As data centers grow in Michigan, officials ask: How many tax breaks are enough?

A local tax abatement to save Oracle and OpenAI $147 million per year likely will be approved by Saline Township
Officials have little choice, but some policymakers wonder about the wisdom of the tax breaks
The local deals come atop separate state tax breaks

SALINE TOWNSHIP — Leaders in this rural Michigan town set to host one of the world’s largest artificial intelligence projects must decide Tuesday whether they will give the project a tax break worth $147 million per year.

They may not have much choice: A court judgment requires the the deal, which appears to be the state’s largest-ever local tax abatement.

Township officials have a Thursday deadline to decide on the request from the $43 billion hyperscale data center named “The Barn,” a joint project by tech giants Oracle and OpenAI.

Along with questions about water use and electricity rates, tax cuts are dogging debate statewide about hyperscale data centers. A 2025 law already exempts the projects from state and local use taxes . Now, host communities statewide face additional requests for property tax cuts worth billions of dollars.

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The tax breaks were designed for traditional manufacturing or research businesses that typically create more jobs.

“We’re looking at it through an industrial prism that we’re used to in Michigan,” Eric Lupher, president of the nonpartisan Citizens Research Council, said. “And maybe that’s the wrong paradigm.”

Others question whether the centers should get any relief in the first place.

“Why do they need all these tax breaks to come here and to use our water, and to take up these considerable areas of land?” Michigan Attorney General Dana Nessel, a data center critic, told Bridge Michigan in a recent interview.

A Citizens Research Council study estimates global data center growth could reach into the trillions of dollars by 2030 but concludes economic benefits are “modest” because of low permanent job growth.

“Hyperscale data center developers are well-funded and could easily afford to pay a full tax rate,” the Citizens Research Council report notes.

Proponents note that the Barn is expected to create 450 high-skilled permanent jobs along with 2,500 to build the complex, which is expected to consist of three 550,000 square-foot data halls.

Considering tax break policy

Because the centers use large areas to build and equip expensive facilities, the tax bills are steep. The nonprofit Tax Foundation found that property taxes are among the top costs faced by data centers.

Tax payments, in turn, represent windfalls to local communities.

In Saline Township, $26 million per year will go to the schools, $4 million per year to the district library and $10 million per year to the township.
In nearby Van Buren Township, Google will pay $6 million to $12 million in local taxes, after receiving a 50% tax cut in May that will save the company $125 million over 12 years.

Lupher, of the Citizens Research Council, said the tax breaks can be minimal for a company, helping them smooth out cost overruns or other unanticipated spending.

However, he said, “to say that you couldn’t afford this data center without these property tax exemptions needs some closer scrutiny.”

The state, he added, could help “these local communities really think through what role should the property tax assumptions play.”

Michigan can benefit from the spending, he added, and the Citizens Research Council says some public concerns about environmental impacts may be overblown.

And in a state whose prosperity has slipped in the past two decades, “we maybe can’t afford to be on the sidelines” Lupher said.

But carefully considering individual tax breaks per project, instead of applying current laws, “might be a best practice.”

The research center notes that local communities could use the tax break as leverage for compliance with regulations, such as noise levels.

Public Sector Consultants, another Michigan-based policy researcher, also recently studied data centers and suggested that a tax abatement could require investments “that create more high-tech jobs, such as a research lab.”

“The property tax payments that come out of these data centers have a real potential for community redevelopment,” Jeff Guilfoyle of Public Sector Consultants told Bridge.

He also said they have the potential to lower property tax rates, such as in Loudon County, Virginia. There, annual data center revenue keeps property taxes 25% lower than in surrounding communities, according to a report in Virginia Mercury. In data center-heavy Prince William County, officials are considering raising the tax rate for data centers.

A community decision

Some Saline Township opponents wondered why no one is talking about reducing their tax rates, especially because they fear their property values will decline with the data center.

Last week, the community’s township hall was filled for a public hearing. Most argued against giving a tax break to The Barn, developed by The Related Cos., the global real estate firm founded by University of Michigan graduate and donor Stephen Ross.

“The state is already giving them a 6% tax break, and now they want more?,” said Kurt Smith of Berlin Township. “I guess I can’t help wondering what will be enough for them.”

Residents attend a crowded township meeting as one attendee holds a sign reading, "Stop selling out your neighbors. Vote no," while others listen and a police officer stands in the back of the room. — People fill the room for a Saline Township Board of Trustees meeting at Saline Township Hall in Saline on Wednesday, July 8. The majority of attendees were there in opposition to a 12-year tax abatement for Oracle’s data center project. (Ella Miller/Bridge Michigan)

The company is building the 250-acre project for Oracle [NYSE: ORCL], the $400 billion IT and software company, and its customer OpenAI. The complex will be completed at the end of 2027. Operations should start in early 2028.

Officials said the 12-year, 50% tax break was sought on the property and eventual compute center contents valued in the application at $43 billion — 10 times higher than originally discussed, officials said, as the actual spending became clear. (Oracle CEO Clay Magouyrk told reporters just weeks ago that the total value would be $56 billion.)

Ypsilanti Township Supervisor Brenda Stumbo, who is battling a computing center planned by the University of Michigan, suggested setting clawback provisions.

“You also should have a letter of credit … for building and for decommissioning,” she said, in case it stops operating during the term of an abatement.

Saline Township attorney Fred Lucas reminded the board — many of them in new roles, because of several openings after other officials resigned — that awarding the subsidy was required by court order after the township and Related settled litigation over whether the data center faced exclusionary zoning.

Alan Greene, a Dykema attorney representing Related, said he appreciated the concerns.

However, he told the board they were not new. Many seated at the table on Wednesday had not been a part of the consent judgement, following angry voter reaction that resulted in multiple board resignations and ongoing recall efforts.

“The issues raised here were discussed in great detail by the board,” Greene said, noting that engineers and planners were involved. The list of concerns, he added, were addressed in the consent judgement that he described as “an agreement and a court order.”

“(We) believe we have honored that totally,” Green said.