"The Honeymoon Is Over": How Arizona Cities Are Fighting Back Against the Data Center Boom
From Chandler's unanimous rejection to Hobbs' plan to kill tax breaks, to Marana's 2,800-signature referendum — Arizona's relationship with Big Tech has flipped. This is the inside story of a suburban uprising.
By Arizona Tech Watch | Published February 12, 2026 | Updated 35 minutes ago
CHANDLER, AZ — On a Thursday night in early December, the Chandler City Council chambers looked nothing like a routine land-use hearing. Residents packed every seat. Dozens stood against the walls. Some held signs reading "No More Data Centers" [citation:2].
The source of their frustration? A New York developer's request to rezone 10 acres of abandoned office land into a 422,000-square-foot AI data center campus. The project had attracted an unusual lobbyist: former U.S. Senator Kyrsten Sinema, who warned local officials that if they didn't approve it voluntarily, federal preemption would soon take the decision out of their hands entirely [citation:2][citation:8].
It didn't work. The council voted 6–0 to reject the rezoning. Vice Mayor Christine Ellis, recalling a private meeting with Sinema, said she asked a single question that decided her vote: "What's in it for Chandler?" [citation:2].
That question is now echoing across Arizona — from Phoenix to Tucson, from Marana to Goodyear. And the answer, increasingly, is: not enough.
“This is not just Chandler. We’re dealing with this all over. Having the community show up, it sends a message to the elected officials. They need to feel the people power behind them.” — Eric Runnestrand, Chandler resident and project opponent [citation:2]
1. "We Don't Need to Incentivize Them Anymore" — Hobbs Draws a Line
One month after Chandler's vote, Governor Katie Hobbs sat down with Capitol Media Services for an extensive interview. Her message was blunt. The tax breaks Arizona has offered data centers since 2013 — exemptions from state and local sales taxes on billions of dollars of equipment — have "done their job." Now, she said, it's time to "strike the right balance" [citation:3].
On January 12, Hobbs made it official in her State of the State address. She announced she would push to eliminate new data center incentives entirely, and impose a penny-per-gallon fee on water used by data centers — estimated to raise $6.5 million annually for conservation efforts [citation:3].
The logic is straightforward. Arizona is now the number-two market for data centers in the world. The industry no longer needs taxpayer subsidies to choose the state. "I don't think the taxpayers should be subsidizing them," Hobbs said [citation:3].
Her position has created a rare moment of bipartisan convergence. Republican Representative Neal Carter of San Tan Valley pre-filed HB2119 on January 2, 2026 — a bill that would amend state law to stop accepting new data center tax credit applications after December 31, 2026 [citation:6]. Carter's reasoning? His constituents "think they're ugly. They think they use a lot of water. It's a bad way to do public policy." [citation:3].
Even U.S. Representative Andy Biggs, who voted for the original 2013 incentives as a state senator and is now running for governor, has signaled support for rolling them back [citation:3].
2. The Great Arizona Divide: Rejection in Phoenix, Embrace in Marana
But while the legislature debates, cities are already voting with their zoning codes.
Phoenix: The city has effectively halted new data center construction near high-capacity transit, enacting buffer rules that make large-scale projects nearly impossible inside the urban core [citation:2].
Tucson: The City Council in August 2025 rejected annexing and providing water to Project Blue, a $3.6 billion data center complex proposed by Beale Infrastructure. The project is now planned outside city limits, but Attorney General Kris Mayes is appealing the Arizona Corporation Commission's approval of its special energy supply agreement, calling it an "unprecedented deal" negotiated "behind closed doors" that violates the Arizona Constitution [citation:3][citation:7].
Chandler: Already home to 10 data centers, the city passed strict zoning rules in 2022 limiting where new ones can go. When Active Infrastructure sought a rezoning exception, the planning office recommended denial. The council agreed unanimously [citation:2][citation:8].
Then there is Marana.
On January 6, 2026, the Marana Town Council voted 6–0 to rezone 600 acres of farmland at Luckett and Hardin roads for a Beale Infrastructure data center campus. The developer promised $5 billion in investment, $145 million in tax revenue, and 4,200 construction jobs. The land is owned by the Kai Family Trust and the Church of Jesus Christ of Latter-day Saints. Councilmember Herb Kai recused himself [citation:5].
But residents had not been consulted. There were no town halls. Beale representatives said they completed outreach to ten nearby property owners — the minimum required by law. That was enough [citation:5].
Within four days of the rezoning vote, the No Desert Data Center Coalition collected 2,800 signatures on each of two referendum petitions — double the legal requirement. On February 4, they submitted them to the Town Clerk. If validated, the project goes to the ballot, and the rezoning is on hold indefinitely [citation:5].
“We got over 2,800 signatures in four days. It goes to show just how opposed voters in Marana were. Without any public hearing, any town halls to gauge resident support or opposition, they pushed it through.” — Vivek Bharathan, No Desert Data Center Coalition [citation:5]
3. The Counter-Movement: 65 Business Leaders Push Back
Not everyone is celebrating the anti-data-center wave.
On February 2, a coalition of 65 Arizona business and industry leaders sent a letter to Governor Hobbs. They thanked her for her focus on sustainability — then warned that eliminating incentives without a transparent public conversation about energy costs and economic impact could harm the state's competitiveness [citation:1].
"Data centers," the letter read, "are foundational to economic competitiveness and national security amid a rapid transformation driven by artificial intelligence, cloud computing and digital infrastructure" [citation:1].
The tension is real. Arizona's data center boom has created thousands of construction jobs and millions in local tax revenue. The industry points to its evolution: closed-loop cooling systems that use far less water, air-cooled designs that reduce strain on the grid, and commitments to hire locally. Beale Infrastructure, for its part, has said the Marana facility will use only 40 acre-feet of water annually — compared to 2,000 acre-feet for the farmland it replaces [citation:5].
But opponents have learned to ask better questions. Water use at the site may be low, they note, but upstream water use at the power plants generating 550–750 megawatts of electricity could be orders of magnitude higher — possibly exceeding 11,000 acre-feet per year. Those costs, and those emissions, are not counted in the developer's presentations [citation:5].
4. Microsoft's "Community-First" Pivot: The Industry Knows the Party's Over
Perhaps the clearest signal that the honeymoon is ending came not from a city council chamber, but from Redmond, Washington.
On January 13, 2026, Microsoft announced its "Community-First AI Infrastructure Initiative" [citation:4][citation:10]. The five-point pledge is extraordinary for its candor:
- We will pay the costs so our data centers do not raise your electricity bills.
- We will reduce our water consumption and replenish what we use.
- We will create jobs for your residents.
- We will grow the tax base for local hospitals, schools, parks, and libraries.
- We will invest in local AI training and nonprofits [citation:4].
Microsoft President Brad Smith was even more direct in a statement to international media. With technology companies earning record profits, he said, asking the public to subsidize AI's electricity costs is "neither fair nor politically sustainable" [citation:10].
President Donald Trump praised the move on social media, writing that tech giants building data centers must "pay their own way" [citation:10].
This is not charity. It is survival. In Virginia, Ohio, and other data center hubs, residential electricity rates rose 12–16% last year — far above the national average. The political backlash is no longer a future risk. It is here [citation:10].
5. "What Are They Afraid Of?" — Mayes Takes On Project Blue's Secrecy
While cities and developers fight over zoning, Attorney General Kris Mayes is waging a parallel war over transparency.
In January, the Arizona Corporation Commission approved a special energy supply agreement between Tucson Electric Power and Beale Infrastructure for Project Blue. The deal allows the data center to negotiate its own electric rates — authority Mayes argues belongs exclusively to the ACC and cannot be delegated to private parties [citation:7].
Her office filed for a rehearing. The ACC denied it. Now Mayes is preparing an appeal.
"Why is the agreement full of redactions?" she asked in a public statement. "Why didn't they hold a full hearing or allow the City of Tucson to cross-examine TEP? What are they afraid of?" [citation:7].
The case could set a statewide precedent determining whether data centers can negotiate secret, individualized utility rates — or whether those rates must be set transparently, like every other customer's.
6. 2026: The Year Local Democracy Caught Up With Big Tech
Here is where things stand on February 12, 2026.
- Legislature: HB2119 would end new data center tax credits after December 31, 2026. Governor Hobbs supports it. It faces opposition from business coalitions but has bipartisan backing [citation:1][citation:3][citation:6].
- Marana: 2,800 signatures are under verification. If validated, the data center referendum heads to the Pima County Recorder, then to a public vote — likely the August primary or November general election [citation:5].
- Project Blue: Still planned outside Tucson city limits, but Attorney General Mayes' appeal could unravel its power agreement [citation:7].
- Microsoft: Implementing its Community-First pledge in Goodyear and El Mirage. Competitors are watching closely. If the model works, others will follow [citation:4][citation:10].
The narrative has shifted. In 2022, Arizona lawmakers renewed data center tax breaks through 2033. Four years later, both parties are racing to repeal them. Cities that once competed to offer the most generous terms are now competing to erect the highest walls.
This is not an accident. It is the product of thousands of residents showing up to council meetings, signing petitions, and demanding answers to a simple question Chandler's vice mayor posed three months ago:
"What's in it for us?"
Arizona's cities are still waiting for an answer they can believe.
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