The New Stadium Scam Is a Server Farm

La Porte, Indiana, is a small city between South Bend, Indiana, and Chicago, Illinois. The recent announcement that Microsoft is investing over a billion dollars into a vast new data center campus in La Porte is expected to be transformational for the town of 22,000 people. 

Microsoft was given a 40-year tax abatement on equipment, a renewable state sales tax exemption through 2068, and just $2.5 million of payments in lieu of taxes (PILOT) over four years—roughly 30 percent of what it would normally owe. After that? Nothing. Local utilities would cover the infrastructure.

Indiana’s levy system is designed to reward growth with lower taxes. But when the biggest newcomer isn’t taxed, the reward goes with them, the burden stays with the taxpayers, and the scales get tilted by bureaucrats.

Just 60 miles up the toll road sits Soldier Field, home of the Chicago Bears. The stadium’s 2002 post-modern renovation cost $587 million, $387 million of which was shouldered by taxpayers. Two decades and two dozen quarterbacks later, Chicago only has $640 million (thanks to $256 million in interest) left to pay (oh, and the Bears are now threatening to leave.)

Cities have long bankrolled stadiums for billionaire team owners, while promising taxpayers jobs, tourism, civic pride—maybe even a Super Bowl. The results? Almost uniformly dismal. The Cincinnati Bengals deal left Hamilton County, Ohio, buried in debt and obligated to fund high-tech upgrades just to keep pace. Miami, Florida, spent $500 million in public funds on a baseball stadium for the Marlins, only to see attendance collapse and the team gutted. St. Louis is still paying off the Edward Jones Dome, even after the Rams skipped town for sunnier Los Angeles. Charlotte, North Carolina, is the latest addition to this hall of shame after handing over $650 million in tourism taxes to renovate Bank of America Stadium, earning them the “Worst Economic Development Deal of the Year” distinction from the Center for Economic Accountability. 

Today’s stadium boondoggle is a server farm: shinier, techier, but often just as bad for taxpayers. Small towns (and not a few big ones) are bending over backward to lure data centers. Local economic development officials tilt the scales, suspend the rules, and give away the farm. The sales pitch is nearly identical to the stadium era: “It’ll create jobs. It’ll put us on the map. It’s worth the investment.”

But once the banners come down and the golden shovels are back in the closet, what’s left is a trail of lopsided deals, and taxpayers stuck holding the bag.

La Porte’s Microsoft deal is really a generational tax holiday. A chunk of the meager $2.5 million PILOT has been promised to buoy the ailing local public schools after a mass exodus has left most buildings at only 50 percent capacity.

However, first, there’s infrastructure. Data centers demand massive utility upgrades: power lines, substations, water lines, fiber, and roads. These are usually paid for by local utilities, state infrastructure grants, or ratepayers. In Kansas City, Evergy announced it would build two new power plants largely to meet data center demand—costs to be passed on to customers. In Northern Virginia, Dominion Energy‘s data center grid upgrades are now a line item in statewide electric rate hikes.

Next, there’s Tax Increment Financing (TIF). In Mount Pleasant, Wisconsin, Microsoft qualified for a TIF district originally created for Foxconn (another economic development disaster). That deal allows the company to recapture up to 42 percent of its own property taxes—not only avoiding taxes but being reimbursed with public dollars. Some cities route PILOT payments into Redevelopment Commissions, meaning even the taxes they do pay never reach the general fund.

Maybe there’s a transparent version of deals like these that could make sense—if PILOTs are structured right, if infrastructure serves broader public use, or if the tax increment is actually tied to value created. But these deals are struck behind closed doors, insulated from scrutiny, and built on the assumption that any growth is good—even if it’s paid for by reaching into your neighbor’s wallet.

Analysts project that data center capacity will more than triple by 2030 and estimate the U.S. will need to reach 35 gigawatts of capacity by then—double today’s total. The surge is largely driven by artificial intelligence (AI), which alone could account for 70 percent of all data center demand by 2030. These facilities already draw more electricity than some nations, and Goldman Sachs projects they’ll consume up to 9 percent of U.S. power by decade’s end. New builds are booming—yet much of that construction is being underwritten, piece by piece, by state and local governments chasing the illusion of growth.

Data centers are not a menace. Left to the market, they’re a genuine asset—critical infrastructure in a country trying to stay competitive in the age of AI. We don’t need to bribe the richest companies on earth to build them.

The post The New Stadium Scam Is a Server Farm appeared first on Reason.com.