Back to data centers

By Don Smolenski, Contributing Editor | TLT Machinery August 2026

How will the growth of data centers impact jobs, taxes and community issues?
I promise that this will be my last column on data centers. In my previous columns1,2 I explained how data centers work and what some of the issues are about water, electricity, land use and so on. I will cover some “other issues” in this column, such as jobs, taxes, community issues and possible risks. Clean energy commitments (Michigan’s goal is 100% by 2040), for instance, may oppose plans for new fossil fuel plants to support data centers. In Michigan, DTE signed a deal for 1.4 gigawatts and Consumers Power signed a deal for 6.4 gigawatts.1 Will these data centers cause significant cost increases in residents’ electrical bills? If not controlled, a 1 gigawatt data center could increase residential electricity rates by 5%-10%!

How will data centers affect jobs? Construction of data centers will certainly require many skilled laborers, but will data centers result in creation of high paying permanent jobs? Some states are already insisting that permanent jobs must be guaranteed. How about taxes, community issues, utility agreements and other things? For the Great Lakes region, for instance, there is additional huge backlash about potential negative effects on the Great Lakes and other possible environmental issues.3 Also, many advocates want regulations mandating renewable on-site energy generation at data centers.

How will data centers affect taxes? Michigan passed legislation providing very significant tax exemptions, but will they be at a cost to the residents? The law prohibits data centers receiving a rate that causes residential customers to subsidize data center infrastructure and/or service costs. Sounds good, but a few years ago, Switch Inc. promised 1,000 jobs and a $5 billion investment in a data center near Grand Rapids, Mich. In seven years, it had created just 30 jobs at median wage and were still collecting $1 million in tax breaks! One data center expert estimates the national average cost per data center job at $2 million.

But what happens if the data centers don’t materialize, are much smaller than expected or very slow to progress? The state and/or the residents could be left holding the bag! There will be significant “exit fees” charged for any “underperforming” data center for state and residents’ protection. In addition, there are already many communities opposing data centers, and they will likely insist on many safeguards to their quality of life.

REFERENCES
1. Smolenski, D. (2026), “Data centers,” TLT, 82 (4), p. 72. Available at www.stle.org/files/TLTArchives/2026/04_April/Machinery.aspx.
2. Smolenski, D. (2026), “Back to data centers,” TLT, 82 (6), p. 96. Available at www.stle.org/files/TLTArchives/2026/06_June/Machinery.aspx.
3. Data Centers reshape the Great Lakes: What are the effects? – Planet Detroit. Available at https://planetdetroit.org/2025/11/data-centers-water-energy-impact/.

 Don Smolenski is president of his own consultancy, Strategic Management of Oil, LLC, in St. Clair Shores, Mich. You can reach him at donald.smolenski@gmail.com.