Earlier this month, Missouri Gov. Mike Kehoe spoke in front of a crowd at an annual summit on power held by the state's Public Service Commission in Jefferson City.
Data centers dominated his remarks.
"Big talk seems to always come back to data centers, which is a piece of the economic puzzle that we would love to have in our portfolio here in the state," Kehoe said. "But it really is much more than that — it's a statement of what Missouri is about and if we're open to do business or not."
Over the past several months, the proliferation of data center proposals in eastern Missouri has sparked public furor from communities and excitement from officials and the development sector.
At the core of the debate: the economic impact of the projects.
Opponents of new data center construction in St. Louis and other communities worry the energy-hungry projects will add to already rising electricity bills, use large amounts of water and negatively impact the environment and strain the grid.
Along with those concerns, some residents and environmental group leaders have questioned how much economic impact the projects actually offer.
But officials like Kehoe and St. Louis Mayor Cara Spencer insist the state and city need to be open for business and looking to attract data centers due to the potential boon to the state and city's tax base.
"We want to be open for business," said Spencer after city officials decided against enacting a temporary moratorium on new data center proposals. "We recognize that data centers play a role in — an important role — in the technology infrastructure that forward-thinking, forward-moving cities need to have as part of an ecosystem that can attract other types of technology companies and technology innovation to their communities."
As the need for data centers grows during the current AI boom, states across the country are rushing to get in on the development.
"If Missouri is not out there bringing in these huge tech companies and investment, another state will, and Missouri could find itself five to 10 years from now having no tech investment because we said no to it," said Oliver Roberts, a co-director of WashU Law's AI Collaborative.
The AI Collaborative researches AI policy and its impact on legal practice, society and policymaking.
The benefits from data centers can be massive, Roberts said. The billion-dollar projects can inject millions into tax bases through property, sales and use taxes and create a temporary boom in jobs during construction.
He pointed to Elon Musk's data center in Memphis, built to support social media platform X's AI. The project is expected to produce $25 million in property taxes for the city.
For a city like St. Louis, where population drain and other factors continue to shrink the tax base, billion-dollar data centers offer an opportunity to inject millions of dollars into its coffers.
The developers of a proposed $1.5 billion data center at the shuttered Armory site in St. Louis say the project would create significant tax revenue. They estimate the project would raise a total of $213 million over 10 years for the city and its schools. That's a combination of permit fees and real estate, personal property, utility, sales and use and earnings taxes.
But Roberts said the true impact of data centers on jobs and tax bases is a complex, multifaceted issue. He said each project offers a unique situation based on the size of the data center, what incentives the state and local governments offer and more.
"There's pros and cons on both sides," Roberts said. "You can look at it from an economic perspective, job creation, tax base, infrastructure, community feedback."
Construction creates initial job boom, which then fades
One of the main promises developers of data centers often tout is the creation of jobs.
For instance, Meta's $1 billion data center in Kansas City created roughly 1,500 construction jobs, and the consultants behind the proposed data center at the Armory recently boasted it would create 600 jobs.
That initial job boom during the construction phase eventually wears off, Roberts said. What's left is a much smaller number of permanent jobs. The Kansas City center will employ around 100 employees when it's finished.
The temporary nature of the bulk of the jobs has proved a sticking point for opponents of data center construction in the city and elsewhere.
"Again, take the Meadows facility over in Kansas City, for example. They say they had 1,500 construction jobs, but then it gets built, it's completed, and now they have 100 full-time staffers," Roberts said. "You really see that drop off between the temporary job creation and the full-time jobs."
At a recent St. Louis Board of Aldermen hearing that added new rules to the building of data center projects in the city, labor leaders asked officials to avoid pushing the data center industry away.
"I understand the need for guidelines and guardrails," said Tim Green, executive vice president of a partnership between IBEW Local 1 and St. Louis' chapter of electrician contractors. "All we're asking is that with these guidelines and guardrails is that we don't push an industry away."
Tax incentives can curb true economic impact
In recent testimony sharing concerns over Ameren's plans, the director of industry analysis for the Missouri Public Service Commission, James Busch, said data centers may not be the income driver many expect them to be.
"These centers are not like large manufacturing facilities that will hire thousands of workers and which have large economic impacts well beyond the building phase. Further, there are statutory provisions that reduce the tax revenue generated by some data centers," he said. "The State of Missouri has incentives in place that would exempt data centers from sales and use taxes associated with the activities required to build or expand facilities in Missouri."
Roberts said tax incentives offered by Missouri and its municipalities also play a big part in the true economic impact of data center projects. Incentives like tax abatements and statewide programs that exempt data centers from certain taxes can greatly affect the revenue that reaches the area's coffers.
As for tax abatements, government entities use them and other incentives in an effort to lure in developers. Abatements mean developers pay significantly less in property taxes over a fixed time period, often anywhere from a few years to 20 or more.
"If you're giving away property tax abatements, that is a pretty huge portion of the tax base they are giving away in hopes that this data center stays for the long term and is a worthwhile investment," Roberts said. "There are these big investment benefits, but there's also this offset in taxes for quite a long time."
Missouri's Data Center Sales Tax Exemption Program, created in 2017 by the state legislature, means the state and cities in it could lose out on millions in tax revenue from data center developments. The law exempts some data centers from paying sales and utility taxes.
Lawmakers created the program in an effort to attract data centers to Missouri by shrinking the cost of building the centers. And, as Kehoe said recently, it's not just about data centers — it's also about what other companies will come with the creation of data centers.
Assessing the program's impact is difficult. Missouri is one of 32 states with subsidy programs for data centers and one of 12 in that group that don't disclose the annual costs of the subsidies, according to a report from Good Jobs First.
"It's tough to see the full economic picture, given that a lot of it is not publicly disclosed," Roberts said. "So all those benefits I listed are, of course, offset by any potential property tax abatement, sales tax abatements, other forms of abatements — and tax benefits include no tax on the materials that are used to build."
Other costs, environmental impacts
Roberts noted there are other costs to data centers on the environmental and cost-of-living side of the economic impact conversation.
Many St. Louisans opposed to data centers expressed concerns about how a new data center might impact their Ameren bills. The topic dominated the conversation at recent town halls hosted over the Armory project.
"We're being told right now that the rates will not increase," said Arthurine Harris at a town hall hosted by Steadfast City last week. "I don't see how that's even possible? How is it that we're so lucky if other people in Georgia and in Memphis weren't so lucky?"
While anecdotal, Roberts said those worries may not be for nothing.
"Citizens in New Jersey, Pennsylvania, they're seeing increased utility bill costs without any corresponding increase in actual energy usage," he said. "It is a realistic concern in many communities that utility rates will go up."
At a recent town hall meeting on the Armory project, James O'Mara, a representative of Ameren, said Missouri legislation passed in March protects consumers from rate hikes from new data center development. The law, SB4, requires large utilities to write tariffs for customers requesting more than 100 megawatts of energy to ensure customers' rates don't reflect any "unjust or unreasonable cost."
But state regulators say the new demand for energy for data centers across Missouri will require expensive new power plants. According to a staff rebuttal on an Ameren proposal urging the Missouri Public Service Commission to reject an Ameren proposal for new large data center rates, construction of new expensive power plants could raise electric bills by an estimated $22 million per year.
"A new [large load] customer is somewhat equivalent to the addition of a new medium-sized city, essentially overnight," staff wrote.
Copyright 2025 St. Louis Public Radio