Badgered state: AI data centers and the future of Wisconsin

By State Senator Chris Larson

This is Part 1 in a 3-part series of reports on AI data centers in the state, how they can benefit, what is involved and the dangers and pitfalls we need to be aware of.

Artificial Intelligence. Unless you happen to be a centipede living under an exceptionally cozy rock, there’s a very good chance you’ve recently encountered some form of AI in your day-to-day life. From crappy Instagram Reels of animals behaving like humans to deepfake videos of politicians and celebrities appearing to say things they never said. Or maybe you’ve been served up one of the often incorrect summaries at the top of your recent Google search results. AI is everywhere. Even if you don’t own a smartphone or connect regularly to the internet, AI likely played a role in the development of the products you buy, the ads seeking to influence those purchases, and the automated phone systems you have to use when something goes wrong.

Like any technology, AI is not inherently good or bad, and we likely won’t understand the full extent of its impact on our lives for years, even decades. One thing is pretty certain - the infrastructure needed to power AI technology (i.e. massive data centers and the power plants to run them) is already causing a variety of problems here in Wisconsin. For the moment, our data center landscape is a bit like the Wild West, only instead of railroads and mining companies racing to profit on this new frontier, we have big tech companies and for-profit utilities running roughshod over our communities.

What we do in the next few years to regulate data centers and their massive energy and water requirements is absolutely critical. Where are we now when it comes to data centers? How did we get here? Who wins? Who is losing? What do we not yet know? What can we do about it? Keep reading to find out.

Where are we now?

There are currently 47 data centers in Wisconsin in 9 different metropolitan areas, with the largest clusters of these facilities in Milwaukee and Madison. Some of these are rather small and are housed in normal-sized office buildings. However, there are a number of much larger projects in the works, including a few that are absolutely massive. It would be nearly impossible to list them all and new ones are proposed seemingly every week. In September, I characterized this rush to build new AI data centers in Wisconsin as a “stampede.” Here are a few notable examples:

Mount Pleasant

Microsoft’s Fairwater data center is Wisconsin's largest at 1.2 million square feet, and sits on 315 acres of land. Planned expansions on this site could add 2 million square feet in future phases. Microsoft has dubbed it “the world’s most powerful AI data center.”

Port Washington

Dubbed “Lighthouse,” this planned Oracle and OpenAI data center would surpass Microsoft’s current footprint by taking up 2.5 million square feet on 672 acres of land, with possible further expansions down the road. On November 18, the city council approved $458 million worth of local funding for the project, which is currently expected to cost $15 billion.

Kenosha

A third Microsoft data center project in Southeast Wisconsin is still on track for Kenosha. This is – at least for now – a somewhat smaller project, at about 250,000 square feet on 240 acres of land near Highway 142 and I-94, close to the Mars Cheese Castle. At a public meeting on Nov. 17, dozens of residents expressed concerns, with many calling for elected officials to halt it altogether. It remains to be seen what will happen with this project.

Beaver Dam

Meta, parent company of Facebook, Instagram, WhatsApp, and Threads, is planning a 700,000 square foot AI data center which is slated to open in 2027. It claims to support 1,000 short-term construction jobs and up to 100 permanent jobs at the facility. It is not clear at this time where the workers for these jobs will come from. The company has also promised to cover $200 million in infrastructure upgrades needed to support the facility.

Paused or canceled projects

Caledonia

This summer, Microsoft announced plans to build a second data center campus on 244 acres of land in Caledonia, adjacent to WE Energies’ Oak Creek Power Plant. This project was shelved after dozens of residents testified against the project at a public hearing in September. Both Microsoft and City officials left open the possibility of a future Microsoft data center project at a different site in the Village.

Menomonie

Also this summer, the Menomonie City Council annexed and rezoned about 320 acres of farmland in preparation for a new data center project that was estimated to cost $1.6 billion and use 75,000 gallons of water per day. After tremendous public outcry against the project from area residents, Mayor Randy Knaack announced that the project was put “on hold.” There has been little public discussion of this project since then.

How did we get here?

For a relatively new technology, the explosion of data center projects in Wisconsin, particularly over the past year, is notable. There are a few reasons for this. First, Wisconsin has what most data centers need a lot of – land, a temperate climate, and (perhaps most crucially) fresh water. For now we’ll focus primarily on the issue of water. 

An abundance of water

You may have heard our neighbors to the west in Minnesota refer to their state as the “Land of 10,000 lakes.” You may not know that Wisconsin has over 15,000 lakes, 13,500 miles of navigable streams and rivers, and enough groundwater to cover the entire state in 100 feet of water.

If you’re a data center operator, that’s music to your ears. Why do they need lots of water? Well, data centers create a ton of heat. In order to keep the equipment functioning, water is used to cool it down. According to the Alliance for the Great Lakes, a hyperscale data center that uses evaporative cooling can consume between 1 and 5 million gallons of water per day. By comparison, it would take 12,000 households to use even 1 million gallons of water in an entire year.

Some data centers use what is called a “closed loop” cooling system. These may consume significantly less water, but there are significant concerns of potential contamination from biological growth (bacteria), corrosion byproducts, and mineral buildup. A so-called “dry cooling” system - like the one Meta plans to use at its planned Beaver Dam site - may use even less water (opting for air cooling instead). Despite its name, even this “dry” method relies on some level of fluid for cooling purposes.

All carrot, no sticks

The second thing that makes Wisconsin so attractive for data center development is its “all carrot, no sticks” approach to large industrial projects. Foxconn may be the most famous example, but Wisconsin has handed out hundreds of millions of dollars worth of incentives for all sorts of projects over the years - at least $91.5 million in fiscal year 2025 alone. In addition, local communities frequently offer tax increment financing (TIF) for large projects such as AI data centers. As was previously mentioned, the Port Washington project is slated to have $458 million in TIF funding.

However, it is a little-discussed provision of the 2023-25 state budget which may best explain why the past 2 years have seen such an explosion of data center proposals in Wisconsin: the sales tax exemption for “Qualified Data Centers.” That’s right, if a data center meets certain criteria related to total project investment relative to the population of the community where it is located, it becomes exempt from sales tax.

At the time the budget was passed, no qualified data centers existed in Wisconsin. As of October 31, 2025, there are four, including the Microsoft facility in Mount Pleasant mentioned previously. It is believed that Microsoft may indeed be the primary reason that the tax exemption was included in the budget in the first place.

How much will this tax exemption cost? It’s extremely difficult to say. However, the nonpartisan Legislative Fiscal Bureau (LFB) estimated that for a single $215.5 million data center construction project, a company would receive $8.5 million in tax exemptions, and an additional $735,000 per year in tax exemptions thereafter for ongoing expenses.

Microsoft has pledged to spend up to $7 billion on its two data center projects in Southeast Wisconsin, which –  extrapolating from the LFB estimate above – would mean a $276.1 million initial tax exemption and an additional $23.8 million per year thereafter. Once equipment replacements begin, particularly if components get more expensive due to inflation, that annual exemption would increase as well.

It’s difficult to estimate the real-world loss in tax revenue from massive data center projects like these, because we don’t know which of these projects would even exist without them. However, given that there are already over 40 data centers in our state that do not currently qualify for the exemption, the number is not zero. 

Of course, loss of tax revenue is not the only potential consequence of allowing data centers to expand in our state unchecked. It’s worthwhile to take a moment to consider what those consequences might be.

Chris Larson is a Democratic state senator from Milwaukee