Moody’s: Data Center Growth Heightens Credit Risks for Governments

Rapid data center growth has introduced credit risks for governments because of their heavy demands for electricity and water, Moody’s Ratings reported Wednesday. In response, states and local governments are reconsidering tax incentives, strengthening developmental review, and proposing moratoriums.

At least 14 states have considered or are considering statewide moratoriums in 2026, according to the National Conference of State Legislatures. “Moratoriums allow time for governments to evaluate data center impacts and design development policies to mitigate potential negative impacts more effectively on their communities,” reported Moody’s.

However, this pushback will also likely lead developers to jurisdictions that are ready to take on new projects with fewer restrictions. Michigan and West Virginia have recently enacted incentives, for example.

“Despite regional policy variations, the essential development drivers will continue to be access and the cost of power, exposure to certain natural disasters and strong fiber connectivity, among other factors,” according to Moody’s. “Data centers potentially bring new revenue, particularly to rural areas with limited development, and assuming tax incentives do not offset new revenue.”

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