New York State on Sept. 15 released a framework for community investment tied to data center development. It recommends that developers invest $1 million in the host community for every megawatt of power demand, meaning a 50-megawatt project would translate to $50 million. The framework follows up on the one-year moratorium that took effect in July.
Gov. Kathy Hochul on Sept. 15 unveiled the Host Community Investment Framework (Community Investment Framework), which sets out how much developers should invest in the communities where data centers are built. It is the first such statewide standard in the nation. At its core is a recommendation that developers invest $1 million in the community for every megawatt of power a data center draws, so a project with 50 megawatts of power demand would have a recommended amount of $50 million.
The framework follows up on Executive Order No. 62, which took effect on July 14. The order introduced the nation's first moratorium on new hyperscale data center development, lasting one year, and directed Empire State Development (ESD) to create an investment framework. The framework is a recommendation, not a mandate, and works as a negotiating template that local governments can adapt to local circumstances. The amount was based on the fact that data centers use large amounts of land, electricity and water but create relatively few permanent jobs for their power load.
To Be Spent on Roads, Housing and Child Care
The framework lists eligible uses for the investment, including public infrastructure such as roads, water and sewer systems, parks and public transit; affordable and workforce housing; job training and apprenticeship programs; schools and educational programs; child care; broadband; public safety; small business support; and reuse of vacant buildings. It also recommends "good neighbor commitments" on water use, noise, lighting, building appearance and landscaping, and includes a structure under which construction workers are paid prevailing wages and local hiring is pledged.
Also notable is its recommendation that, if a developer asks a local government to sign a nondisclosure agreement (NDA), the government first weigh whether the agreement benefits residents and, if it does sign one, limit its scope to the level of trade secrets exempt under the Freedom of Information Law (FOIL). Once a facility begins operating, the developer is to report annually to the community on employment, water and electricity use, energy demand, payments into the investment fund, and environmental impacts and mitigation measures. The framework does not replace the State Environmental Quality Review Act (SEQRA) process or permitting procedures.
A Link to Electricity Rates
The state Department of Public Service (DPS) is separately pursuing a process called "Energize NY." Its aim is to ease the burden on household and business rates by having data centers pay more for electricity or supply their own power through on-site generation. Also under consideration is a new "Grid Acceleration Fund" that would make data centers bear the cost of investing in aging transmission and distribution networks, and the governor is also pushing legislation to eliminate the sales tax exemption granted to large data centers.
The moratorium will remain in place until the state completes its Generic Environmental Impact Statement (GEIS) on data centers. That could take up to one year from the date the executive order took effect, and in the meantime the Department of Environmental Conservation (DEC) will not issue discretionary permits, except for applications already deemed complete. The full text of the framework is available on the ESD website at esd.ny.gov/communityinvestmentframework.