Amidst great debate, a city commission in Festus recently moved forward with plans for a new data center development.
Festus is not alone in its debate. Nationwide, there have been significant disputes about whether communities should want data centers in their backyards. While data centers can bring investment to a community, there are concerns about electricity, water usage, and sound.
Of the hundreds of citizens participating in the recent Festus hearing, one gentleman’s comments captured my attention. The St. Louis Post-Dispatch reported:
He urged local governments to turn any revenue gain due to the new facility into lower property taxes for the general public. He also said a data center should pay for any increase in utility rates due to the extra energy usage it requires. And, he said, the city should not offer the data center any tax incentives.
I have to wonder—has this gentleman read this article I recently published?
Jokes aside, his comments convey a few key points that I think are important to keep in mind when considering a data center project in a community.
#1: Lower taxes help drive economic growth, so a reliable course of action is to return extra revenue to taxpaying citizens.
New data center revenue ought to be returned to taxpayers through lower tax rates, easing pressure on the entire tax base. Property tax abatements should not be handed out.
#2: Find innovative solutions for electricity needs.
Last year, a major energy omnibus bill, Senate Bill 4, included a provision that protects average ratepayers from “any unjust or unreasonable costs from service to such customers [such as data centers].” This should help shield average ratepayers from rate hikes to meet this new energy demand, but some burden will likely still fall on them.
While it is a state-level solution, Missouri should explore consumer-regulated electricity (CRE), which would allow new data centers and other large customers to be served by separate, independent grids. This idea could be beneficial for both ratepayers and developers. You can read more about CRE here.
#3: Remember what data center developers are prioritizing, and do not hand out subsidies.
Lastly, the actions of the biggest data center customers have made their priorities clear.
Money does not seem to be a big factor for these enormous developers. They instead seem focused on energy availability, speed to operation, and long-term stability. A clear example of this is Microsoft pouring an enormous amount of money into restarting Three Mile Island for its data centers.
Instead of handing out subsidies, a municipality could evaluate its own permitting rules. Reducing red tape could both accelerate speed to operation and signal that the community is a dependable, long-term location.
Festus will certainly not be the last community to have a heated debate about data center development. Keeping these key principles in mind, however, may help communities have productive debates on this topic.
