Gary officials and residents are grappling with whether the city should welcome data centers amid concerns about environmental impacts, tax incentives, and strain on local infrastructure.
During a public forum hosted by Common Council member Darren Washington, community members, environmental advocates, and residents discussed the potential benefits and liabilities of data center development in Gary.
Washington opened Thursday’s forum emphasizing that no formal proposal has been presented to the council yet but said the discussion is necessary as interest in data center development grows across Northwest Indiana.
“We’re not going to be in a position where we just grab the first economic opportunity that comes along,” Washington said.
The forum was prompted in part by recent state legislation affecting energy and economic development. One measure, Senate Bill 424, allows utility companies to develop small modular nuclear reactors to power energy-intensive facilities like data centers.
Data centers are also extraordinarily energy-intensive. A single facility can consume as much electricity as an entire city, said Sam Carpenter, executive director of the Hoosier Environmental Council.
Indiana has become a target for development partly because of generous tax incentives, including a sales tax exemption on electricity used by data centers which could save a large facility hundreds of millions of dollars. At the same time, Carpenter said, Indiana ranks last in the nation for environmental protections, and recent legislation has weakened regulatory oversight.
Washington also pointed to examples in nearby communities. In Hobart, officials recently approved a data center deal despite public opposition. In La Porte County, Microsoft negotiated a deal to build a data center after local officials and residents pushed back against tax incentives, ultimately agreeing to pay property taxes rather than seek an abatement.
Similar discussions have emerged in other parts of the state as utilities and lawmakers promote Indiana as a destination for data center investment, highlighting the potential for jobs and economic development while critics warn about rising energy demand, environmental risks and the long-term costs of tax subsidies.
At the same time, Washington expressed concern about Senate Bill 1. The measure, which was signed into law, shifts local income taxes from city councils. He said that could leave cities like Gary struggling to fund essential services such as police and fire protection.
Carpenter told attendees that modern data centers are no longer just for storing cloud data. Instead, they are increasingly powering the global race toward artificial general intelligence, or AGI — a form of AI designed to replicate humanlike reasoning.
But Carpenter warned that the industry’s rapid growth comes with risks.
“The AI industry right now is not profitable,” he said. “If that bubble bursts, communities could be left with stranded assets.”
Facilities often rely on large diesel generators as backup power sources and can consume enormous amounts of water for cooling systems. Some cooling technologies also involve chemicals known as PFAS, a class of toxic compounds sometimes referred to as “forever chemicals.” Carpenter said many municipal sanitation systems are not equipped to remove PFAS from wastewater.
“They’re essentially poison,” he said.
Several residents raised concerns about the environmental impacts of data centers. Others raised concerns about whether Gary’s infrastructure could handle additional industrial demand.
Carolyn McCrady of Gary Advocates for Responsible Development, or GARD, urged officials to consider a one-year moratorium on data center projects to allow time for further study.
“We don’t have enough transparency right now,” she said.
Ashley Williams, executive director of Just Transition Northwest Indiana, described problems she said occurred in Michigan City, where a data center was built on a contaminated brownfield site. Because of nondisclosure agreements between developers and local officials, Williams said, residents were unaware of the project until construction was already underway.
“We don’t want that happening here,” she said.
Other speakers raised concerns about water quality, noise pollution, and potential competition for electricity with Northwest Indiana’s steel industry.
Terry Steagall, a retired steelworker, said reliable energy will be critical as steel companies transition to lower-carbon production methods.
“If we’re talking about green steel, they’re going to need electricity,” he said.
Carpenter urged Gary officials to adopt a local data center ordinance before any projects are proposed. Such policies could require environmental impact studies, noise mitigation plans, and guarantees that developers cover the full cost of infrastructure upgrades. He also suggested requiring decommissioning plans backed by a surety bond to ensure facilities are dismantled properly if companies go bankrupt.
Washington said the information shared during the meeting will be presented to other council members as they consider whether Gary should develop its own regulatory framework. He also encouraged residents to contact state lawmakers about stronger protections around data center development.
The councilman announced that additional forums are planned, including an April 7 meeting with the Citizens Action Coalition to discuss rising NIPSCO utility rates.
“This is the beginning of the conversation,” Washington said.