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