A data center is a secure building that houses computer servers, data storage systems, networking equipment and the cooling and backup power systems needed to keep it all running. They are sometimes called the “engine rooms” of the digital economy: every email sent, show streamed, online purchase made, telehealth visit or file saved to the cloud is processed and stored in one. As more everyday activity, business operations and emerging technologies such as artificial intelligence move online, more of this infrastructure is needed to keep those services fast and reliable. Built and operated to high standards, data centers can also bring significant investment, tax revenue and long-term job opportunities to the Michigan communities that host them.
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Nationally, the data center industry directly employed more than 1 million workers and supported a total of 5.5 million jobs in 2024, according to industry group Data Center Coalition, and contributed an estimated $204 billion in local, state and federal taxes that help fund schools, roads and public safety. In Michigan specifically, an independent economic analysis by Anderson Economic Group projected construction-phase economic output ranging from $121 million to $5.5 billion depending on a facility’s size, and host communities can see lasting gains through property tax revenue and negotiated community benefit agreements.
A 2026 report from the nonpartisan Citizens Research Council of Michigan found that the size of these benefits depends heavily on how well a project is structured, which is exactly why the coalition pushes for responsible standards and careful local review: they help make sure Michigan communities capture the full, lasting value these projects can offer.
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Both. Building a data center can take several years and, at peak, employ more than 1,000 construction workers on larger projects. Once operating, a facility employs a smaller number of permanent staff, along with ongoing trade jobs, including electricians, HVAC technicians, pipefitters and others, to maintain it.
Michigan’s data center tax exemption also requires qualifying projects to create at least 30 permanent jobs paying at least 150% of the region’s median wage and to maintain those jobs for decades, turning the state’s incentive into durable, well-paying careers rather than a short-term construction bump.
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Roughly ¾ of states offer incentives to attract data center investment and the jobs and tax revenue that they can bring. In April 2025, Michigan joined them by passing the Enterprise Data Center Sales & Use Tax Exemption, which eliminates the state’s 6% sales tax on eligible data center purchases.
To qualify, a data center coming to Michigan must invest at least $250 million; create at least 30 qualifying jobs paying 150% of the regional median wage; maintain those jobs through December 2050 (or 2065 for brownfield or former power-plant sites); obtain a green building certification within three years of startup; and structure its electric service so costs are not shifted onto residential customers. Projects also cannot receive local property tax breaks unless the local government separately approves them. These conditions are designed to make sure the exemption goes only to projects that bring substantial investment, good jobs and high building standards to Michigan, rather than functioning as a blanket giveaway.
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Michigan has specific rules in place to prevent this and to make sure new data centers actually benefit the broader grid. The Michigan Public Service Commission (MPSC) requires data centers and other very large electricity users to pay the full cost of the power they use and the infrastructure needed to serve them, sign long-term contracts (15 to 19 years in cases approved so far), guarantee a high minimum monthly payment regardless of actual usage and pay an exit fee if they stop operating early.
In one 2025 case involving a proposed data center in Washtenaw County, DTE Electric calculated that the new contract would generate roughly $300 million in net benefits for its other customers, because the added load helps spread the utility’s fixed costs across more users. In other words, a well-structured data center contract can help lower long-term costs for everyone else on the grid.
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The Michigan Public Service Commission has legal authority over the rates and contract terms utilities offer large customers such as data centers, and it can require minimum contract lengths, minimum billing guarantees and exit fees to protect other ratepayers. Consumer and environmental groups, including the Citizens Utility Board of Michigan and the Michigan Environmental Council, regularly intervene in MPSC cases, giving Michigan multiple layers of oversight working to keep costs fair for everyday customers.
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Michigan’s clean energy targets remain in state law. When the MPSC approves a data center’s energy contract, it requires the utility to show how it will meet renewable energy standards while serving the data center. Far from being a setback, data center growth can actually help accelerate progress: the industry nationally has become a major purchaser of clean energy, and according to S&P Global, U.S. data centers accounted for about half of all corporate clean energy purchases through the third quarter of 2024.
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Data centers need to stay online during power outages, including for services relied on by hospitals, first responders and government agencies, so most keep on-site backup generators. Diesel generators remain the industry’s most common choice because of their reliability and availability, though some facilities are piloting lower-carbon alternatives, such as renewable diesel and battery storage. According to an analysis by Virginia’s Joint Legislative Audit and Review Commission, these generators are typically used no more than about 30 minutes per month, mostly for routine testing, with additional use only during actual outages, and the industry continues to invest in cleaner alternatives as they become viable at scale.
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State and federal regulations provide strong protections regulating large water users. Any facility seeking to withdraw a significant volume of water must register the request with the Michigan Department of Environment, Great Lakes, and Energy (EGLE), which reviews the project’s environmental impact and can deny or limit a withdrawal that would harm local water supplies or ecosystems. Michigan holds roughly 20% of the world’s fresh surface water, and that abundance, combined with these enforceable legal protections, puts the state in a strong position to host water-responsible data centers without putting local supplies at risk.
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It depends heavily on the cooling technology a facility uses and the local climate. An independent 2024 review by Virginia’s Joint Legislative Audit and Review Commission, examining the world’s largest data center market, found that 83% of data centers there use the same amount of water or less than a typical large office building (about 18,400 gallons per day). Facilities that use closed-loop cooling can reduce freshwater withdrawal by as much as 70% compared with older, single-pass cooling systems, because the same water is recirculated rather than replaced.
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A closed-loop system recirculates the same water repeatedly to cool servers: water absorbs heat from the equipment, releases that heat through a cooling tower or heat exchanger and then loops back through the system to be reused. Because the water is continually reused rather than drawn fresh and discharged, closed-loop systems use significantly less water than older designs, and this approach is increasingly the standard for new, responsibly designed facilities.
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If a facility discharges water, it must comply with state and federal permitting under the National Pollutant Discharge Elimination System (NPDES). The NPDES requires ongoing monitoring, testing and reporting of water quality and limits the chemicals, such as cooling agents, that can be released. Large facilities must also maintain a Stormwater Pollution Prevention Plan to control runoff and are subject to inspection for ongoing compliance. These requirements are designed to prevent pollution and thermal impacts to nearby rivers, lakes and groundwater, giving communities confidence that water quality stays protected long after a project is built.
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Typical residential areas have background noise levels of about 45 to 60 decibels, comparable to a quiet street or a conversation. Acoustic consultants note that if a data center’s operational noise matches the pre-construction ambient level, the overall increase is often only about 3 decibels, which is generally considered a low impact on its own. However, that same 3-decibel increase can be far more noticeable in a quiet rural area than near a busy road. Local noise ordinances, rather than a single statewide number, are typically used to set enforceable limits based on each area’s baseline conditions. This gives residents a locally appropriate, measurable standard for evaluating whether a project will be a good neighbor.
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Establishing accurate, project-specific noise limits requires measuring the ambient sound level at a site before construction begins, since a facility’s impact cannot be assessed without knowing the baseline. Best practice includes conducting a pre-construction noise study, setting enforceable limits tied to those existing conditions and requiring ongoing monitoring after the facility opens. The nonpartisan Citizens Research Council of Michigan has urged the state’s local governments, which control zoning and siting decisions, to require these kinds of assessments and monitoring before approving projects.
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Michigan already has a strong foundation of enforceable protections that apply to data center projects. On energy, the MPSC requires data centers to pay the full cost of the power and infrastructure they use, sign long-term contracts and meet minimum billing guarantees so costs are not shifted to other ratepayers. On water, EGLE reviews and can deny large withdrawal requests, the Great Lakes Compact restricts diversions outside the basin and discharge permits regulate wastewater. On taxes, the state’s data center sales tax exemption applies only to projects that meet minimum investment, wage and job-creation thresholds and obtain green building certification. On transparency, major permits require public notice and comment periods, and facilities must provide ongoing compliance reporting. Together, these tools give Michigan a solid framework for making sure new projects deliver real benefits responsibly.
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Zoning, siting and permitting decisions for data centers are made primarily at the local level. Cities, townships and counties decide where these facilities can be built and can set additional local requirements. Michigan’s process for major environmental permits requires public notice and comment periods, and residents and officials can raise concerns or seek changes to a project before it is approved. Because these are local decisions, the level of community engagement and negotiated local benefits can vary significantly from one project to the next. Independent guides, including one from the University of Michigan’s Graham Sustainability Institute, are available to help local officials evaluate proposals, build negotiating capacity and secure strong community benefit agreements from the start.
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Data center developers can only build in areas allowed by local zoning. In some cases, land zoned for their use sits near existing neighborhoods. Beyond zoning, companies also weigh access to existing fiber-optic and electric infrastructure, which is often concentrated near populated areas
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The coalition believes the strongest path forward is for Michigan to compete for these projects on its own terms rather than pushing them to states with fewer protections. If Michigan does not allow responsible development, projects won’t stop. They will simply move to other states. This means we would lose out on the jobs, tax revenue and infrastructure investment these facilities bring, without gaining any of the leverage needed to set strong standards.
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