Chicago Wants Share Of Suburban Data Center Boom

As data center developers flock to the suburbs, one Chicago official is devising a plan to lure more of the industry’s top players to the city.

Alderman Gilbert Villegas, of the 36th Ward, has proposed an initiative that would encourage data center developments in the city through generous incentive packages, while increasing property tax revenue, Crain’s reported.

Villegas, who’s also chair of the Committee on Economic, Capital & Technology Development, introduced a proposal to require 8 percent of the city’s new data spending to be directed to vendors using Chicago-based facilities. He projects this ordinance could eventually generate $50 million to $100 million annually in property taxes and create construction jobs.

“More than $400 million of the city of Chicago’s budget is I.T. spend, which supports companies that use data centers that are in Chicago, but many do not,” Huffman told the outlet. “There should be incentives for more investment to happen.”

Villegas envisions this plan replicating data center proliferation Loudoun County, Virginia, which reaps $800 million a year in taxes from its extensive data center presence. The influx has allowed the county to lower its tax rate, although its property taxes have increased due to higher valuations.

Data centers, essential for supporting artificial intelligence, video streaming and mobile communications, are increasing rapidly nationwide. The Chicago area ranks as the third-largest data center market in the nation, benefiting from a state tax incentive introduced in 2019.

However, most data center developments have occurred in the suburbs, especially those near O’Hare International Airport, due to cheaper land and better infrastructure, leaving the city itself with a smaller share of the region’s data center footprint.

Villegas argues that fostering data center construction within Chicago could stimulate investment in underserved communities and create opportunities for minority and women entrepreneurs in real estate. His ordinance also includes a provision that an additional 6 percent of annual data spending be allocated to vendors using data centers throughout Illinois.

Craig Huffman, CEO of Metro Edge Development Partners, supports the ordinance, noting its potential to advance projects like his planned 50-megawatt data center in the Illinois Medical District on the Near West Side.

The proposal has faced some criticism. The Chicagoland Chamber of Commerce warns that the mandate could deter companies from selecting Chicago for future data center sites, potentially causing unintended consequences. Opponents argue that the ordinance takes an outdated view of data processing and suggest there are more effective ways to promote data center growth.

—Quinn Donoghue