Demand for internet access and electronic storage has grown alongside digital technology itself. At the center of that growth are the energy infrastructure and data centers that governments and companies began developing in Northern Virginia in the late 20th century. Today, the region houses the world’s largest concentration of data centers, making Virginia the nation’s digital capital.

That growth has brought major economic benefits for local governments, but it has also divided communities increasingly weary of the facilities’ heavy demands on water and energy, among other impacts.

The commonwealth’s rise as a global digital leader did not happen overnight, said House Technology Committee Chair Cliff Hayes, D-Chesapeake. It was a result of years of persistence, long-term planning and problem-solving.

”This designation for the commonwealth to be the digital capital not only of this country but of the world has taken a lot of stamina, resilience and vision,” Hayes said.

Hayes said leadership also means adapting to new challenges. This year alone, lawmakers passed an entire package of bills aimed at further regulating the industry, while the fight over tax incentives remains largely unsolved.

AOL’s move 

Ashburn’s rise as one of the largest digital infrastructure hubs began in 1997 with the arrival of America Online, or AOL, then the primary internet gateway for many users. Soon after, UUNet/WorldCom and the relocation of the Metropolitan Area Ethernet East, a major internet exchange and traffic hub, helped create unmatched fiber connectivity, turning Loudoun County into a key internet crossroads and destination for other businesses.

Buddy Rizer, executive director for Loudoun County Economic Development, said AOL’s decision to locate in Loudoun helped make the internet mainstream for Americans and anchored the infrastructure that turned Loudoun and Virginia into the world’s leading internet hub.

“You can’t overstate the importance of AOL, right? AOL didn’t invent the internet, but they made it accessible to ordinary Americans at the moment that the commercial internet was starting to take off… by the late 1990s AOL had 20 million subscribers, and roughly half of U.S. homes that had internet were using AOL by 1997.”

Rizer said once Loudoun established core infrastructure and attracted a few anchor companies, growth became compounding: infrastructure drew companies, companies brought more infrastructure and the cycle continued for roughly 20 years.

Data storage and computing explodes 

While data centers have existed in Virginia for decades, the recent rise of artificial intelligence has accelerated demand for the warehouse-like facilities that store and process data around the world. 

Ali Mehrizi-Sani, a professor at Virginia Tech, said Northern Virginia had many of the right ingredients to attract the industry even before the state sales and use tax exemption passed in 2008.

“The fact is that we have a lot of customers of data, and that’s really the federal government and their contractors,” Mehrizi-Sani said. “They use a lot of data, so really just proximity to Washington, D.C. has been a main driver of honestly everything in Virginia, including data centers.”

The early development of the internet exchange points in Virginia, combined with large stretches of undeveloped land in Northern Virginia, also helped fuel the industry’s growth. Loudoun County, for example, was far more rural than it is today.

Loudoun recorded 71 operating data centers, the most of any locality in the commonwealth, according to a 2024 study by the Joint Legislative Audit and Review Commission. Statewide, 131 data centers were operating at the time. 

“That’s why you see data centers are coming further south, even to areas like where I live in Roanoke and Botetourt County, essentially in search of land,” Mehrizi-Sani said.

He said data centers have also remained in Virginia because electricity rates are comparatively lower than in other parts of the country. Another major factor is the state’s sales and use tax exemption.

Tax breaks and tax gains

In Loudoun, data center revenue has generated substantial tax income year after year, providing the county with more than $100 million annually to support schools and government services.

The revenue stream — estimated at about $1.3 billion in 2027 — has grown enough that the county has reduced real estate tax rates for homeowners every year for the past decade, according to county officials. 

Revenue from data centers has also allowed county leaders to propose reducing the personal property tax rate on vehicles beginning in tax year 2026 and eliminating the $25 vehicle license fee.

In 2008, the General Assembly approved a statewide incentive allowing data centers to avoid the state’s 5.3% sales and use tax, which at the time was estimated to save the industry about $1.5 million annually. Data centers routinely refresh computer equipment and software, the exemption can significantly reduce costs every few years. 

Now, however, the cost of the tax break has ballooned to about $1.9 billion annually in foregone state revenue. 

While the tax break had previously been extended, and former Gov. Glenn Youngkin sought to continue it through 2050 in his final budget proposal, debate over potentially ending the incentive led to months of negotiations and brought Virginia to the brink of a government shutdown after lawmakers failed to pass a budget until the final days of June.

Some lawmakers argued the industry had benefitted enough from the tax exemption. At the same time, concerns over rising energy costs and environmental impacts prompted legislators to look for ways to reclaim some revenue from the trillion dollar industry.

But Gov. Abigail Spanberger led the push to preserve the tax break, arguing Virginia had “made an agreement” and should not reverse course. The exemption is currently set to expire in 2035 unless lawmakers change it before then.

“We know technology is not bad,” Senate Finance Committee Chair Louise Lucas, D-Portsmouth, said last month. “We all can benefit from technology, but we, as a government, have not done a good job in managing the regulations and the impact on our communities, and that’s what we’ve got to rein in. But we’ve also got to rein in the fact that data centers – they’re some of the largest corporations on the face of the Earth, trillion dollar organizations – are getting tax exemptions right now.”

While the exemption ultimately remained in the budget, lawmakers approved a new energy consumption tax on data centers expected to bring in a total of $600 million annually, or $1.2 billion over the biennium. The industry will pay 1.1 cents per kilowatt-hour of electricity consumed up to the cap, with any excess refunded at the end of the fiscal year.

Dominion Energy and Mecklenburg, Northern Virginia, and Rappahannock electric cooperatives reported in 2023 that data centers used about 5,050 megawatts of power that year, based on peak-load forecasts, according to the Joint Legislative Audit and Review Commission.

“What I have found is that some of the businesses coming to our commonwealth, they want to make investments in our communities and in our workforce. The consumption tax, as we’ve conceived of it here in the commonwealth, is one that’s based on fairness,” Spanberger told The Mercury last month.


Lawmakers also approved new water use regulations for data centers in areas designated as water scarce and within the water management area east of Interstate 95.

Virginia has a new two-year budget. Here’s what lawmakers now require of data centers.

The changes aim to push facilities away from evaporative cooling systems that consume millions of gallons of water annually and toward more efficient technologies. Also, for the first time, the state will regulate data center noise levels. 

The General Assembly also passed bills requiring cleaner backup generators that emit fewer carbon emissions and measures intended to help localities better assess the residential and environmental impacts of proposed facilities.

Public policy 

In 2010, Virginia created a retail and sales tax exemption for data centers, a factor companies have consistently identified as important in site selection.

Loudoun designated large areas for industrial and employment uses where data centers could be built, helping reduce development timelines and support continued growth. 

Through successive comprehensive plans, Loudoun also reserved large tracts of land in eastern Loudoun — near Washington Dulles International Airport and the W&OD Trail — for industrial and employment uses close to existing fiber networks and electrical infrastructure. The move ensured a long-term supply of development-ready sites for large-scale data center campuses.

Opposition from residents has grown in recent years, with hundreds of community members attending local government meetings to oppose projects near homes, drinking water supplies and high-voltage transmission lines. Residents have urged lawmakers to impose stronger regulations and seek greater financial contributions from the industry for supporting infrastructure.

What’s next 

Last week, lawmakers ordered a work group to study how the data center tax exemption could be phased out or modified to generate additional state revenue. A report is due in November.

While Spanberger has described the new consumption tax as “fair,” the data center industry disagrees. After lawmakers approved the budget amendments last week, Data Center Coalition CEO Josh Levi said the new tax will “drive away investment and job creation, and tarnish Virginia’s reputation.”

“The message to businesses in all industries is clear — Virginia is no longer a reliable partner,” Levi said in a June statement.

Rizer argued that Loudoun’s and Virginia’s future depends on treating data centers as a foundation for broader technology growth while maintaining a stable and predictable business climate. 

“You can’t take success for granted … the principle that made us successful is a predictable, welcoming environment with predictable tax and policy issues,” Rizer said. “The only way that that success can go into the future is by staying grounded in those principles that brought us this far.”

As for federal involvement in an issue that has become a national flashpoint, Democratic U.S. Sen. Tim Kaine of Virginia, who was governor when the tax exemption passed, said states should decide individually how to manage data center growth rather than adopt a one-size-fits-all approach.

“(Data centers are a) global phenomenon, and being a leader in this important area is good for America’s national security and for Virginia’s economy,” Kaine said. “But there are real challenges when it comes to water, power and land use, so local communities must get a say when it comes to how to handle them.”

Virginia has become the state that many others are watching as they weigh to and regulate the growing data center industry. Lawmakers now face balancing the promise of economic investment with mounting concerns from residents pushing back against continued expansion.

Editor’s note: This story has been updated to reflect the correct amount of data center revenue in Loudoun for fiscal year 2027, which was $1.3 billion, not $890 million as previously reported.

Hundreds of people fill a downtown street for a protest, waving signs and chanting as they march past businesses and government buildings. Overhead, a police drone records video of the crowd. Nearby traffic cameras and license plate readers capture faces, vehicles and movements along the route.

With artificial intelligence, experts say, hours of footage can be analyzed in minutes, making it easier for police to track or target a participant long after the demonstration ends.

As law enforcement agencies increasingly embrace AI, some civil liberties advocates, legal scholars and policing experts warn that the technology could amplify surveillance, introduce hidden biases into investigations and make it harder to challenge evidence in court. They also worry about a future in which AI takes on a more active role in policing and criminal investigations.

“It’s especially concerning sort of the ways that these tools could supercharge that kind of surveillance and enforcement,” said Rachel Levinson-Waldman, the director of the liberty and national security program at the Brennan Center for Justice, a nonpartisan law and policy organization at the New York University School of Law. Levinson-Waldman has written extensively about the risks of police surveillance and the unregulated use of AI in policing.

Artificial intelligence in policing is not new. For decades, law enforcement agencies have used data-driven and automated tools, including facial recognition systems, automated license plate readers, predictive policing models and video analytics that can flag objects or activity in recorded footage.

What is changing is the speed, scope and complexity of those tools. As police departments accumulate growing volumes of digital evidence — from body camera footage and surveillance video to jail calls, social media records and case files — AI is increasingly being used to help sort, search and analyze that information.

“AI is going to basically be able to sort through otherwise overwhelming amounts of data in ways that we just haven’t seen yet, and give police and prosecutors and the government a lot more power over us in ways that I think will be deeply uncomfortable for many of us,” said Andrew Guthrie Ferguson, a law professor at George Washington University and the author of “Your Data Will Be Used Against You: Policing in the Age of Self-Surveillance,” a book published this year.

Cris Moore, a computer scientist and professor at the Santa Fe Institute, a research and education center, said the technology is advancing faster than agencies, regulators and courts are able to fully assess its implications, raising questions about transparency, accountability and the role automated systems should play in policing decisions.

“It’s fair to say that the speed at which technologically created evidence has been adopted, and the aggression with which it’s being pushed makes it hard for the legal community to keep up,” Moore said.

State legislatures and police departments are still developing rules to govern how AI can be used in public safety settings. While some agencies have adopted internal policies or vendor-specific guidance, there is no consistent national framework, and state-level approaches remain limited and uneven.

At least two states, California and Utah, have recently enacted laws regulating the use of generative AI in police report writing, requiring disclosure when AI is used and adding safeguards around accuracy and oversight.

More broadly, more than a dozen states have passed laws regulating related technologies such as facial recognition, drone surveillance and automated license plate readers, according to the National Conference of State Legislatures.

Emerging tech

Some of the major companies offering AI-powered tools for law enforcement include Axon, Motorola Solutions, TRULEO, Flock Safety, Clearview AI and others. Their products can search body-worn camera footage, analyze large datasets, review digital evidence and case files and identify potential suspects through facial recognition.

Some of these systems are built into centralized platforms that are able to pull and search for data from sensitive databases and police records.

Mark43, a cloud-based software company serving more than 300 public safety agencies, offers two AI-powered tools. ReportAI helps officers draft reports using information from dispatch records and body camera footage, while BriefAI summarizes case information for investigators and supervisors.

Police agencies can choose which AI features to enable and who can access them, and the system maintains audit logs of AI-assisted activity. Mark43 told Stateline that dozens of agencies are using, testing out  or evaluating the AI features.

“Our core mission is to help responders spend less time on administrative work, so that they can spend more time serving in their communities,” said Wendy Gilbert, Mark43’s senior vice president of product.

Some experts are wary of AI being used for decisions that could affect a person’s rights or freedom, such as identifying suspects, recommending enforcement actions or influencing arrests. Critics warn that AI-generated outputs can make mistakes, reflect biases in underlying data and create a risk that officers or investigators place too much weight on the technology’s recommendations.

They also argue that many AI systems operate in ways that are difficult for the public — and sometimes even officers — to fully understand.

One source of concern is the possible advent of “agentic policing.” Future technologies could integrate body-camera footage, camera networks and other data sources into a single system capable of generating investigative leads, identifying potential suspects or suggesting connections between cases.

Even if humans remain responsible for final decisions, critics say, such systems could shape investigative judgments in ways that make it more difficult to understand how conclusions were reached.

“All that data is going to be dumped into an AI model, and they’re going to query it to say who’s the most likely suspect,” said Ferguson of George Washington University. “The AI is going to be running the agentic analysis of it and come up with the answer, and then police and prosecutors have to kind of work backwards to see if it’s accurate.”

Ferguson warned that this flips the traditional investigative process on its head.

“We’ve never started with an answer and made people work backwards,” he said. “There are very real constitutional, statutory and practical risks with this new model of agentic policing.”

AI companies and some law enforcement agencies argue the technology is designed to assist officers, not replace them. They emphasize that officers are responsible for reviewing, verifying and approving AI-generated information, and that the tools are intended to reduce administrative work and help people navigate large volumes of data more efficiently.

“AI should increase accountability, not reduce it, and so we’re doing everything in our will to provide transparency, governance and human control,” said Zach Barden, the lead product manager for AI at Mark43.

In recent years, a growing number of police officers across the country have been accused of misusing AI-powered tools, including automated license plate reader systems, available through their departments to track people for personal reasons.

In April, a former Costa Mesa, California, police officer pleaded guilty to using law enforcement databases and Flock Safety cameras to monitor his wife, a mistress and several romantic rivals. Similar allegations have surfaced in Florida, Georgia, Idaho, Illinois, Kansas, Pennsylvania, Tennessee and Wisconsin.

Flock Safety, one of the nation’s largest providers of automated license plate readers, uses roadside cameras to capture images and video of passing vehicles, including license plates and basic vehicle details, and store them in searchable law enforcement databases.

Some communities have reconsidered their use of automated license plate reader systems, with at least 30 cities ending or canceling contracts since early 2025 amid growing concerns about surveillance and data sharing, NPR reported in February.

A Flock Safety representative was not available for an interview with Stateline before publication. In a May blog post, the company said misuse of its system is rare and noted that permanent audit logs help identify and investigate improper access.

The company said the camera network has helped agencies recover missing people, connect cases across jurisdictions and identify suspects more quickly.

Reshaping public safety operations

While some law enforcement agencies have moved forward with early deployments, others are taking a more cautious approach as they assess potential benefits and risks.

In Maryland, the Montgomery County Police Department, one of the state’s largest law enforcement agencies, is in the early stages of exploring potential uses of AI, including tools to support non-emergency call handling, translation and transcription services, and report writing to reduce administrative workload and improve efficiency.

“We want to bring technology to policing, but we need to make sure that we do it safe(ly), we do it efficiently, and that when we do do it, we’re setting the community and ourselves up for success,” said Capt. Cody Fields, the director of the police department’s media and public information division.

In Arkansas, officials are developing the Arkansas Criminal Intelligence Network, a centralized cloud platform designed to connect data across police agencies in the state and support the use of advanced AI-powered analytical tools.

In Hawaii, the Maui County Council earlier this month approved a $1.7 million expansion of high-tech policing tools, including cameras and drones supported by AI to assist with real-time monitoring and emergency response. Last year, the Honolulu Police Department announced a pilot program with Axon, which offers a generative AI feature that helps draft police reports using video and audio transcriptions from body-worn cameras.

Legal and evidentiary concerns

Police reports often play a critical role in investigations and court proceedings, and some experts warn that errors introduced by AI systems could have significant legal consequences if they go undetected.

Errors introduced by AI systems, including inaccuracies, omissions or misinterpretations of context and language, could influence how evidence is understood by investigators, prosecutors and judges.

Experts and industry leaders generally point to a few safeguards: clear disclosure when AI is used in reports, mandatory human verification of all AI-generated text, regular independent auditing of tools, and training for law enforcement and legal stakeholders on how the systems function and how to trace outputs back to raw audio, video and other source evidence.

Those recommendations align with a framework released earlier this year by the nonpartisan think tank Council on Criminal Justice, which calls for rigorous independent validation of AI systems, enforceable procurement standards, ongoing performance monitoring, and clear human oversight to ensure operators can override AI-generated outputs.

“The pace of change is really pretty dramatic, and there’s a lot of energy and churn and attention to these issues,” said Jesse Rothman, the director of the Council on Criminal Justice’s task force on artificial intelligence. “The opportunities and the risks are really serious.”

Stateline reporter Amanda Watford can be reached at awatford@stateline.org.

With many students and educators already using widely available artificial intelligence tools, state lawmakers and school districts are playing catch-up on AI policies.

In Maryland, for example, AI usage policies for K-12 schools are “all over the map,” Democratic state Sen. Katie Fry Hester said.

In some school districts, she said, AI use is encouraged, while in others it is restricted, or — a worst-case scenario for Hester — there is little to no policy guidance at all.

“What we heard repeatedly is that the teachers were feeling like they had to navigate artificial intelligence entirely on their own,” Hester said.

Hester said square one for lawmakers is AI literacy, which was the aim of new legislation that she sponsored and that was signed into law in May. It requires an AI coordinator in each school system, a statewide AI professional development for teachers and AI literacy to be a component of career readiness and computer science standards for K-12 students. It also requires the state Department of Education to provide certain guidance on AI.

Many other states have also been trying to create AI policies for schools. Lawmakers filed more than 134 bills across 31 states this year related to AI in education, focusing on data privacy, usage restriction in the classroom, literacy and training, according to MultiState, a government relations firm.

A survey by the Center for Democracy & Technology showed that a large majority of teachers (85%) reported using AI in their classroom during the 2024-25 school year, while 86% of students said they’d used AI for either personal or school-related reasons. But only about half of teachers and students reported that they received some training or information about AI from someone at their school, and few received training or information on risks of AI use.

A turning point for schools came with the rollout of ChatGPT in 2022, said Noelle Ellerson Ng, chief advocacy and governance officer for the School Superintendents Association. “AI was something that could not be gatekept,” said Ellerson Ng. “It was in the classroom the minute students were able to access it.”

Her association does not take positions on state AI bills or policies. But she said districts are trying to avoid knee-jerk, reactive policies such as New York City’s brief 2022 ban of ChatGPT because of fears about cheating.

Some states have made progress in laying the groundwork for AI policy in K-12.

Ohio has set a July 1 deadline for every school district, community school and STEM school to adopt an AI use policy. The state’s model policy recommends that districts address student and staff uses, privacy, ethical use, teacher-specific uses, vendor agreements, third-party AI tools and student assessments.

A new Idaho law signed in March requires local school districts and charter schools to devise local policies for AI usage in K-12 schools, requires state standards for AI literacy and education training and ensures that no AI “replaces or eliminates a human teacher.”

An Oklahoma law enacted last month requires AI tools to be age-appropriate and requires teachers to review anything AI produces before using it in the classroom. It also allows parents to opt their children out of using AI tools. The law also directs the state education department to develop AI guidance and requires local school boards to set policies before the 2027-28 school year.

Yet even as schools are being sold on AI products by numerous vendors, there’s a growing skepticism about AI in classrooms. It follows a similar backlash about social media and digital technology’s academic and mental health effects on students, which has led to more states and districts putting in place cellphone bans and rethinking their reliance on laptops.

In the Center for Democracy & Technology survey, half of students said using AI in class made them feel less connected to their teachers, and 70% of teachers said they were concerned that students’ use of AI was preventing them from learning important skills.

Schools need to weigh the benefits of adopting AI tools in the classroom against their effect on student privacy, mental health and social skills, said Sue Thotz, director of outreach for Common Sense Media, a nonprofit advocacy group focused on technology and its effect on children and families.

Schools, Thotz said, may be the “only mandated safe space” where students can learn to use and access emerging technology. But she and other education experts believe districts need to increase scrutiny of products.

Globally, the market for AI products in K-12 schools was worth around $391.2 million in 2024, and could rise to more than $9 billion by 2034, according to market.us, a market research company. That includes AI products for tutoring, personalized learning, automated grading, lesson planning and administrative tasks.

“When I talk about AI literacy, it’s not how to use AI. It’s understanding how AI is built,” said Thotz. “Why is it being created? Who’s profiting off of this?”

‘Giving a tool to children’

New York Assemblymember Robert Carroll said he uses artificial intelligence in his own work and sees its value. As someone who struggled with dyslexia as a child, he also thinks technology can help students with disabilities.

But he also wants to keep AI out of most K-8 classroom instruction. Students should learn basic subject matter first — in conjunction with critical thinking — and then later use the tools that can assist them, he said.

Carroll, a Democrat, has introduced legislation that would prohibit the use of most AI in K-8 classrooms, with exceptions for diagnostic testing and support for students with disabilities.

“It is imperative that all children gain strong foundational skills, especially in literacy and numeracy, and it seems that AI is uniquely positioned to possibly undermine that,” he said. “There’s a difference between giving a tool to adults and giving a tool to children who have yet to master skills.”

Rather than full bans, most bills seeking to restrict AI have opted to focus on age restrictions, parental opt-outs, oversight and bans on using AI to replace teachers.

This year, Florida’s “AI Bill of Rights” proposal would have included a statewide restriction on student access to AI instructional tools before sixth grade, with exceptions for use supervised by school personnel, English-learner translation support and disability accommodations. It overwhelmingly passed the Senate 37-1, but died in the House.

A new Connecticut law adds computer science to the required public school curriculum, including AI and emerging technologies. Connecticut lawmakers in 2025 failed to pass a bill aiming to stop AI from “replacing” public school educators.

Sophia Romee, the general manager of the GenAI Studio, an initiative studying how students and educators use generative AI at the College Board, the nonprofit that administers the Advanced Placement curriculum and SAT tests for high schools, said she is concerned that only about 1 in 5 districts that allow students to use generative AI have a formal policy governing its use.

The College Board’s research, Romee said, shows many students are worried about becoming too reliant on AI, and that adults need to give clearer guidance about where using AI tools for brainstorming, revising and tutoring crosses the ethical line into cheating.

“Students are far more self-aware about AI’s risks than headlines suggest.”

Like aviation in 1905

Jason Coley, director of the Center for Academic Innovation at Maria College in Albany, New York, said the policy debate needs to move beyond whether schools are “for” or “against” the use of AI.

“The better question is what kinds of AI use are supervised, age appropriate, transparent, and tied to real learning,” Coley said. Schools need guardrails around privacy, student data, bias, teacher training and equity of access, he said, but also permission to “experiment responsibly.”

Ellerson Ng, of the School Superintendents Association, said superintendents see AI as part of a larger umbrella of disruptive technologies in schools that has evolved from calculators to laptops to cellphones. The lesson, she said, is that overreactive policy rarely works. She also said schools should not cover AI in a separate policy, but as part of a broader technology policy.

“I don’t have a calculator policy. Why would I have an AI policy?” she said, describing how some district leaders think about the issue. “I have a technology policy.”

With past technologies such as cellphones and laptops, adults could often control when students had access, Ellerson Ng said. With AI apps and platforms, many students accessed the tools before teachers, principals or state officials were even aware of them.

That makes bans difficult, she said. Schools can block tools on school-owned devices and networks, but “you’re only one personal device away from social media and AI being in your schools.”

Justin Reich, an associate professor of digital media at MIT, said that uncertainty around AI should make policymakers cautious about declaring best practices too soon.

Reich said states are trying to regulate classroom AI at a moment when the field is still so unstable that “writing a guide for AI in 2026 is like writing a guide for aviation in 1905” before airlines, airports or even commercial flight.

“If you were to take any of the AI literacy documents, AI readiness documents, even the moratorium documents, and put them against a checklist,” said Reich, “there would be a lot of boxes in the ‘we’re making this up’ column and not a lot in the ‘we have evidence’ column.”

State lawmakers and school districts should be honest that they don’t know what they’re doing, are relying on limited expert information and that policy is subject to change with new information, Reich said.

“Lawmakers will need to be honest that what they propose now could be completely outdated in two years.”

Stateline reporter Robbie Sequeira can be reached at rsequeira@stateline.org.