Data centers near Chicago’s O’Hare International Airport have secured property assessment reductions and incentives projected to save them nearly $100 million, raising new questions about how the region’s fast-growing digital infrastructure affects homeowners and local tax bills.
An Illinois Answers Project and Chicago Tribune analysis examined 18 data centers across five northwest Cook County suburbs. In Elk Grove Village, Northlake and Franklin Park alone, assessment reductions and incentives removed nearly $2 billion from taxable property values. The 18 facilities still paid nearly $71 million in property taxes for the 2025 tax year.
Why Northlake homeowners are most affected
The impact is particularly significant in Northlake, where three data centers represented about 28% of the city’s tax base last year.
The analysis estimated that an average Northlake homeowner would have paid more than $2,000 less annually — nearly 30% — in a modeled scenario where local data centers received neither the assessment reductions nor incentives examined.
That does not mean a single company added $2,000 directly to each homeowner’s bill. Property-tax levies still have to be funded, so reducing the taxable value of major commercial properties can shift a larger share of that burden to other properties.
How the tax breaks work
At least 18 data centers received multimillion-dollar valuation reductions. Eleven also operated with special local property-tax incentives, while 12 had separate Illinois state tax benefits involving sales and use taxes.
Cook County’s Class 6(b) incentive can assess qualifying industrial property at 10% of market value instead of the normal 25% for 10 years — effectively reducing its taxable assessment by 60% — before gradually returning toward the standard level.
Microsoft case exposes the valuation problem
Microsoft’s Azure data center in Northlake illustrates how far apart valuations can be. Microsoft presented an appraisal of nearly $250 million, while Cook County Assessor Fritz Kaegi’s office argued the property was worth nearly $900 million. The Board of Review ultimately set its value at about $364 million.
The assessor cited the property’s $182 million 2009 sale and at least $650 million in subsequent upgrades. A central dispute is whether expensive generators, chillers and electrical systems essential to running a data center should be included as taxable real property.
Another Elk Grove Village data center owner sought a valuation of about $21 million, while the assessor argued for substantially more. The Board of Review ultimately retained the assessor’s roughly $70 million value.
Appeals can create risks for schools
The Cook County Board of Review received about 290,000 appeals during its 2025 session, including more than 32,000 commercial cases. Owners unsuccessful at the county level can continue to the Illinois Property Tax Appeal Board or court, potentially resulting in retroactive refunds.
Schools can be especially exposed because large refunds may come from current budgets. That risk sometimes encourages districts to negotiate settlements with major property owners.
One Digital Realty property in Northlake was initially valued at approximately $191 million by Kaegi’s office. The owner’s appraisal came in at $56.2 million, while a settlement involving the school district ultimately valued it at about $61.5 million.
Elk Grove Village has become a data center hub
Elk Grove Village has 20 operating data centers and another five under construction. Incentives covering five data center complexes removed more than $280 million in taxable value last year, generating an estimated $14.5 million in tax savings.
However, the modeled impact on an average Elk Grove Village homeowner was much smaller — roughly $33 — partly because property-tax growth from several facilities flows into the Busse/Elmhurst tax increment financing district, which funds infrastructure projects.
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Why local leaders still want data centers
Municipal officials argue that incentives can replace obsolete offices and lower-value industrial properties with developments that still contribute millions in taxes. Northlake officials, for example, point to a Digital Realty facility that paid more than $2 million last year, compared with about $617,000 a decade earlier.
They also warn that projects could move to competing jurisdictions such as neighboring DuPage County if incentives disappear.
Critics counter that the O’Hare area already offers valuable advantages — power, water, fiber networks, industrial land and proximity to Chicago — potentially reducing the need for large subsidies.
Demand for those resources is accelerating with artificial intelligence. Investments such as Nvidia’s backing of Cloverleaf’s AI data center infrastructure illustrate how electricity and powered sites are becoming strategic assets, while the Nvidia, SB Energy and OpenAI data center expansion shows the enormous scale of new AI infrastructure projects.
Illinois is reconsidering its incentives
The investigation estimated that the facilities also benefited from at least $278 million in state tax breaks. Illinois has now started reconsidering that approach.
According to the Illinois Department of Commerce and Economic Opportunity, the state stopped processing new applications for its Data Center Investment Program beginning July 1, 2026, following a directive from Gov. JB Pritzker.
The pause does not stop new data centers from being built or eliminate existing local incentives. It comes as Illinois weighs economic development against concerns involving electricity demand, water use, infrastructure and taxpayer costs.
For homeowners, the issue is not whether data centers pay taxes — they do. The unresolved question is how these specialized, increasingly valuable facilities should be assessed, how much public incentive is necessary to attract them and who carries more of the local tax burden when their taxable values are reduced.
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