It was a disaster with a deadline. In the late 1990s, civilization as we knew it was supposedly going to end at midnight on the new millennium. Virginia sat at the center of the Year 2000 rollover, since half the world’s internet traffic then passed through a commonwealth company, America Online. State officials spent years preparing for every conceivable disruption, and as the acting chief technology officer for the Virginia Department of Health and Human Resources, I was tasked with keeping hospitals open, prisons secure, and international communications running.
Virginia has a decadeslong record of building the infrastructure that powers the modern internet, and just as important, the governance capacity to manage it responsibly. Today, the commonwealth hosts the world’s largest concentration of data centers, at 13% of global capacity. That makes Virginia a valuable case study, not because growth here happened without challenges, but because the commonwealth built the institutional capacity to manage that friction as it arose.
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The familiar worries are valid: rapid growth could overwhelm power grids, strain water supplies, or impose costs on residents while benefiting large tech companies. If those fears were correct, we would expect to see the consequences in Virginia by now, not because growth here has been smaller or slower, but because Virginia has had more of it, for longer, than anywhere else.
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Instead, the commonwealth’s experience points in the opposite direction. The worst fears have not materialized, and the reason is not luck. It is governance. Virginia treated data center growth as a planning problem to be managed rather than a threat to be blocked or a windfall left unsupervised. And the results are measurable.
According to Virginia’s Joint Legislative Audit and Review Commission, the industry supports roughly 74,000 jobs, generates $5.5 billion in labor income, and contributes about $9.1 billion annually to the state’s economy.
Because data centers require heavy capital investment while placing modest demands on public services, they have also become major local tax contributors, accounting for as much as 31% of government revenue. Across Northern Virginia, they generated more than $1.3 billion in direct property tax revenue in 2024. One analysis found residential tax rates would have needed to rise by as much as 91% in certain counties to replace it. That gives localities every incentive to get oversight right, which the record shows they largely have.
The feared trade-offs around utility bills and water have also proven more manageable than expected, not because they’re illusory, but because the commonwealth built regulatory structures to address them as growth occurred. Common sense suggests that greater electricity demand should mean higher prices. Virginia shows otherwise: what matters is whether infrastructure planning keeps pace.
Lawrence Berkeley National Laboratory found Virginia’s average electricity prices declined during the period studied, even as demand grew substantially, reflecting sustained investment in generation and transmission alongside the load growth, the kind of coordinated planning other states will need to replicate. Still, this is not a static victory; future investment remains necessary, and past price stability is no guarantee. The lesson is that demand and affordability can coexist when governance keeps pace with growth.
Water tells a similar story: more manageable than anticipated, the product of monitoring rather than the absence of impact. The industry accounted for less than one-half of 1% of statewide water withdrawals in recent years, with more than a third from reclaimed sources, a result of deliberate engineering choices, not coincidence. There is room for continued improvement, but growth and water stewardship can coexist when regulation requires it.
As artificial intelligence drives demand for new computing infrastructure, more states will soon face the questions Virginia confronted decades ago. The evidence points toward building governance capacity early rather than choosing between unconstrained growth and outright rejection. States that reject data centers outright risk forgoing investment, jobs, and a role in one of the fastest-growing sectors of the economy. States that approve development without Virginia’s planning and oversight capacity risk the very outcomes critics fear.
The stakes extend beyond any single state, just as they did during the early 2000s. The United States is in intense competition with China for leadership in AI. Winning requires more than software and chips; it requires physical infrastructure and the governance capacity to build it without the public backlash that halts projects mid-stream. Virginia’s model offers a template.
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This does not mean every proposed data center should be approved, nor does it eliminate the need for thoughtful oversight. It demonstrates that the predicted trade-offs are manageable when states build the governance to manage them, and that the economic benefits, paired with that governance, are substantial and measurable. The best indication of future results is past performance, provided other states are willing to build what Virginia built, not just hope for what Virginia got.
Sound policy decisions had positive worldwide effects as the clock crossed to 2000, and we avoided disaster. Today, as the U.S. races to lead the next generation of innovation, that is a lesson other states would be wise to consider.
Jack Yoest is an associate professor at The Catholic University of America in the Busch School of Business. He served as an assistant secretary for Health and Human Resources for the Commonwealth of Virginia and is the author of Learning to Win: The 45 Laws of the Public Policy Process.
