New York has issued a voluntary framework recommending that communities seek at least $1 million in local investment for every megawatt of power demanded by a proposed data center.
The Host Community Investment Framework is intended to guide local governments negotiating with data center developers during a statewide moratorium on new projects. A 50-megawatt facility, for example, would carry a recommended community investment target of $50 million.
The benchmark is not a tax or mandatory state fee. Communities and developers would negotiate the amount, timing and structure of an agreement, which could include payments into a locally administered investment fund.
Gov. Kathy Hochul directed Empire State Development to prepare the guidance through Executive Order 62, issued July 14. The order imposed a one-year moratorium while the state develops environmental and utility rules for data centers.
Local governments can negotiate project benefits
The framework is designed as a template that local governments may modify based on a project's scale and the host community's priorities. It recommends that officials compare a facility's land, electricity, water and infrastructure demands with expected jobs, tax benefits, payment-in-lieu-of-taxes agreements and environmental effects.
Suggested investments include roads, water and sewer systems, parks, public transit, affordable and workforce housing, job training, apprenticeships, schools, child care, broadband, public safety, community institutions and small-business support.
The guidance also encourages communities to seek the reuse of vacant or underused properties. Developers could be asked to make additional commitments if a data center expands or increases its demand for public infrastructure.
Empire State Development President and CEO Hope Knight said data centers differ from traditional manufacturing because they use significant power but generally create fewer permanent jobs. She said the framework is intended to help communities turn private development into longer-term public benefits.
Framework calls for public input and reporting
Local officials are encouraged to identify community priorities before negotiations begin and involve residents and other stakeholders through a public process. Agreements should define promised investments, implementation responsibilities and any conditions tied to future expansion.
The framework advises local governments to scrutinize requests for nondisclosure agreements. If officials agree to confidentiality, the state recommends limiting it to proprietary information, commercially sensitive material or trade secrets exempt from disclosure under New York's Freedom of Information Law.
Once a facility begins operating, the guidance recommends annual public reporting on employment, water and utility use, energy demand, contributions to community investment funds, environmental effects and mitigation work.
Suggested “Good Neighbor Commitments” address water use, noise, lighting, building design and landscaping. The framework calls for prevailing wages on construction work and encourages local hiring commitments, fair labor standards and participation by organized labor.
The voluntary framework does not replace environmental review, permits, zoning decisions or other legal requirements. Projects would still have to comply with federal, state and local rules, including the State Environmental Quality Review Act.
State develops energy and environmental rules
The Department of Public Service is separately developing an Energize NY proceeding aimed at preventing data center electricity costs from being shifted to other customers. The state is considering requirements that facilities pay more for their power or provide dedicated supplies.
Executive Order 62 also directed the department to prepare a generic environmental impact statement covering data center construction and operation. The review will examine electricity demand, water use and water and air quality and may take up to one year from the date of the order.
During that review, the Department of Environmental Conservation will not issue discretionary permits for projects whose applications had not already been deemed complete. The moratorium is expected to end after the state completes its standards, after which projects could proceed through state and local approvals.
The Public Service Department is also considering a New York Grid Acceleration Fund that could require developers to support upgrades to the state's electric grid. Possible uses include new clean-energy supplies and an insurance pool protecting customers from speculative projects that reserve large amounts of power but do not materialize.
Other approaches under review include requiring facilities to fund clean electricity dedicated to their operations, such as on-site or customer-sited distributed energy systems and battery storage.
Hochul is also seeking legislation to eliminate state sales-tax exemptions for very large data centers. The framework and related proceedings do not guarantee that any proposed project will be approved.
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