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The multi-billion-dollar data centers planned for Arkansas have been touted as significant sources of future tax revenue for local governments and schools.
But the projects are set to receive property tax abatements — a standard incentive for large industrial projects under Arkansas law — that will wipe out over half of the potential revenue.
For example, the planned Google data center at the Port of Little Rock is expected to generate over $5 million annually in new property tax revenue and fees if the development is valued at $1 billion, according to an analysis from the Little Rock Regional Chamber of Commerce. That money will primarily flow to the city, Pulaski County government, the Central Arkansas Library System and the Pulaski County Special School District.
If the same property were taxed at the standard rate, however, it would generate over $12.8 million in property tax revenue alone, not including other fees.
Additionally, officials at the city of Little Rock have agreed to eliminate or greatly reduce utility-related taxes for Google’s data center.
Jack Thomas, the senior vice president of economic development for the chamber, said local incentives are critical for attracting investments like Google’s. The purpose of economic development is job creation and broadening the tax base, he said.
“And this is a classic example of broadening the tax base from a piece of property that paid $1,200 in property taxes last year,” he said.
Google’s project in Little Rock also has the potential to grow several times over, meaning the potential tax revenue could increase dramatically, too.
The $1 billion estimate is based on a single, 300,000-square-foot data center building, but officials have acknowledged the Google facility eventually could include up to five primary buildings encompassing a total of 1.43 million square feet.
PILOT AGREEMENTS
Several large-scale data centers are known to be in the works in Arkansas.
They include two from Google — the one in Little Rock and another in West Memphis. AVAIO Digital Partners, a Connecticut-based firm, is developing a data center in an unincorporated area of Pulaski County near Wrightsville.
Developers are pursuing two other data center projects in Clarksville and Conway. (Documents for the front companies behind the West Memphis, Little Rock and Conway data center projects all list the same person, Michael Montfort.)
Arkansas law allows companies to receive property tax abatement of up to 65% for up to 30 years for projects that are financed using industrial development revenue bonds issued by a city or county.
Under a payment in lieu of taxes, or PILOT, agreement, a company transfers ownership of a piece of property to a local government entity, which then leases it back to the company. The company makes payments based on what it would have owed in taxes at the reduced rate.
PILOT agreements reached for Google’s West Memphis and Little Rock projects say the company’s data centers will receive the maximum 65% tax abatement for 30 years for real estate and personal property. City leaders in Conway have agreed to do the same for the data center in that city.
The cities of West Memphis and Little Rock each are expected to issue up to $60 billion in industrial development revenue bonds to finance the development of Google’s data centers.
It’s not clear if similar tax abatements will be negotiated for the AVAIO project.
In January, Pulaski County Judge Barry Hyde said that the developer had not requested “any property tax breaks or incentives at this time,” but likely would explore options like industrial development revenue bonds.
When asked for an update recently in light of Hyde’s earlier statement, county spokeswoman LaTresha Woodruff said via email, “That statement still stands.”
County judges in Arkansas have unilateral authority to authorize PILOT agreements and the associated bonds on behalf of their county, according to a recent opinion issued by the Arkansas attorney general.
The AVAIO data center could become the single-largest project to benefit from a PILOT agreement in the state’s history.
When the project was announced, Gov. Sarah Huckabee Sanders described the initial $6 billion investment as the largest in Arkansas’ history, meaning it also would be the largest example of a PILOT arrangement.
The full scope of the Google data center in Little Rock has yet to be determined because the company is in the early stages of the project, officials have said.
Google has committed to a $1 billion investment to construct one roughly 300,000 square-foot primary building, according to Thomas. But the project has the potential to grow substantially, he acknowledged.
Plans submitted to the U.S. Army Corps of Engineers call for building five industrial buildings of around 300,000 square feet each, along with ancillary structures. A Google official said recently that the company plans to resubmit its permit application to the Corps.
Local property taxes on Google’s planned data center at the Port of Little Rock are set to be reduced by 65% over 30 years. The bar chart shows the expected annual revenue generated by a $1 billion data center with and without the tax abatement. (The project could grow much larger than $1 billion eventually.) The pie chart shows how property tax revenue at the Google site is divided up between local entities. (Arkansas Democrat-Gazette graphic)
‘MISSED OPPORTUNITY’
A 65% property tax abatement “means there’s quite a lot of money left on the table,” said Kasia Tarczynska, a researcher with Good Jobs First, a nonprofit organization based in Washington, D.C., that tracks corporate subsidies.
She called it a huge “missed opportunity” for local governments, which otherwise could use the extra money to improve public services and support small businesses.
There is an argument for using government incentives on certain private-sector projects that need extra financial support, but “companies don’t really need any public financial support to build and operate data centers,” she said.
The tech companies behind data centers are responding to a market demand and have a lot of money with which to develop the facilities, Tarczynska said.
Companies choose data center sites mostly due to factors like the cost of power and regulatory hurdles, she argued. Subsidies rank low on the list and tend to come at the end of the site selection process. People also need to evaluate the other costs related to rising costs for electricity and water as well as things like noise pollution and light pollution, Tarczynska said.
Thomas said property tax abatement is “a tool in the toolbox of economic development to be able to attract global companies to come invest here in Little Rock and across the entire state of Arkansas, and I think it’s safe to say that without these property tax abatements that Google would not have invested here.”
The data center at the port is poised to generate $4.5 million in new property taxes, he said, of which $2.9 million will go to the Pulaski County Special School District. Though the property is within Little Rock city limits, it lies within the Pulaski County district rather than the Little Rock School District.
Over 60% of the annual property tax revenue would support the Pulaski County Special School District. Smaller shares would go to the city, county and regional library system.
The amount of the tax abatement and the time frame both are subject to negotiation, Thomas said.
When asked whether officials ever consider going down from the 65% maximum, he said yes.
“There’s also consideration to go down on the terms,” he said. “So we don’t really have a precedent of doing 30-year property tax abatements, but what we also don’t have a precedent for is billion-dollar projects.”
Other projects at the port, like manufacturing facilities from the companies Trex, Elopak and the Faymonville Group received PILOT agreements at 65%, but not for a 30-year time frame.
Additionally, Amazon has invested in facilities at the port twice, but without property tax abatements, which Thomas attributed to those projects being less capital-intensive.
The e-commerce company opened a fulfillment center at the port in 2021 and plans for a second facility, a logistics hub, were announced last year.
The Arkansas Department of Finance and Administration does not track the impact of PILOT agreements on property tax collections around the state, according to department spokesman Scott Hardin. The department does issue a regular report with estimates of revenue reductions tied to sales and income tax exemptions and exclusions.
OTHER TAX BREAKS
In addition to the property tax abatements available through PILOT agreements, data center developers in Arkansas can receive other tax incentives.
At the state level, they may qualify for sales and use tax exemptions for certain equipment, services and electricity, thanks to laws passed in 2023 and 2025.
In Little Rock, city officials have agreed to eliminate local taxes on water and wastewater usage for the Google data center and slash a levy on electricity sales to a tiny fraction of what most residents pay.
The city charges local utility providers taxes known as franchise fees based on their gross revenue, and the providers pass the charges on to customers. The decision to cut those fees ultimately benefits Google.
The fees provide a sizable chunk of annual revenue for the city. This year, Little Rock is expected to collect over $36 million in franchise fees, or 13% of total general-fund revenue, according to the annual operating budget.
Little Rock’s Board of Directors approved franchise fee carve-outs for the proposed data center at the port in April 2025 at the same time that they authorized the sale of land to Google’s front company.
Those measures did not specifically mention the project at the port. Instead, they lowered or eliminated franchise fees tied to revenue from any users of power, drinking water and wastewater above a certain volume.
For those high-volume users, Entergy Arkansas’ franchise fee was reduced from 5.2% to 0.25%.
Franchise fees for Central Arkansas Water, the regional drinking water utility, and the Little Rock Water Reclamation Authority, the city’s wastewater utility, both were reduced from 10% to zero.
For Entergy customers, that meant any customer with a contract for at least 225 megawatts. For water and wastewater customers, that meant users with average water demand above 1 million gallons per day and average wastewater discharge above 750,000 gallons per day.
Google also has agreed to make an annual payment dubbed a “city enrichment investment” to Little Rock based on the number of data centers that are constructed. Payments would start at $300,000 for one data center and increase by $200,000 with each additional data center that is built.
The annual payment would increase by 2% every five years.
If the Google site expands to five buildings as planned, the enrichment payments to the city could be more than $1 million each year. But that number would be dwarfed by the millions of dollars in revenue the city would be losing as a result of the PILOT agreement and reduced franchise fees.
Jeremy Horpedahl, an associate professor of economics at the University of Central Arkansas, said he understood why cities are willing to give tax abatements because a major development still provides a net benefit to the government from an economic perspective. Once completed, the data centers will be massive taxpayers, he noted.
Nevertheless, Horpedahl said he’s “generally skeptical” that local tax incentives are needed to attract firms when weighed alongside factors such as electricity costs.
“In some cases, it might be the deciding factor, but I think in most it’s probably not,” he said. “The other factors probably matter a lot more.”
Joseph Flaherty
Joseph Flaherty covers the city of Little Rock for the Arkansas Democrat-Gazette. A graduate of Middlebury College and Columbia University’s Graduate School of Journalism, he has worked for the newspaper since 2020.
