City Council debates data centers

Minneapolis joined a growing number of local governments this spring wrestling with pressure from companies to build more data centers and resident concerns about their potential negative impacts.

The Minneapolis City Council plans to study the issue in the months ahead and draft new laws regulating computer data centers that they hope to approve in November.

Data centers are facilities where the primary function is to house computers and related equipment used to collect, process, store, or retrieve information. The recent increase in demand for more, and larger data centers is most often attributed to large technology companies seeking to provide and profit from the anticipated growing use of artificial intelligence or AI.

Partial City moratorium
The Minneapolis City Council voted 8-5 on May 21 to formally take up a new ordinance that imposes a six-month moratorium on new or expanded centers outside of downtown, and those in downtown could not be larger than 350,000 square feet.

Council Members Jamison Whiting, Aisha Chughtai, Soren Stevenson, Jamal Osman, Elliott Payne, Robin Wonsley, Jason Chavez, and Aurin Chowdhury voted in favor of the moratorium. Council Members Elizabeth Shaffer, Linea Palmisano, Michael Rainville, LaTrisha Vetaw, and Pearl Warren voted in opposition.

A final council vote on the ordinance will be taken on June 25, following a public hearing on June 16. If approved, the restriction would go until Nov. 21.

The authors of the moratorium ordinance, Ward 12’s Chowdhury and Ward 9’s Chavez, contend that the moratorium provides time for the City to develop a comprehensive regulatory framework for data centers in the city.

“We have more unanswered questions about data center impacts than answered,” Chowdhury said. “And we should be eyes wide open on what the impact is and what regulation is necessary before we allow for the growth of this usage.”

Chavez voiced specific concerns about the likelihood of new centers being allowed in historically disenfranchised communities and industrial areas in East Phillips.

Data center advocates see them as a way to provide jobs and help the local economy.
“I’m opposed to any moratorium because it sends the message once again that Minneapolis is closed for business,” said Shaffer, noting that St. Paul has no moratorium.

Other Minnesota cities, including Inver Grove Heights, Eagan and Carver City, have passed moratoria.

The Minneapolis Building and Construction Trades Council and President and CEO of the Downtown Council, Adam Duininck, also opposed the citywide moratorium. Duinick said they are an important part of the future economic health of downtown.

The risks and benefits of data centers
Data center opponents are concerned about excessive water usage, energy demands, noise, waste, and pollution.

“I am concerned about the cumulative impact of multiple new generation data centers developing throughout the city and the total energy usage, water consumption, and environmental impact that they will have,” said Chowdhury.

Shaffer believes small-scale centers are beneficial, especially for downtown by boosting property values, supporting union jobs, increasing commercial property taxes, and supporting the City’s climate goals through increased franchise fees.

“We want to do everything we can at this moment in time to drive investment and to drive jobs,” said Shaffer

A current data center is at the former Sleep Number building at 1001 3rd Ave. S. The building was sold for $235 million in April, well above its assessed value possibly because of its data center capabilities.

Nokomis East resident and Senior Program Manager at the Sierra Club Minnesota North Star Chapter Joshua Houdek supports a moratorium and better regulations.

“Data centers come in different shapes and sizes,” Houdek said. “So when you hear that Minneapolis already has data centers and you don’t need to be worried, this isn’t correct.”

The data center proposed in Hermantown, Minnesota for example, would be 1.8 million square feet. The center on the top three floors at 1001 3rd Ave. S. in downtown is roughly 184,000 square feet.

“What’s new now is proposals from tech billionaires to build huge, hyperscale data centers,” Houdek said. “These types of data centers come with significant risks if not well regulated. Hyperscale data centers can pollute our water, increase climate pollution, raise electric bills, subject neighbors to air, noise and light pollution, strain public budgets, and force cuts to services people rely on.”

The U.S. Department of Energy, in a recent report, called data centers one of the most energy-intensive building types and reported that they consume 10 to 50 times the energy of a typical commercial office building.

Diamond Lake resident John Farrell is co-director of the Institute for Local Self-Reliance located in Seward.

“I’m supportive of local moratoria to allow communities to get their heads wrapped around the breadth of the issue,” Farrell said.

Farrell has researched and co-authored, with fellow co-director Stacey Mitchell, a policy framework to help communities respond to demand for more data centers.

“The fundamental moral question is this: AI is a technological bet by some of the richest people in the world who imagine growing their wealth by monopolizing its use,” said Farrell. “There’s no reason they can’t afford to design the computing power to fuel it in a way that minimizes community harms and maximizes community benefits.”

Some council members share concerns about whose interests the centers might be serving.

“I also know that the push by billionaires and big tech for the rapid creation of data centers is a manufactured campaign. There is not an organic demand for Minneapolis to become a destination for a data center,” said Chughtai. “I don’t believe in rushed development that prioritizes profit over people and puts our grid and our water at risk.”

New City regulations
At the same May 21 meeting where the moratorium was passed, the council unanimously directed staff to research the subject. Nine council members on both sides of the moratorium vote (Shaffer, Palmisano, Whiting, Osman, Chowdhury, Payne, Rainville, Vetaw, and Warren) gave notice of their intent to co-author data center city ordinance amendments.

The nine intend to craft changes to the city’s zoning code to better regulate the centers, and potentially other uses for the centers, including electric or gas substations, backup generators, utility boxes, and battery energy storage systems.

The amendments could limit the size and even ban the centers from some or all of Minneapolis. The amendments could also require a conditional use permit approval process for data centers.
Under a conditional use permit, developers could be required to meet specific conditions before they receive approval. Permits can be revoked if conditions are not met throughout the lifespan of the property.

Chowdhury supports banning large centers citywide and prohibiting smaller ones from other areas.

“There should be restrictions based on energy and water usage,” Chowdhury said. “We will need a cap, even on smaller mid-sized data centers.”

City staff are set to analyze regulations in other cities over the summer, including how they have affected tax revenue, the environment, and the energy grid. Staff will then create recommendations for the council members to review.

Shaffer, who is the lead author on the zoning amendments, said in an email that it “will provide exactly the kind of smart, targeted guardrails the public has been asking for,” and that she is “hopeful that we can build a coalition across the ideological spectrum on the council, and that this effort can serve as a model for how we do substantive policy work going forward.”
Farrell believes that there should be state legislation as well.

“Communities should have the opportunity to transparently discuss any of the issues that would affect them and, along with the state government, set appropriate boundaries,” Farrell said. “But making AI-driven data centers align with the public interest is beyond the scope of individual communities.”

The City staff report is due in early fall with the first draft of the ordinance amendments expected in October or early November.

“Not a single person on the council nor the mayor is an expert on this topic,” said Chowdhury. “So we will have to do our due diligence as we build out the regulations in the next six months.”