Data centers near O’Hare International Airport are benefiting from substantial local property tax breaks, costing suburban homeowners while local leaders praise the growing industry. These tax benefits are concentrated in suburbs reliant on few major businesses, notably impacting areas like Northlake. Analysis shows homeowners in Northlake could save over $2,000 annually on property taxes if data centers did not receive valuation reductions and incentives.
Cook County officials granted reduced taxable values to 18 data centers, with 11 receiving special incentives from local leaders, already minimized tax burdens over many years. Twelve offer additional state tax savings on sales and use taxes. Collectively, these efforts reduce the taxable property value of data centers by nearly $2 billion in three suburbs: Elk Grove Village, Northlake, and Franklin Park. Consequently, residents miss about $100 million in tax savings, funds that could support local infrastructure.
Data center valuation in Cook County remains uncertain with sparse consultation and community awareness. The county assessor, local taxing agencies, and data center operators often disagree on property valuation for tax purposes. The data center businesses argue that tax breaks are essential for successful operations; otherwise, the properties might lay vacant or attract less lucrative industries.
In the tax year 2025, the 18 data centers paid nearly $71 million in property taxes. Northlake’s data centers contributed about 28% of the city’s tax base last year. Assessments were analyzed involving data centers in Elk Grove Village, Franklin Park, Des Plaines, and Mount Prospect.
Illinois, according to Tietz from Data Center Coalition, faces challenges in maintaining appeal compared to more tax-friendly states. Despite high property values near reliable resources, including water, power, and fiber-optic lines, some argue further incentives are unnecessary.
Kasia Tarczynska from Good Jobs First insists that companies building data centers have the financial means to pay taxes without requiring breaks. She highlights corporate spending of $800 billion on data centers and emphasizes how local communities could benefit from redirected funding to basic services.
Cook County Assessor Fritz Kaegi has opposed valuation reductions for data centers, arguing commercial properties have been consistently undervalued. The assessor’s office contests the issue but faces mixed results. Data centers present a unique property assessment challenge due to their novelty.
The valuation complexity involves methods like cost replacement, income potential, and market comparisons, each open to interpretation. The lack of available leasing and sales data for data centers complicates assessments.
The case of Microsoft Azure’s data center in Northlake reflects this complexity. Kaegi’s office assessed its value around $900 million, while Microsoft appraised it at $250 million, revealing vast discrepancies attributable to varying methodologies and property attribute views.
David Lehman from the assessor’s office argues all critical systems like generators and chillers should be included in valuations. These systems, he contends, are core to the facility’s operation as a data center and thus count as real property, a stance contested by Microsoft’s appraisal.
The tussle continues over whether equipment and installations should be considered permanent for tax purposes. State law definitions around ‘real property’ are seen as inadequate, according to experts.
The situation reveals wider issues within property tax systems. Instances of substantial under-assessments pressure local taxing bodies to settle cases preemptively, often compromising potential tax gains to avoid possibly onerous refunds.
Tax incentives are granted through programs for industrial buildings in designated conditions, reducing taxable value by 60% over 12 years before returning to baseline. TIF districts like Busse/Elmhurst further compound local tax dynamics by redirecting property tax growth to infrastructure instead of neighboring tax relief.
Suburban leaders defend incentives, asserting data centers contribute more tax revenue than previous site occupants and aid in maintaining competitiveness amid regional industrial assessment discrepancies.
Others challenge whether incentives actually influence developer site choices, given the strategic location benefits that suburbs like Northlake and Elk Grove Village offer, arguing it lends advantage regardless.
Recent county interest suggests future adjustments to incentive criteria, proposing more tailored, merit-based awards and reviews. State intervention paused certain tax credit applications temporarily, aiming for more comprehensive rules and standards adaptation.