They will go somewhere else where they get this exemption today,” Hertel said. 

Hertel also noted that the legislation includes language requiring companies to receive certification from among a list of green building or energy efficiency agencies within three years of being placed in service. 

However, advocates and lawmakers have each shared concerns on the impacts these facilities could have on Michigan’s energy grid and water infrastructure. 

“The new mega data centers represented in these bills are really important for us as we more and more depend on using technologies like artificial intelligence. Michigan is a good choice for hosting these large enterprises, especially when we get them to use our brownfield sites and have the potential to really make a positive difference in the communities that host them. These data centers are also massive users of electricity and water,” Sen. Rosemary Bayer (D-West Bloomfield) said in her n” vote explanation on the bill, with Sen. Erika Geiss (D-Taylor) concurring. 

Bayer noted the states that are already hosting data centers are consistently seeing needs to upgrade their energy grids and water infrastructure, costs which are often passed on to residents through their water and electricity bills. She also noted that some states hosting data centers were experiencing issues with depleting aquifers and loss of water for residents. 

As the policy moves forward Bayer called for regulations to ensure data centers are not overusing water, that they are powered by green energy and to protect residents’ utility bills.

“My hope is that these issues are addressed as we move forward with the pair of bills as this goes over to the House and we continue to work on the House Bill that goes with this to put these kind of protections in place,” Bayer said.

Senate Bill 237 is currently awaiting further consideration by the House, as its companion bill, Senate Bill 238, awaits a vote on the Senate floor. 

House Bills 4905 and 4906, two similar policies which passed the House in November, are also awaiting further action on the Senate floor after they were reported out of the Senate Finance, Insurance and Consumer Protection Committee in March.

The bill’s companion in the Senate, Senate Bill 238, is also awaiting a vote on the Senate floor. 

While Michigan does not have many data centers, research from other states shows that once established, data centers are often the largest users of water in a community, Sean McBrearty, Michigan director of Clean Water Action said at Monday’s press conference. 

McBrearty explained large data centers typically use between 1 million and 2.5 million gallons of water a day. This is because they use evaporative cooling technology, which is the cheapest way to cool the heat generated by the center’s equipment. 

Senate Bill 237 requires facilities to draw their water from a municipal source, or develop a plan to convert to municipal water within five years of operating. 

Water withdrawals that large are often harmful, McBrearty said, noting that these data centers would use between two and five times the amount of water requested by Nestle in its controversial effort to increase the amount of groundwater extracted for sale as bottled water. 

As data centers bring increased energy demands, advocates also raised concerns that these facilities will increase reliance on fossil fuel energy sources. 

Pontiac City Councilperson Mikal Goodman also stressed the impact these facilities will have on low-income communities and communities of color which are already burdened with water affordability concerns and 

As lawmakers discuss legislation to improve water affordability, the data center legislation has passed in the shadow of a “groundbreaking” climate package, Goodman said. 

“Now that juxtaposition is made worse. We have so many people in Black and brown communities like Detroit who are given criminal charges or worse, for turning back on their water to make sure that they have a very needed resource for living. Meanwhile, we have data centers and large corporations like Google like Amazon, just having free rein and access to whatever resources that they need,” Goodman said. 

“These exemptions are coming directly from the mouths of not only our community and our budget, but the quality of life of our residents,” Goodman said. 

Many of the communities where these centers would be housed, such as Benton Harbor, are already facing issues with infrastructure and pollution, Goodman said. 

“When we are giving these large exemptions, these large tax breaks to these businesses to these corporations, we are directly taking money out of our coffers to be able to do things,” Goodman said. 

“For every lane-mile of roads that is not resurfaced or reconstructed can be tied back to taxes that were not collected by the city. Lead pipes that are not being replaced, community programs, community centers, everything that my citizens come to every meeting complaining about the city not being able to get done,” Goodman said. “It is not because he does not want to do them, but it’s because we do not have unlimited money to meet the needs of our citizens. But it goes beyond not just having that unlimited money. We don’t even have the money that we should have because we continue to rollover or the people of influence.”

He also noted that the jobs promised to these communities are temporary, leaving residents working construction on the facilities without a job when they are completed. 

Advocates also pointed to research from the Brookings Institute which found 75% of the time business incentives do not impact a company’s decision on where to locate. 

“What we are doing is not working to fix the roads, schools or our water systems. Detroiters keep being promised that big tax breaks for Hudsons, Little Caesars and Bedrock are the only way to bring new jobs. Yet, every time we give them the money, the jobs don’t come,” said Molly Sweeney, of 482 Forward, Michigan Education Justice Coalition and Fund MI Future.

“Michiganders deserve good jobs without giving away the revenue needed for our schools and communities. These corporations — with the right regulations and accountability to the community — should come without taking away key revenue from our communities,” Sweeney said. 

As lawmakers move forward with these policies, advocates encouraged officials to pump the brakes and ensure they get the policy right. This would include requiring facilities to use renewable energy, preferably building their own. They also recommended prohibiting centers from using evaporative cooling systems and axing the tax exemption for these sites. 

The post Enviros push back on bills giving tax breaks to data centers appeared first on Michigan Advance.