Data Centers Are the New Highways. Who Gets to Write the Terms?

One issue this week. The data center fight is moving fast. The terms that get written in the next 24 months will set the rules for the next two decades.

When Robert Moses started cutting the Cross Bronx Expressway through the South Bronx in 1940s, he was working ahead of the federal terms.

The highway displaced sixty thousand people from neighborhoods like East Tremont. By the time it was finished in 1972, it had become the prototype for how to build a freeway through a working-class neighborhood: condemn the homes, frame it as slum clearance, let the political weakness of the residents do the rest.

In 1956, the federal government built the terms around what Moses had already shown could be done.

The Federal-Aid Highway Act covered 90 percent of the cost of building 41,000 miles of Interstate. That’s 90%! The law itself did not say much about where the highways should go. So, routing was left to state highway departments and local officials. But those officials were already working from another federal framework. The 1949 Housing Act's "slum clearance" provisions had labeled working-class, immigrant, and Black neighborhoods as "blighted" and ready for demolition.

The combination was giving a clear signal. The 90 percent match made the highways cheap to build. The blight framework made it justified to route them through neighborhoods that couldn't push back. And, these were lower resourced neighborhoods. State engineers, downtown business interests, and federal officials deferred to that combination.

Seventy years later, we are still spending billions trying to undo what those terms set in motion. Cap-and-stitch projects in Syracuse. Freeway removal in Rochester. Health impact studies in West Oakland. Reconnecting Communities grants flowing out of the federal government to fix the cuts the federal government paid to make.

The terms were framed as efficiency in 1956. The consequences are still arriving in 2026.

Highways are not the only example. Parking minimums written into postwar zoning codes added tens of thousands of dollars to the cost of every housing unit and made walkable neighborhoods almost impossible to build — and we are still dealing with the consequences. Single-family zoning, written in the 1920s in part as a tool to keep Black families out of white neighborhoods, still governs three-quarters of residential land in most California cities.

In each case, the terms got written quickly, by people with a clear agenda, in a window when nobody else was paying attention. The consequences arrived on a delay. The cleanup cost more than the original deal.

It Is Happening Again, Faster

In South Memphis, residents of a majority-Black neighborhood started smelling something different in the air.

xAI's Colossus supercomputer site had gone up in months. To power it, the company installed up to 35 methane-burning gas turbines on site without federal air permits. Residents found out the turbines were running by living next to them.

After the NAACP threatened to sue under the Clean Air Act in 2025, xAI removed most of the unpermitted turbines at the original Colossus 1 site and obtained permits for 15 of them.

Then the company built Colossus 2 (two miles south, just across the state line in Southaven, Mississippi!) and installed 27 more unpermitted turbines to power it. On April 14, 2026, the NAACP and Earthjustice filed suit, alleging xAI violated the Clean Air Act by operating the turbines before permits were granted.

The lawsuit estimates those 27 turbines could emit more than 1,700 tons of nitrogen oxides annually, which would make the facility the largest industrial source of NOx in the 11-county Memphis metropolitan area.

Memphis is what happens when the procedural floor is missing. The deal moved faster than the community's ability to respond. By the time the response organized, the infrastructure was already running, and the company had already built the next one across a state line.

Now look 600 miles northeast.

In Loudoun County, Virginia, the data centers along what locals call Data Center Alley carry a significant share of the world's internet traffic — a figure often cited as 35- 70 percent!

The data centers there pay almost no property tax on the underlying real estate. They negotiated equipment tax exemptions and abatement deals years ago. By the time those deals expire, the buildings will be functionally obsolete and the companies will have moved on. With lots of cash.

Loudoun residents are now seeing rising power bills, new transmission lines proposed across rural Virginia, and a tax structure that was pre-negotiated before most current residents moved in. In early 2025, the county finally eliminated by-right data center development, requiring legislative review and public hearings. The terms set fifteen years ago took fifteen years to renegotiate.

Memphis is the procedural failure happening now. Loudoun is the same failure, fifteen years on.

And the bill is spreading. The PJM grid covers thirteen states from Illinois to North Carolina, serving 67 million people. In 2024, PJM's capacity auction cleared at $28.92 per megawatt-day. In 2025, that price jumped to $269.92 — an 833 percent increase! The next auction cleared at $329.17. PJM's independent market monitor attributed 63 percent of the 2025-2026 price spike to data center demand, costing ratepayers an additional $9.3 billion.

The Natural Resources Defense Council (NRDC) estimates cumulative ratepayer costs across PJM could reach $100 billion to $163 billion through 2033 unless reforms pass. For the average household in the region, that translates to roughly $70 a month by 2028.

The communities did not get bad deals because they negotiated badly. They got bad deals because there were no terms to negotiate against. Or, because they had little time to react.

Why the Terms Matter More Than the Project

Every major piece of infrastructure built in the last century produced a set of terms for how communities capture value from it. Those terms often did not exist in detail before the infrastructure showed up. They were negotiated into existence in narrow windows, usually before the industry locked in its preferred version.

Railroads gave us rights-of-way doctrine. Oil and gas gave us severance taxes and royalty trusts. Wind and solar gave us community benefit agreements.

Each set of terms took 10 to 20 years to harden. Each one set the rules for decades after.

The communities that got the best deals were the ones whose planners, attorneys, and CBOs were at the table early. Before the terms set.

AI data centers do not have settled terms yet. The industry has a playbook. Communities, mostly, do not. Virginia locks in 30-year abatements. Texas offers sales tax exemptions. Arizona communities are rezoning and rezoning back.

A March 2026 Gallup poll found that 71 percent of Americans oppose AI data center construction in their local area. Nearly half are strongly opposed. That number is not a referendum on AI. It is a signal that the procedural infrastructure for siting this kind of facility has already broken.

We are roughly in year three of the window. It will not stay open.

What Good Terms Contain

Once a critical mass of communities sign 30-year deals on the current basis, those deals become the floor for every negotiation that follows.

Good terms need at least the following elements:

• Revenue capture that does not expire early. Severance-style taxes on energy or water use, megawatt fees, or percentage-of-revenue structures. Not abatements that disappear after 20 years and leave the community with the externalities and none of the upside.

• Capacity protection. Pre-defined caps on water draw and grid load, tied to regional carrying capacity rather than project-level estimates. The model has to match the watershed and the substation, not the other way around.

• Workforce floors. Construction jobs are temporary. Operational jobs would stay. Local hiring requirements need to survive past the build-out phase.

• Community benefit funds. Percentage-of-revenue structures that grow with the facility, not one-time signing bonuses spent before the building opens.

• Sunset and reopener clauses. The technology will change. The deal should adjust with it. A 30-year fixed agreement is too risky.

• Procedural floors. Public comment windows, environmental review thresholds, no consent-agenda approvals above a defined project size. The community has to know what it is being asked to approve.

This list is not exhaustive. It is the start of a shared definition of what "good enough" looks like.

Why This Matters for Your Work

The argument lands differently depending on where you sit.

If you are a planner, this is about getting the analytical and procedural infrastructure in place before the next pitch lands on your council's agenda. Once a project is announced, the political pressure to approve it eclipses the procedural questions almost immediately.

If you are at a CBO, this is about being at the negotiation table — and having a shared framework with neighboring communities so you are not negotiating in isolation. The single biggest leverage a developer has is the threat to take the project to the next county. A regional set of terms neutralizes that threat.

If you are at a foundation or government program, this is a funding gap. Almost nobody is paying for the analytical capacity that small cities and rural counties need to evaluate these deals on equal footing. That is a strategic opportunity hiding in plain sight.

If you are at the state or regional level, this is the moment to write the framework. SB 79 is the precedent — California decided housing near transit was a statewide priority and standardized the rules. AI infrastructure will need its version, and the question is whether the framework gets written by communities or to them.

Clarity, Trust, and Tradeoffs

The terms question pulls on all three.

• Clarity and Focus. What is a data center actually delivering to the host community? Most current pitches conflate construction jobs with operational jobs, and one-time payments with ongoing revenue. Good terms force the developer to answer the questions the community would have asked if it had time.

• Trust and Power. Who is at the table when the terms get written? How are the data center companies building trust with the community to support long term operation?

• Tradeoffs and Courage. Communities that get good deals are the ones willing to walk away. A shared framework makes walking away easier because it gives you a definition of "good enough" that you did not have to invent under deadline pressure.

The 1956 terms were not written by the South Bronx. They were written by a federal government that knew what it wanted, scaling a model Robert Moses had already proven. The AI-era terms can be different. But it requires showing up early, and it requires thinking long term.

We need data centers. And, communities need livable environments and terms that work long term.

—> ONE BIG IDEA.

Terms for new infrastructure get written in narrow windows, and we are inside that window for AI data centers right now. What gets agreed to in the next 24 months will define the rules for the next 20 years.

—> ONE THING TO REFLECT ON.

When a major infrastructure project lands in a community, the terms set at the start follow that community for decades. Who was at the table when those terms were written? Who wasn't?

—> ONE THING TO TRY.

This week, find a term sheet, community benefits agreement, or host community agreement for a recent infrastructure project in your region. It could be a data center, a warehouse, a solar farm, a transit project, a stadium. Read it like a community member would. Ask three questions: What does the community actually get, and when? What happens if the promises are not kept? Who has the power to enforce it? If you cannot answer all three from the document itself, that tells you something about how the deal was written.

Nader Afzalan, Ph.D.

Founder and CEO, The Triangle

Program Director, Sustainable Environmental Design, UC Berkeley