The Southwest Michigan Planning Commission hosted a civic learning session on data centers and what they could mean for local communities.
This is the first of three in the civic learning series. The other two cover farmland preservation and housing affordability, density and zoning. Organizers said the sessions are not decision-making forums. The series offers balanced, research-informed perspectives on issues that will shape local decisions.
What is a data center?
Dr. Sarah Mills, a professor of practice at the University of Michigan and director of the university’s Center for EmPowering Communities, covered the basics. She noted that “data center” covers a wide range, from small server rooms to massive hyperscale facilities that act as cloud factories. They can be classified by size (hyperscale or edge) and by ownership (enterprise, owned by a single entity, or co-location, where space is leased to multiple clients). She said how much power and water a data center uses depends on its size and cooling method, and that its effect on other customers’ electric rates is uncertain. She also said Michigan’s state sales and use tax incentives for data centers do not exempt them from local property taxes.
What developers look for
Developers typically seek access to electricity (especially transmission lines), backbone fiber, large contiguous parcels of cleared land, favorable zoning, and lower millage rates.
The big impact areas
- Jobs and taxes: Construction brings temporary jobs and a small number of permanent ones, and estimates vary widely depending on whether direct or induced jobs are counted. Michigan offers sales and use tax incentives for qualifying facilities. Data centers are taxed as commercial property, but the rapid depreciation and replacement of computer equipment can make property tax revenue fluctuate.
- Electricity and rates: Data centers demand a lot of power, which affects grid capacity. The Michigan Public Service Commission regulates utilities, but there is real uncertainty about how data centers might affect rates for other customers.
- Water and cooling: Cooling choices involve a trade-off. Evaporative cooling uses more water and less electricity, while closed-loop and air cooling use less water and more electricity.
- Air quality: Impacts come from electricity generation and from backup generators.
- Quality of life: Noise, lighting, and visual changes matter, particularly near homes. Dr. Mills noted that the constancy and frequency of sound, not just its volume, affect how people experience it, and that night sounds differ from daytime sounds.
Tools for local governments
Presenters offered several practical recommendations:
- Zoning: Treat large-scale data centers as industrial uses and place them in industrial districts, with attention to infrastructure needs and neighboring land uses. Communities should also consider quality-of-life standards (sound, screening, light) for all industrial uses.
- Moratoria: A temporary pause can give a community time to update its ordinances, but it works only if real progress happens during the pause and legal counsel is involved.
- Decommissioning: Require a plan, financial assurance such as surety bonds, and agreements on when and how a facility will be retired, so that today’s development doesn’t become tomorrow’s brownfield.
- Community benefit agreements (CBAs): Negotiated agreements can ensure tangible local benefits. Examples from other U.S. cities, including Cleveland’s checklist approach, were discussed, along with the pros (lower transaction costs, improved local hiring) and cons (slower processes, questions about legal enforceability). Monitoring and enforcement over time was a recurring concern, especially where community groups lack the resources to do it.
Questions from the room
The Q&A covered decommissioning agreements, grid investment, and water use, and returned often to a central challenge: smaller and rural communities often face well-funded corporate legal teams with limited budgets of their own. Ideas included escrow accounts to cover legal fees, sharing information across communities, and shared templates and agreements. The Southwest Michigan Planning Commission is also working on an online tool to centralize data center information for local governments and residents. Speakers also stressed planning for long-term infrastructure maintenance through capital improvement plans, and described economic development as most successful when the developer is a good neighbor.
