Chicago’s finances are in dire straits, leaving little doubt the City Council and Mayor Brandon Johnson will investigate ways to tap further into taxpayers’ pocketbooks in an attempt to make up the looming $1 billion shortfall.
It’s a route every Chicago mayor and City Council has taken, as they seek to balance the city’s budget.
But when Johnson was elected, he also promised to find new sources of municipal revenue and pushed to create a City Council subcommittee for that purpose. So with that in mind, we’ll be watching Wednesday’s City Council meeting with interest.
That’s when the council is expected to consider a proposed ordinance that supporters, led by sponsor Ald. Gilbert Villegas (36th), believe will promote the development of data centers — buildings that house servers and infrastructure used for remote storage and processing of computer data.
Data centers, supporters say, could potentially generate millions a year in property tax revenue, as well as creating tech jobs that don’t necessarily require a four-year college degree. Since 2019, 21 new data centers have sprung up in Illinois, but only four are in Chicago.
Of course, data centers will not solve the city’s current massive budget problems, but down the road, every bit of added revenue helps. Council members should see that, and press forward with an ordinance — with adjustments, if need be — that could help the city reap the benefits and minimize any risks.
An economic development tool
Under the proposed ordinance, a vendor who bids on a contract to store some of Chicago’s municipal data would get a 4% tax credit for storing the information in a data center within the city’s borders. Vendors would also receive the 2% credit for storing data in Illinois, according to the ordinance.
The city’s data is currently stored in centers across the country, Villegas has pointed out. Offering a financial pot-sweetener — not a mandate — to developers as a way to encourage the storage of Chicago’s data in Chicago is the goal.
A data center can yield as much as $13 million a year in real estate taxes, Villegas said. And the centers could help spark development in neighborhoods with a surfeit of long-vacant former industrial land.
“The city spends hundreds of millions of dollars on IT contracts that, in part, store its data in other cities and states, allowing them to benefit from Chicagoans’ data and their tax dollars without giving anything back,” Villegas said. “This data residency ordinance is a tool the city can use to bring in new revenue, good jobs and economic development in communities that need it the most.”
The ordinance passed the City Council’s Committee on Economic, Capital and Technology Development last Wednesday.
“At a time when the city needs to be the most creative with solutions to generate revenue, I am happy to see the data residency ordinance pass committee,” Villegas said. “This is a huge economic win for the city of Chicago and it’s something that just makes sense.”
Questions to be answered
There is opposition to the measure, in part from environmentalists concerned about the greenhouse gas emissions from data centers — and not without reason.
Greenhouse gas emissions from big data centers owned by tech giants such as Google, Microsoft and Apple were more than seven times higher than the companies had reported, according to a recent analysis by The Guardian. Supporters say modern data centers use newer energy-efficient and sustainable technologies that don’t stress the environment, but safeguards should be in place to ensure that’s the case.
The Chicagoland Chamber of Commerce is also opposed to the ordinance, saying the law ultimately wouldn’t bring additional business to the city, and would make data storage less secure.
The City Council, of course, has the chance to ask hard questions on both of these points and more. And council members also must get a clearer picture of how much the incentive might cost taxpayers.
If passed Wednesday, the ordinance would take effect Jan 1. If the ordinance ends up being tabled for a short time to make sure outstanding questions can be fully answered, fine.
But one thing council members shouldn’t do is dismiss the proposal out of hand. That’s something Chicago can’t afford.
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