City Council Agenda Report
Meeting Date: October 20, 2026
From: Daniel S. Wall, P.E., Director of Public Works-City Engineer Department: Public Works
Submitted by: Daniel S. Wall, P.E., Director of Public Works-City Engineer Subject
Potential Regulation of Data Centers and Cold Storage Warehouse Development Recommendation
Consider the information presented and provide direction to staff on whether and in what manner to adopt regulations governing data center and cold storage warehouse uses in the I Zone.
Background
Since at least 2007, data centers and cold storage warehouses have been permitted uses under Vernon Municipal Code (VMC) Section 17.22.020. “Permitted uses” are land uses allowed as a matter of right within the industrial zone of the City and do not require any separate City Council or discretionary approval. For permitted or by-right uses, the project approval process is ministerial and the City’s review is administrative, designed to ensure that the proposed development adheres to existing general plan and zoning rules and meets existing legal standards for building quality, health, and safety.
There is currently one operating data center in the City of Vernon and several other data center projects at varying stages in the development process. The City Council has recognized that data center projects have generated many questions within the community and directed staff to analyze and provide recommendations regarding changing the use from permitted/by-right to a regulatory framework designed to ensure City Council discretion and public engagement through a transparent process that addresses community and environmental impacts.
City Council also directed staff to analyze changing cold storage warehouse uses from permitted/by-right to a regulatory process with additional oversight in response to community health and safety concerns in the aftermath of the Lineage fire in Boyle Heights.
Staff presented the following information to the Vernon Business and Industry Commission (BIC) at its special meeting on October 1, 2026 for the regulation of Data Centers and Cold Storage Warehouses:
Regulatory Options
In evaluating regulatory options, staff focused on the Conditional Use Permit (CUP) and Development Agreement (DA) processes.
A CUP is a discretionary entitlement that allows a use not permitted by right, subject to specific findings such as consistency with the General Plan, compatibility with surrounding uses, adequate infrastructure, and a determination that the use is not detrimental to public health and safety. If the necessary findings can be made, the CUP generally must be approved. The City may attach conditions reasonably related to mitigating the impacts of the specific use, such as traffic, noise, hours of operation, screening, and odor control. These conditions must be connected to and proportionate to the project's impacts. Any fee associated with a CUP is likewise subject to nexus and proportionality requirements; a generic community benefit fee not linked to a specific impact would be vulnerable to legal challenge.
A DA is a contract between the City and a property owner that allows negotiation of financial terms and conditions, such as contributions to community benefits and other broader advantages. Unlike a CUP, these benefits are not strictly linked to the project's direct impacts.
A CUP and a DA serve distinct legal functions, and relying on a DA alone may surrender key regulatory authority preserved by a CUP:
• Contract versus permit: A DA is a bilateral contract authorized under Government Code Section 65864 et seq. Its statutory purpose is to provide developer certainty by vesting the rules in place at approval. Conversely, a CUP is a discretionary land use permit issued under the City’s police power, allowing the City to retain ongoing regulatory oversight rather than being bound strictly by contract terms.
• Legal nexus and financial scope: CUP conditions and fees must satisfy strict legal nexus and proportionality requirements tied directly to project impacts (e.g., traffic, noise, screening). A generic "community benefit fee" imposed through a CUP would be vulnerable to legal challenge. In contrast, a DA allows the City to negotiate broader financial contributions and community benefits that are not strictly limited to direct impact mitigation
• Enforcement mechanism: Violating a CUP condition is a code enforcement issue that the City can resolve administratively, including permit modification or revocation through a public hearing. Violating a DA constitutes a contract breach, requiring court litigation— a process that is slower, costlier, and may not automatically halt ongoing site operations during the dispute.
• Periodic review and unilateral updates: The City can condition a CUP to require periodic operational reviews, giving staff the authority to adjust or strengthen conditions over time. A DA cannot be modified unilaterally by the City; any amendment requires the developer's mutual consent.
• CEQA mitigation enforcement: While both entitlements trigger project-level CEQA review and mitigation requirements, their enforcement tools differ significantly. Mitigation measures imposed via a CUP are enforced administratively, whereas DA mitigation measures must be enforced through court action.
Because a CUP and a DA serve different legal purposes and offer different enforcement tools, the City Council may wish to consider both the certainty a DA offers developers and the ongoing regulatory flexibility a CUP preserves for the City in formulating its recommendation.
Any proposed new regulations would apply to projects and developments not yet permitted or approved as of the effective date of the ordinance. The City cannot unilaterally impose new or additional regulations on existing projects where there are approved permits, a contractual relationship, and substantial investment by the developer, without risking legal action.
Options for consideration include the following:
1. Requiring a CUP for new data center and cold storage warehouse uses in the I Zone.
2. Requiring both a CUP and DA, while providing City Council authority, in its sole discretion, the ability to waive the DA requirement on a case-by-case basis upon specified findings.
3. Requiring a CUP (with or without DA) for new data center uses only. Cold storage warehouses make up an important segment of the City’s business community and economy, and play a critical role in the food supply chain serving an essential function in the region; staff have had limited time to study the potential impacts of additional regulatory requirements for cold storage uses. If the direction is to prioritize data center regulation, staff can focus the ordinance on those changes and come back at a later time with further analysis and recommendations regarding cold storage regulation.
4. Leave the Municipal Code unchanged and continue to seek feedback. Under this approach, data centers and cold storage warehouses would remain permitted/by-right uses unless and until City Council takes further action.
Recommendation from the Business and Industry Commission (BIC) At its special meeting on October 1, 2026, the BIC received a presentation and information regarding options for the regulation of new Data Centers and Cold Storage Warehouses in Vernon. The BIC considered the information presented and recommended that the City Council not make any changes to the regulation of data centers and cold storage warehouses.
Next Steps
Staff requests that the City Council provide direction on changes to the regulation of data centers and cold storage warehouses if any. If City Council directs staff to prepare an ordinance incorporating some or all of the proposed regulations, the ordinance will be duly noticed for a public hearing and considered by City Council for first reading not less than 20 days after the hearing notice is published. If approved, the ordinance and new regulations would take effect 30 days after second reading and adoption by City Council.
Strategic Plan Goals
Goal 3: Advance Sustainability and Environmental Stewardship Fiscal Impact
There is no fiscal impact associated with this report.
Attachments
None.