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A two to one vote Last week’s crackdown on data centers in a Milwaukee suburb may be a harbinger of future regulations as communities across the U.S. push back against data centers and local leaders struggle to figure out what authority they have to respond.
With more than 4,000 data centers are already operational and 3,000 more planned or under construction, state and local governments are facing growing public pressure to assert control over where and how this infrastructure is built. But experts say cities don’t always have the legal authority to act, and heavy-handed tools like moratoriums and referendums can create as many problems as they solve.
Last week, three significant actions indicated how quickly the political landscape around data centers is changing. Voters in Port Washington, Wis., overwhelmingly approved first referendum of its kind require city leaders to get voter approval before awarding tax incentives for projects over $10 million, including data centers. In Maine, the state legislature passed the nation’s first state moratorium on building the data center. And last Thursday, a bipartisan coalition of governors called on grid operator PJM Interconnection to require data centers to cover all the costs they impose on the grid.
On Tuesday, the Board of Supervisors of Prince William County, Virginia, voted in favor end a legal battle with a group of residents to bring a data center to the area. After the decision, Mac Haddow, president of the Oak Valley Homeowners Association, said in a statement released to local media that residents would have suffered “from the unchecked and predatory expansion efforts of a global multibillion-dollar data center industry.”
Communities speak up
“Clearly, the public has turned against data centers as their environmental costs and impacts become better understood,” Sheila Foster, a professor at the Columbia Climate School, said in an email. Port Washington’s vote will serve as a template for other communities that share similar concerns, he said.
“Large-scale infrastructure development has long been an area where residents push for a stronger voice,” Foster said, leading to more referendum-driven community benefit agreements such as Detroit Community Benefits Ordinancewhich requires developers to proactively engage with the community to identify the benefits and address potential negative impacts of certain development projects.
The Port Washington referendum was “in part a specific response tied to AI infrastructure and the energy transition, but in part a long-standing desire by local communities to have a say in what gets built in their neighborhoods or nearby areas,” Foster said.
Great Lakes Neighbors United, a community advocacy group, brought the referendum to voters amid a fight against an $8 billion data center complex approved by the city’s common council in August. On the website saveportwashington.com, the group says the city approved the project, which would be powered by “immense amounts of electricity and cooled by millions of gallons of water drawn from Lake Michigan through our municipal system,” with limited notice and public hearings and without a published impact study.
“A local moratorium on data centers would discourage further investment in Port Washington, both from the data center industry and other advanced industries that rely on predictability and a welcoming business climate to make multibillion-dollar investments,” Brad Tietz, state policy director for the Data Center Coalition, said in an emailed statement after last week’s vote. “The data center industry remains committed to working with communities, local officials, and state and federal policymakers, including in Wisconsin, to ensure the continued responsible development of this critical industry.”
Why public rejection is important
As the two-thirds majority vote in Port Washington suggests, voters are very likely to “vote against the data center community” when presented with the question, said Ishyan Veluppillai, who tracks state and local data center politics for energy companies and investors at investment advisory group Capstone.
The Port Washington referendum and the Maine legislation are not isolated incidents, Velupillai said. In some markets, especially places that have already seen large data center growth, public sentiment against data centers is politically powerful.
Voters are very concerned about road infrastructure and noise and air pollution from data centers, he said, but cities don’t always have full control over whether data centers can be banned or heavily restricted. In some states, local governments cannot ban data centers without a state permit, while others, such as South Dakota, have passed laws to preserve meaningful local authorityVelupillai said.
Sentiment against data centers tends to be higher in areas where they are oversaturated, such as northern Virginia and Ohio, which can be a red flag for data center developers because it carries the potential for greater public pushback and political risk, Velupillai said.
In Virginia, leaders are struggling to agree on how to balance economic development, affordability and data center policy, as illustrated by a Senate budget proposal to phase out the state’s sales and use tax exemption for data centers. Large load tariffs, which require data centers to pay more than the energy costs they generate, are also emerging as a policy tool, Velupillai said.
Structuring agreements for the benefit of the community
The biggest problem with moratoriums and referendums like the one in Port Washington is that they are not very precise and could end up being litigated through utility commissions or states, Velupillai said. “You’re creating even more problems by not being prescriptive enough and thinking, Oh, we’re wiping our hands of this problem, but not thinking five years from now?”
Local leaders need to think strategically, not just about whether to allow data centers in their communities, but about how to structure deals so the community gets benefits without absorbing too much cost or risk, he said. For example, community benefit plans ensure that developers contribute to the tax base and pay for infrastructure improvements as well as unrelated projects such as libraries and schools.
“There are good examples of how cities or other political subdivisions can really work with data centers in a constructive way, and I think there is — that even with this pushback, there are areas of this country where that process works very well, and that’s why you still have data centers online,” Velupillai said.
Mayors should reach out to affected communities early in the process of considering data centers, said Columbia Climate School’s Foster, with a transparent process “that allows them to fully understand the benefits and risks of the project.” It also recommends “a negotiated community benefit process with strong local community representation and enforceable mechanisms.”
