Data Center Knowledge Base

What Is a Data Center

A data center is a facility that houses large numbers of computer servers, storage systems, and networking equipment. These facilities store, process, and distribute the data that powers internet services, cloud computing, artificial intelligence applications, financial systems, healthcare records, and much more.

Data centers range in size from a single room to massive campuses covering hundreds of acres. The largest facilities — called hyperscale data centers — are typically built by technology companies such as Amazon (AWS), Microsoft (Azure), Google, and Meta, or by specialized real estate investment trusts (REITs) that lease space to these companies.

Illinois, particularly the Chicagoland corridor, is one of the top data center markets in the United States. Key location factors include access to major fiber-optic networks, relatively stable weather, land availability, and historically favorable energy costs and incentive policies.

Power Consumption

Data centers are among the most power-intensive land uses that a municipality can approve. A single large data center campus can consume 100 to 500 megawatts (MW) of electricity — comparable to the power needs of tens of thousands to hundreds of thousands of homes.

For context, a typical single-family home in Illinois uses approximately 7,000 to 8,000 kilowatt-hours (kWh) per year, equivalent to roughly 0.8 to 1 kilowatt of continuous average demand. A 100 MW data center campus represents the equivalent continuous load of roughly 100,000 homes.

This power demand must be served by the local electric utility — in northern Illinois, typically Commonwealth Edison (ComEd). Large data center projects may require significant upgrades to local substations and transmission infrastructure. The costs of these upgrades, and who pays for them, vary by utility tariff and negotiation.

The energy source matters: data centers powered primarily by coal or natural gas have a different carbon footprint than those served by nuclear or renewable energy. Illinois has a significant nuclear fleet, which reduces grid carbon intensity compared to many other states.

Grid & Utility Infrastructure

When a data center developer proposes a large load — anything from 50 MW upward — the utility and regional grid operator must study whether the existing transmission and substation infrastructure can support it. Understanding this process helps communities ask the right questions and identify who bears the cost.

Interconnection Studies: Before a large industrial customer can be served, ComEd and the regional grid operator (MISO, which manages the bulk power system across the Midwest) conduct an interconnection study. This study identifies what transmission and substation upgrades are needed to deliver power reliably to the new load. Upgrade costs can range from a few million to tens of millions of dollars depending on the condition and capacity of local infrastructure.

Who Pays for Upgrades: The answer depends on whether the upgrades are classified as "customer-specific" or as shared regional improvements. Customer-specific upgrades — a new substation feed, a dedicated transmission line — are typically paid for by the developer. Regional reliability upgrades that benefit the broader grid may be socialized across all ratepayers. Communities should ask developers and utilities to disclose which upgrades are required and how costs are allocated.

Substation Capacity: Local substations transform high-voltage transmission power to distribution voltage. A large data center may require construction of a new substation or significant expansion of an existing one. Substation siting, construction, and interconnection timelines can take two to five years, which affects project scheduling.

New Transmission Lines: In some cases, a large load requires new high-voltage transmission lines. These projects involve easements, environmental review, and longer timelines. Communities along potential transmission corridors have independent interests in that process.

What to Request: Communities should ask developers to provide the results of any interconnection feasibility studies, disclose the estimated cost of required utility upgrades, and confirm whether any ratepayer costs are expected. This information is often not volunteered in zoning presentations.

Water Usage

Many data centers use water for cooling — specifically, evaporative cooling towers that discharge water vapor to dissipate heat from servers. Evaporative cooling is efficient but consumes significant quantities of water.

A large data center may consume 1 to 5 million gallons of water per day during peak cooling periods. Water usage varies by cooling technology (air-cooled systems use less water but are less efficient), climate, and data center design.

For communities served by municipal water systems or drawing from local aquifers, large data center water consumption can represent a material addition to local demand. Communities should understand the source of the water (municipal, well, river), whether the water is consumed (evaporated) or returned to the watershed, and what infrastructure upgrades, if any, are required to serve the facility.

Some newer data center designs use air cooling or liquid cooling systems that significantly reduce water consumption. The specific cooling technology a developer plans to use is typically disclosed in permit applications.

Economic Impacts

The economic impact claims associated with data center projects require careful analysis, as the benefits and costs are not evenly distributed.

Jobs: Data centers create substantial construction employment during the build phase — often hundreds of workers for large projects. Permanent operational employment is typically much smaller: a large data center campus may employ 50 to 200 full-time workers in operations, security, and management. Job quality is generally high for technical and management roles. This is a significant difference from manufacturing facilities, which often employ more workers per square foot.

Tax Revenue: Developers and municipalities frequently cite property tax revenue as a primary community benefit. However, when tax incentive agreements (TIF, enterprise zones, abatements) are in place, the incremental tax revenue may be reduced or deferred for years or decades. The net tax benefit depends on the specific terms of any incentive agreement, which are public records.

Infrastructure Costs: Communities may bear costs for road improvements, utility upgrades, and emergency services capacity to support large facilities. These costs are sometimes negotiated as part of annexation or development agreements.

Long-Term Lock-In: Data centers are capital-intensive, long-lived assets. Once built, the land use and utility load are largely fixed for decades. Communities should consider whether the land use, infrastructure commitments, and incentive costs align with long-term municipal goals.

Impact on Nearby Property Values

One impact that is rarely discussed in developer presentations — but that directly concerns neighboring homeowners — is the effect a large data center may have on residential property values in the surrounding area. The municipal tax revenue a data center generates and the property values of adjacent homes are separate questions, and the answers can point in opposite directions.

What the Research Shows: Academic and appraisal-industry studies on the property value impacts of heavy industrial facilities — warehouses, manufacturing plants, power infrastructure — generally find negative effects on homes within a half-mile to one-mile radius, with the magnitude depending on the nature and scale of the facility. Data-center-specific research is limited but growing. The consensus is that impacts are highly site-specific, driven primarily by noise, visual character, lighting, and traffic rather than any inherent land-use category. Large facilities with significant generator testing, 24/7 cooling fan noise, and minimal screening are the most likely to affect neighboring values.

The Municipal Revenue vs. Neighbor Value Distinction: Developers frequently present property tax projections as a community benefit. But the taxable assessed value of a data center is not the same as its stated investment value. Illinois's tax exemption for qualifying data center equipment — servers, networking gear, cooling infrastructure — removes much of the equipment value from the tax rolls entirely. The building shell and land remain taxable, but communities should request an independent assessment of actual taxable value rather than relying on a developer's investment figure. Meanwhile, adjacent homeowners who experience noise, visual impact, or neighborhood character changes may see their own assessed values stagnate or decline — a cost that is diffuse and rarely captured in municipal impact analyses.

Key Factors That Drive Impact: Not all data center proposals carry the same risk to neighboring values. The factors that matter most are: proximity and setbacks from residential parcels; the height and visual mass of structures; noise levels at property lines during normal operations and generator testing; intensity of exterior lighting; frequency and volume of heavy truck traffic (fuel deliveries, equipment installation); and the extent of landscaping, berms, and screening buffers. A well-sited facility with generous setbacks and effective noise attenuation is materially different from one placed close to homes with minimal buffering.

What Communities Can Request: Communities can require an independent real estate impact analysis as part of the application — analogous to traffic studies or environmental assessments — prepared by a licensed appraiser with experience in industrial land use impacts. This is standard practice in some jurisdictions. The analysis should estimate effects on residential values within a defined radius under different buffering and noise scenarios. Requiring this analysis before a zoning vote creates an independent record and may reveal conditions worth negotiating.

Protections to Negotiate: Conditions that reduce property value risk to neighbors include minimum setbacks from residential property lines exceeding zoning minimums; mandatory noise limits measured at residential property lines with independent verification; screening requirements (masonry walls, earthen berms, dense landscaping) tall enough to block sightlines from adjacent homes; limits on exterior lighting spillover; and restrictions on heavy truck access routes through residential areas.

Illinois Incentive Law

Illinois offers one of the most generous data center tax incentive programs in the United States. Understanding what is being given away — and what conditions apply — is essential context for evaluating any project in the state.

The Core Exemption: Under Illinois law (35 ILCS 120/1l, enacted in 2019 and significantly expanded by Public Act 102-0669 in 2022), qualifying data centers are exempt from the state's Retailers' Occupation Tax and Use Tax on data center equipment — including servers, networking hardware, cooling infrastructure, and other qualifying property. They are also exempt from the state electricity excise tax on power consumed at the facility. These are substantial exemptions: sales tax in Illinois runs 6.25% at the state level, and electricity taxes add further savings.

Qualification Thresholds: To qualify, a new facility must invest at least $250 million in Illinois over a 60-month period. Existing Illinois data centers can qualify for expansion exemptions with a lower threshold. Smaller "emerging technology" data centers have a lower threshold of $10 million. The investment must be certified by the Illinois Department of Commerce and Economic Opportunity (DCEO).

Duration: The exemption runs for 20 years from the date of the initial certification. This is a long-term fiscal commitment by the state.

Local Incentives on Top: State tax exemptions are separate from local incentives that municipalities may offer — property tax abatements, TIF financing, enterprise zone designations, or reduced infrastructure fees. Local and state incentives can stack, sometimes significantly reducing the total tax contribution a project makes relative to its stated economic impact.

What to Look For: When evaluating a local project, residents and officials should request: (1) a copy of any DCEO certification or application; (2) an estimate of the total value of state and local tax exemptions over the project's life; and (3) a clear accounting of what net tax revenue — after all incentives — is projected to flow to local taxing bodies, including school districts, park districts, and the municipality itself.

Policy Context: Illinois lawmakers have debated whether the exemptions are too generous given the relatively low job creation of large data centers. The law has been amended several times. Communities should be aware that the incentive landscape may continue to evolve.

Environmental Impacts

Data center development has several categories of environmental impact that are relevant to local communities.

Land Use: Large data center campuses convert farmland, open space, or light industrial land to heavily impervious surfaces. Stormwater management, grading, and impervious cover requirements are typically addressed in site plan review.

Noise: Data centers generate continuous noise from cooling equipment — fans, cooling towers, and backup generators. Noise levels at the property line are typically regulated by local ordinance and may be a condition of zoning approval. Generator testing and emergency operations can produce higher noise levels.

Visual Impact: Data centers are large, utilitarian structures. Some include significant mechanical equipment visible from surrounding areas. Design standards (screening, landscaping, setbacks) can be negotiated as part of the approval process.

Energy Source: As noted in the power section, the carbon footprint of a data center depends significantly on the energy mix of the regional grid. Some developers make public commitments to renewable energy procurement.

Emergency Preparedness: Large electrical infrastructure and diesel generator fuel storage may create local emergency response considerations.

Diesel Generators & Air Quality

One of the least-discussed impacts of large data centers is the scale of their diesel backup generator infrastructure. Every data center requires reliable power backup; a power outage, even briefly, can cause data loss and service disruption. The solution is banks of large diesel generators capable of carrying the full facility load.

Scale of Generator Infrastructure: A 100 MW data center campus may install 50 to 100+ individual diesel generator sets, each rated at 1 to 3 MW. In aggregate, the backup capacity can equal or exceed the facility's full operating load. This is not a small generator in a closet — it is a substantial industrial installation comparable in scale to a small power plant.

Fuel Storage: Generators require large quantities of diesel fuel stored on-site so they can run through extended outages. A large campus is typically sized for 24 to 48 hours of continuous full-load operation. At roughly 70 to 80 gallons of diesel per hour per megawatt of generator output, a 100 MW campus burns approximately 7,000 to 8,000 gallons per hour at full load. This means on-site storage of hundreds of thousands to over a million gallons — comparable in scale to a bulk petroleum storage facility. Storage above 1,320 gallons of aboveground diesel triggers EPA Spill Prevention, Control, and Countermeasure (SPCC) plan requirements. Communities should ask to review the SPCC plan and confirm that the local fire district has been briefed on storage volumes and tank locations.

Fuel Deliveries: Keeping tanks full during normal operations, and replenishing after any generator run, requires regular tanker truck deliveries. Each tanker carries approximately 8,000 to 9,000 gallons. Filling a large campus tank farm from near-empty can require dozens to over a hundred individual deliveries. During extended grid emergencies, fuel resupply becomes a logistics operation — with continuous tanker traffic that communities and emergency managers should anticipate.

Testing Requirements: Generators must be tested regularly to ensure they will start and carry load when needed. The EPA and industry practice generally call for monthly testing of emergency generators, typically for 30 minutes to two hours per unit. On a large campus, this means diesel engines running regularly — producing exhaust, noise, and fuel consumption — even when there is no actual power outage.

Air Quality Permitting: Diesel generators that run for non-emergency purposes (including testing beyond certain thresholds) must be permitted through the Illinois Environmental Protection Agency (IEPA). Facilities above certain emission thresholds require a Title V air permit. These permits specify allowable operating hours, emission limits for particulate matter, nitrogen oxides (NOx), carbon monoxide (CO), and other pollutants, and monitoring and reporting requirements. Permit applications are public records.

Health Considerations: Diesel exhaust is classified as a probable human carcinogen by the International Agency for Research on Cancer. Particulate matter from diesel combustion is associated with respiratory and cardiovascular disease. Communities with sensitive populations — schools, hospitals, residential neighborhoods — near proposed data center sites should consider requesting independent air quality modeling as a condition of approval.

What to Request: Communities should ask developers to disclose the total nameplate generator capacity, the total on-site diesel fuel storage volume, the planned testing schedule, whether a Title V or minor source air permit will be required, and what noise attenuation measures are proposed for the generator enclosures.

What Other Communities Have Done

Communities across the United States have responded to data center proposals in a range of ways.

Negotiated Conditions: Many communities approve data center projects but attach conditions — noise limits, setback requirements, landscaping and screening standards, water usage caps, community benefit agreements, or requirements to purchase renewable energy.

Moratoria and Studies: Some municipalities have enacted temporary moratoria on new data center approvals to allow time for comprehensive planning studies examining infrastructure capacity, incentive policy, and land use goals.

Zoning Amendments: Several communities have amended their zoning ordinances to create data center-specific use categories with tailored standards — separating large-scale hyperscale facilities from smaller commercial data centers and applying different approval standards to each.

Denials: Some communities have denied data center applications outright on grounds including inadequate infrastructure, incompatibility with surrounding land use, or insufficient benefit relative to impacts.

Incentive Policy Reform: Some states and municipalities have revised incentive policies after finding that blanket tax exemptions for data centers produced fewer local benefits than projected.

Approvals Without Conditions: Many communities have approved data center projects with minimal or no conditions, accepting developer representations about job creation and tax revenue at face value.

The range of outcomes reflects the significant discretion local governments have in this process and the importance of community participation in shaping that outcome.

Community Benefit Agreements

A Community Benefit Agreement (CBA) is a legally binding contract — or a set of conditions attached to a zoning or development approval — that commits a developer to specific obligations in exchange for municipal approval or support. CBAs are one of the most effective tools communities have for converting a developer's desire for local approval into tangible, enforceable benefits.

What Communities Have Negotiated: Specific provisions that communities have secured from data center developers include: caps on water consumption with monitoring and reporting requirements; noise measurement standards and decibel limits at residential property lines; local hiring preferences for construction and operations positions; commitments to procure renewable energy equivalent to a specified percentage of facility consumption; road improvement contributions; emergency services funding; and landscaping and screening standards beyond the minimum required by ordinance.

How They Are Created: CBAs can take several forms. Some are standalone agreements between the developer and the municipality or a community organization, executed before a zoning vote. Others are incorporated directly as conditions of approval in a special use permit, planned unit development, or annexation agreement — which makes them enforceable as part of the approval and tied to the facility's operating permits.

The Leverage Window: Developer leverage is highest before approval and lowest after. Once a project is approved and built, the community has little recourse if commitments are not met unless they were written into enforceable conditions of approval. Communities should negotiate and finalize all material commitments before any vote on zoning, annexation, or incentive agreements.

Enforcement: An agreement is only as good as its enforcement mechanism. Communities should ensure that CBA provisions are: written specifically enough to be measurable (decibel limits, not "reasonable noise levels"); tied to annual or periodic reporting obligations; backed by a remedy if violated (permit revocation, financial penalty, or bond forfeiture); and assigned to a specific municipal official or body responsible for monitoring compliance.

Getting Started: Residents can advocate for a CBA by presenting a written list of proposed conditions at the public hearing, contacting village board members before a vote, and asking the village attorney to review and strengthen any proposed conditions. Model CBA language from comparable projects in other communities is increasingly available through planning associations and academic research.

Questions to Ask Before Approving

The following questions are a due diligence checklist for village board members, planning commissioners, and engaged residents evaluating a data center proposal. Answers should be provided in writing and entered into the public record before any vote.

Tax and Incentives: What is the total estimated value of all state and local tax exemptions over the life of the project? What net property tax revenue — after all abatements, TIF diversions, and enterprise zone credits — is projected to flow to each local taxing body (municipality, school district, library, park district) and when? Has the village attorney reviewed all proposed incentive agreements?

Jobs: How many permanent, full-time jobs will be created at this facility? What is the projected average wage and benefit level for those positions? What percentage of construction jobs are expected to be filled by local or Illinois workers?

Power and Infrastructure: What is the facility's projected peak electrical load in megawatts? What utility infrastructure upgrades are required, and who pays for them? Has a formal interconnection study been completed by ComEd or MISO? Are any ratepayer costs associated with the required upgrades?

Water: What is the projected daily water consumption at full build-out? What is the source of that water, and does the municipal system have capacity to serve it? Will the facility return any water to the local watershed, or is consumption primarily evaporative?

Generators and Air Quality: What is the total nameplate diesel generator capacity in megawatts? What is the total volume of on-site diesel fuel storage? What is the planned testing schedule and duration? Has the developer applied for or received an IEPA air permit? What are the emission limits in that permit?

Noise: What noise levels are projected at the nearest residential property line during normal operations and during generator testing? What noise attenuation measures — barriers, enclosures, equipment selection — are proposed?

Community Benefits: Is the developer proposing any community benefit agreement, and if so, what are the specific, measurable commitments? Are those commitments conditions of approval or unenforceable representations?

Long-Term Considerations: What happens to the site if the data center ceases operations? Are there decommissioning or remediation obligations? Does the approval lock in any land-use or infrastructure commitments that would constrain future municipal options?

Industry Overview

The data center industry is one of the fastest-growing real estate sectors in the United States. Growth is driven primarily by cloud computing adoption, artificial intelligence workloads, and the ongoing shift of enterprise IT to third-party facilities.

Key industry players include hyperscale cloud providers (Amazon AWS, Microsoft Azure, Google Cloud, Meta), colocation REITs (Equinix, Digital Realty, Iron Mountain), and specialized developers (QTS, CyrusOne, Switch). Many projects are developed by specialized real estate firms and then leased to cloud providers under long-term agreements.

Illinois, specifically the I-88 corridor west of Chicago, is among the top five data center markets nationally. Factors driving Illinois development include proximity to Chicago's dense fiber network, favorable land costs relative to primary markets, and historically competitive energy rates.

Industry growth is expected to continue as AI infrastructure demands increase. The power requirements of AI-focused data centers are substantially higher than traditional cloud computing facilities, which may amplify the infrastructure and grid impact questions relevant to local communities.

AI Workloads and the Power Surge

The recent surge in data center proposals — including projects larger than anything most communities have previously considered — is driven substantially by the infrastructure demands of artificial intelligence. Understanding this context helps communities appreciate why current proposals are different in scale and impact from data centers approved a decade ago.

Traditional vs. AI Infrastructure: A conventional cloud computing data center primarily runs general-purpose CPUs handling web requests, databases, and business applications. Power density in these facilities is typically 5 to 15 kilowatts per server rack. AI training and inference workloads run on specialized graphics processing units (GPUs) or custom AI chips, which are far more power-intensive — often 50 to 100 kilowatts per rack or more. The same building footprint, filled with AI hardware instead of conventional servers, consumes dramatically more power.

Scale of New Proposals: The hyperscale data center campuses being proposed in Illinois and nationally reflect this shift. Where a large conventional data center might require 50 to 100 MW, AI-focused campuses are being planned at 200, 500, and even 1,000 MW — equivalent to a significant fraction of the output of a major power plant. These proposals strain regional grid infrastructure in ways that earlier projects did not.

Cooling Demands: High-density AI hardware also generates more heat per square foot, requiring more aggressive cooling. This increases water consumption in evaporative-cooling facilities and drives design choices — liquid cooling systems that circulate coolant directly to chip packages — that are newer and less tested at scale in municipal utility systems.

Speed of Deployment: AI infrastructure buildout is moving faster than traditional data center development. Developers are under competitive pressure to deploy capacity quickly, which can compress the timeline communities have to evaluate, negotiate, and impose conditions on projects.

What This Means for Communities: A proposal framed as a "data center" may look very different in practice depending on its intended use. Communities should ask specifically whether a proposed facility is designed for AI training or inference workloads, what the maximum power density per building is, and whether the cooling system is air-cooled, water-cooled, or liquid-cooled — as the answers drive fundamentally different infrastructure and environmental impact profiles.

Key Terms Glossary

The following terms appear frequently in data center zoning and approval proceedings. Understanding them helps residents and officials follow public hearings and review documents more effectively.

Annexation

The process by which a municipality incorporates land that was previously unincorporated or part of another jurisdiction. Developers often seek annexation to gain access to municipal utilities or more favorable zoning.

Enterprise Zone

A designated area where businesses receive state and local tax incentives to encourage economic development. Approval typically requires action by the Illinois Department of Commerce and Economic Opportunity.

FOIA (Freedom of Information Act)

Illinois law (5 ILCS 140) that gives residents the right to inspect and copy public records held by government agencies. Requests must be submitted in writing and agencies must respond within 5 business days.

Planned Unit Development (PUD)

A type of zoning approval that allows a developer to build a project under a customized set of standards, often in exchange for community benefits. Requires approval from the planning commission and governing board.

Rezoning

A change to the official zoning designation of a parcel of land. Requires a petition, public notice, a public hearing, and a vote by the governing body.

Special Use Permit

A permit allowing a land use that is not automatically allowed in a given zoning district but may be approved if certain conditions are met. Requires a public hearing.

TIF (Tax Increment Financing)

A public financing mechanism where future increases in property tax revenue within a designated district are set aside to fund development costs within that district. Existing taxing bodies (schools, park districts) do not receive those incremental revenues for the life of the TIF.

Zoning

A system of land-use regulations that divides a municipality into districts and specifies what types of buildings and activities are allowed in each district.