No State Rules, One Town at a Time: Colorado's Data Center Fight Moves Local
Colorado's legislature killed both of its data center bills in May 2026, one offering tax breaks and one setting guardrails. The state now has no framework governing how data centers get built, powered, cooled, or sited. At least nine local governments have stepped into that gap, and four fights came to a head in the first two weeks of August alone.
At a glance
Both 2026 bills died: SB26-102 (clean energy guardrails) and HB26-1030 (a 20-year sales and use tax exemption on projects over $250 million)
The tax break would have cut general fund revenue by $29 million, then $59 million, which under Colorado's budget rules automatically shrinks tax credits for low-income families
At least nine jurisdictions have paused or capped development
A typical project brings roughly 1,500 construction jobs but as few as 100 permanent ones
The place to weigh in right now is a city council or county planning meeting, not the Capitol
What happened at the Capitol, and what happened after
Two competing approaches went to the 2026 session.
Senate Bill 26-102 would have required large-load data centers to meet their full annual electricity consumption with renewables starting in 2031, and to prepay utility costs or sign long-term contracts, shifting infrastructure expense from ratepayers to developers.
House Bill 26-1030 would have granted a 100% state sales and use tax exemption for 20 years, extendable to 30, to operators committing $250 million within five years.
Both were postponed indefinitely in May after compromise talks failed. The effort drew 196 lobbyists representing 150 clients, one of the most heavily lobbied fights of the session. Polling cited during the debate found 91% of Coloradans supported guardrails.
Here’s how various jurisdictions responded:
Denver passed a one-year moratorium in May and convened a working group on noise, air pollution, energy use, and zoning.
Boulder County followed with six months in June.
Broomfield passed an 18-month ban in July covering facilities of 10 megawatts or more.
Jefferson County extended its pause to March 2027 after commissioners found their zoning code did not define a data center.
Larimer County extended its pause to February 2027.
Woodland Park and Monument acted in July.
Lochbuie adopted the longest pause in the state at five years.
Longmont capped hyperscale energy use at 5% of the regional grid, roughly 100 megawatts.
The four fights that came to a head in August
Aurora. Councilmember Amy Wiles proposed a six-month pause while the city wrote rules on cooling, setbacks, noise, and proximity to neighborhoods. The city had nine operating data centers and five in development as of June. On August 10, the council rejected the moratorium and advanced a competing measure from Councilmember Curtis Gardner banning evaporative cooling and requiring setbacks, without the pause. Aurora is now the outlier among large Front Range jurisdictions, keeping approvals open while it writes the rules.
Weld County. Global AI bought the 438-acre former Kodak site near Windsor and began building. The county has issued three stop-work orders for unpermitted construction, then a formal order to abate on July 20. The scale explains the scrutiny. Phase one needs 27.5 megawatts, roughly what 22,000 homes use, and the company has described eventual expansion to one gigawatt. The local co-op can supply 35 megawatts only until mid-2028, and the water agreement inherited from Kodak ends in March 2027 unless the company annexes.
Colorado Springs. Project Taurus would be the city's first AI data center, sited off Garden of the Gods Road. Residents have appealed twice over noise and energy use. The planning commission upheld the approval 6-2, and the city council makes the final call on September 17, with public comment capped at 120 speakers, two minutes each, first come first served.
North Denver. CoreSite's DE3 campus in Globeville and Elyria-Swansea is building toward 65 to 75 megawatts, and the company defended the project publicly this month in the Denver Post. State air regulators had asked CoreSite in March to hold public meetings under Colorado's environmental justice rules, which apply to projects in communities carrying disproportionate pollution burdens. The neighborhood is majority Latino, ringed by heavy industry, and has higher-than-average asthma hospitalization rates. CoreSite was not legally required to comply, and did not.
The concerns being raised
The jobs math. The gap between 1,500 temporary construction jobs and as few as 100 permanent ones is the crux of the objection. Construction work is real work, and it ends. A facility that occupies land, draws power, and runs for decades on a skeleton crew is a different economic proposition than a factory or a distribution center.
Who pays for the tax break. Legislative analysts found HB26-1030 would cut general fund revenue by $29 million and then $59 million. Because Colorado's low-income tax credits shrink automatically when revenue growth falls short, any bill cutting revenue by at least $28.1 million triggers that reduction. The analysis projected roughly $106 million in lost credits for low-income Coloradans in a single fiscal year, against a state budget already about $1 billion short under TABOR limits. The companies seeking these exemptions are among the largest in the world.
Siting and cumulative burden. Elyria-Swansea is the clearest example of the pattern communities object to: diesel backup generators in a neighborhood already carrying an outsized share of the region's industrial pollution, approved without the public process a project of that consequence warrants. Denver council members have since called the approval a mistake.
Commitments outrun local capacity. Weld County's project needs more electricity than its rural co-op can supply past 2028 and has water only through March 2027. Statewide, Xcel has received about a dozen serious applications representing roughly 2,000 megawatts of new demand by 2031, in a state with 56 existing data centers. Those commitments get made in a permitting process most business owners never see.
Process, not just outcome. Several of these disputes are procedural. Weld County found construction underway without permits. Jefferson County had no zoning definition for the use it was asked to approve. Colorado Springs residents appealed on the grounds that the city skipped steps. Local governments are not refusing to decide. Instead, they are asking for the time and the definitions to decide properly.
The case for data centers in Colorado
Investment. Thirty-seven states offer meaningful incentives, and eight data center developers headquartered in Colorado have built their largest facilities elsewhere. One estimate puts the potential loss at $3 to $4 billion over the next decade. Rep. Valdez put it plainly during the session: without incentives, "Wyoming wins, and Texas wins."
Jobs and tax base. Duane Nava of the Greater Pueblo Chamber of Commerce has argued that a single project creates roughly 1,500 construction jobs for electricians, welders, and heavy equipment operators at average pay near $140,000, plus up to 100 long-term positions. He points to Pueblo and Craig, absorbing the loss of power plants and mines, as places where that base matters. Data centers generated $1.37 billion in state and local taxes in Colorado in 2023.
Water in context. CoreSite's 18-megawatt phase would use about 230,000 gallons a day at peak, comparable to 4,600 households, in a state where agriculture accounts for 89% of water use. Newer closed-loop and air-cooled systems cut consumption substantially against older designs.
Grid costs may be covered. Xcel has proposed a large-load tariff requiring customers over 50 megawatts to pay for the generation and transmission they need and sign 15-year minimum contracts. If it works as designed, the infrastructure cost stops at the data center instead of landing on everyone else's bill.
How small businesses can get involved
Local process is where this is being decided, and it is where a business voice carries unusual weight.
Show up where the decision is. The Colorado Springs hearing on Project Taurus is September 17. If your city or county is drafting rules, planning commission and council meetings are open, and written comment usually counts the same as testimony.
Ask the specific questions. How many permanent jobs, in writing, and at what wage? Who pays for new transmission and generation? What is the water commitment and how long is it guaranteed? What are the noise limits at the property line, and how are they enforced? Vague answers at approval become disputes later.
Watch the utility side. The Public Utilities Commission is reviewing Xcel's large-load tariff, which determines whether data center infrastructure costs land on business and residential ratepayers. That proceeding accepts public comment.
Prepare for 2027. Both bills will be back in some form. A small business owner explaining what a $59 million revenue reduction means against the credits and services their employees rely on is an argument legislators hear far less often than the one lobbyists are making.
Where Good Business Colorado stands
Colorado does not have to choose between attracting investment and protecting the communities that host it. The state has not built the framework that would let it do both, and without one, individual towns are negotiating alone against companies with vastly more resources at the table.
Two principles should carry into 2027. First, guardrails come before incentives. Water commitments, emissions limits, noise standards, ratepayer protection, and honest job counts are the terms of the deal, not paperwork to sort out after approval. Where a project lands in a community already carrying a disproportionate pollution burden, environmental justice review should be a requirement, not a recommendation a company can decline.
Second, public subsidy should follow public benefit. A twenty-year tax exemption for trillion-dollar companies is hard to justify when the same bill mechanically reduces credits for Colorado's lowest-income families and the permanent employment on offer is a hundred jobs. Colorado's small businesses pay full freight on their sales and use taxes. They deserve an explanation of why the largest firms in the world should not.
We take the counterargument seriously. Communities losing power plants and mines need a tax base, construction trades need work, and this infrastructure will be built somewhere. The question is not whether Colorado hosts data centers, data centers are already here in Colorado. It is whether the state sets the terms before the buildout, or spends the next decade litigating them one county at a time.
Colorado Springs City Council hears Project Taurus on September 17 at the Pikes Peak Center. If your city or county is drafting data center rules, check your planning commission agenda. Comments on Xcel's large-load tariff can be submitted through the PUC.