Data center could be a costly boondoggle if AI boom turns into bubble

Editor:

In a recent Daily News article about the proposed data center at STAMP in the Town of Alabama, GCEDC Director Mark Masse gave an electrifying account of the economic benefits. Underneath this buzz, though, is the need for closer examination of the economic returns.

There has been concern for some time that the generative AI boom may actually be a bubble that will someday burst.  According to a recent article in The Atlantic, during the 1990s, when it was thought that increased usages of PCs and the Internet would warrant them, there was a large build-out of fossil fuel-powered energy plants. When that demand failed to materialize, many energy projects were abandoned or went bankrupt. Well, guess what. The same article continues:

“The generative-AI boom, too, could prove to be a bubble. The technology remains extraordinarily expensive, largely because of the cost of advanced computer chips, and no AI firm has presented a convincing business model… And if AI doesn’t turn out to be as transformative a technology as experts predict, swaths of data centers could be left unused or unfinished—ruins from a future that never came to pass.”

What if this is the case for the $19.46 billion STREAM project and the undisclosed future operator? Is there any protection for the Town of Alabama, Genesee County or the GCEDC if the project is started but abandoned? Has the project been bonded for performance or payments or are there other safeguards to protect local entities? Does the Town of Alabama or the county have the capacity to maintain or to demolish a 2.2 million square-foot building or to take care of residual pollution?

GCEDC claims that Genesee County can expect $283.9 million in PILOT/Host payments over a 30-year period and $9 million annual in sales tax revenue from electrical usage, for a total of $270 million over 30 years.

Realistically, the average lifespan of these facilities is currently 10-15 years, with massive data centers like the one proposed at the STREAM site too new to be known. Because technology changes so rapidly, any prediction about an industry or tax benefits over a 30-year period is conjecture.

The public is increasingly skeptical of data centers, with a February poll showing 70% of Wisconsin residents now believing that the costs outweigh the benefits, a microcosm of what is happening elsewhere. In at least 14 states and dozens of local municipalities, governments are introducing legislation to slow or stop data center development.  In Virginia,  an area that’s referred to as “Data Center Alley,” voters have turned sharply against building more, with only 35% of people now comfortable with a data center in their community (69% in 2023); a proposed 1,700 acre campus near Manassas was recently dropped. In addition, Virginia voters have turned abruptly against tax breaks for these centers with 56% now strongly opposed (31% in 2023), an opinion that has shaken up local elections.

Data centers are unifying people across the political divide and garnering strong bipartisan resistance. In addition to environmental concerns, people are worried about higher electricity prices and lower home values, and they take exception to major corporations quietly arriving in their communities and setting up colossal and secretive deals affecting taxpayers.

Here in Genesee County and the GLOW region, resistance is mounting as people see the consequences of the dangerous environmental impacts along with the economic gamble.

Leslie DeLooze

LeRoy