Powering Progress: How Community Benefits Agreements Can Drive Responsible Data Center Development

Data centers are poised to consume land, water and power across the United States at an unprecedented rate. Driven by artificial intelligence, cloud computing and supportive government policies, U.S. data centers’ power capacity could reach 194 gigawatts by 2035, more than three times the current 58-64 GW. They could also consume 20% of the nation’s electricity, up from 5.9% today.

The unprecedented scale and rapid pace of hyperscale data center development have overwhelmed traditional policy playbooks. As developers race to build increasingly expensive facilities, they are frequently engaging in opaque negotiations and rapid, behind-closed-doors dealmaking with local authorities.

Data centers can strain local water supplies, cause noise and air pollution, increase competition for land and compound environmental and economic challenges, especially in marginalized communities. As development accelerates, community resistance is growing, and state and local governments are struggling to keep up with an industry evolving faster than municipal zoning laws.

All this raises the critical question: how can these massive facilities minimize harm and deliver long-term benefits to the communities that host them?

Community benefits agreements (CBAs) are emerging as an essential governance tool. These legally binding contracts between developers and local community coalitions or municipalities can guarantee specific benefits to communities in exchange for their support. While CBAs were originally used in urban commercial real estate, they have a long history of being adapted for large-scale projects in mining, manufacturing and utility-scale clean energy sectors. Now, a growing number of local governments and communities are leveraging these tools as part of the data center development process, from Lancaster, Pennsylvania, to Rio Grande, Texas.

But signing a CBA is not enough. It must be strategically designed to be effective rather than performative. Most importantly, CBAs aren’t silver bullets. For some communities, no agreement can make a massive data center welcome. For others, the calculation is different, with residents viewing the potential economic benefits as a fair trade for the local costs. CBAs also shouldn’t be seen as a substitute for robust governance. Rather, they should complement state and local policies that manage the impacts of data center growth.

Drawing from existing research (including Brookings Institution, National Association for the Advancement of Colored People (NAACP) and Columbia Law School Sabin Center for Climate Change Law) and lessons learned from several WRI case studies of benefits-sharing agreements, we propose concrete guidelines to help local governments and communities negotiate with data center developers in ways that protect communities and advance long-term prosperity.

Private and Public CBAs Have Different Implications for Communities

Private agreements are signed between developers and community coalitions, which can include local residents, community-based organizations (CBOs), labor unions and environmental groups. Government agencies are generally not parties to these agreements, though they can support negotiations by providing resources to community groups or expediting project approvals once an agreement is signed. Public agreements, by contrast, are negotiated between developers and a local government body, which can leverage regulatory powers such as land-use approvals and zoning amendments to secure community benefits. WRI’s database of Community Benefits Frameworks catalogs dozens of public and private agreements, with details about framework type, project sectors, location and specific benefits provided.

The two frameworks each address different structural vulnerabilities. Private agreements become necessary when the standard political and regulatory system fails to protect communities. They allow community groups to directly negotiate with developers, but also depend on well-organized, well-resourced coalitions to succeed. So far, they remain rare in the context of data center projects. Civil rights organizations like the NAACP have released standardized CBA templates to help grassroots coalitions in managing data center buildouts.

Public agreements address the financial and infrastructural risks faced by municipalities. These agreements are becoming more common in the data center context, with local governments stepping in as the primary negotiator and conditioning essential project approvals — such as parcel rezoning or utility hookups — on the developer signing an agreement to provide public benefits. The agreement between Lancaster, PA, and three developers is, to our knowledge, the first public CBA for a data center project. It requires the developers to provide $20 million in funding for sustainability and local economic initiatives, use 100% clean energy, comply with strict water-use caps and meet noise restrictions. The city administration is responsible for enforcing the agreement. Public agreements use the full weight of the government to require community investments, though the benefits secured and the agreement’s enforcement may be limited by local political will and zoning laws.

Public agreements offer another advantage: scalability. When a municipality passes a Community Benefits Ordinance — similar to the model pioneered by Detroit — it replaces project-by-project organizing with a clear, law-mandated framework. Specific CBAs can still be negotiated based on individual project context and neighborhood needs, while the ordinance makes it easier for communities to participate and gives developers clear, consistent expectations. In 2025, Memphis passed an ordinance capturing 25% of AI data center property taxes to fund public projects within a five-mile radius.

In cases where state laws limit local governments' authority, community groups may be left to negotiate directly with developers to secure benefits. Tennessee, for instance, prohibits local governments from requiring CBAs as a condition for receiving state economic incentives or tax breaks. Texas prevents local governments from enforcing or requiring CBAs through broad state preemption. The state law also limits their authority to mandate labor standards, impose broad impact conditions or regulate areas not explicitly granted by state statutes.

Effective CBAs Demand Early, Transparent and Continuous Engagement Across All Stages of Data Center Development and Operations

CBAs direct benefits to local communities, so their terms should be shaped by community priorities. In both private and public agreements, developers should engage communities as active co-creators from the start.

Public and private CBAs present different transparency and engagement challenges because of who controls the information and who holds legal standing.

Public CBAs face transparency failures through the misuse of non-disclosure agreements (NDAs) and exclusion of communities from negotiations. Public agreements are generally subject to municipal sunshine laws and freedom of information statutes, but developers routinely bypass this by signing sweeping NDAs that shield the entire economic development package from view. In Virginia, for example, 25 of the 31 localities with data centers have signed NDAs. As a result, public CBA negotiations are frequently reduced to backroom exercises where residents get as little as a few weeks’ notice before a project is greenlit.

Even in the absence of NDAs, community groups have accused local governments of freezing them out of CBA negotiations. Local groups like Lancaster Stands Up stated the public was excluded from negotiations and details were hidden until the last minute when the Lancaster CBA was signed. Local government willingness to meaningfully engage communities can be constrained by capacity deficits where understaffed municipal offices may lack time and resources to meaningfully engage the public. In some cases, local officials may view public participation as a “box-checking” exercise, holding one-off, poorly publicized town halls at inconvenient times to satisfy minimum legal requirements while actively blocking grassroots coalitions from the negotiating table.

Private CBAs, according to advocates, can offer true grassroots democratic representation by allowing communities to organize outside of formal government channels and put bargaining power directly in residents’ hands. However, private CBAs can also face transparency criticisms when representation is unclear, making it hard to determine whether a coalition speaks for the broader community or a select group. Negotiations in such cases can happen behind closed doors, and the final agreement is often private unless the parties choose to publish it.

Community groups can also face resource gaps: they may lack the capital to hire independent grid engineers, hydrologists or contract attorneys to fully assess the impacts of a data center project.

Here are some approaches that local governments and communities can take to ensure transparency and representation in data center CBAs:

• Targeted NDA restrictions: Pass local ordinances, such as Big Rapids Township, Michigan, that prohibit elected officials, municipal staff and economic development authorities from signing blanket NDAs with developers. To preserve municipal competitiveness, these frameworks can allow narrow, temporary protections for proprietary intellectual property, brand identity and early-stage land pricing agreements. Because local governments can be pitted against one another, states can also step in to create a uniform playing field (legislation has been introduced in 10 states to ban state and municipal employees from signing NDAs). Going further, regulatory frameworks should clarify that data on public resource use — including water, energy and infrastructure — is strictly public information. This would prevent developers from using confidentiality clauses in private CBAs to conceal a facility’s true environmental footprint.
• Three-party negotiation framework: Require all public development projects to establish a three-party negotiation framework, making a CBA a mandatory precondition for project approval, public funding or zoning changes. For large-scale, high-impact projects, an independently elected and demographically representative community advisory board (CAB) could serve as a coequal negotiating voice alongside the developer and local government. For private agreements, the CAB could serve as the core steering committee empowered to negotiate, execute and monitor the private contract.
• Independent technical and legal funds: Eliminate the capacity and technical knowledge imbalances by requiring developers to pay into a municipal fund that gives local government staff and grassroots community coalitions the capital to hire independent legal, hydrological and grid experts during negotiations.
• Periodic performance reviews: Transform the contract from a static document into an adaptive framework by incorporating periodic reviews over the life of a project. The Stillwater Good Neighbor Agreement has been amended multiple times to address changing commercial operations and emerging community interests. Data center CBAs can follow this model by including automatic renegotiation triggers for unforeseen grid congestion, changes to municipal water baselines and rapid technological shifts, holding the developer accountable to the local community over time.

Effective Agreements Pair Strict Harm Mitigation and Robust Benefit Delivery

Data centers present both challenges and opportunities to local communities and regions. CBA negotiations should begin by understanding potential project impacts and identifying areas where community and developer priorities align to secure tangible community benefits, setting the stage for a successful, collaborative partnership. 

Local governments should first enshrine harm mitigation and community protections in zoning and nuisance laws, establishing a strict regulatory floor for responsible data center development. Where these public protections are weak or absent, CBAs become the community’s primary regulatory defense. In these jurisdictions, CBAs should be structured to address the environmental, economic and infrastructure strains caused by data centers, building on existing local or state baselines to guarantee stricter enforcement, close regulatory loopholes and protect against future rollbacks. The Lancaster CBA serves as a good model. It caps municipal water consumption at 20,000 gallons per day per campus, requires 100% clean energy use and imposes financial penalties for noncompliance, and restricts noise levels to pre-construction ambient baselines.

Data Center Harm Mitigation Through Community Benefits Agreement

Historically, CBAs across sectors have prioritized defensive harm reduction over long-term community wealth building. Even when benefits are included, they are typically described in ambiguous and aspirational terms (“strive to create local jobs” or “strive to hire 30% of workers locally”), without clear metrics, timelines or enforcement mechanisms.

Because data center developers receive significant public incentives and access to shared community infrastructure — such as local water supplies and electrical grids — agreements should secure meaningful community and regional benefits. Public agreements are more likely to secure macro-level benefits, such as regional infrastructure funds and grid modernization, while private agreements are vital for securing hyperlocal benefits that directly compensate the neighborhoods bearing the facility's daily disruptions.

Careful negotiation can bridge the gap between these macro-level and hyperlocal priorities. Workforce development is a prime example. While data centers generate high capital value, they create relatively few permanent operational jobs. To ensure meaningful economic returns, negotiators can ask the developer to invest in regional workforce development, including advanced AI academies to prepare workers for the digital economy and unionized skilled-trade training centers that serve the workforce needs of clean energy industries and other local sectors. These regional investments can be anchored in the host community through project labor agreements that mandate union apprentice programs, local hiring preferences and dedicated training opportunities for residents living closest to the data center facilities. Workforce strategies can extend beyond jobs to build community wealth through local and diverse business development, contracting opportunities and community-owned assets.

Mapping Benefits: Regional vs. Hyperlocal

Data Center Agreements Demand Strict Monitoring and Enforcement Tools to Protect Communities

Monitoring and accountability mechanisms are essential in both public and private data center CBAs. They help ensure that promised benefits are delivered, harms are mitigated and commitments are enforceable. Many past agreements have failed to deliver results because they relied on vague language, lacked independent monitoring or had weak enforcement mechanisms.

Possible mechanisms for robust monitoring and accountability include:

• Independent third-party monitoring: Use neutral entities, such as universities or trusted nonprofits, to regularly audit water use, energy consumption and emissions and verify compliance with the baselines and thresholds established in the CBA. In public agreements, independent CABs, with dedicated seats for residents and environmental justice advocates, can foster trust and transparency, provided they have the legal authority to commission independent audits and trigger penalties.
• Data transparency portals: Create public online dashboards showing real-time or periodic metrics, such as water withdrawals, grid load, emissions and air and water quality. To maximize their utility, these portals could be paired with statutory requirements for public disclosure of whether a project is meeting its targets. Understaffed local government agencies and capacity-constrained CBOs may need technical assistance to interpret complex data. A technical and legal fund, as discussed earlier, could support hiring of independent data analysts, hydrologists or energy engineers to review dashboard data on behalf of communities and local government. Portals could also be designed to generate non-technical summaries alongside the raw data.
• Parent company guarantee: Standalone limited liability companies (LLCs) are sometimes created for specific data center developments, even when the ultimate backer is a major hyperscaler such as Google, Meta or Microsoft. If an agreement is signed with the LLC alone, the community risks being left with a worthless contract if the LLC is dissolved, goes bankrupt or transfers the asset. The parent company should be required to sign as a co-party and explicitly state that all obligations, penalties and monitoring requirements automatically transfer to any future buyer, operator or tenant if the data center or LLC is sold, leased or restructured.
• Enforcement clauses: Agreements should include penalties for noncompliance, such as fines, reduced subsidies, tax incentive clawbacks or legal action. For instance, public and private agreements can define precise, escalating per-day financial penalties for specific infractions, such as exceeding nighttime decibel limits or water caps. They can also require developers to place funds in escrow before construction begins, ensuring money is available to cover penalties or remediation. Public agreements can tie local property tax abatements or infrastructure subsidies to strict performance milestones, with proportional clawbacks for missed targets. Enforcement presents practical challenges, especially for private agreements, where local communities are up against well-resourced corporations. Agreements should therefore mandate a structured dispute resolution process with a neutral third-party arbiter before escalating to costly court battles. As an example of the enforcement clause, the City of St. Louis has added strict financial accountability mechanisms to its agreement with the developers of the Armory Innovation District data center to protect the city and the school system if economic projections fall short. The city projects that the data center will generate $432.3 million in local taxes over 10 years, including more than $206 million for public schools. Beginning in 2029, the city will compare the actual local tax revenue generated by the data center against the year-by-year projections in the agreement. In case of a deficit, the developer will pay the city $15,000 in liquidated damages for every $100,000 shortfall – effectively guaranteeing 15% of the projected tax revenue.  

Community Benefit Agreements Are One Tool in a Broader Toolbox for Responsible Data Center Development  

The effectiveness of CBAs also depends on other public policies and decisions surrounding a data center project. Land-use planning helps determine where facilities may be located. Utility regulation influences how electricity and water infrastructure is financed and who pays for new investments. Public finance governs incentives and tax expenditures. Environmental standards establish baseline operating requirements, while disclosure and reporting systems determine whether communities can evaluate actual project performance. Because these responsibilities sit with different public institutions, no single CBA can perform all of these governance functions across a project’s lifecycle. However, a range of governance tools can address development challenges at different stages of the project lifecycle.

Data Center Lifecycle Governance Framework

State and local leaders are beginning to use these complementary tools. Kentucky’s Qualified Data Center Incentive Program requires independent impact analyses, information on ratepayer impacts, decommissioning planning and community notification before projects receive final approval and tax relief. Several jurisdictions are using temporary moratoria to pause development and proactively update public policies before large-scale projects can proceed. For example, Aurora, Illinois, enacted a 180-day moratorium to evaluate grid, water and neighborhood impacts and establish data-center-specific zoning.

CBAs reach their full potential within a strong governance ecosystem: They can focus on securing community-defined benefits, while complementary planning, regulatory, transparency and accountability tools establish the consistent public safeguards that every project should meet.

CBAs as a Catalyst to Move Communities from Reactive Bargaining to Proactive Governance

As data center expansion reshapes communities across the U.S., the challenge for local leaders is transitioning from reactive bargaining to proactive governance. Done well, legally binding CBAs transform data center development from a closed-door transaction into an equitable partnership, ensuring local growth delivers durable, shared prosperity.

Yet CBAs are only one tool in a broader governance toolbox. Meaningful accountability requires pairing these agreements with comprehensive state and local actions, including modernized zoning codes, grid and ratepayer protections, utility commission reforms and robust environmental regulations. By deploying these tools in tandem, communities can shape data center development on their own terms and in ways that deliver long-lasting benefits.