The Markley data center rises up above the Sacred Heart neighborhood of Lowell. (Jordan Wolman/CommonWealth Beacon)

MASSACHUSETTS HAS PAUSED applications for its data center sales tax exemption while the Healey administration develops stronger protections for ratepayers, public health, water, air quality, and the environment.

The state should use that pause to do more than improve a permitting checklist.

Massachusetts should decide what role data centers will play in its energy, climate, economic development, and environmental justice future—and what these extraordinarily energy intensive facilities must contribute in return for public support.

The Commonwealth created a qualified data-center sales-and-use tax exemption in 2024. A certified facility can receive a 20-year exemption covering eligible computer equipment, software, electricity, construction materials, cooling systems, batteries, backup generation, utility infrastructure, and other operating equipment.

On June 25, the administration stopped accepting applications while it reconsidered the program. Its emerging framework begins with an essential principle: The full cost of the energy supply, interconnection, infrastructure, and system upgrades required to serve a data center should be borne by the facility rather than shifted to other customers.

That is the right first principle, but it is not enough.

Massachusetts should establish a three-part data-center bargain.

First, every data center should pay the full cost of serving its extraordinary electricity, water, transportation, and public-infrastructure demands.

Second, every host municipality should receive a developer-funded environmental master plan and the continuing resources needed to carry it out. The host should retain all its taxes, mitigation payments, infrastructure reimbursements, and negotiated community benefits.

Third, covered data centers should make a separate statewide linkage contribution to the proposed Green Zone Investment Fund (GZIF) to help transform neighborhoods carrying Massachusetts’s greatest household energy burdens and cumulative environmental harms.

That would turn data center policy from a series of private applications into a public strategy.

A permit is not a strategy

A permitting process asks whether a particular project satisfies existing legal requirements. A strategy asks larger questions.

How many data centers can the Massachusetts electric system accommodate without undermining reliability, affordability, and climate goals? Where should large-load development be encouraged, and where should it be discouraged? What generation, transmission, water, and wastewater infrastructure will facilities require? Who bears the risk if projected demand does not materialize? How will their electricity consumption affect clean energy procurement?

A strategy must also consider cumulative development. One data center may appear manageable when evaluated in isolation. Several facilities seeking power in the same utility territory or water from the same watershed present a different challenge.

Massachusetts should therefore evaluate data centers as a portfolio, not merely as unrelated private projects.

A statewide plan should forecast electricity and capacity demand, identify technically and environmentally appropriate locations, establish additional clean energy requirements, protect existing ratepayers, and designate areas where cumulative burdens make further development inappropriate.

It should also answer a basic public-benefit question: What should Massachusetts receive in return for granting a substantial tax advantage to an industry whose defining input is electricity?

Data centers can generate construction work, municipal tax revenue, and some permanent employment. They can also consume enormous amounts of electricity, require new substations and transmission facilities, use substantial quantities of water, depend on backup generators, and occupy land that might support other economic or community purposes.

Massachusetts need not reject data centers. But it should establish the rules before the industry becomes too deeply embedded to govern effectively.

Protect every host community

The municipality hosting a data center will experience the facility most directly. It may receive tax revenue and economic activity, but it will also confront land use, traffic, water, sewer, emergency response, noise, air quality, and long-term closure issues.

Host community negotiations often produce disconnected commitments: a road improvement, an annual payment, emergency equipment, a workforce goal, or a limited environmental study. Each may be worthwhile, but together they do not necessarily constitute a long-term community plan.

Every host municipality should therefore develop an environmental master plan examining how the project—and potential future data-center growth—will affect the community over the facility’s operating life.

The plan should establish baseline conditions, including electric and water infrastructure, air and noise conditions, household energy burdens, public health, traffic, housing pressure, emergency-response capacity, climate hazards, and existing industrial burdens.

It should then identify what the developer must finance or help implement. Depending on local conditions, that could include grid and water system improvements, permanent environmental monitoring, renewable energy and storage, emergency response staffing, environmental remediation, resilience facilities, tree canopy expansion, workforce development, housing stabilization, and eventual site restoration.

The developer should pay for preparation and implementation, but the plan should remain under public control. Residents, environmental justice populations, public health agencies, utilities, labor organizations, local businesses, and regional planning bodies should all have a role.

The plan should include measurable milestones and an implementation budget extending beyond construction. Community benefits should not disappear when the ribbon is cut.

Most importantly, the host community should retain every dollar negotiated because it bears the project’s direct impacts.

The host should keep 100 percent of its property taxes or payments in lieu of taxes, infrastructure reimbursements, mitigation payments, environmental monitoring funds, workforce commitments, community-benefit payments, and master plan implementation funding.

The statewide contribution should be additional.

The rule should be easy to explain: The host keeps everything negotiated for hosting the facility. The developer pays separately for the broader consequences of extraordinary demand on a shared energy system.

Link data center growth to Green Zone transformation

Many Massachusetts neighborhoods may never host a data center but already carry high energy costs, inefficient housing, pollution, aging infrastructure, and climate vulnerability.

Paying for a data center’s substation, transmission connection, or water infrastructure does nothing to address those existing burdens. Those are direct project costs, not contributions to environmental justice.

The larger distributional question is this: When Massachusetts grants a major public benefit to an energy-intensive industry, should some of the value created help households for whom electricity and heating costs already consume an unsustainable share of income?

The answer should be yes.

Rather than create a new Data Center Energy Justice Linkage Fund, the Legislature should add a separate data center assessment as a dedicated revenue source for the proposed Green Zone Investment Fund (GZIF). The GZIF would pool data center contributions with other proposed revenue sources, including attorney general environmental settlements, Regional Greenhouse Gas Initiative revenues, and alternative compliance payments from building performance requirements, and deploy those resources in Green Zone communities.

Massachusetts already identifies environmental justice populations primarily through demographic measures such as income, minority population, and English language isolation. Those criteria are important, but eligibility is not the same as urgency.

When a large share of the Commonwealth qualifies under at least one definition, municipalities with stronger staffing and grant writing capacity can outcompete neighborhoods with more severe needs but fewer institutional resources.

Massachusetts now has a tool that can help make that distinction. The state Office of Environmental Justice and Equity has developed MassEnviroScreen, a GIS-based screening tool that produces a cumulative-burden score and indicator data for every census block group in the Commonwealth. GZIF investments should use MassEnviroScreen, together with household energy burden data and community-level information, to identify and prioritize the communities facing the greatest combined environmental, energy, health, and socioeconomic burdens.

Within that prioritization, household energy burden should carry the greatest weight. Energy burden is usually measured by dividing household energy costs by gross income, but that calculation can understate hardship. Families pay taxes, rent or mortgages, food, transportation, medication, and child care before paying utility bills.

A $400 monthly energy bill may be manageable for one household and catastrophic for another. For a family with little income remaining after housing and basic necessities, it can lead to arrearages, shutoff notices, unsafe indoor temperatures, food insecurity, or high-cost debt.

Priority should also reflect the conditions producing high bills: old buildings, inadequate insulation, obsolete wiring, leaking roofs, inefficient heating systems, mold, lead, asbestos, and landlord-tenant barriers.

The GZIF should not become a second version of Mass Save. It should finance the work that existing programs often cannot cover but require before efficiency and electrification can begin.

That includes roof, structural, and electrical repairs; mold, lead, and asbestos remediation; assistance for renters and small multifamily properties; arrearage relief connected to lasting affordability measures; neighborhood solar and storage; resilience hubs; tree canopy; pollution monitoring; and aging energy infrastructure.

A program’s existence does not mean residents can use it. The relevant question is whether households can actually receive the benefit.

Each highest-priority area should receive a multiyear Green Zone transformation plan—not another isolated grant.

The plan should identify the homes requiring repairs and weatherization, households facing disconnection, locations needing resilience infrastructure, heat-island hot spots, pollution sources, recurring outages, workforce needs, and financing gaps. It should establish measurable targets for reducing energy burden, arrearages, shutoffs, pollution, and outage vulnerability over 10 or 15 years.

Planning and implementation must be connected. A plan without capital funding is another report. Capital spending without a plan becomes another collection of disconnected projects.

Establish a durable assessment

The Legislature should authorize a statewide linkage assessment based on the scale and energy demand of covered data centers.

One workable approach would set a target assessment of up to 15 percent of the facility’s full pre-incentive property-tax equivalent, combined with a minimum payment based on contracted or reserved megawatts.

Property value would reflect the economic scale of the development. The megawatt floor would prevent facilities with comparable demands from making dramatically different contributions because of local tax rates, leased equipment, ownership structures, or tax arrangements.

The final rate should be supported by a public nexus study and economic-feasibility analysis. The state should quantify regional and statewide costs associated with extraordinary data-center demand while excluding expenses already directly assigned to individual facilities.

It should also examine how rates of 5, 10, 15, 20, or 25 percent would affect project financing, competitiveness, development timing, and the value of the state tax exemption.

The assessment could begin at 10 percent, rise to 12.5 percent, and reach 15 percent in the third year, subject to public review. A phase-in would allow developers, regulators, municipalities, and utilities to adjust while establishing a clear long-term obligation.

Massachusetts would not be inventing the idea that development can finance related public needs. Boston’s linkage program uses major commercial development to support affordable housing and job training. The Community Preservation Act protects dedicated revenue for defined public purposes. Gaming law allows host-community agreements to coexist with statewide mitigation funding. Oregon requires certain large tax-exempt projects, including data centers, to make community-service payments based on taxes otherwise saved.

Massachusetts should adapt those precedents, not copy them mechanically.

Revenue from the data center assessment should be deposited directly into the GZIF rather than the general fund. Most spending should produce direct household, building, or neighborhood improvements. Administrative costs should be capped. Funding should be multiyear, publicly reported, and targeted primarily to the communities with the most severe combined burdens.

The proposal should apply to newly constructed or substantially expanded facilities exceeding a defined size or electrical-load threshold, whether or not the developer claims the state tax exemption. Receiving the exemption should carry additional planning, reporting, employment, procurement, environmental, and decommissioning requirements.

This is not anti-development. It is a public-benefit condition attached to extraordinary demand and, in many cases, a substantial public subsidy.

Massachusetts can welcome innovation without repeating a familiar pattern in which the public assumes the costs, private actors capture the benefits, and neighborhoods already carrying the greatest burdens are told to wait for another grant cycle.

Every data center should bear the full cost of the infrastructure its facility requires. Every host community should know how development will improve its long-term environmental and economic conditions. And part of the value created should help transform the Green Zones where energy insecurity and environmental harm are greatest.

Under this framework, data centers contribute; the Green Zone Investment Fund receives and deploys the money; MassEnviroScreen helps determine where the need is greatest.

That is how growth becomes a tool of repair.

Ed Gaskin is executive director of Greater Grove Hall Main Streets in Boston.

This article was updated to incorporate information on the Green Zone Investment Fund.