Microsoft’s plan to counter community backlash over AI data centers

Microsoft has responded to the growing backlash over U.S. data center expansion with a set of five commitments meant to win over communities worried about electricity prices, water scarcity and job losses.

More than $64 billion in data center projects were killed over the past two years by villages, towns and cities concerned about surging utility bills, shrinking water supplies and land development deals conducted in secrecy.

The Community-First AI Infrastructure initiative encapsulates the policies that Microsoft will use when approaching new development starting this year, including a promise to bear the cost of electric grid transmission updates and new generation resources.

“We need to stand up and step up as an industry and ensure that we pay the tab for things like the cost of electricity data centers will need,” said Microsoft Vice Chair and President Brad Smith, speaking at a launch event in Washington, D.C.

Microsoft is also pledging to replenish water in communities that host new facilities, to train and hire local residents for jobs at its facilities, and to refrain from requesting special tax breaks. 

Community-First AI Infrastructure doesn’t include specific policies related to land-use conversion, which is another concern for some rural agricultural communities. But Microsoft’s data center development team screens sites for potential impacts on nature and biodiversity.

The Trump administration has adopted sweeping federal-level policies to encourage AI infrastructure development via executive order, but the real decision making comes at the community level, Smith said: “As important as the President of the United States is on almost everything, when it comes to a data center, sometimes it is the president of the village council that is more important still.”

Already in practice

Many approaches or policies promised under the initiative are already used in communities where Microsoft has a presence or seeks to establish one. Likewise, Amazon and Google have orchestrated creative relationships to support their need for new data center capacity, especially those running on clean energy. 

But Microsoft is the first to make broad promises about picking up the tab for electricity and water upgrades needed to support the industry’s billions of dollars in planned AI expansion. Amazon and Google did not respond to a request for comment.

“Not all companies are speaking like them, certainly not all companies are acting like them,” said Mike Monroe, chief of staff for North America’s Building Trade Unions, a labor organization that supports Microsoft’s plan. 

For example, the company is spending $7 billion to build what it bills as the most powerful AI data center in the world near Racine in Mount Pleasant, with the first phase to be complete early this year. The company was the largest single taxpayer in the county in 2025. It’s also supporting a special electricity tariff in Wisconsin for customers with large loads, including data centers, so that the costs aren’t passed on to individuals or smaller businesses.

“If we think about the impact that businesses like Microsoft can have, that leveraging the AI revolution can have, they are real and substantive,” said U.S. Rep. Brian Steil, a Republican who represents the district. “They are real and substantive, I think, in two ways. One, reducing the tax burden, which is always a good thing but also investing in a lot of the resources that communities need.”  

In Wyoming, Microsoft created a first-of-its-kind tariff about 10 years ago, with utility Black Hills Energy, to segregate its needs from traditional rate payers. The arrangement lets Microsoft source wind energy for its data centers and also enables Black Hills to draw from Microsoft’s on-site backup power supplies during times of peak demand.

“In order to make this successful for the community, I think that Microsoft saw early on they wanted to make sure they were a long-term, viable partner,” said Wes Ashton, vice president of South Dakota and Wyoming utilities for Black Hills. The company has been candid about its growth needs and vision, which was essential for success.

Microsoft’s new strategy for water also has roots in past experiences. In Quincy, Washington, an 8,200-person agricultural town in the center of the state that has hosted Microsoft data centers for two decades, the company funded a water reuse facility, rather than relying on groundwater, and it pays for ongoing upgrades. 

The tech company is likewise paying for water and sewer improvements near its data center in Leesburg, Virginia. Identifying the needed upgrades and developing an investment plan took many meetings and candid communication, said Brian Stone, deputy director for the Leesburg department of utilities, who manages these relationships for the community. 

Once the difference between Leesburg capacity and Microsoft’s needs was quantified, a plan to address it was captured in a formal agreement that was executed in late 2025. Microsoft is paying 100 percent, or about $2 million, for a capacity upgrade that serves its facility along with a large portion of other upgrades and maintenance projects.