1 of 5 September 15, 2026, Item #11
M EMQRAN DLJ M Cit y of Poway
ADDITIONAL MATERIALS
(Agenda Related Writings/Documents provided to City Council or Staff after distribution of the Agenda Packet for the September 15, 2026 Regular City Council Meeting) DATE:
TO:
FROM:
CONTACT:
SUBJECT:
September 15, 2026
Honorable Mayor and Members of the City Council
Carrie Gallagher, City Clerk ~
(858) 668-4535 or [email protected]
Item 11 -Amendment to Poway Municipal Code and South Poway Specific Plan to Prohibit Third Party Al Data Centers
Attached please find correspondence received after the agenda posting deadline.
Tracy Stevens
Assistant City Manager
Reviewed By:
Alan Fenstermacher
City Attorney
Approved By:
c~
City Manager
2 of 5 September 15, 2026, Item #11
From: ~
Date: Saturday, September 12, 2026 at 1 :08 PM
To: Steve Vaus
Cc: Anita Edmondson ; Dale Long
Subject: The dynamics if winning with data centers.
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Steve, I wanted to be a voice of reason on the Al/Data center issue. We have called Poway home for 41 + years, and I believe our city government to be a functioning, objective, nonpartisan body doing its best to follow our charter and laws. A big part of that has always been community input. To that end I wish to show the benefits of being openminded and pragmatic on the Al/Data center issue. Not knowing if any Al/Data centers are even interested in Poway, I present this point of view. We should look to the successes other communities have had in negotiating the challenging/complex opportunity.
I did a large language model search on "What are the best deals that communities are making with data centers, so the community wins and the data center wins what are some example examples of those deals? The 4 examples below and their summary are exactly what I want to say. There are 4 different approaches or models that may combine to be solid background for a Poway approach. Let me know your thoughts. I'd say I'll bee at the meeting Tuesday, but I am fighting stage 4 cancer and fade energy wise in the evening. Thanks for your leadership, Dale What are the best deals that communities are making with data centers, so the community wins and the data center wins what are some example examples of those deals? Yes. There are some very interesting deals emerging where the community doesn't simply give a data center a tax break-it makes the developer pay for infrastructure and make substantial direct investments in the community. This is becoming a much bigger issue in 2026.
The best examples I found fall into several models:
1. Frederick County, Maryland - a very strong new example This is probably the example I would study first.
The developer of the Frederick Digital Campus agreed in September 2026 to provide more than $11 0 million in direct community investments. That is in addition to projected annual tax revenue of about $215 million.
The $110 million includes things such as:
• School construction and renovations
• A new fire engine
• Other community-selected projects
• Direct capital investment rather than merely promisingjobs This is the kind of arrangement I'd call a "pay for the impacts+ share the upside" deal.
2. Lancaster, Pennsylvania -money+ water+ clean energy
Lancaster negotiated a community-benefit agreement covering three data centers.
The agreement reportedly provides:
• $10 million to a community foundation
• $10 million to a clean-energy fund
• $250,000 for planning
• A $10 million letter of credit that can be drawn against if the developer doesn't comply
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• Water consumption capped at 20,000 gallons per day per campus • Closed-loop cooling requirements
That's about $20.25 million in direct community funding, plus the enforcement mechanism.
There are weaknesses in Lancaster's agreement too-for example, critics say some of the environmental and hiring requirements aren't sufficiently measurable. That's actually useful when designing a better agreement.
3. Temple, Texas -make the developer pay for the infrastructure it needs A proposed $4.2 billion data-center campus in Temple provides another interesting model.
The developer, Rowan Digital Infrastructure, committed $32 million toward a $71.1 million water infrastructure program and agreed to use closed-loop cooling to reduce water consumption.
That's important because the community shouldn't have to build a huge water or electrical system for the benefit of a private company and then Leave taxpayers holding the bill.
A better negotiating position is:
If the data center causes the infrastructure requirement, the data center pays the incremental cost.
4. Loudoun County, Virginia -the Long-term "tax base" model This is a different approach. Loudoun County didn't necessarily negotiate one giant community benefit check. Instead, it created an environment where data centers generate enormous ongoing tax revenue.
The result has been extraordinary: data centers are projected to generate about $1.3 billion in county tax revenue in FY2027, and that revenue has helped support schools, parks and other public services.
So the model is essentially:
Data center investment ➔ enormous tax base ➔ Lower burden on homeowners+ better public services.
That's probably the most important long-term example.
What I think is the best deal structure
If I were advising a city or county negotiating with Amazon, Google, Microsoft, Meta or another large Al/data-center operator, I'd want something like this:
Community gets
Large capital investment
Property-tax revenue
Data center gets
Predictable permitting
Long-term tax certainty
Developer-paid utility infrastructure Guaranteed power/water capacity Fire/emergency equipment
School funding
Road improvements
Local hiring/training
Renewable-energy investment
Water-use guarantees
Noise limits
Decommissioning bond
Annual community payment
Reliable emergency response
Good community relations
Better access to facility
Qualified local workforce
Easier environmental approval
Regulatory certainty
Predictable operating rules
Protection if facility becomes obsolete
Long-term political stability
The key is that the community shouldn't give away everything up front.
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Instead:
"You get certainty; we get certainty."
For example:
25-year agreement
• Data center invests $5 billion.
• County provides a predictable tax rate for 25 years.
• Developer pays all incremental road/water/fire infrastructure. • Developer establishes a $50 million community-benefit fund. • Developer pays $5 million/year into it.
• Property taxes remain substantial rather than being almost completely abated. • Water consumption is capped.
• Noise has an enforceable decibel limit.
• Developer must provide a decommissioning bond.
• Local workforce gets training and hiring commitments. • If the company fails to meet investment/employment/environmental commitments, tax benefits decrease automatically.
That's much better than:
"We'll give you a 20-year tax holiday if you promise to create jobs." One thing communities are beginning to realize
Don't negotiate primarily over jobs.
A hyperscale Al data center can cost billions of dollars but employ surprisingly few permanent workers compared with a factory.
The real economic value can be:
property/equipment taxes+ infrastructure investment+ construction activity+ utility investment+ secondary economic activity.
That's why the tax structure is so important.
And there's a warning here: states such as Ohio have discovered that extremely generous data center tax exemptions can become enormously expensive. Recent reporting says Ohio's data center tax exemptions exceeded $1.5 billion in 2025, prompting the state to reconsider the program.
So I'd be very cautious about a community saying:
"We'll give you a 100% tax exemption for 20 years."
That can be a terrible deal if the community is giving away hundreds of millions of dollars of revenue.
The emerging best practice
The Community Benefits Agreement (CBA) is becoming the mechanism for solving this. A recent review found 10 actual data-center community-benefit agreements and identified recurring provisions involving taxes, infrastructure, water, energy, jobs and community investments.
And New Jersey has created a state resource specifically to help municipalities negotiate these agreements.
If you're thinking about the Virginia/other-state examples you asked me about previously, I can go one step further: I can put together 5-1 O of the best actual data-center deals in America, with the dollar amounts, tax breaks, jobs, infrastructure commitments, and exactly what the community received. That would make a very useful comparison of who got the best deal.
Well, this is the end of my idea sharing. I hope it helps and maybe stimulates positive conversations. Thanks again. Dale
5 of 5 September 15, 2026, Item #11
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