State initiative protects against abusive data center development

ALBANY | Gov. Kathy Hochul has announced the release of the nation's first statewide Host Community Investment Framework for Data Center Development, delivering on a commitment made through Executive Order No. 62. The Community Investment Framework provides local governments with critical guidance for any future negotiations with major tech companies and developers, a powerful tool to ensure communities are protected from exploitative data center projects and get the benefits they deserve. The Framework also ensures local communities can negotiate a deal that mitigates the negative effects of data centers and puts their communities and the families that live there first. Localities are encouraged to use the Community Investment Framework (CIF) to build on the ongoing statewide regulatory frameworks being finalized by the Department of Public Service (DPS) that are designed to protect New York ratepayers from costs associated with data center development and create a funding pathway to directly lower bills for residential and commercial customers. Executive Order No. 62, issued July 14, 2026, established a first-in-the-nation moratorium on data center development and directed Empire State Development to formulate the Community Investment Framework. The voluntary Framework establishes a recommended community investment benchmark of $1 million for every megawatt of utility demand associated with a data center project, recognizing the significant land, energy and infrastructure requirements of data centers and their comparatively lower number of permanent jobs per megawatt of electric demand. The benchmark is intended to help communities negotiate meaningful, long-term investments that reflect the scale of the projects they host. "In the absence of federal leadership, someone has to write the rules and New York is leading the way," Gov. Hochul said. "I was proud to sign the nation's first data center moratorium and as part of that pause, we're giving communities the tools they need to protect themselves in negotiations with major tech companies. As artificial intelligence rapidly changes the world we know, I won't allow New York's communities and the families who live here to be taken advantage of and that's why I'll continue stepping up, putting New Yorkers first." This CIF puts necessary protections in place so that data centers do not take advantage of communities across the State during this unprecedented technological development. The Framework is designed as a flexible template that localities may use and modify based on their circumstances and priorities. It is intended to help communities negotiate and document commitments with data center developers, owners and operators while recognizing that every project and host community is different. PUTTING HOST COMMUNITIES FIRST Data centers are a fast-growing form of industrial development in the United States and often require substantial amounts of land, electricity, water and other infrastructure. The CIF empowers localities to assess those demands alongside a project's anticipated fiscal and economic benefits, including employment, PILOT agreements and potential environmental and infrastructure impacts. Under the Framework, a 50-megawatt data center, for example, would carry a recommended community investment level of $50 million. Communities and developers would negotiate the timing and structure of those investments, including contributions to a locally administered Community Investment Fund. The Framework provides localities with a range of potential community investments that can be tailored to local needs, including public infrastructure such as roads, water and sewer systems, parks and public transit; affordable and workforce housing; workforce training and apprenticeships; schools and educational programming; childcare; broadband access; public safety; community institutions and small business support; and revitalization of vacant or underutilized properties. The Framework also provides suggested Good Neighbor Commitments addressing potential impacts including water consumption, noise, lighting, building design and landscaping, and encourages projects to prioritize fair labor standards and local hiring. It calls for prevailing wages for construction workers and provides a structure through which communities and developers can establish local hiring commitments and engage organized labor on high-quality employment opportunities. LOCAL INPUT, TRANSPARENCY AND ACCOUNTABILITY The Framework recommends that if a data center developer asks a locality to sign a non-disclosure agreement (NDA), the local government should carefully consider whether the proposed NDA benefits the community. If the local government decides to move forward with an NDA, the agreement should be limited to protecting proprietary or commercially sensitive information or trade secrets that are exempt from mandatory disclosure under the New York Freedom of Information Law. Community engagement is central to the State's guidance. Localities are encouraged to engage residents and stakeholders early through transparent public processes, establish community priorities before negotiations begin, clearly define investments and implementation responsibilities, and plan for additional commitments if a data center expands or increases its infrastructure demands. The Framework also recommends ongoing transparency once a facility is operating, including through annual reporting to host communities on metrics such as employment, water and utility usage, energy demand, Community Investment Fund contributions and environmental impacts and mitigation measures. The Framework does not replace or supersede environmental review, permitting or other applicable laws and regulations. Data center projects must continue to adhere to established state, federal and local regulatory processes, including the State Environmental Quality Review Act (SEQRA), and municipalities are encouraged to coordinate community investment agreements with those processes. COMPANIES PAYING THEIR OWN WAY Earlier this year, the Governor directed DPS to begin the Energize NY proceeding, which will require data centers to either pay more for their energy or supply their own, allowing the State to keep energy more affordable for New Yorkers. In Executive Order No. 62, the Governor directed DPS, as part of the Energize NY proceeding, to develop a Generic Environmental Impact Statement (GEIS) for data centers to ensure new data centers coming online are being held to consistent standards. During the development of this GEIS, which will take up to a year from when the Executive Order was issued, a moratorium is in place and the Department of Environmental Conservation (DEC) will not issue any discretionary permits not already deemed complete. The State will use the GEIS to assess the potential environmental impacts of the construction and operation of data centers in the State, including their effect on energy demand, water use and quality, and air quality. Once the State finalizes these standards, the moratorium will be lifted, allowing new data center projects to proceed as long as they follow state, zoning code and other local approvals. Additionally, in the Executive Order, the Governor directed the DPS to consider creating a New York Grid Acceleration Fund to require data centers to invest in the State's aging grid infrastructure and energy needs so all New Yorkers benefit from responsible development. The fund could support the procurement of new clean energy supply and establishment of an insurance pool to which developers may need to contribute to protect against speculative large loads that create uncertainty and increase costs. DPS is also considering approaches to require data centers to fund new clean electric generation dedicated to their operations, including but not limited to customer-sited distributed energy resources and battery storage. Finally, Gov. Hochul is pursuing legislation to repeal sales tax exemptions for massive data centers across the State. For more information, visit ESD's Community Investment Framework for Data Centers webpage.

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State initiative protects against abusive data center development

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