Dozens of data center developments are popping up across northern Illinois. Many residents are pushing back. In community after community, concerns pour in about the noise, home values, water quality, and energy consumption.
It’s become a strikingly bipartisan issue. A Gallup poll finds 70% of Americans oppose data center construction in their area.
One of the core promises of these projects is a tidal wave of tax revenue flowing into cities, which could have a huge impact on local school districts pressed for cash.
Data centers and school funding
Chris Goodman is a professor of public administration at Northern Illinois University. He says data centers are very different from other industrial developments like factories, mainly because they don’t provide many long-term jobs.
“What we're essentially fighting for," he said, "is construction jobs up front and tax base growth on the back end."
Most local property tax revenue goes to school districts. It’s also where schools get most of their money, so any increase is a big deal.
Last year, the DeKalb School District opened a brand-new school: Mitchell Elementary. At the ribbon cutting, one of the speakers was Tara Tenorio, a representative from Meta.
“People talk about the moment that Meta broke ground here as one of those pivot points in a community,” said Tenorio. “I am so honored to be a part of the one that is happening in real time before us.”
Meta’s hyperscale data center in DeKalb went online in 2023. Since then, superintendent Billy Hueramo says it’s generated a lot of tax revenue for the district — and helped them open the new school faster.
“In 2023 we collected $2.3 million," said Hueramo. "The next year we collected $7.1 million. After that $19 million, and then in 2026 $18.8 million.”
That nearly $19 million makes up over 20% of the district’s annual property tax revenue.
The district’s partnership with Meta reaches beyond taxes. Through grants, the Facebook parent company has supported district STEM initiatives to the tune of almost $400,000. They helped the district fully fund its Project Lead the Way STEM curriculum and make Mitchell Elementary a STEAM school.
Meta’s also awarded Data Center Community Action Grants to the Northern Illinois University Foundation and nearby community college Kishwaukee. Community colleges are also partially funded through property taxes. In each of the past two years, Kishwaukee has collected over $2 million in property taxes from Meta.
Tax breaks leave money on the table for schools
The windfall for local schools could have been much larger but Meta — like many data center projects — received an array of state and local tax breaks to lure it to the region.
Meta acquired a tax abatement from DeKalb County — which, in this case, means, for the first two decades, they’ll have their property tax bill cut more than half.
Kasia Tarczynska with the economic development watchdog Good Jobs First says local communities should be wary of giving tax subsidies to big corporations.
“We are talking here about Meta," she said, "an extremely controversial company that is quite rich and really don't need any public financial support."
Tarczynska says DeKalb may have cut a decent deal compared to the tax incentives handed out in other states like Ohio, where sales tax exemptions cost the state $1.6 billion last year.
With the DeKalb project, Meta also benefits from the Illinois’ Data Center Investment Program, which exempts them from paying other taxes like some sales and use taxes, as well as the state’s Personal Property Replacement Tax which, Tarczynska notes, also helps fund public schools in Illinois. The state estimates the value of the tax benefits is $50 million.
“So, we have this situation," said Tarczynska, "where you have individual school districts benefiting from some of the taxes when everybody else is losing taxes.”
She says that’s tough at a time when many school districts are dealing with multi-million-dollar budget deficits, staffing cuts, and a pullback of federal support.
Illinois Governor J.B. Pritzker just paused those tax breaks over energy cost concerns. Data centers in the state had received nearly $1 billion worth of tax benefits from 2020-2024.
Goodman says there’s actually quite a bit of academic research about if tax incentives induce companies to locate in a particular place.
“The general thinking on that is no," he said, "that companies have chosen a particular location for reasons that have nothing to do with tax incentives."
For data centers, it’s access to water, electricity, and land. Often, he says, these incentives are just companies playing communities off each other to see how much additional money they can get.
Could data centers lower property taxes for residents?
There’s an implicit suggestion that if these data centers generate substantial tax revenue, it’ll allow school districts to reduce residents’ property taxes.
Armir Doka with the DeKalb School District says they’ve lowered their tax rate each of the past five years, in part because of data center tax revenue. He says they’ve shifted the tax burden from primarily on residents to industry.
“Ballpark, I would say residential is now contributing 30%," said Doka. "Just five years ago it was more than half."
But data centers use a lot of water and electricity. So, even if property tax rates go down in some places, water and electric bills could go up.
Illinois ComEd customers saw a 12% jump in their electric bills this summer directly due to data center demand.
Late last year, DeKalb gave the green light to another data center proposal.
A new era for data centers
DeKalb’s Meta project started years ago, long before data centers became so controversial. DeKalb had far fewer residents protesting the proposal than cities are seeing now. Back then, communities were trying to woo developers with tax incentives.
Now, it’s a different environment. Companies have to convince communities. Yorkville has approved three data center projects, although only one, CyrusOne, is currently under construction while the other two are tangled in community-driven litigation.
Yorkville City Administrator Bart Olson says none of them are getting local tax incentives, and it reached an agreement with the developers to give their school district money above and beyond property taxes.
Yorkville, like DeKalb, needs new schools. The district has been trying to build two new schools and renovate their high school. Voters shot down a referendum to do that this spring.
Community benefit agreements
Now, the data center companies will send the school district money up front to help build those new schools. When the CyrusOne project files for a building permit, which will likely happen soon, they’ll send the school district $10 million. If the other two projects move forward, they’ll send a total of $90 million more to the city — the majority going to the school district.
NIU professor Chris Goodman says community benefit agreements can guarantee investment, but they can also feel like a way to try and win over increasingly skeptical residents.
“I very much hesitate to call them a bribe," he said, "but it could almost feel like that, right? ’Hey, we'll front you the money to build this new school if you just let us do what we want.’ I mean, it accomplishes the goal from the school district's perspective, but it really doesn't feel very good.”
The CyrusOne development is in Yorkville, but falls within neighboring Plano’s school district. Luke Baughman, Plano’s chief school business official, says, unlike Yorkville, they’re not expecting to receive a lump sum.
He says they’re projecting the data center will generate almost $11 million in annual property tax revenue. The district collected around $21.6 million last year.
Data centers don’t bring in many jobs, relative to other industrial developments. Yorkville’s Olson says, when it comes to school funding, that’s means developers pay disproportionate property taxes into the school district, but don’t bring in any additional students who cost money to educate.
“For instance, one of our largest subdivisions in Yorkville is Bristol Bay," said Olson. "There are a few hundred homes in this subdivision, with 352 actual Yorkville school district pupils living in those homes. All of the homes in the subdivision generate around $3.3 million in property taxes to the school district, but it costs the Yorkville School District around $4.8 million to educate all of the Bristol Bay subdivision pupils.”
Even though new property taxes help schools, Tarczynska with Good Jobs First says it’s not the only factor. You also have to consider the environmental, ethical, and economic effects.
“We really need," said Tarczynska, "to take under consideration the cost of other harms these data centers, this product, create.”
Because she says, good and bad, students will pay the price for the costs that come with today’s intense data center developments.
What if the data centers leave?
The influx of large hyperscale data center projects is driven by AI. There are many who see the industry as a bubble. So, what happens if it bursts and demand for data centers dries up?
Goodman says school districts wouldn’t necessarily be caught holding the bag, but it’s likely that an empty building will be worth a lot less than a full one, which means less property tax revenue than school districts and municipalities were expecting.
“It could get real sticky if the bubble bursts," he said, "and all of a sudden, either these data centers start to leave, they, you know, pull their servers out or they become less valuable because we as a society value what they're doing less.”
It’s why school districts like DeKalb say they’re trying to continue budgeting conservatively, so they’re not caught off guard if things change.