Who Should Pay for the Infrastructure Burden of Big Tech Expansion? Assessing Risk and Return in State-Sponsored Tech Infrastructure Investment

The rapid expansion of Big Tech has created an infrastructure arms race, with states scrambling to attract hyperscale data centers, AI hubs, and digital networks. Yet this growth comes at a cost: aging grids, water scarcity, and fiscal pressures on public budgets. The question of who should bear these burdens—states, taxpayers, or corporations—has become a defining debate in infrastructure policy. By analyzing risk-return frameworks and case studies, this article argues that a balanced approach, leveraging public-private partnerships (PPPs) and structured financial tools, offers the most sustainable path forward.

The Rising Infrastructure Demands of Big Tech

Big Tech's insatiable appetite for infrastructure is reshaping state budgets. Hyperscale data centers, for instance, consume vast amounts of energy and water, straining local resources. In “Data Center Alley” near Washington, D.C., a 2025 incident saw 60 data centers abruptly disconnect from the grid, forcing operators to slash power generation to avoid outagesInfrastructure Resilience and Big Tech’s Grid Impact^[1]. Such events highlight the systemic risks posed by private-sector energy consumption, which is often optimized for corporate reliability at the expense of grid stability.

States, meanwhile, are incentivizing these projects with tax breaks, streamlined regulations, and direct subsidies. Northern Virginia's success as a digital hub, for example, relied on strategic infrastructure planning, including a reliable energy grid and targeted tax incentivesInfrastructure Resilience and Big Tech’s Grid Impact^[1]. While these investments generate jobs and economic output, they also shift long-term maintenance costs to public entities, creating a fiscal asymmetry.

Public-Private Partnerships: Sharing Risks and Rewards

PPPs offer a model for distributing infrastructure risks and returns between states and private actors. In Virginia, Bland County partnered with Gigabeam Networks to deploy fixed wireless broadband, leveraging state grants and local land for tower installationsInfrastructure Resilience and Big Tech’s Grid Impact^[1]. This open-access model allowed multiple providers to use the infrastructure, reducing redundancy and ensuring coverage in rural areas. Similarly, Prince George County issued bonds and created a separate entity, PGEC Enterprises, to fund fiber deployment, combining public capital with private operational expertiseInfrastructure Resilience and Big Tech’s Grid Impact^[1].

These examples illustrate a key principle: private partners often assume greater financial and operational risks in exchange for potential returns, while public entities mitigate risks through regulatory support or long-term contractsRisk Allocation in Public-Private Partnerships^[3]. For instance, the Eastern Shore of Virginia Broadband Authority (ESVBA) combined federal, state, and private funding to build an open-access fiber network, serving schools and businesses in geographically isolated regionsInfrastructure Resilience and Big Tech’s Grid Impact^[1]. Such collaborations align private incentives with public goals, ensuring infrastructure remains both profitable and equitable.

The Bhutan Model: Public Bonds and Citizen Stewardship

Beyond traditional PPPs, Bhutan's Gelephu International Airport project demonstrates how public bonds can democratize infrastructure financing. The Gelephu Investment and Development Corporation (GIDC) launched a domestic bond with a 10% annual coupon, allowing citizens to invest in the airport's developmentGelephu International Airport and Public Bonds^[2]. This approach not only diversified funding sources but also fostered public ownership of the project's risks and rewards. The bond's five-year lock-in period and listing on Bhutan's securities exchange underscored the long-term commitment required for large-scale infrastructureGelephu International Airport and Public Bonds^[2].

Bhutan's model also integrates sustainability, with the airport designed to use local timber, traditional craftsmanship, and renewable energyGelephu International Airport and Public Bonds^[2]. By embedding environmental and cultural priorities into the project's financial structure, the state ensured alignment between corporate development and public welfare—a contrast to the often extractive nature of U.S. data center incentives.

The Risks of Unbalanced Incentives

The U.S. experience with data centers, however, reveals the pitfalls of one-sided risk distribution. States offering tax exemptions and relaxed zoning laws to attract Big Tech often neglect to secure reciprocal commitments for grid resilience or environmental safeguardsGelephu International Airport and Public Bonds^[2]. The result is a growing vulnerability: North American Electric Reliability Corporation (NERC) forecasts warn of energy shortfalls as data centers consume an increasing share of powerInfrastructure Resilience and Big Tech’s Grid Impact^[1]. Private operators, meanwhile, resist reliability standards that could increase costs, even as their backup generators exacerbate grid instabilityInfrastructure Resilience and Big Tech’s Grid Impact^[1].

This imbalance mirrors broader trends in infrastructure investment. A 2025 McKinsey report notes that while the Bipartisan Infrastructure Law (BIL) has allocated $350 billion for transportation and climate projects, states with the greatest needs—often those with weaker fiscal capacity—struggle to match federal fundsU.S. Infrastructure Investment Trends^[4]. Without mechanisms to align private and public interests, infrastructure gaps will widen, disproportionately burdening taxpayers.

A Framework for Equitable Investment

To address these challenges, states must adopt risk-return frameworks that ensure shared responsibility. Three principles emerge from the case studies:

1. Structured Risk Allocation: PPPs should clearly define which partner assumes specific risks—e.g., private firms covering construction overruns, while states provide regulatory guaranteesRisk Allocation in Public-Private Partnerships^[3].
2. Revenue-Sharing Mechanisms: Projects like Bhutan's bonds or value capture tools (e.g., special assessment districts) can link corporate profits to public returnsRisk Allocation in Public-Private Partnerships^[3].
3. Grid Resilience Clauses: Incentive packages for data centers should include mandates for grid support, such as investing in renewable energy or demand-response systemsInfrastructure Resilience and Big Tech’s Grid Impact^[1].

For example, Virginia's success with broadband PPPs relied on open-access rules that prevented monopolistic control, ensuring competition and affordabilityInfrastructure Resilience and Big Tech’s Grid Impact^[1]. Similarly, Bhutan's bond model created a direct stake for citizens, aligning long-term infrastructure goals with public accountabilityGelephu International Airport and Public Bonds^[2].

Conclusion

The infrastructure burden of Big Tech expansion cannot be shouldered by states or taxpayers alone. While private capital is essential for scaling digital infrastructure, it must be harnessed through frameworks that balance profit motives with public responsibility. By learning from models like Virginia's PPPs and Bhutan's citizen bonds, states can design investments that distribute risks equitably, ensure grid resilience, and align with broader societal goals. In an era of climate uncertainty and technological disruption, such collaboration is not just prudent—it is imperative.