Data Center Boom – PPP Golden Child

By now you have seen the public protests against data centers in many states. But instead of listening to the concerns and answering the questions of citizens County Commissioners across the country are channeling Oprah Winfrey “You get a data center, and you get a data center, and you get a data center!”

Whether you support the data center build out or not you have to admit that the actions of elected ‘representatives’ across the country – with few exceptions – ignoring constituent concerns points to something bigger.

It is not that every project being considered is crony capitalism and not every person involved is evil or corrupt. But the money involved with AI and data centers is mind blowing and human nature and the track record of privatized economic development tell us to be wary.

Efforts to stifle and stigmatize public involvement raise red flags and the threats to our private property need to be challenged. Do your own homework and share it with friends. Awareness is key and this article is a start.

This is the latest in our series of articles on the privatization of government, primarily economic development. In Part I we covered the growing use of Public Benefit Corporations (PBCs) to privatize government functions, specifically economic development. In Part II we covered the Arkansas law authorizing PBCs and raised the potential for fraud and crony capitalism. In Part III we discussed Utah’s approach to Public Private Partnerships (PPPs) through the non-profit Military Industrial Development Authority (MIDA).

In this installment – Part IV- we look at the data center boom as the latest and greatest example of PPPs blurring the line between representative government and private entities.

What is behind these data center protests? Kevin O’Leary, a backer of the initially massive (and now possibly downsized) data center project in Box Elder County, UT (discussed in Part III of this series) claimed the people showing up to protest were ‘paid protestors’ who were bussed in from other states. Investigations into this claim showed a significant majority of protestors were from Utah.

O’Leary, Interior Secretary Doug Burgum, and others have claimed the protests were foreign supported disinformation efforts pushed by China. This claim was also debunked and I won’t be running to my mailbox expecting a check from the CCP.

Not to be left out Blackrock’s Larry Fink warned that data centers could be targeted by domestic terrorists. This should be a clue about the type of data that the data centers will be interested in.

Finally, tech billionaire Peter Thiel (PayPal, Palantir) goes a bit further claiming the Antichrist is anyone who seeks to slow the advance of science.

According to Google Gemini Thiel believes the rapid advancement of technology is humanity’s only chance to avoid Armageddon.

The rhetoric is heating up faster than the land around a data center!

To me, the concerns and questions from people opposing data centers are valid and legitimate. The name calling and finger pointing from data center proponents and politicians is projection, or it at least rhymes with projection.

One thing is clear, the debate around the data center rollout is another example of political realignment. Conservative politicians and pundits are split on the issue with several prominent conservative influencers giving full-throated support to all things data center. While opponents of the data center buildout range from liberal to conservative. At some point (possibly soon) the political realignment may move beyond single issues.

This series is focused on state-level efforts to encourage and utilize PPPs primarily for economic development. These efforts have been around a very long time and they have evolved. In the last 15 years the introduction of Public Benefit Corporations (PBCs) (see Part I) coming just in time for technological advancements like Artificial Intelligence (AI).

PBCs are better equipped than non-profit PPPs to attract big money. As private companies with little to no transparency the vast amount of money flowing into these PPPs attracts actors seeking marketplace advantages and corporate welfare. The potential for corruption rises with the growing piles of cash.

But are these PPPs even legal?

Eminent domain, the ability of government (the public side of the PPP) to take private land plays a significant role in privatized economic development. But that was not always the case.

The ‘takings clause’ of the 5th Amendment has traditionally been interpreted narrowly, the final portion of the 5th Amendment states, ‘nor shall private property be taken for public use without just compensation.’ Pretty simple.

The ‘public use’ to justify the taking of private property was generally confined to utility lines, highways, and rail lines. That changed significantly in the 2005 Supreme Court Opinion in Kelo v. City of New London. ‘Public use’ was changed by the Court to ‘public purpose’. That may not sound like a significant change but in Kelo the Court ruled that private property could be taken and given to a private developer for economic growth purposes. Public Use is apparently in the eye of the beholder.

Like it or not the Kelo decision was a shot of adrenaline for PPPs and privatized economic development.

Justice Thomas opened his dissent of the Court’s Kelo Opinion with this:

“Long ago, William Blackstone wrote that “the law of the land … postpone[s] even public necessity to the sacred and inviolable rights of private property.”

Justice Thomas went on to say:

“This deferential shift in phraseology enables the Court to hold, against all common sense, that a costly urban-renewal project whose stated purpose is a vague promise of new jobs and increased tax revenue, but which is also suspiciously agreeable to the Pfizer Corporation, is for a “public use.”

“Allowing the government to take property solely for public purposes is bad enough, but extending the concept of public purpose to encompass any economically beneficial goal guarantees that these losses will fall disproportionately on poor communities.”

For Thomas ‘poor communities’ included rural areas that lacked he political power and resources to fight back. Prescient given how and where the data centers are being placed across the country.

The Constitution and the protections of private property are conveniently ignored or rewritten when it is expedient.

Public (read – taxpayer) support for privatized economic development is usually justified by the promise of new jobs. The theory is that these economic development efforts will spur economic growth and the state’s ‘investment’ will raise tax revenue (eventually).

The reality is that job creation rarely meets the numbers promised. If you are interested in examples this 2013 piece titled ‘Creating Scandals Instead of Jobs: The Failures of Privatized State Economic Development Agencies’ from goodjobsfirst.org is devastating. The piece includes examples of scandals from a number of states, maybe a state near you.

This track record continues to this day. Earlier this week as I was pulling this information together Breanna Morello posted a report on X (@breannamorello) about a Chinese company called SemCorp that received tax credits from Ohio for jobs it never created. In fact, she reports that any jobs that were created were given to foreign labor.

I assume that when taxpayers hear about new jobs they assume the jobs will be for their neighbors, am I wrong?

Unfortunately, the news out of Ohio does not end there. I am not picking on Ohio this stuff is happening everywhere, but Ohio just gets more coverage than most.

Whitney Webb and Mark Goodwin wrote an exhaustive piece (do you expect anything less from Whitney Webb?) titled Technate, Ohio that covers years of privatized economic development in the state, including the data center buildout.

JobsOhio is a PPP formed in 2011 and has a murky history of actual job creation. The ‘public’ part of this PPP is that it is funded in part by the state liquor tax and funded very well I might add.

The piece includes fascinating reporting of corporate welfare and crony capitalism. It also includes examples of corruption. Excerpt, ‘In July 2020, five Ohioans were charged with racketeering in what has been described as “likely the largest bribery, money laundering scheme ever perpetrated against the people of the state of Ohio.”’

According to the article those arrested included the then Speaker of the Ohio House of Representatives, Larry Householder. Householder was apparently in control of a secretive 501(c)(4) that was involved in several economic development efforts. The article is well worth the read.

And, before we leave Ohio we need to circle back to data centers. The Ohio Legislature is considering HB 126, dubbed by some as the Data Center Immunity Bill. I have not dug into that piece of legislation but if you are from Ohio you may want to look into it.

A lot of money is flowing into anything related to AI and data center projects. Where is the money coming from?

Just last month Larry Fink, our friend concerned about ‘domestic terrorists’, let the cat out of the bag on where all this money to fund these data centers will come from – much will come from your savings, pensions, and 401(k)s . Comforting, no?

The use of private assets by government may just ring a bell. It is not just the U.S. – it is everywhere.

European Commission President Ursula von der Leyen is leading an initiative to bridge the continent’s funding gap by redirecting Europe’s (emphasis added) vast private savings toward critical public and strategic investments. This strategy, known as the Savings and Investments Union (SIU). She refers to it as ‘turning private savings into much needed investment’. And to be clear the private savings are not ‘Europes’ they are people’s property and the ‘much needed investment’ is determined by government. Voluntary? We will see.

The Great Taking meet The Great Using

The moment the idea is admitted into society, that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. If “Thou shalt not covet,” and “Thou shalt not steal,” were not commandments of Heaven, they must be made inviolable precepts in every society, before it can be civilized or made free. - John Adams