By Andrew Biggerstaff

The growth of artificial intelligence (AI) and increasing demand for computing power have fueled a boom in data center development, particularly hyperscale facilities that combine hundreds of thousands of square feet of climate-controlled space with racks of servers.

For local governments, these projects rarely start with a standard planning application. Instead, they often begin with mysterious inquiries under tightly guarded code names, such as Project Loon or Project Skyway, leaving local leaders trying to separate fact from fiction.

To make sense of these proposals, it helps to recognize that data center development typically involves four constituencies:

• Data center developers: Companies that assemble land, secure infrastructure, and deliver “shovel-ready” sites.
• End users: Technology companies that rely on computing power for their operations, such as Meta and Google. Data centers also support everyday services, including online banking and local government websites.
• Electrical utilities: Providers that supply the massive electrical loads needed to power and cool the facilities.
• The public: The local government and residents where the development is proposed.

Like any major land use application that comes before a city council, data centers bring unique challenges. But unlike traditional industrial projects, they often involve fast timelines, unprecedented utility demands, and stringent corporate secrecy. Communities that want to avoid being caught flat-footed should take a proactive approach.

Managing nondisclosure agreements

Nondisclosure agreements (NDAs) can be an early point of friction because they require one or more parties to keep specified confidential information private and not disclose it to others. Under the Minnesota Government Data Practices Act, government data is presumed public unless specifically classified otherwise. Conversely, data center developers often operate under strict confidentiality to prevent land-acquisition speculation and inflated property costs. As a result, developers frequently ask local staff and elected officials to sign NDAs.

Signing an NDA is not categorically prohibited by law, but caution is required. The Minnesota Data Practices Office has opined that even when a city signs an NDA, the NDA cannot limit access to public government data, and provisions in an NDA that attempt to do so are unenforceable. (Advisory Opinion 25-004, Advisory Opinion 22-006). Nor should an NDA prevent elected officials from communicating with constituents, although it can place difficult restrictions on what those communications might involve.

Local leaders should consult their city attorney before signing an NDA to consider both the legal boundaries and the practical effects on local governance. During the 2026 Minnesota legislative session, bills were introduced that would have limited local officials’ ability to sign NDAs, so local leaders should continue to monitor this issue.

Evaluating impacts

Beyond secrecy, communities naturally have concerns about resource consumption, including water and energy use, noise and light pollution, and the scale of these facilities.

Local leaders should keep perspective by comparing data centers with existing industrial properties. Industrial processing plants, food producers, and manufacturers can also require significant water and energy resources. However, few industrial users, if any, require the level of electricity demanded by many hyperscale data centers.

Similarly, heavy industrial noise and light pollution are often addressed through existing municipal standards. Local officials should use a “trust but verify” approach, rather than taking developer or opponent statements and projections at face value.

Using local controls

Fortunately, cities have tools to help them navigate this wave of data center development. Two important ones are interim ordinances and conditional use permits (CUPs).

Interim ordinances can give cities time to study the issues associated with data center development. A temporary moratorium can allow a municipality time to consult utility and planning experts, analyze infrastructure capacity, and develop thoughtful, permanent regulations tailored to the community’s long-term goals. Cities should consult their city attorney to determine the timing and scope of any moratorium considered.

The CUP process offers a powerful mechanism for ongoing oversight. Because CUPs allow cities to impose tailored site conditions, they help ensure data centers coexist peacefully with neighbors. Conditions may address concerns such as exterior cooling fan noise, mandates for closed-loop cooling or water conservation where feasible, backup power using batteries instead of diesel generators, and lighting restrictions.

Balancing opportunities and risks

Ultimately, data centers are neither an existential threat nor a guaranteed financial windfall. They are complex industrial land uses. They expand tax bases and bring jobs, but can also strain resources and erode public trust if mishandled.

They also can create opportunities for creative problem-solving for local leaders. Treating developers as partners in the process may open the door to community benefits agreements that provide one-time or ongoing contributions to the host community. Data center development may also create opportunities for brownfield redevelopment.

Local governments facing these proposals are best served by establishing clear regulations and not being rushed into making decisions. Instead, cities should slow down and take the time they need, within the confines of regulatory timelines, to thoroughly consider the matter.

City officials represent the public, not the developer, utility, or end user. Maintaining that perspective can help communities navigate this evolving area of development.

Andrew Biggerstaff is an attorney at Kennedy & Graven (kennedy-graven.com). Kennedy & Graven is a member of the League’s Business Leadership Council (lmc.org/sponsors).