Why developers come here
Arizona has been a data center state since the early 2010s. Metro Phoenix offers flat, dry land, almost no earthquake or hurricane risk, direct fiber routes to Los Angeles and Dallas, and a workforce already trained by the semiconductor build-out around Chandler and north Phoenix. The Arizona Corporation Commission counted about two dozen operating data centers with more than 2,000 MW of load in April 2026, and more than 10,600 MW of additional capacity planned.
The other draw has been price. Industrial electricity averaged 7.34 cents per kWh in the first half of 2026, down from 8.03 cents a year earlier, and the state has exempted data center equipment from sales tax since 2013. Both of those advantages are now under pressure: the tax exemption is closed to new applicants until mid-2029, and both big Phoenix utilities are asking regulators to charge very large customers more.
Incentives
- Computer Data Center (CDC) program. Administered by the Arizona Commerce Authority under A.R.S. 41-1519, with the exemption itself at A.R.S. 42-5159(B)(24). A certified owner, operator, or colocation tenant pays no state, county, or city transaction privilege (sales) tax or use tax on “computer data center equipment,” meaning servers, networking gear, cooling, power distribution, and related materials. Electricity is not listed as exempt equipment.
- Thresholds. At least $50 million of capital investment within five years of certification for a facility in Maricopa or Pima County, or $25 million in any other county. Standard certification lasts 10 years; a “sustainable redevelopment project” can qualify for up to 20 years. The program was extended through December 31, 2033.
- Three-year pause on new certifications. The state budget signed in June 2026 (HB 4168 / SB 1861) bars the Commerce Authority from accepting new CDC applications from July 1, 2026 through June 30, 2029. Facilities already certified keep their exemption for the remainder of their term. The exemption had been costing the state roughly $38 million a year. The Commerce Authority received 113 applications in the last two weeks of June 2026 as developers rushed the deadline, so a large pipeline of certified-but-unbuilt projects now exists.
- Property tax. Arizona has no data-center-specific property tax abatement. Local deals are negotiated city by city; check the specific municipality.
- Other 2026 legislation. A bill requiring utilities to report data center connections was signed. A bill that would have blocked local ballot referrals of data center rezonings, inspired by a Marana fight, was vetoed. A Democratic bill directing the Corporation Commission to prevent cost shifts to residential customers did not get a hearing. Attorney General Kris Mayes called for a statewide pause on new hyperscale approvals on August 31, 2026; that is a request, not law.
Power
Arizona is in the Western Interconnection but not in an organized market like CAISO, so interconnection runs directly through the utility. Arizona Public Service (APS) serves most of Phoenix and northern Arizona, Salt River Project (SRP) serves the East Valley and Mesa, and Tucson Electric Power (TEP) serves Tucson. SRP is a public power district and is not rate-regulated by the Corporation Commission; APS and TEP are.
APS filed a rate case in June 2025 that proposed roughly a 45 percent increase for extra-large users and a new extra-high-load-factor rate, with long-term contracts under which data centers pay directly for the generation and transmission built to serve them. SRP told the Commission in April 2026 that it already serves 59 large-load customers totaling about 7,000 MW and forecast a 13.1 GW system peak for 2026. TEP had one 286 MW project under contract and described 8 to 10 GW of speculative requests in its queue. The Corporation Commission is working toward a standardized large-load tariff paired with energy service agreements, and held its first workshop on April 16, 2026. Expect upfront collateral, minimum bills, and “bring your own power” provisions in any new agreement.
Water is the other constraint. The federal government cut Arizona’s Colorado River allocation by nearly 30 percent, and groundwater basins outside the Phoenix active-management area, such as the Eloy sub-basin, are already showing subsidence and dry wells. Developers now routinely propose closed-loop cooling and annual water caps to get a hearing.
Where the projects are
The West Valley (Goodyear, Buckeye, Avondale) and the East Valley (Mesa, Chandler, Queen Creek) hold most of the operating and permitted capacity. Tract’s Buckeye data center park in Maricopa County is the largest announced land play. Pinal County (Eloy, Casa Grande, Coolidge) drew the biggest speculative proposals, including Vermaland’s La Osa Energy Center, which was denied in August 2026. Pima County and Marana, near Tucson, are the newest frontier, anchored by the 290-acre Project Blue site.
Local politics
Pinal County’s Board of Supervisors denied La Osa 4-1 on August 26, 2026, after a five-hour hearing with 123 letters in opposition and 16 in support. The developer had already cut the project about 80 percent, from 59 buildings on 3,300 acres to 11 buildings and 1 GW, and offered a 600 acre-foot annual water cap. Supervisors cited the aquifer, unenforceable stipulations, and the fact that only 500 MW of gas generation was secured for a 1 GW load. Residents are now asking the county for a data center ordinance; none exists.
Chandler’s council rejected a data center rezoning on the Price corridor 7-0. Tucson’s council voted down annexation for Project Blue, which then proceeded on unincorporated Pima County land with a Corporation Commission-approved power deal; Pima County supervisors have since directed staff to draft a four-month moratorium on new projects. On the other side, Buckeye, Goodyear, and Mesa have continued to approve projects for the tax base and construction jobs, and Republican legislative leaders defended the incentive as a national security and economic development tool while agreeing to the pause.
What a landowner should know
Developers in the Phoenix metro typically look for 100 to 500 acres for a single campus and 1,000 acres or more for a multi-tenant park, within a few miles of a 230 kV or 500 kV line and, ideally, an existing or planned substation. Option agreements running 12 to 36 months are standard while the developer works through the utility’s load study and the city’s rezoning. Ask which utility the buyer has talked to and whether a load-study agreement is signed; that is the difference between a real buyer and a speculator now that new tax certifications are frozen.
Groundwater rights matter. Inside an active management area (most of Phoenix and Tucson) the buyer will need an assured water supply; outside one, expect the county to ask about well impacts, as Pinal did. The state contact is the Arizona Commerce Authority, which runs the CDC program and can confirm whether a project claiming certification actually holds one.