Yes, but..................to data centers

 

Movements are afoot to stop the spread of data centers.  We hesitate to give advice, but there are certainly better alternatives to the “just say no” approach.

First of all, can we all agree that unless your intent is to roll back the internetization of things, data centers are somewhat of a necessity.  Reasonable people might agree that it is bizarre that household appliances are now designed to be connected to the internet, but unless we are willing to forsake our smart phones and the convenience of on-line shopping, we need data centers.

While “data center” may sound vaguely mysterious, they are really nothing by large warehouses filled with electronic equipment, i.e. computer servers.   It is helpful to remember that when we talk about stuff being in “the cloud” all we are talking about is your information being stored on other people’s servers – located in data centers.   The more that we rely on (or become addicted to) our smart phones and computers, the greater the necessity for the infrastructure to handle that usage – I. e. data centers.   The advent and growing sophistication and usage of AI has led to the explosive growth of that infrastructure.

Is that really such a bad thing?  The major objections to data centers seem to be their enormous demand on the electrical grids and municipal water supplies, and thus causing rates for us normal folk to spike.  Let us remember that our world evolves, and the data center industry is evolving rapidly.  Already they have figured out how to recycle the water they use, dramatically reducing their impact on municipal systems.  A whole new industry is developing to convert natural gas to electricity on a local level.  One thing Ohio has a lot of is excess natural gas.  Smart people have figured out the conversion of this excess gas into electric power on a site specific basis.  In other words, it is now possible for data centers to satisfy their power requirements without impacting the overall electrical grid.

Another significant objection to data centers could be best described as “opportunity costs”.    Data centers take up a lot of land generally zoned for industrial uses.  Industrial uses are important to communities because of the jobs they create, and the payroll taxes those jobs generate support municipalities.  While data centers create significant construction jobs, once up and running they are notorious for having very few employees.   This is a problem.  The City of Pataskala recently said no to a data center.   While we did not attend the public hearings, it is likely that this “opportunity cost” loss weighed heavily on Council’s decision.

The final negative to data centers seems to be that they are not always the best neighbors.

There are some benefits to the community from having a data center.  The biggest one being property taxes.  Here locally Microsoft has started construction of two data centers, both being located within the Lakewood School District.   Strategically trying to build local goodwill, Microsoft has declined the available property tax abatement.  That decision means that Lakewood Local School District will collect an estimated three million dollars per year in property taxes once the construction is completed.   That is a nice benefit.   We should also remember that Microsoft has pledged over thirty million dollars (combined) to Heath and Hebron for municipal infrastructure  improvements.  Another nice benefit.

So, back to the alternatives to “just say no”.   Why wouldn’t a municipality amend their zoning ordinance to make data centers permitted as “Conditional Uses”.   Let’s imagine some of those conditions:

1.      Set a maximum amount of kilowatts the facility could draw from the power grid on any given day.  Force the data center developer to create the required electricity without impacting the grid.

2.     Set a maximum amount of water the facility could draw from the public water system on any given day.  Force the data center developer to create a sophisticated recycling system for coolants.

3.     Disallow the facility from receiving any property tax abatements or other governmental incentives.  Force the data center owner to pay appropriate market rate property taxes.

4.     Most municipalities already have “impact fees” established for development.  Specify that new data centers shall pay significant “impact fees” to enhance local infrastructure.

5.     Establishment of significant separation distance from residentially zoned land along with mandated buffering from same.

6.     Establish an “average payroll tax per acre” that the municipality might expect from an industrial user.  Make approval of the data center subject to the data center operator committing to annual payments to the municipality that would mirror the anticipated payroll tax generated by the “average payroll tax per acre” metric.

 

It is clear, based on the way, way, way above market price data centers are willing to pay for land, that the data center business is very profitable.   Good for them.   Rather than “just say no,” wouldn’t it be a better decision to say “yes, but….”, and figure out ways in which the municipality, and its citizens, could share in the financial bounty?

One thing we should remember:   in their beginning, cell towers were unpopular with many people who had to look at them.  As cellular phones became ubiquitous, cell towers became so important that the government decreed that cell towers were like public utility lines and denied local zoning codes the ability to regulate them out of existence.   Like cell towers, data centers are taking on national importance.   If local governments get too heavy handed in saying “no” to data centers, it should not surprise us to see the federal government classify them similarly to cell towers, and deny local government the ability to say no.  Before we get that far, how about we ponder the possibilities of “ Yes, but…”.

this was first published in the September 2026 Shai-Hess Report