Subscriber Benefit
As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowAs data centers dominate economic development conversations in Indianapolis and draw packed meetings in small towns around the state, officials with the Indiana Economic Development Corp. commissioned a study earlier this year on the costs and benefits of data centers.
The IEDC is paying Boston Consulting Group $650,000 to research the economics of data centers and produce a white paper report detailing the best way for the state to approach such proposals, according to a contract approved by the agency.
The no-bid contract states the study was to be completed by June 30, but the IEDC now says the report isn’t finished as the agency was delayed in finalizing an extension with Boston Consulting for a second phase of the project.
A spokesperson for the agency told Inside INdiana Business on Friday that the study is expected to be released “next week,” but that an official release date was unclear.
Indiana Secretary of Commerce David Adams was formerly a senior adviser to Boston Consulting and has overseen the IEDC, as well as several other state agencies, since his appointment by Gov. Mike Braun in January. According to documents available in the IEDC’s transparency portal, the agency contracted with Boston Consulting two other times, both in 2023, on studies regarding development incentives.
The IEDC said the extension period concluded at the end of August, but it’s unclear when any reports will be released or if there will be any additional payments to Boston Consulting. When reached by Inside INdiana Business, Boston Consulting declined to comment on the contract.
Data center boom
Driven by a huge demand to power generative artificial intelligence technology, large tech companies are aggressively pursuing data center projects.
Thanks in part to legislation passed in 2019 that gave substantial tax incentives to data center operators, many projects have targeted Indiana, including hyperscale projects by Amazon, Google, Meta and Microsoft.
In addition to the tax incentives—which run up to 50 years on qualified technology equipment—Indiana offers relatively cheap land, labor and energy costs and has relatively few instances of natural disasters, all of which make the state attractive to developers.
The IEDC has given out tens of millions of dollars in tax breaks to data center projects, but decisions on whether projects are built or abandoned often come down to elected officials at the city or county levels.
There’s no official count of how many data centers currently operate in the state, but the utility consumer advocacy group Citizens Action Coalition estimates there are around 40 data centers that are active or being proposed.
Just this week, an $800 million data center project received tax abatements in Michigan City and a rezoning proposal advanced for a data center near Frankfort.
However, the past 18 months has seen increased opposition to data center projects from local communities. Proposals have recently been voted down in Chesterton, Burns Harbor, Valparaiso and Kosciusko County. In March, a developer withdrew a rezoning request for a data center in Hancock County after opposition led by the owners of Tuttle Orchards. In Indianapolis, a majority of city councilors have publicly said they don’t plan to support a rezoning request for 470 acres of land in Franklin Township for a Google data center.
Residents across the state have voiced concerns about data centers contributing to rising electricity costs and depleting water resources. Many are also worried about noise and the loss of agricultural land for projects that can generate hundreds of millions in investments but few jobs.
Data center ‘playbook’?
According to IEDC documents, those topics are central to the report Boston Consulting was contracted to prepare for the state.
An overview of the agreement states Boston Consulting’s report is meant to answer “whether data centers provide sufficient return on investment for Indiana, given their high energy consumption, relatively low direct job creation and community concerns.”
The prospectus states Boston Consulting will research outcomes and trends for data centers and their supply chains and develop “an opportunity evaluation playbook outlining factors to consider” when considering data center projects.
The study overview is similar to two previous contracts Boston Consulting has undertaken for the IEDC.
Both studies were completed in 2023 and looked at incentive packages for semiconductor developments in and around the LEAP Innovation District (LEAP stands for Limitless Exploration/Advanced Pace). The IEDC paid Boston Consulting $75,000 for one study and $1 million for the second.
IEDC spokesperson Lindsay Lindsey said findings from the research will be publicly available.
Please enable JavaScript to view this content.
“An overview of the agreement states Boston Consulting’s report is meant to answer “whether data centers provide sufficient return on investment for Indiana, given their high energy consumption, relatively low direct job creation and community concerns.”
Other than that, loads of benefits for Hoosiers!
Why waste $650,000 on a study? The issue is homeowners don’t want to pay for the electricity infrastructure. Every deal should require the data centers to pay for the infrastructure needed. I’m ok with tax breaks and the data centers can pass that electricity infrastructure on to their customers.
Agree
That’s the key question – whether these new data centers pay for the electric and water infrastructure impacts. Whether “data centers provide sufficient return” will likely hinge on that answer, which could vary based upon jurisdiction.