How Data Centers Bypass Zoning Laws and Avoid Local Opposition

The data center companies are starting to get smart. They’re figuring things out. If you’ve listened to me for any length of time, either on the old show or this one, I told you this was going to happen. Why? Because they’ve got huge money behind them. They’ve got great lawyers and great researchers. It was only a matter of time before the data center companies figured something out. What they’re doing now is finding land in major metropolitan areas that is already zoned industrial. They’re figuring out ways to place data centers on land that’s already zoned that way, which allows them to bypass town and city councils entirely. Let me explain what I’m talking about.

Example of a Data Center Project in Indianapolis

We already saw this in Indianapolis with a data center that was recently approved, and now another one is coming. According to the Indianapolis Star, DC Blox, a developer based in Atlanta, filed documents with the city of Indianapolis in March to build a three-building data center campus on the site of the former Ford Visteon manufacturing site in the Eastgate neighborhood. It’s just southwest of the intersection of Washington and Shadeland Avenue. If you know the city, that location means something to you. If you don’t, it doesn’t really matter. DC Blox is seeking a variance of use approval from the Metropolitan Development Commission. We’ve talked about them before. It’s a nine-member board, essentially a planning commission. In Indianapolis it’s called the Metropolitan Development Commission. If the commission approves it, and I’ll explain in a moment how the data center companies are learning to work inside the system, they won’t have to go to the city council for a full rezoning. Remember the Google data center proposal that got shut down by the city council? Google pulled out before the council could vote because the council had to approve rezoning the land. In this case, the land is already recommended for heavy industrial use under the city’s comprehensive plan. By the way, this is supposed to be a $2 billion investment. And this is what’s wild to me. A $2 billion investment that creates only about 35 permanent jobs. Thirty-five jobs for a $2 billion project. This brings us back to what these data centers actually do. They don’t create many jobs. They don’t really help Hoosiers directly. They help the data centers. I’ve said before I’m not anti–data center, but we need all the cards on the table. We need an honest discussion about what these facilities are and what they do so we can have public policy that works for everyone—the taxpayers, the government, and the companies. Right now we’re not having that discussion.

How Data Centers Avoid Rezoning Requirements

So here’s what happens in this case. The company just needs permission from the nine-member Metropolitan Development Commission. These members are appointed, not elected. That means yelling at them or complaining to them doesn’t have much effect because they can’t be voted out of office. All the developer really needs is what’s called a use variance. In simple terms, they’re asking whether a slightly different use of the property fits within the zoning category the land already has. What the data center companies have realized is that if they go after land that’s already zoned industrial, they eliminate a huge portion of potential opposition. They avoid many of the hurdles that normally appear when land has to be rezoned. Every community has zoning ordinances. Every parcel of land—whether it’s a house, a warehouse, a nuclear power plant, or a corner café—has a zoning classification. Those classifications exist to protect the people living and working in those areas. For example, if you live in a residential neighborhood, you probably don’t want a nuclear power plant built next door. Zoning laws help prevent that. When people say “my property, my choice,” that’s partly true. But people in a community also have rights. If you own a home somewhere, you have a reasonable expectation that the character of the surrounding area won’t dramatically change without some kind of process.

What This Means for Communities and Local Control

So the challenge for governing bodies is finding the balance. How do you protect the rights, health, and property values of the people already living there, while also respecting the rights of property owners who want to sell or develop their land? It’s a balancing act, and it’s difficult. I’ve served on a planning commission before. I’ve voted developments down. I’ve stopped projects because you have to weigh those competing interests. When a developer wants to rezone land, it’s supposed to be a difficult process. That’s by design. If I buy a house, open a business, or purchase land, I do so with the expectation that the character of the area will remain relatively consistent. If that character is going to change, there should be a high bar to clear. Normally, a rezoning request goes through a planning commission with a public hearing. Community members can speak and present evidence. If the planning commission approves it, the proposal then goes to the city or town council—elected officials who voters can hold accountable. Those meetings also include public hearings where residents can speak. Depending on the details, the Board of Zoning Appeals may also hold hearings. Any of those bodies can stop the project. But if a developer buys land that is already zoned heavy industrial, about 95 percent of that opposition disappears. In many cases the public hearing process, if it happens at all, becomes little more than a formality. That’s why these data center companies are starting to focus on industrially zoned land. They’re learning how the system works, and they’re adapting to it.