As Minneapolis moves toward a permanent zoning framework for data centers, City Council Members Elizabeth Shaffer and Michael Rainville convened a downtown community conversation aimed at separating large-scale fears from the smaller urban projects now being discussed for the city’s core.
Amid a looming municipal budget crisis and a rapidly shifting commercial real estate market, Minneapolis city leaders and industry experts gathered Thursday night to map out the future of urban data center development.
The “Community Conversation,” co-hosted by City Council Members Elizabeth Shaffer (Ward 7) and Michael Rainville (Ward 3) at the Public Service Building, arrived at a critical legislative juncture. Earlier that afternoon, the City Council passed a temporary moratorium on data center developments in a razor-thin vote. The pause is intended to give officials time to establish a permanent zoning framework, a process set to include 60 days of public engagement this summer with a final ordinance target date in mid-November 2026.
While the moratorium highlights local hesitation, the panel heavily emphasized the immense economic and structural lifelines that urban data centers could offer to a struggling downtown corridor.
An Economic Lifeline for Downtown Real Estate
Proponents of data center development framed the technology as a vital tool to combat severe municipal deficits. According to council data, downtown commercial real estate values have plummeted 45% between 2021 and 2026, leaving the city with a $53 million property tax valuation shortfall this year alone. Because the city must fund its operations, this deficit has shifted the tax burden heavily onto residents, with homeowners and renters now carrying 55.6% of the overall property tax load.
Don Kohlenberger, president of Hightower Initiatives and a construction consultant with 35 years of local experience, argued that data centers represent the most viable vehicle to stabilize cratering property values. Kohlenberger noted that data centers pay the highest property tax rates—roughly double the rate of residential properties—while requiring minimal public infrastructure.
“I’ve been involved in office projects, and I cry about how these empty buildings are being devalued,” Kohlenberger said. “I want something that can come in and save this city. It’s there, and it’s possible.”
Kohlenberger clarified that the panel was not discussing massive “hyperscale” facilities—which scale upward of 100 to 500 megawatts and occupy vast rural footprints—but rather compact, “urban” data centers ranging from 10 to 50 megawatts. He described these facilities as the “necessary bottom layer of a wedding cake” for struggling real estate. Sited discretely in the basements of underutilized office towers, these data centers can provide the financial foundation landlords need to fund street-level retail, restaurants, and upper-floor residential conversions.
Dan McConnell, business manager for the Minneapolis Building and Construction Trades Council, strongly opposed the council’s moratorium, calling some of the anti-data center rhetoric online “alarmist.” McConnell pointed to the stark contrast between the vacant 35-story American Express Tower, which sold for a meager $6 million last year, and the active eight-story Sleep Number building, which fetched $235 million.
“I want more $200 million commercial properties on the tax rolls to subsidize the amount of property tax that I pay on my modest home in South Minneapolis,” McConnell said.
From a labor perspective, McConnell noted that data centers drive robust, high-skilled union construction careers, registered apprenticeships, and ongoing technical maintenance jobs. He also warned that blocking data centers in Minnesota would simply push developers to states like North Dakota, where facilities are powered by coal plants whose particulate emissions ultimately drift back into Minnesota’s air.
Utility Grid and Clean Energy Advantages
John Marshall, Regional Vice President for Xcel Energy and Chair of the Minneapolis Downtown Council, assured residents that the downtown electrical distribution grid possesses ample excess capacity to safely absorb urban data center loads without risking reliability for residential customers.
Marshall explained that interconnecting these large customers benefits regular ratepayers by spreading the grid’s fixed asset costs across greater volume, creating “downward pressure on rates going forward.” Furthermore, under the city’s franchise agreement with Xcel Energy, Minneapolis receives a franchise fee based on a percentage of gross utility revenues, meaning increased data center energy sales will directly inject new dollars into the city’s operating budget.
Addressing sustainability, Marshall highlighted Xcel’s aggressive transition to clean energy. The utility currently generates 69% carbon-free electricity in Minnesota, plans to wind down all coal operations by 2030—reaching an estimated 80% to 88% carbon-free mix in just four short years—and is legally mandated to achieve a 100% carbon-free grid by 2040.
Siting data centers within Xcel’s territory, Marshall argued, ensures the technology is powered by one of the cleanest grids in the nation.
Environmental Cautions and Regulatory Questions
While the economic advantages dominated the first half of the discussion, the panel later shifted to the notable environmental and neighborhood concerns associated with data infrastructure.
Kathryn Hoffman, CEO of the Minnesota Center for Environmental Advocacy (MCEA), urged city leaders and residents to remain vigilant and demand ironclad, enforceable protections in the upcoming ordinance rather than trusting corporate promises.
“Press releases or statements at the city council are not something you can take to court,” Hoffman warned, advocating for strict stipulations to be embedded directly into city permits and contracts.
Hoffman raised several key areas of concern for the city to address during its zoning rewrite:
-
Transparency and Secrecy: Hoffman noted that across Minnesota, data center developers frequently bind local governments to strict non-disclosure agreements (NDAs), forcing environmental review processes to occur under a “cloak of secrecy.” However, during the Q&A portion of the meeting, a representative from the Minneapolis City Attorney’s office clarified that Minneapolis city policy strictly avoids NDAs, and any such agreement would require explicit, public City Council authorization.
-
Energy Demand Off-Ramps: While acknowledging Xcel Energy’s partnership and clean energy milestones, Hoffman reminded the audience that the state’s 2040 clean energy law contains legal “off-ramps.” She noted it is technically permissible for utilities to build gas plants and purchase out-of-state renewable energy credits to comply with the law, meaning a massive surge in data center energy demand could still impact the pace of local carbon reductions.
-
Low-Frequency Noise: Unlike standard commercial noise, data centers generate a persistent, low-frequency hum from cooling systems and servers, which Hoffman compared to living next to a continuous audio subwoofer. Because standard building insulation fails to block low-frequency vibrations, Hoffman pressed the city to establish localized testing parameters and decibel limits that go beyond existing state standards.
Responding to public questions about neighborhood disruption, panel members noted that technological fixes are already being deployed effectively. Council Member Shaffer shared that during a recent tour of downtown’s Sleep Number facility, the processing infrastructure was completely imperceptible from the street due to voluntary sound barriers installed by the developer. Kohlenberger added that modern urban designs place backup emergency generators multiple floors underground and vent exhaust through the roof, keeping local street noise and air pollution to a minimum.
Council Member Shaffer closed the evening by emphasizing that the newly approved moratorium is just the beginning of a collaborative process. “We have some good ideas that are already bubbling up about multi-use incentives to drive some of our climate goals,” Shaffer said, promising a transparent and deeply vetted ordinance by the autumn deadline.
Let’s be honest about this. The Mpls City Council is just looking for more tax revenue to replace all the businesses that have left and that will continue to leave.
What about water use? That’s typically one of the controversial data center points and no mention of it.
I was at the meeting and my big take away was that Minneapolis should be focused on attacting small data centers and focus their regulatory energy on those kinds of data centers. I assume the majority of the Council will never accept mega-data centers in Minneapolis and will create so many obstacles that those data centers will not even consider Minneapolis. Focus on mega data centers may scare away the small data centers that would work in Minneapolis. We need to change the narrative ASAP.
“Large” versus “small” data center concerns is just not a thing.
We *always* have a cluster of buildings.
And always have significant resource draws & health risks.
You either build them all at once, as Google wants to in Pine Island, or project by project, as you want downtown.
Same issues, to the same extents.
It is good that this group studying all is working at trying to draw a distinction between different types and sizes of data centers, especially those that are in vastly different physical environments.
The problem will be that 6, and sometimes 7, of the 13 Mpls City Council members will continue to act in bad on any/ all matters that they do not agree with. Given this voting block’s limited employment histories and life experiences, our city pretty much has to try to ignore this DSA aligned voting block, and with fingers crossed, we can get to 7 reasonable, experienced people when it’s time to take a/ any vote.
Three and 1/2 years is a long time to wait before the next city elections, to get to a remade, and improved, city council. But at least we are one down now, temporarily, with the recent break ( going in both directions) that this reprieve and respite provides for in Ward 10, and the rest of the city.
Data centers are used by Flock to unconstitutionally take away our 4th Amendment rights.
“In August, Flock admitted to 9News in Denver that it had a pilot program with U.S. Customs and Border Protection, which includes Border Patrol. The company’s CEO Garrett Langley had previously denied the company had federal contracts.
“[T]here have been conflicting reports in the media about Flock’s relationship with federal agencies, and some of our public statements inadvertently provided inaccurate information,” Langley later acknowledged in a statement. “We clearly communicated poorly. We also didn’t create distinct permissions and protocols in the Flock system to ensure local compliance for federal agency users.”
https://www.npr.org/2026/02/17/nx-s1-5612825/flock-contracts-canceled-immigration-survillance-concerns