DATE: September 15, 2026
TO: Mayor and City Council
FROM: Development Services Director
SUBJECT: City Council Referral: Actions to Limit or Further Regulate Data Centers in Hayward.
RECOMMENDATION
That the Council accepts this report related to a variety of actions that may be taken in response to the City Council referral directing staff to develop options to limit or ban future data center development and provide staff direction on next steps.
SUMMARY
On August 12, 2026, three members of the City Council prepared a referral directing staff to begin the process of prohibiting future data centers in Hayward with action preferably occurring before the end of the calendar year. The referral cited significant community outcry related to the approval of The Stack Data Center and lingering concerns about the potential health and environmental risks, rising utility costs and overconsumption of natural resources of data centers in general. The referral also directed the Council Sustainability Committee to develop a report on economic & environmental impacts of existing data centers in Hayward.
This report provides background on data centers currently operating or recently approved in Hayward; the process for reviewing and approving new data centers; and provides information on actions that the City Council may take to further regulate, limit or ban future development of data centers. Specific actions described in this report include directing staff to update and strengthen data center regulations while maintaining the current application review and approval process; adoption of an urgency moratorium to pause data center development while staff prepares updates to regulations; and initiation of a Council-initiated ban.
BACKGROUND
Data centers are buildings designed and equipped to meet the needs of high-density computing equipment, such as server racks, used for data storage and processing. Typically, these facilities require dedicated uninterruptible power supplies and cooling systems.
Functions may include traditional enterprise services (to support the needs of large organizations), on-demand services, high-performance computing, internet facilities, and hosting facilities. While most data centers rely on the electric grid as their primary source of power, they typically provide on-site electricity generation for backup power, most commonly diesel-powered generators. These backup generators are designed to only run during emergencies, testing, and maintenance.
While the functions and design of data centers have changed with expanding technology, they are not a contemporary phenomenon. In fact, data centers have been operational in the United States for decades and have expanded along with technology:
- In the 1960s, data centers housed mainframe computers for large corporations, universities and governments.
- In the 1970s, data centers were located within rooms or floors of buildings as computer use and operations expanded into the private sector. - In the 1980s and 1990s, data centers expanded into separate buildings to provide multiple servers, storage devices and to support expansion of telecommunications and the internet.
- In the 2000s, data centers further expanded into warehouses to support cloud computing and virtualization, which enables the division of a single computer’s hardware into multiple virtual machines thus expanding its capabilities. - The 2010s saw the development of hyperscale data centers ranging from thousands to millions of square feet with the rise of cloud services, big data and the internet of things (smart homes, wearables, smart cities, among others). - The 2020s have seen the expansion of hyperscale data centers resulting in a significant expansion in quantity and size of data centers to accommodate increasing demand for data storage, data analytics, AI, automation, self-driving cars, and other expanding and emerging technologies.
City of Hayward Data Centers
Hayward has several existing telecommunications facilities and data centers that were constructed between the 1980s and mid-2000s. The City is not aware of any environmental issues related to the existing facilities which have been consistently operating for decades.
On February 11, 20211, the Planning Commission approved an application for Major Site Plan Review (MSPR) and Conditional Use Permit (CUP) to construct three speculative industrial buildings and a three-story data center on an approximately 26-acre site at 25800 Clawiter Road. The MSPR and CUP were triggered by the size of the site and the sizes of the buildings, respectively. In addition, the applicant sought an increase in building height increase pursuant to Hayward Municipal Code (HMC) Section 10-1.1604, where the approving authority may approve a height increase where the increase is necessary to provide a more beneficial site layout or will result in public benefits or amenities that could not be achieved under current
1 February 11, 2021 Planning Commission. https://hayward.legistar.com/LegislationDetail.aspx?ID=4791223&GUID=52B31733-BC4B-4D91-A106- 1853583C544E&Options=&Search=
zoning standards. In exchange for the increase in height, the applicant provided the following community benefits: a financial contribution to the construction of off-site bicycle infrastructure, installation of art throughout the site, and construction of an outdoor plaza for food trucks and community gatherings.
On May 22, 20252, the Planning Commission approved an application for MSPR and AUP to construct an approximately 310,000 square foot, three-story data center and related generator yard, substation and switching yard at 26062 Eden Landing Road. The MSPR was triggered by the size of the site and the AUP was triggered by the diesel fuel stored on-site for the backup generators staged on-site. Like the Clawiter data center development described above, this applicant also sought an increase in building height in exchange for a community benefits package that included financial contributions of $2 million to various City projects and community groups.
On April 21, 20263, the City Council held a public hearing on a variety of Zoning Text Amendments to streamline entitlement for desirable businesses across commercial, mixed use and industrial zoning districts and to activate vacant and underutilized properties. In conjunction with those amendments, the City Council took the following actions to strengthen oversight and create more transparent, stricter and clearer regulations related to data centers:
- Defined the term “data center” in the Municipal Code. Previously data centers were included under the general “Office” use and were considered a by right use; - Established a new Major Conditional Use Permit (MCUP) process requiring City Council approval;
- Allowed data centers in the General Industrial and Industrial Park zoning districts subject to approval of a MCUP; and,
- Required that all data centers submit a Sustainability Plan and Community Benefits Package regardless of building height or size of site.
To date, the City has not received any new data center applications under the new regulations.
Environmental Review & California Energy Commission Oversight
If on-site back-up electricity generation is below 50 MW, the City is responsible for preparing the environmental analysis and serves as the lead agency and permitting authority. Hayward’s Corporate Avenue and Clawiter Road data centers followed this process.
If on-site back-up energy infrastructure exceeds 50 MW, then the facility falls under the jurisdiction of the California Energy Commission (CEC)4.
2 May 22, 2025 Planning Commission. https://hayward.legistar.com/LegislationDetail.aspx?ID=7400268&GUID=4C37C260-C950-440F-B68C- 826967AFB56C&Options=&Search=
3 April 21, 2026. https://hayward.legistar.com/LegislationDetail.aspx?ID=7987053&GUID=C94A3DF0-8BAB-4F0D-B8CE-5076FDDDD36E&Options=&Search= 4 California Energy Commission, Data Centers Permitting Process. https://www.energy.ca.gov/programs-and-topics/topics/data-centers
- If a facility generates between 50-100 MW, the project is eligible for the CEC’s Small Power Plant Exemption (SPPE) program. Under this program, the CEC conducts environmental analysis in accordance with the California Environmental Quality Act (CEQA) and California Code of Regulations Title 20. Following CEQA review, which includes mandatory public noticing, if the CEC finds that the facility will not create a substantial adverse impact on the environment or energy resources, then they find the project exempt and the developer must seek local, state and federal permits to construct and operate the facility. The Stack Data Center followed this process. - If a facility generates over 100 MW, the facility requires approval through the CEC’s certified regulatory licensing process and related environmental analysis and the CEC is responsible for ongoing monitoring for compliance with all local, state and federal laws in addition to any conditions of certification. Hayward does not have any data centers that fall into this category.
State Legislation
There are several bills under consideration or recently passed by the California State Legislature that address ratepayer protection and energy costs related to data centers (Senate Bill (SB) 886, Assembly Bill (AB) 2383 and SB 1168); water use and reporting (AB 2469, AB 2619 and AB 1577); and environmental efficiency reporting (SB 887)5. At this point, staff is uncertain which bills will be signed into law by the Governor and can provide a verbal update at the September 15th Council hearing if the bill status changes.
Council Referral
On August 12, 2026, citing concerns about the potential health and environmental risks, rising utility costs and overconsumption of natural resources related to approval of The Stack Data Center, three members of the City Council prepared a referral (Attachment I):
- Directing staff to begin the process of prohibiting future data centers in Hayward with action before the end of the calendar year, and
- Directing the Council Sustainability Committee to develop a report on economic & environmental impacts of existing data centers in Hayward.
DISCUSSION
The City Council has various options for limiting or disallowing future development of data centers. These include maintaining the status quo while directing staff to update the current regulations, adoption of an Urgency Moratorium, and initiation of a Council-Enacted Ban. The following discussion includes a description of each of the potential actions, one or more jurisdictions that have taken that action, a timeline and benefits and drawbacks of each action.
Maintain Status Quo/Direct Staff to Review Strengthen Existing Regulations. As described above, in April 2026, the City Council adopted new regulations related to data
5 https://www.politico.com/news/2026/09/01/california-lawmakers-big-swing-newsom-data-centers-01058848
centers that enact stricter regulations and oversight, while still allowing data center development. The City Council may choose to maintain the status quo and allow any new data center development to go through the new process with the understanding that the development will ultimately be approved or denied by the City Council following environmental review and subject to approval of a sustainability plan, community benefits package and findings related to the specific development.
The City Council may also direct staff to conduct outreach and to prepare Zoning Amendments to strengthen environmental monitoring and reporting to disclose any potential water, electricity, noise or other environmental impacts while maintaining the status quo. Other jurisdictions that are taking a status quo approach while they update and strengthen regulations include San Jose and Los Angeles County.
Process: This action would require staff to prepare a study, conduct outreach, and prepare Zoning Text Amendments intended to address environmental and community concerns. Following preparation of Amendments, staff would schedule public hearings with the Planning Commission and City Council followed by a second reading with the City Council. If approved, the Ordinance would take effect 30 days later.
Timeframe: The process of amending the Zoning Ordinance to strengthen or otherwise update date center regulations could be accomplished within approximately six to nine months with the Planning Commission hearing by March 2027, City Council hearings in April 2027 and regulations taking effect in May 2027.
Benefits: This action would provide time for City staff to analyze environmental impacts of data centers; monitor pending State legislation related to data centers; develop updated standards for data centers before bringing forward a permanent recommendation; and analyze, hold a public hearing on and approve or deny data center applications on a case-by-case basis.
Drawbacks: The City must continue to take in and process data center applications while the updated regulations are being prepared.
Urgency Moratorium – Temporary Ban. Pursuant to Government Code Section 65858, the City Council may adopt an urgency moratorium subject to certain findings to provide time to study the potential cumulative impacts of the use and to develop updated regulations based on the updated analysis. This action would require a 4/5 vote of the City Council. Other jurisdictions that have adopted moratoria include Oakley, El Monte, Baldwin Park, Montebello, Calipatria, Patterson, Imperial, Indio, Desert Hot Springs, Commerce, as well as Imperial, Tulare and Calaveras counties.
Process: This action would require staff to return to the City Council with findings for an urgency moratorium. Adoption of a moratorium would initiate a 45-day moratorium on approval of any new data center development which may be extended for an additional 10 months and 15 days, and again for a second year, based on findings.
Timeframe: Staff could return to the City Council with findings to start the moratorium in late October 2026. If an extension of the moratorium is necessary to accomplish the work directed by City Council, staff could return in early December 2026 to extend it. If the City Council directs staff to amend the Zoning Ordinance related to data centers during the moratorium, refer to action above regarding process and timeframe.
Benefits: The action would take effect immediately upon adoption and result in a ban on new data center approvals which would temporarily ban data center development in Hayward. Further, this action would provide time for City staff to analyze environmental impacts of data centers; monitor pending State legislation related to data centers; develop updated standards for data centers before bringing forward a permanent recommendation
Drawbacks: The City must redirect staff and City resources to develop urgency findings pursuant to State Law and continue to take in and process, although not approve, applications during the moratorium.
Council-Enacted Ban – Permanent Ban. The City Council may direct staff to amend the Zoning Ordinance to prohibit or otherwise limit data center development based on local analysis. This process will require public hearings with the Planning Commission and City Council. Other jurisdictions that have enacted or are in the process of enacting bans include Coachella, Cudahy and Irwindale.
Process: This action would kick off a process involving preparation of a local study, preparation of Zoning Text Amendments based on the evidence and findings of the local study, public hearings with the Planning Commission and City Council followed by a second reading with the City Council. If approved, the Ordinance would take effect 30 days later.
Timeframe: The process of amending the Zoning Ordinance to ban date centers regulations with options for excluding/exceptions for existing data centers could be accomplished within approximately six to nine months with the Planning Commission hearing by March 2027, City Council hearings in April 2027 and regulations taking effect in May 2027.
Benefits: The City Council retains the authority to amend the Zoning Ordinance and may define exclusions and exceptions to the Ordinance both upon initial adoption and in the future.
Drawbacks: This action has a longer time frame for implementation and creates uncertainty around existing data centers unless exclusions/exceptions are made for such facilities; the City must take in and process applications under current regulations until they are amended; and, this action would result in a loss of potential revenues and community benefits associated with future data centers.
FISCAL IMPACT
Staff Time and Consultant Support
Depending on Council direction, there will be fiscal impacts associated with hiring a consultant(s) to prepare a local study to quantify, examine and disclose environmental impacts associated with data centers and to provide a legal basis for pausing or banning such use. There has not been adequate time to investigate costs associated with a consultant.
Further, there will be costs associated with staff time to manage consultants, review local studies, conduct public outreach, participate in internal and external meetings, prepare Zoning Amendments, staff reports and findings based on the local studies, and public noticing for future actions. Depending on City Council direction on the variety of actions described below, staff time could range from no impact (for the status quo alternative) to approximately 25% to 35% of a full-time employee (for the other alternative actions described below), not including support from other Departments. This would result in other projects Development Services projects being postponed. Since this would be a City-initiated project, staff would be funded entirely through the General Fund.
Property, Sales, and Utilities Taxes
While the City does not have any current applications for data centers, a moratorium or a ban could result in the loss of potential revenues associated with future data centers.
For comparison, the projected tax revenue from the Stack Data Center is estimated to be somewhere between $5 to $9 million annually, based on two studies commissioned separately by the City and the developer.
STRATEGIC ROADMAP
This agenda item is not on the Strategic Roadmap and will require that projects included on the Strategic Roadmap be paused or eliminated depending on City Council direction.
NEXT STEPS
Depending on Council direction, staff will implement the appropriate next steps.
Prepared by: Leigha Schmidt, AICP, Planning Manager
Recommended by: Sara Buizer, AICP, Development Services Director
Approved by:
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Jennifer Ott, City Manager