Ranting about data centers is all the rage these days. Word got out recently of a developer exploring Jackson in hopes of building a new AI (artificial intelligence) data center. Who knew it would unleash a hornet’s nest of protests and gnashing of teeth? Opponents drove from three hours away to a City Council meeting just to share for three minutes their dire warnings of great troubles with data centers. That proves it is an important topic worthy of calm and rational discussion.
Some factoids on data centers:
The buildout of AI data centers is by far the hottest part of the U.S. economy. It is just getting started and already ranks as the biggest capital investment boom in American history with hundreds of billions invested so far and trillions more expected by 2030. Some compare it to the advent of railroads 150 years ago – a boom that radically transformed America and its economy. Why all the excitement about AI?
AI is a paradigm shift in compute, not unlike the mainframe to the PC to the Internet to the smartphone. Its proponents claim it will transform and reorder the economy in the same way that previous paradigms have. Warehouses for computers and communication gear have been around for decades but AI, turbo-charged by Nvidia’s parallel processing chips has enabled vast new compute capabilities. It is these new capabilities that have triggered the tech titans to open their checkbooks, join the AI race and shift their business models from capital light to capital intensive.
Two big concerns around AI data centers are electricity and water usage.
Electricity: The proposed data center in west Jackson calls for enclosed reciprocating engines powered by natural gas with no connection to the grid. Such an arrangement would have no effect on local electricity rates or availability.
Water: Jackson’s primary source for water is the Ross Barnett Reservoir, the largest surface source of water in the State of Mississippi at 340,000 acres which is continually fed by the Pearl River drainage basin. When water is running over the spillway, which is most of the time, it contains 146 billion gallons of water. Thanks to JXN Water Jackson’s two water plants are fully operational with capacity to produce 50 million gallons a day. The city’s water woes are financial in nature. The city needs more water customers paying their bills. A data center that uses lots of water and pays their bill is part of the solution not part of the problem.
An upside surprise: A key feature of AI compute is its very large footprint versus previous compute paradigms and what that means in terms of ad valorum taxes. For 50 years compute devices have shrunk in size until now when the footprint of AI has exploded from angstroms to acres with campuses of bricks and mortar. The result is gushers of ad valorum tax receipts that will last for decades for the states, counties, municipalities and school districts that these data centers call home. The ad valorum tax estimates from Amazon’s data center investment in Madison County for County/City/Schools is $60 million a year for the next 10 years and $120 million per year for the following ten years. It doesn’t take AI to figure out how that can help a city budget.
Ashby Foote III is President of Vector Money Management and serves on the Jackson City Council, Ward 1. He is on the board of Bigger Pie.
