A City Within a Town: A Municipal Leader's Guide to Data Center Readiness

Key Takeaways:

1. Data center development is accelerating rapidly, with approximately $550 billion in U.S. projects currently under development. The water and utility rate structures in place today were not designed for hyperscale demand, making early assessment essential for communities considering or facing a data center announcement.
2. Practical readiness — not consultant-speak — is what protects communities. Naming a project manager, empowering a finance lead, and understanding water and sewer rate structures are immediate, tangible steps municipal leaders can take.
3. Long after the announcement, local leaders are the ones managing the operational and financial reality. Building the right team, oversight structure, and audit-ready processes early is what separates communities that benefit from data center investment from those that struggle to absorb it.

U.S. data center construction is exploding. Approximately $550 billion in projects are currently under development in the United States, with electricity usage from these facilities having tripled between 2014 and 2023 and projected to double again by 2028. Data centers are being constructed as rapidly as infrastructure, regulation, and policy will allow.

Whether this is good for society will be debated passionately. But what is not up for debate is how to properly steward the resources required to operate the data centers that already exist, let alone the centers under construction. States and municipalities will need to find ways to be good stewards of the water and power required to cool the data centers. In the first four months of 2026 alone, dozens of articles, studies, and legislative analyses have addressed data center water stewardship. For municipal leaders, a more immediate and practical question takes precedence:

Are we equipped to handle the influx of money, legal obligations, and complexities that come with data centers?

A new data center sounds great in a news headline, but making it work locally can be challenging. As investments of billions of dollars flow to communities, many of those communities have strained administrative resources. The decision-makers in these settings often have limited support, and small teams may not be equipped to handle spending and distribution of funds, legal and regulatory compliance, grants management, or water and sewer rate structure design.

Water and sewer rate structure design deserves a closer look. The department of public works needs to know whether the rate structure can support the volume of water necessary to cool a $10 billion facility. Rates need to compensate water or sewer districts, support data center cooling, and simultaneously preserve water supply. In short, what role does a municipal leader play in their community’s most important issues when a data center gets announced?

Practical Steps for Municipal Leaders

Recent guidance on this topic hasn’t been that practical — create messaging, get aligned, conduct stakeholder rollouts — adding stress to the leader wearing multiple hats. A more practical approach is more helpful. The recommendations below come from extensive experience working hand in hand with state and local governments, with a perspective grounded in accounting and program management rather than engineering.

Here is what we recommend when you hear a data center may come to your community:

• Name a project manager. This person needs to do nothing but think about the data center and its implications within the community. They should be empowered by local officials to avoid bottlenecks in decision–making, and serve as the liaison to the owner of the data center. If the state’s economic development office is running point initially, designate the local project manager as the liaison anyway. The state will eventually step back, and the local team will own the results and aftermath from there. If a paid hire is not possible, a volunteer board member can fill this role.
• Name and empower a finance director. This may be a hat someone in town already wears, but they should surround themselves with qualified people. If your team doesn't have the bandwidth or expertise to manage data center-scale finances, consider outsourced accounting or fractional CFO support. At minimum, this person should make a list of financial questions and call the largest municipality near — ideally one with a full-time finance director — and ask for support working through these difficult questions and topics. Accounting is not everyone’s specialty, so don’t be afraid to assemble a team to support the effort.
• Find your water and sewer rates. Read them. Try to understand them. If rates are not your area of expertise, feed them into an AI tool of your choice. A useful prompt to utilize is: “Please explain our [water or sewer] rate structure in layman’s terms and tell me if they are designed to handle water volumes required by large data centers. Base any information you provide on AWWA Manuals (M1 and M35).” You do not have to own the American Water Works Association (AWWA) manuals to have an AI tool to reference them — AWWA does produce great content.
• Get expert help designing new rate structures. Once you understand your current rates, you need to set appropriate rates within an updated structure and project a long-term financial forecast of debt obligations, revenues, and usage projections. That forecast tells you whether your system is sustainable for the long term—also known as full-cost recovery. This is even more important if a windfall of data center funding is on the horizon.
• Build a grants tracker. Assign a team member to maintain a list of grants being received, the compliance and reporting requirements of each grant, and how they should be spent. Ideally this person has grant expertise, but an administrative assistant can start the list in an Excel spreadsheet.
• Set up a coordinating committee. Include representatives from each affected organization — water, sewer, finance, economic development, police, fire, and any other relevant departments. This committee creates a shared operating picture and prevents critical decisions from happening in silos.
• Get ahead of audit requirements. New federal or state funding will likely come with compliance strings attached. Know your Single Audit thresholds and start documenting early.
• Establish vendor oversight early. Someone needs to track proper procurement and contracts, monitor costs against milestones, and flag scope creep before it becomes a problem.
• Get smart on how to use AI to complement your capabilities. Local governments can use a range of AI tools to help manage larger projects, even when they still need professional support for certain skill sets. If you are not using AI as part of your team, you are behind.
• Establish ongoing water system monitoring. Continuous evaluation is the proactive way to catch impacts to system and the surrounding community that may not be anticipated today.

The Bottom Line

Data centers are double-edged swords. They bring immense economic value, but they also require water, power, trash removal, and many other services that may have never been considered before. Long after the press conference and the photo ops, the local leader is the one left managing a city within a town. The technology behind a data center may be complex, but preparing your community to host one doesn’t have to be.