Nobody wants to live next door to a giant data center. Everybody’s heard the horror stories about depleted water reservoirs and the neverending hum of industrial cooling equipment. But what if the company building that new data center offered you $10,000?
That’s the proposition facing households in De Soto, Kansas. Data center developer Digital Realty (DLR) has announced a $20 million community investment fund to sit alongside its new Astra North project in the area. The scheme is still being hammered out with local officials, but it looks like every household in the small town would receive annual utility and property tax credits worth up to $1,000 per household for 10 years.
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Residents have been sharing petitions and trying to stall the work for months, and so developers are now paying close attention to Digital Realty and its shiny new investment fund. If this tactic works, it could literally pave the way for new data centers all over the country. Then again, is $1,000 a year really enough to change anyone’s mind?
Why Doesn’t Anybody Want a Data Center Next Door?
Like it or not, data centers are essential to the global modern economy. They store information, support cloud computing, and provide most of the compute required by the AI systems increasingly taking over workflows. The problem is that those data centers take huge amounts of physical infrastructure to operate.
Servers require next-level, 24/7 grid access, and cooling systems place enormous demand on local water supplies. Particularly large campuses like the one Digital Realty is planning in Kansas also bring construction disruption, industrial noise, heavy traffic, and noticeable changes to surrounding landscapes.
The obvious concern for residents is that these data centers are only benefiting tech companies in Silicon Valley, while Kansas locals are going to be stuck with the environmental and infrastructure costs.
Electricity prices are another sensitive issue.
When utility companies need to upgrade transmission infrastructure or expand generation capacity, there’s always a suspicion that existing customers are going to end up paying for improvements needed by somebody else’s business. There are some conflicting studies on this one. But research conducted last year by Bloomberg found that wholesale electricity prices had increased by 267% in areas near new data centers.
Then there are concerns around sustainable employment. Developers love to brag that new data centers will support thousands of construction jobs. But once the dust has settled and everything’s online, a lot of these centers don’t actually require very many permanent workers. That’s why a quarter of Americans now say they think data centers are bad for local employment, and nearly half argue the developments negatively impact people’s quality of life.
These are all concerns that De Soto locals have raised, and there are still plenty of residents who doubt whether the potential economic upside of Digital Realty’s latest project justifies the disruption. Then again, that’s what makes the company's change of tactics so interesting.
Digital Realty is Trying a Different Approach
Up to now, most of the development companies working on data centers have been trying to convince locals with the same old promises of lots of construction jobs and future tax revenue. Digital Realty is trying something totally different. They’ve committed $20 million to a community investment fund that promises up to $1,000 in annual utility and property tax credits to every household in De Soto for the next decade.
This is a really clever approach, because the financial benefits on the table aren’t tenuous promises about long-term economic growth. They have a clear monetary value that will directly reach residents. That’s going to seem like some much-needed relief to local families who are struggling with this cost of living crisis.
Does it resolve concerns about noise, water availability, or the reliability of local grid supply? Absolutely not. But the way De Soto residents decide to react to this offer could provide other developers with a much-needed community relations playbook.
Polls show that most people oppose data center construction in their areas. The problem is that demand for computing infrastructure isn't disappearing. In fact, the AI boom we’re stuck in has made it business-critical for more companies to secure land, water, and electricity for new facilities. And those same companies are finding out the hard way that having enough capital to build a data center doesn’t mean you’re going to be able to get enough public support to break ground.
If developers want to hold on to their momentum, they’ve got to start offering something more tangible to the people who have to live their lives next to these facilities. Direct payments certainly look like a good option. But if AI companies want to reclaim local support, they must also become more transparent about how much electricity and water their projects will consume and who’s going to pay for the upgrades to support that consumption.
Digital Realty’s latest move is one that shareholders should be watching closely. After all, community opposition can increase development costs or totally shut down even the most innovative project. Any developer that finds a way to win local support is gaining a competitive advantage over other AI companies.
Still, only time will tell if handing out money is going to become the new textbook solution for data centers. After all, Digital Realty has effectively put a price on being a good neighbor. It remains to be seen whether the people of De Soto think that price is fair.
On the date of publication, Nash Riggins did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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