Simplified: City Council on Tuesday unanimously approved both a rezoning request and preliminary plans for a hyperscale data center in northeast Sioux Falls after nearly four hours of public comment, largely in opposition. But councilors emphasized to Sioux Falls Simplified that the city is still hearing residents' concerns. Here's what they had to say.
Why it matters
- The site at the center of this debate is a 164-acre property south of Rice Street and east of Veterans Parkway on land that was annexed into the city last fall. Data centers have existed in Sioux Falls for years, but what we're talking about here is on a much grander scale. Discussions Tuesday night centered on a maximum energy usage of 500 megawatts for this project.
- Reports vary on how many homes could be powered by 500 megawatts, but for context, your electricity bill is measured in kilowatts (technically kilowatt hours, but let's not get too in the weeds here), and there are 1,000 kilowatts in one megawatt.
- Some of the big concerns around the proposed data center are the impacts on electricity rates in the area, water usage and noise – all of which councilors say were addressed in detail both in the weeks leading up to their decision and in Tuesday night's meeting.
- And while cities across the country are rejecting data center projects – this study outlines some of them – councilors told Sioux Falls Simplified they feel confident in the work the city has done to put guardrails up to protect residents from adverse affects.
"People need to understand that we have some really smart people working for the city that have done their research to figure out how to make this a good project for Sioux Falls," Councilor Ryan Spellerberg said.
What else did councilors have to say?
Largely, councilors emphasized that the proposed data center will not receive any special tax incentives. In fact, data centers were removed from the city's list of projects qualifying for specific tax cuts last fall.
"We didn't go to them," Councilor Miranda Basye said. "They came to us."
The city is also putting additional constraints on the project, including requiring setbacks, limiting water usage and requiring the company to pay all costs to run utilities to the area.
Councilors also noted the potential tax revenue the project could bring to the community.
"People think that's almost blasphemy to say you’re just after the revenue, but we have to acknowledge they're good tax payers in a community," Councilor Vernon Brown said.
Councilor Rich Merkouris said his main concerns were electricity and water usage, and conversations over the last few months have given him confidence that the city and state have guardrails in place to protect both electric rates from going up and excess water usage.
Councilor David Barranco, who was absent from Tuesday's meeting due to illness, said he can't say how he would've voted in the moment, but he wants residents to know councilors are hearing their concerns.
"We are concerned about water," he said. We are concerned about safety and about envrionmental consequences. There's not an enemy within the gates on this."
So, will electricity costs go up?
Not as a direct result of a data center, no. Energy costs in South Dakota are regulated by the Public Utilities Commission, and companies like Xcel Energy have to go through a months-long process of review and pay about $1 million to try to raise rates (a process that's going on right now, by the way).
And any electricity the data center uses, it'll pay for, said Steve Kolbeck, principal manager for Xcel Energy (and state senator).
"I’ve always said we’ll sell as much electricity as somebody’s willing to buy," Kolbeck told councilors Tuesday night. "As long as they pay us for it, we’ll sell it. That’s capitalism."
Ok, but what about water?
Public Works Director Mark Cotter said from the very start of discussion, the city was clear that it didn't have any interest in providing clean drinking water for the purposes of cooling.
"We all know the precious resource that we have," Cotter said Tuesday. "The City of Sioux Falls has very good progressive growth. We want to try to maintain those water sources for our growth."
Michael Anvar, a spokesman for developer Gemini Data Center SD said the plan is to have a closed-loop system for cooling. That said, he also noted that Gemini won't be the end user, just the developer.
Councilors added an amendment to the preliminary plan approved Tuesday to limit water usage to the property to what it calls "domestic," i.e. the kind of water usage you'd get to a typical single-family home.
What happens next?
Tuesday's decision paved the way for a potential future data center, but any actual construction or building plans are still a ways away (and would require further permitting/approval from the city).
