Data centers have become one of the biggest symbols of the artificial intelligence boom, bringing enormous investments, new infrastructure and growing demand for computing power. But around Chicago’s O’Hare International Airport, the rapid expansion of these facilities is creating a different kind of cost — one that is increasingly being felt by homeowners.
At least 18 data centers across Chicago’s northwest suburbs received major reductions in their taxable property values for the 2025 tax year. Together, those reductions and existing tax incentives erased nearly $2 billion from the facilities’ taxable value and generated almost $100 million in local tax savings.
The consequences are particularly striking in Northlake. If local data centers had been taxed without the valuation reductions and incentives, the average homeowner in the suburb could have paid more than $2,000 less in annual property taxes — nearly 30% of the average bill.
The figures highlight a growing debate over whether governments should continue offering generous incentives to data centers as demand for artificial intelligence, cloud computing and digital infrastructure accelerates.
A Growing Data Center Hub
The O’Hare region has become an important location for data centers because of its access to electricity, fiber-optic networks, transportation infrastructure and a large metropolitan market.
Facilities have expanded across communities including Northlake, Elk Grove Village, Franklin Park, Des Plaines and Mount Prospect. The 18 facilities examined in the latest analysis collectively paid nearly $71 million in property taxes for the 2025 tax year, meaning they remain significant contributors to local government revenue.
However, their tax bills would have been substantially higher without the combination of assessment reductions and government incentives.
Eleven of the 18 facilities already benefited from Cook County’s Class 6(b) industrial tax incentive program. The program can reduce the taxable value of qualifying properties by 60% for 10 years before gradually returning them to the standard assessment level.
Twelve facilities also benefit from a separate state incentive that provides exemptions from sales and use taxes for qualifying data center investments.
When these incentives are combined with reductions obtained through the property assessment process, the amount of taxable value removed from the data centers becomes enormous.
Why Homeowners Feel the Difference
Property taxes do not operate in isolation. Local governments still need money to operate schools, maintain roads, fund public safety, support libraries and provide other services.
When a major commercial property receives a lower assessment, the government does not necessarily reduce those expenses. Instead, the tax burden can shift toward other properties.
That is why the Northlake figures have attracted attention.
Three data centers accounted for roughly 28% of the city’s tax base, making their assessments especially important to the community’s finances. If those properties are valued significantly lower, other taxpayers can effectively make up part of the difference.
For the average Northlake homeowner, the estimated impact exceeds $2,000 per year.
That amount is significant in a region where property taxes are already a major household expense. It also raises questions about whether economic development incentives are producing enough additional benefits to justify the revenue being forgone.
Data Center Owners Defend the Incentives
The data center industry argues that tax incentives are necessary because companies have choices about where they build.
Developers can compare locations across states and municipalities based on taxes, electricity costs, regulations, infrastructure and other factors. If one region becomes substantially more expensive than its competitors, companies can move their investments elsewhere.
From that perspective, governments may see tax incentives as an investment rather than a loss. A facility that receives a tax break can still generate millions of dollars in property taxes, construction activity and related economic benefits.
The 18 O’Hare-area facilities, for example, still generated nearly $71 million in property taxes for the 2025 tax year.
Industry supporters argue that without incentives, some of those facilities might never have been built in the area. In that scenario, communities could lose not only potential tax revenue but also construction spending, jobs and long-term investment.
Critics Question Whether the Breaks Are Necessary
Critics, however, argue that the economics of the data center industry have changed dramatically.
Technology companies are investing enormous amounts of money in computing infrastructure because of the explosive growth of artificial intelligence. With demand for data center capacity rising rapidly, some analysts question whether local governments need to compete so aggressively by offering tax breaks.
The concern is particularly strong when incentives are given to companies that might have chosen the region even without them.
Research into corporate subsidies has suggested that tax incentives are decisive in only a portion of development decisions. Critics therefore argue that governments can end up sacrificing substantial public revenue without actually changing the outcome.
In other words, a data center might be built regardless of the tax break — leaving taxpayers with the cost of the incentive but without receiving additional investment in return.
The Valuation Battle
Another major issue is how data centers should be valued for property tax purposes.
These facilities are fundamentally different from ordinary office buildings or warehouses. Their value is tied not only to the land and physical structure but also to specialized infrastructure, including electrical systems, cooling equipment, backup generators and high-capacity connections.
That has produced major disagreements between property owners and Cook County officials.
One notable dispute involved Microsoft’s Azure data center in Northlake. The company’s appraisal valued the property at roughly $250 million, while the Cook County assessor’s office estimated its value at nearly $900 million.
The enormous difference illustrates the stakes involved in data center assessments. Even a relatively small change in valuation can translate into millions of dollars in taxes.
The assessor’s office has argued that some property owners and their appraisers undervalue facilities by excluding expensive systems from the calculation. Property owners, meanwhile, maintain that certain specialized equipment should not necessarily be treated as taxable real estate.
The Bigger AI Infrastructure Debate
The O’Hare controversy comes at a time when communities across the United States are wrestling with the consequences of the data center boom.
Artificial intelligence requires enormous computing capacity, and companies are building facilities at an unprecedented pace. While these projects can generate investment and tax revenue, they can also place pressure on electricity grids, water supplies, roads and other public infrastructure.
That has forced local governments to consider a difficult question: how much should taxpayers subsidize the infrastructure supporting the AI economy?
For officials, tax incentives can be a tool for attracting investment. For homeowners, however, the calculation looks different when their own tax bills rise as large corporations receive reductions.
The O’Hare-area experience shows that the cost of the AI boom is not always visible in the billions spent building data centers. Sometimes, it appears quietly on a property tax bill.
As more communities compete to attract data centers, the debate over who benefits from these facilities — and who ultimately pays for them — is likely to become even more intense.
