Three Thoughts: Data Center Backlash

 

Nationally, data center bashing is a bipartisan issue.  The backlash is not going away either.

The first time I heard about a data center, it could fit in the space of a couple tractor trailer parking spaces.  They looked the part too—windowless boxes with a door for the occasional tender to visit and a vent for the excess heat.  There were some parked just outside the Brewery District twenty years ago.

Today, even though semiconductors allow more storage to fit in less spaces, data centers have evolved to become land-, water-, and electric-consuming massive concrete buildings.  Ohio, aided by strong electric infrastructure thanks to our long legacy of manufacturing and a lack of hurricanes, has been an attractive place to locate.  Today, there are reportedly 40 of them in New Albany alone. 

Far be it for me to pile on the backlash, but here I go.

ONE THOUGHT: Is the Juice Worth the Squeeze?

The biggest reason for the national backlash is a basic fact: The economic impact of data centers is truly weak.  

All the think tank studies claiming supply chain and spillover impact I’ve looked at never survive a couple questions deep.  Benefits to a few.  Pain to many others.  Not much juice for all the squeeze.

There’s no reason to incentivize them to come.  New Albany has one part of the data center equation right.  They impose a payment in lieu of payroll tax that brings in the equivalent from the machines that it would if there were people in those buildings paying wage taxes instead. 

 

SECOND THOUGHT: Electricity Demand Disrupted

The Ohio Manufacturers Association is right to point out that data centers, though certainly bringing a larger demand than manufacturers do, are not the ones to blame for the rising power rates.

OMA points the fingers at utilities.  The electric rate bidding system favors reporting higher electricity demand than can be proven.  The systems to hold monopoly utilities accountable are seemingly broken.

To be fair, there are risks.  Technology improvements could cut the electricity needs of AI and future data needs.  Thus, electric infrastructure investments based on data centers alone as a customer is a risky move to make.

The worst thing that could happen?  Put the risk of electric growth on stranded customers.  Ohio’s move to deregulate electricity 20 years ago was the right move.  Reversing that would be a huge mistake.  Mom and pop electricity rate payers shouldn’t bear the brunt of risky business decisions.

 

THIRD THOUGHT: Opportunity Cost is The Biggest Issue

To me, the biggest issue is one that isn’t at the center of the backlash but ought to be.  It’s opportunity cost.  It’s asking the question: What alternative opportunity could happen with a data center site, in the long run, that has more economic impact?

Without naming names, here’s one example that proves my point:  One large data center company sits on 350 acres with 70 jobs paying an average of $75,000 a year.  Just 15 miles away that same 350 acres hosts an industrial park with 20 diverse manufacturers employing 2,070 people.  The average pay is the same.

The difference is 2,000 families with jobs and a community with a more stable, growing tax base.  That’s the definition of opportunity cost.

It’s smart for communities to make informed decisions with future opportunity in mind.

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This column is a regular column in The Dispatch.

Three Thoughts: Watching Foreign Investment, Energy, and Reindustrialization

It’s my job to keep my ear to the ground in industrial development.  Columbus and Central Ohio are at the heart of one of the best places to be listening with that ear to the ground.

ONE THOUGHT: OHIO POISED FOR FOREIGN DIRECT INVESTMENT

The national panelists at the recent NAIOP Midwest Industrial Conference predicted investment from overseas to be an increased trend in 2026. Foreign direct investment is by no means a scary thing.  In fact, just the opposite is true. 

If you want to sell to the U.S., you’ve got to come to the U.S. is the message.  Gaining foreign-headquartered investment is what the aim is if we are going to see manufacturing pick up its pace in Ohio and the country.

Central Ohio’s best economic years have been when manufacturing came to our shores. In fact, it’s hard to imagine our economy thriving without it.

There are 1,800+ people working to make solar panels on one side of our region and thousands of people working to make automobiles on the other side.  The supply chains for a wide variety of household products and business-to-business sales have, for decades, been based on foreign investment. 

SECOND THOUGHT: ELECTRIC WILL BE A TOP ISSUE OF 2026

While mom and pop are seeing their electric bills skyrocket, so are the biggest users of electricity--manufacturers. And that hurts in more ways than one.

Threats of rolling blackouts. Political backlash in other states over the proliferation of data centers. The lack of transparency about electric supply and demand. For these reasons and more, energy is an issue to watch and will remain so in 2026.

This isn’t just an Ohio issue, but since the country is economically dependent on Ohio’s manufacturing prowess, negative impacts in Ohio ripple across the globe.  We all have a reason to watch this issue, not just those of us in industrial development.

There’s hope that moderation is coming.  The headlines earned from predictions of “Manhattan” size usage by 2030 are already being back pedaled.  One expert who tracks data centers told me that the real number may be as low as 1/10^th of that scary usage prediction. 

Sadly, though, those predictions likely have found their way into demand prediction models and unfairly could impact pricing for a while.

THIRD THOUGHT: REINDUSTRIALIZATION IS THE NEW BUZZWORD

Now, more and more, the buzzword is "reindustrialization." I'm not totally on board with this word as the "re" part implies industrialization wasn't already happening and it was, in Ohio.

Ohio’s GDP for manufacturing grew more than 20% in the last three years in years which, frankly, were not the nation’s strongest economically.  Ohio has preserved its position as the third largest state in generating manufacturing jobs.

Whatever the word, reindustrialization or reshoring, it’s been happening and the potential exists to keep it going in 2026.  Uncertainty about interest rates and tariffs, for example, have left some in a wait and see approach, but I sense the activity is coming.

These are my three issues to watch in 2026 while I keep my ear to the ground.

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This column is a regular column in The Dispatch.

Three Thoughts: Taxing Squirrels? Tax What You Don’t Want. Exempt What You Do.

Ohio once had a squirrel tax. No kidding.

The legislature made a quota for every property owner. To reduce the out of control squirrel population in 1807, Ohio would exempt your property tax bill for every squirrel skin one provided as proof of squirrel population reduction.

Ohio has an agricultural value reduction program to reduce property tax on land used for agriculture.  Manufacturing equipment is automatically exempt from sales and use tax.

Thus, the pattern has been clear for 220 years: Tax what you don't want. Exempt what you do.

Taxes can be both counterproductive and counter intuitive.

➊ ONE THOUGHT: TAX WHAT YOU DON’T WANT

Taxes on alcohol, tobacco, and cannabis are "sin" taxes designed to generate revenue on things that government wishes to discourage.

Ohio's 1807 squirrel tax is a shining example. Bring us your squirrel skins or pay more tax.

Arguably, some local places in Ohio have purposely taxed themselves more in order to keep certain real estate investments out.

 

➋ ANOTHER THOUGHT: EXEMPT WHAT YOU DO WANT

 Exemptions for job-creating globally-competitive capital investment just makes sense.

Ohio automatically reduces property taxes on agriculture land and has for decades. It's called CAUV. Tax farmland more? You'll get less farmland.

Trade this year's revenue for a longer-term future of more revenue is the biggest point with local property tax exemption authority.

Trade incremental property tax one year for greater income tax now and in the future.

 

➌ WATCHING THE GREAT TAX DEBATE IN OHIO

Though action has been taken from the Ohio General Assembly, there could be more to come in the debate sparked by rising property taxes.  And it’s not just property taxes in play.  Talk about redirecting local income taxes, removing sales tax exemptions, and curbing real estate tax diversions are among the items open for debate.  Should an over $20 billion hole emerge in Ohio’s collective state and local tax portfolio from a possible statewide referendum, there’s nothing off the table.

That’s why the principle from 1807 is key to remember.

Tax what you don't want. Exempt what you do.

By the way, that Ohio squirrel tax had to be repealed in 1808, because it worked. The squirrel population was decimated and taxpayers were afraid they couldn't gather enough squirrel skins to avoid the tax.

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This column is a business page regular column in The Dispatch.