A data center moratorium isn’t a retreat. It’s Arizona’s opportunity to get It right

Arizona’s emergence as one of the nation’s premier destinations for data center investment was no accident. It resulted from thoughtful public policy, bipartisan leadership and the recognition that digital infrastructure would become as essential to the modern economy as highways, railroads and airports were to previous generations.

Unfortunately, the conversation surrounding data centers has become increasingly polarized. Headlines have focused on electricity consumption, water use and tax incentives while overlooking the economic benefits these facilities have delivered in the past decade. The recent decision to impose a three-year moratorium on Arizona’s data center tax incentive has only intensified that debate.

It’s time to set the record straight.

Arizona’s data center tax incentive was enacted in 2013 with overwhelming bipartisan support. Republicans and Democrats recognized attracting capital-intensive technology infrastructure would diversify Arizona’s economy, strengthen its competitive position and encourage long-term private investment. The incentive was a transaction privilege tax and use tax exemption on qualifying equipment purchased by certified data centers meeting significant capital investment and job creation thresholds.

The policy worked exactly as intended.

Since its adoption, Arizona has attracted billions of dollars in private investment from many of the world’s leading technology companies. These projects have generated thousands of construction jobs, hundreds of permanent high-paying careers, millions of dollars in tax revenue, and significant business opportunities for Arizona contractors, engineers, electricians manufacturers and suppliers. They have also strengthened Arizona’s position as a technology hub.

Data centers are society’s digital backbone

Even more important, data centers have become critical infrastructure supporting virtually every sector of our economy. Artificial intelligence, cloud computing, semiconductor manufacturing, bioscience research, financial services, public safety, defense, higher education and healthcare all rely on secure, resilient data centers. They are the digital backbone of modern society.

The industry itself also has changed dramatically since 2013.

Today’s facilities are significantly more energy efficient than those built a decade ago. Operators have invested in advanced cooling technologies, AI-driven workload management, waste heat recovery and more efficient server architecture. Water conservation has become a major priority as many new facilities utilize air-cooled or hybrid cooling systems, reclaimed water and sophisticated recirculating technologies that substantially reduce potable water use.

At the same time, public sentiment toward data centers has shifted; not just in Arizona, but nationwide. Communities are asking tougher but legitimate questions about electricity demand, water use, land use, infrastructure and community benefits. The industry must answer them openly and transparently.

That changing landscape led Arizona lawmakers to adopt a three-year moratorium on the tax incentive. It is important to understand what that means – and what it does not.

The moratorium does not prohibit new data center development. It does not prevent cities and counties from approving projects. It does not stop companies from investing in Arizona.

Instead, it temporarily pauses eligibility for one specific state tax incentive while policymakers evaluate its effectiveness and consider whether modifications are warranted in light of today’s marketplace. That is a far more measured response than permanently repealing the incentive.

A moratorium provides an opportunity to replace emotion with thoughtful analysis. It allows legislators, local governments, utilities, economic development organizations, community leaders and the industry itself to examine what has worked, what should be improved and how Arizona can continue attracting investment while addressing concerns.

The industry also has an opportunity – and, I would argue, an obligation – to evolve.

Data centers have to reset expectations

Simply put, data centers have a branding problem. Too often, the public hears only about megawatts, water consumption and tax incentives. They rarely hear about the thousands of workers building these facilities, the local businesses benefiting from their investment, the engineers developing the next generation of AI, or the critical services these facilities enable.

Over the next three years, I hope data center developers embrace a new model of community engagement. Start conversations long before zoning hearings. Clearly explain energy and water use. Share realistic economic impacts. Listen to neighborhood concerns. Invest in workforce development, education, public safety and the communities where you build. Become visible corporate citizens rather than anonymous infrastructure providers.

Arizona has every right to expect transparency, accountability and responsible development. Likewise, the industry has every opportunity to demonstrate it can be an exceptional community partner.

Moving forward, data center operators should think of themselves not merely as technology companies but as partners in prosperity. Success will depend not only on delivering world-class digital infrastructure but also on earning the trust of the communities they serve.

Data center operators should use this moratorium to revise their playbooks and put people first so Arizona emerges with stronger public confidence, better projects and an even more competitive technology economy.

That is a far better outcome than abandoning one of Arizona’s most successful economic development policies.