By Andy Vargas-Hernandez
China and the United States are in a race for AI supremacy, and the outcome will shape everything: global trade, national security, and economic power for a generation. Data centers are the infrastructure of that race. They are coming to Texas regardless of what any city council, utility commissioner, or state legislature decides. That part is settled.
What is not settled is whether the communities that host them come out ahead or instead bear the costs while others reap the economic gain.
I’ve watched this up close. A few months ago I sat down with El Paso Matters to discuss the Meta data center coming to Northeast El Paso, a deal that started at $1.5 billion and has since grown to $10 billion.
The city got a bad deal. In exchange for an $800 million investment from Meta and a requirement of just 50 local jobs, El Paso handed over an 80% property tax break. This incentive is valued at up to $550 million – that is, hundreds of millions of dollars in tax revenue that the city would have otherwise allocated to fund public priorities like safer roads and better community facilities.
Yet these figures fail to capture the entirety of what El Pasoans will actually pay. It’s not just about corporate tax breaks and investments.
Utility rates and tax burdens shoot up when a facility consuming hundreds of thousands of gallons of water per day and enough electricity to power a small city sets up next door.
Meta will provide a meager $25,000 grant to El Paso Water to help low-income residents with the expected higher water bills. El Pasoans should read the token $25,000 for what it is – an admission of the strain on our public resources, not a gesture of goodwill.
With $10 billion now on the table and the deal in flux, El Pasoans deserve to know whether it can be renegotiated on terms that reflect what our community is actually worth.
Still, this isn’t about relitigating one deal. It’s about making sure that our state and local governments don’t keep making the same mistakes as the next data centers get sited, permitted, and subsidized across the state.
The economic upside of hosting AI infrastructure – an expanded tax base, grid modernization, workforce development, and supply chain growth – can be genuine and lasting.
But the important question is whether Texas is negotiating from strength or from fear. Today, it’s fear. And it’s costing the state.
Just this year, Texas has given away $1.3 billion in sales tax breaks to subsidize the data center industry, a figure projected to climb to nearly $1.8 billion annually by 2030.
Texas now leads the nation in data centers under construction: 142 and counting. The subsidy structure that made all of this possible was created in 2013, when data centers were the size of office floors and the AI boom was unimaginable. It’s time we reassess.
The most consequential costs are not in the dollar figures. A recent study from the University of Cambridge found that areas surrounding data centers warm by an average of 3.6 degrees Fahrenheit, with effects measurable up to six miles away. In a desert city that already pushes the limits of livability in summer, that’s not an abstraction, it is a real and serious consequence.
And heat is only part of it. A joint study by Caltech and UC Riverside found that air pollution from data center diesel backup generators and electricity consumption could contribute to as many as 1,300 premature deaths per year in the United States by 2030. The public health costs are estimated at $20 billion annually.
These costs – water, electricity, natural gas, and now health and environmental impacts – need to be taken into account.
AI companies choose to build in Texas for its cheap land, abundant electricity, and grid independence, not because of a tax exemption. Dick Lavine, a former fiscal analyst at Every Texan, argued as much to the Texas Tribune: when a company decides where to build, land, energy costs and infrastructure are what drive their decision, not the tax breaks.
The money is something companies take because it’s offered, not because it’s needed to build. Community leaders hand it over because they’re convinced they have no leverage. We must shift our collective mindset from “we’re lucky to even be
considered” to “we know our worth and deserve a fair deal that clearly benefits our whole community.”
El Paso’s own history reminds us what’s possible when communities hold the line and leverage their power. My mother worked 25 years at Farah, which once made this region the jeans capital of the world. In the 1970s, workers walked out in a boycott that became a national model for organized labor. The company eventually yielded, and for a generation, Farah and the factories on both sides of the border benefited from real wage growth and an improved quality of life.
El Paso can tell the difference between a deal structured to endure and one structured to extract. Let’s not forget that.
Once again, El Pasoans deserve a fair deal, not an 80% tax break handed to a company sitting on $44 billion in cash. Communities deserve a deal that reflects their worth and actually works for them.
What would better terms look like? In a recent podcast with El Paso Matters, I outlined four pillars: smaller and shorter abatements, a “bring your own power” requirement, mandated water reclamation, and a meaningful and binding local workforce investment.
The July Texas Senate Finance Committee hearing, called by Sen. Joan Huffman, is an opportunity not to kill the industry, but to build a statewide framework that turns lopsided infrastructure deals into partnerships with real community protections and benefits.
Tie incentives to local hiring. Require companies to fund their own substations. Mandate water reclamation and closed-loop systems. Shorten abatement periods and build in performance clawbacks. Invest the savings in the things that actually move the needle for places like El Paso: community colleges training the next generation of advanced manufacturing workers, neighborhood revitalization projects, sustainable local startup investment, and the kind of ecosystem development that keeps talent here rather than watching it leave for Dallas or Austin.
The July hearing, though, is only part of the conversation. Alongside my co-founder, Jack Loveridge, I’m building Borderlands AI, an international technology conference and festival coming to San Antonio in 2027.
The conference will bring together leaders from government, industry, academia, and civil society to confront the harder questions that a Senate committee can’t fully address. This includes how AI is reshaping trade, migration, security, and environmental resilience across the Americas, and how border communities can claim their share of the upside. The July hearing can set the policy floor. Borderlands AI is where we will build the vision above it through honest, well-informed dialogue.
The AI infrastructure buildout is real, the capital is committed, and the data centers are coming to Texas. Infrastructure development and community benefit are not necessarily in conflict, but they will not align on their own. That alignment requires discipline, leverage, and the willingness to hold the line for what’s right for El Paso.
Andy Vargas-Hernandez is a co-founder of No Border Ventures and Borderlands AI. He previously held roles in cloud infrastructure at AWS and Amazon, energy trading and capital markets at Marathon Petroleum Corporation.
The post Opinion: As data centers expand, here’s what communities should require in return appeared first on El Paso Matters.
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