Most Cities Court Data Centers; Niagara Falls Is Blocking One

By Frank Parlato

Most U.S. cities are rolling out the red carpet for AI data centers. Niagara Falls is trying to turn one away.

Across the United States, governors and mayors are courting developers and operators of data centers with incentives of land, discounted power, and tax abatements.

Thirty-six states have enacted laws to attract developers, including exemptions on equipment sales taxes, construction materials, and job-creation credits. Local governments are adding abatements and fast-track permitting.

So what does Niagara Falls Mayor Robert Restaino know that these other municipalities do not? He does not want AI or data centers. He is betting it all on an arena instead.

Niagara Falls possesses a world-famous name, a breathtaking natural wonder that draws millions of tourists. And yet, the city is broke. This isn’t an accident of fate; it’s the direct result of decades of poor management and bad decision-making—a tradition Mayor Robert Restaino seems determined to continue.

It is a city in distress:

• Poverty: Nearly one in four residents lives below the poverty line.

• Once beautiful homes are now vacant and headed for demolition.

• Low Income: The median household income is a stagnant $48.5k, well below New York State’s average of $84.6k.

• Heavy Tax Burden: Homes are cheap (median value $104k), yet the city’s homestead tax rate is among the highest in the USA. This is a bad combination: low incomes, low property values, and high tax rates. It is a recipe for driving out the residents the city needs.

This is the backdrop against which Mayor Restaino is making his choice.

Niagara Falls has an offer on the table right now for a $1.5 billion AI data center, without requiring any tax subsidies.

Mayor Restaino doesn’t want it.

Not because the developer, Urbacon, isn’t qualified – the company has a track record for successfully building them in North America.

Not that the landowner and financier, Niagara Falls Redevelopment (NFR), cannot afford it. The billionaire banking family, the Milsteins of Manhattan, owns NFR and the 60 acres of land in Niagara Falls that they want to build on.

The company has filed plans for the Niagara Digital Campus: a nine-building data-center complex totaling 1.23 million square feet, with an on-site electrical substation that the developer will fund. NFR estimates a $1.5 billion buildout and 550 permanent positions.

The developers will pay all costs to develop and after it is developed they will pay a projected $20 million in property, energy and sales tax on average every year.

That’s more than $400 million over 20 years.

But the mayor of Niagara Falls, population 47,000 – down from 100,000 – isn’t having it.

Other Places Are Vying for AI Data Centers

In Arkansas, the cities of Little Rock and Conway competed with offers of property tax incentives to lure a data center prospect.

Texas continues to approve data centers. They are now promoting a $25 billion, “Frontier” campus in Shackelford County as a source of jobs and tax revenue.

In Wisconsin, Microsoft increased spending to $7 billion.

Pittsburgh, a city once defined by fire and furnaces, is looking to the future. An “AI Strike Team” packages power, land, and permitting to attract AI data center projects.

Cheyenne, Wyo., already a hub for data centers, has a Tallgrass/Crusoe AI campus that local leaders describe as transformative.

Virginia’s Loudoun County built “Data Center Alley,” and  data centers pay so much that the taxes on homes have been decreasing each successive year.

But in a city famous for the river that falls, the mayor stands against the current.

The Niagara Exception

Restaino has said no to the machines, no to the mirrored halls of servers. He doesn’t want AI, which is like turning down indoor plumbing in 1900.

Against that backdrop, Mayor Robert Restaino has steered the city away from a privately financed data-center campus—and toward his own taxpayer-funded $200M “Centennial Park” arena. And he wants to build it on the same critical 10 acres (“Parcel 0”) the developers need for their project’s entrance.

So he initiated a lawsuit to take via eminent domain NFR’s land, not after a search for the best site. He picked their land first, then three years later commissioned a study that declared it the perfect spot after all.

Restaino “marches to a different drummer.”

At a time when leaders court Silicon giants, Mayor Restaino positions the city as a holdout. He wants an arena at taxpayer expense over an AI data center.

Trade-offs

He wants to replace a power substation with a popcorn machine and a Zamboni.

Passing on a data backbone that will lower taxes and electric rates to install bleachers.

Studies show the campus would broaden the tax base and help underpin grid upgrades. 

Trading payroll for 550 engineers at an average of $100,000 for part-time ushers, then asking taxpayers to pay the ushers.

He is rejecting a self-funded substation that will increase the capacity of the grid to take on a publicly funded scoreboard, swapping a 24/7 server hum that pays mega taxes for a 3-hour event that needs subsidies.

He wants taxpayers to pay for short-duration cheers.

His $200 million arena—with no anchor tenant—will be a fiscal anchor itself.

Debt and operational costs – at an estimated $17 million per year – will consume half of the city’s property tax revenues. He is literally seizing the land that would generate $20 million in new revenue annually to build a project that will cost $17 million annually (debt service on the bond will be upwards of $15 million).

Restaino wants a $200 million taxpayer-funded arena and to kill the $1.5 billion AI Data Center.

Why?