As with many policy areas, there’s growing tension between state and local authority when it comes to data centers. While state policymakers are largely continuing to try to attract data centers (primarily through tax incentives), local officials are increasingly scrutinizing zoning, permitting, and energy requirements for data center projects. Here's an overview of the growing divide between state and local policymakers on this issue. 

Data Centers' Economic Impact and Growing Local Opposition

Data centers are fiscally important to the localities where they’re located. Take Loudoun County, Virginia, for example, home to the largest concentration of data centers in the world. In Loudoun County, almost half of property tax revenues are generated by data centers. This has enabled the county to reduce its residential property tax rate by nearly 40 percent over the last eight years, an anomaly in property taxes for high-growth areas. But there’s a local backlash to these projects that’s just beginning. Polling suggests that even residents who are supportive of the growth of artificial intelligence and data centers oppose data centers being built in their own communities. 

Moody’s Ratings predicts that data center investment will hit $3 trillion globally in the next five years. To the extent that much of this investment is made in the United States, state and local policymakers are set up to continue clashing over who has ultimate authority over these projects. Three southeastern states paint a picture of what the power struggle might look like. 

Georgia's Approach to Data Center Regulation

Georgia has emerged as a popular area for data center development, with the Metro Atlanta area becoming the second largest data center hub in the country, following only Northern Virginia. But while the state has been eager to support data center development – Governor Brian Kemp (R) vetoed legislation (GA HB 1192) in 2024 that would have paused the state’s sales tax exemption for data center equipment – data centers have faced local pushback in both urban and rural areas. 

Atlanta Metro Area Zoning Restrictions

As data centers began opening in the Atlanta area, some council members were concerned about where these projects were located. In late 2024, the Atlanta City Council voted unanimously to enact an ordinance requiring developers to seek a special use permit for data centers and prohibiting data center construction in the popular Beltline area of Atlanta, an urban redevelopment project that connects 22 miles of trails and green space to local neighborhoods and various transit stops, as well as bars, restaurants, and other attractions. Neighboring Douglas and Clayton counties also approved temporary moratoriums or new restrictions on data center construction while they reviewed their zoning regulations. 

Rural Community Pushback and State Review Process

Tension has spread to rural communities as well, including at least one highly-publicized debate in Twiggs County, Georgia (population of approximately 8,000). Part of the backlash – and now litigation from residents – allegedly relied on the fact that the project was approved during a time in which the Georgia Department of Community Affairs (DCA) had paused its review process. After the review process resumed, the DCA unanimously voted to, in effect, require data center developers to disclose their estimated water and electricity needs for each new facility. The Department does not approve or deny projects, as that authority belongs to the local government. The Department’s role is to establish review procedures and provide a consistent method for communities to assess large development projects, but local governments cannot approve projects while the review process is ongoing. 

The DCA’s expansion to include data center projects is a clear indicator that some policymakers and residents are looking for additional information and guidance on how to weigh data center proposals in their communities. 

West Virginia's State Preemption Strategy

Unlike Georgia and Virginia, West Virginia lawmakers opted for explicit state preemption. West Virginia Governor Patrick Morrisey (R) has been actively working to attract data center investment in West Virginia. He believes that the state could use part of the revenue generated by data centers to reduce personal income taxes, a longtime goal of multiple governors in the Mountain State. In 2025, lawmakers passed a bill to encourage data center development through providing Freedom of Information Act (FOIA) exemptions for data centers, creating economic development programs for microgrids, creating special tax valuations, and more. One of the most talked-about provisions of the bill, in retrospect, is the section that preempts counties and municipalities from imposing or enforcing local laws concerning the creation or regulation of microgrids or data centers. The bill also diverts a majority of data center tax revenue to the state instead of localities

Senate President Randy Smith has since said that some members of the legislature are interested in revisiting these provisions to restore local control and provide regulations for where these projects can be located. The Governor does not want to see the legislature reopen the matter. The current dynamic makes it ripe for another legislative battle with localities, the legislature, and the governor each representing a distinct perspective.

Virginia's Local Control Model Under Pressure

Local policymakers have largely led the way in terms of regulating data centers in Virginia. In 2023, the Joint Legislative Audit and Review Commission (JLARC) conducted a comprehensive study on data centers and found that “there is not currently a compelling reason for a state role in setting local requirements for data centers or intervening in local approval decisions.” JLARC did recommend best practices for localities, as well as some statutory actions state policymakers could take to make the local authority explicit, including expressly authorizing localities to require sound modeling studies for data center project approval. 

Loudoun County Tightens Data Center Requirements

Loudoun County, home to the greatest concentration of data centers, is proud of its ability to attract immense amounts of technological investments. The County website touts its recent reductions to both residential property taxes and the personal property tax (also bemoaned as the car tax in Virginia) due to the revenue generated by these projects. However, increased scrutiny by some residents has pushed the Board of Supervisors to tighten its requirements on applications for new data centers. In March of 2025, the Board voted to end by-right zoning for data centers. Previously, in some areas of the county, data centers were allowed on a by-right basis, meaning the projects were subject to staff-level review, but not a public hearing. After the Board’s vote, however, all data center applications will be subject to staff-level review, a public hearing, and a recommendation from the Planning Commission. But it’s unclear if this has placated residents, as questions seem to linger. In the Frequently Asked Questions section of the County’s website, it asks whether Loudoun County can enact a total moratorium on new data center construction? The answer is no, Virginia law requires each application to be considered on its individual merits.  

State Level Legislative Changes and the New Governor's Position

At the state level, former Governor Glenn Youngkin (R) was supportive of data centers and vetoed a bill (VA SB 1449) last year that would have required data center operators to perform site assessments to determine the impact on water, agricultural, and historical sites. The sponsor of the vetoed legislation has introduced similar legislation (VA SB 130) this year. Incoming Governor Abigail Spanberger (D), who will be sworn in on January 17th, has stated that data centers need to pay for their own energy while ensuring local communities have the information they need to make informed decisions about approving or denying data centers. Virginia lawmakers have also signaled a continued interest in data center regulation, with bills already introduced proposing to eliminate tax exemptions (VA SB 93), impose a new excise tax on data centers (HB 641), enact siting restrictions (VA SB 94), and address energy concerns (VA HB 284; VA HB 155). 

The coming session will test whether incoming Governor Spanberger and the democratic legislature are at odds with localities like Loudoun County, whose economy and budget relies heavily on data centers.

Track State Data Center Policy

Last year, states considered hundreds of data center bills, and we expect activity to continue growing in 2026. To stay on top of this rapidly evolving landscape, we've launched MultiState Policy Watch: Data Centers – a subscription featuring legislative analysis, trend summaries, and expert insights across energy, tax, water, zoning, and other policy areas impacting data centers. Sign up here.