Connecticut has fast-tracked a law to bring data centers. Plans bogged down as cities ponder unknown hi-tech arrivals, ‘lots of unknowns’

Plans to introduce data centers, the repositories of digital information given tax breaks in Connecticut law fast-tracked last year, are running into a tangle of questions about local rules.

Last year, the General Assembly overwhelmingly approved legislation that Governor Ned Lamont quickly signed into law, providing tax incentives to attract data center developers. The intention was to compete with other states and stimulate the development of sites used for data of all kinds: medical, economic, demographic, financial, government records and countless other uses.

Opponents cited the costs to taxpayers who will fund 30-year tax breaks and stress on the state’s energy grid.

The legislation came with a sense of urgency, to compete with New Jersey, which was considering ways to kick-start data center development. The Garden State ultimately balked at granting tax relief, and the “conversation died down considerably,” said Connecticut Economic Development Commissioner David Lehman.

More than a dozen data centers have expressed interest in “doing something in the state or elsewhere, and we’re educating them about the state,” he said. “We are playing the long game with this law.”

The problem is now closer to home.

Data center developers are struggling to break into the new market, and municipalities are determining land use and other rules.

“There are a lot of unknowns about this use,” said Wallingford town planner Kevin Pagini. “We researched for months and months.”

Wallingford, with its own municipal utility that generates electricity at a price lower than that offered by Eversource Energy and United Illuminating, is developing regulations to accommodate data centers. Municipal utilities in Groton, Norwich and Wallingford are a selling point for data centers that require huge amounts of power.

Planners are learning that data centers are nothing like the condos, malls, warehouses, and office buildings that typically take their time. Pagini said he’s hired specialists, talked to other municipalities with data centers, and “done as much research as possible.”

A sound engineer has been hired to help planners draft regulations to address potential noise concerns, such as the constant hum of data centers, electrical substations and standby generators that run 24 hours a day. 24, 7 days a week, he said.

Mike Grella, Chief Operating Officer at Gotspace Data Partnerssaid Wallingford’s low decibel limit would rule out a data center, demonstrating that communities don’t understand data centers.

The City of Groton recently halted efforts to negotiate a hosting deal with a data center developer. Councilman Aundre Bumgardner said his concerns centered on possible air quality impacts from diesel generators.

Glenn Pianka, Bozrah’s first coach, said candidates for a data center did not follow through and the city rejected the proposal, which could be resubmitted.

Spokesman Chris Riley said Norwich Public Utilities had had preliminary discussions with a few data center developers he had not identified. “The pandemic has slowed things down,” he said.

State law allows the Department of Economic and Community Development sign tax incentive agreements with qualified data centers for terms of 20 or 30 years, depending on the size and location of the data center investment.

A data center owner would have to spend at least $50 million to qualify if the center was in a Federal Opportunity Zone or Enterprise Zone and $200 million if it was built elsewhere.

“I’m disappointed we couldn’t make more progress,” said Fred Carstensen, a professor of finance and economics at the University of Connecticut who has been a strong supporter of data centers. depend on digital transactions.

“If you’re in insurance and finance, you need powerful data centers,” he said. “You have to have the data here to keep the jobs here.”

State Sen. Heather Somers, R-Groton, is bullish on data centers and urges patience.

“It’s not like a data center can snap its fingers,” she said.

Company decision makers must settle on a site, land acquisition agreements must be executed, and municipalities must go through public procedures before officials will agree to host data centers, Somers said.

She said she hopes to see “significant movement” by summer or fall.

With or without Connecticut, the global Internet data center market is expected to more than double in seven years. Its size was estimated at $59.3 billion in 2020 and is expected to reach $143.4 billion by 2027, according to “Internet Data Centers – Global Market Trajectory and Analysis.”

Grella said he was closing a round of funding and land plots before approaching cities with data center proposals.

“We’re going to hold back…if it’s half-baked,” he said.

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Grella said he wouldn’t say how long it would take before he had a deal with a city to build a data center, but that it could be next year. He said Connecticut’s tax incentives are “among the most aggressive” in the United States, but developers, site selectors and project managers don’t know the law.

“Connecticut has really put itself in a sustainable advantage and a position of strength over its mid-Atlantic peers,” he said. “The big problem right now is that communities don’t understand what data centers are.”

State Senator Cathy Osten, D-Sprague, said real estate agents are advancing land purchases with no interest shown by data centers.

“The middleman comes in, buys real estate and works with data centers,” she said. “It should be the opposite. A data center of this or that size will work with you. It was not the case.

Tony Sheridan, President and CEO of the Eastern Connecticut Chamber of Commercesaid Connecticut is “becoming an older state” with more retirees and “people fearing the unknown.”

“The key is finding the right location for them,” he said.

Stephen Singer can be reached at ssinger@courant.com.