As Data Centers Spread, Cities Fight to Keep Up
Still, developers are finding ways to move ahead outside local jurisdiction.
WASHINGTON, August 10, 2026 – Across the country, local governments are discovering that zoning codes written before the data center boom often have no way to account for facilities. Now, officials are playing catch-up.
Aurora, Illinois, didn’t have a category for data centers in its zoning code. So for years, it treated them like warehouses. That meant new data centers were approved administratively, by right, with no public hearing and no review distinct from a building full of pallets.
The gap went unnoticed until it didn’t. Electricity rates in the area jumped 24 percent in 2025, which the local utility attributed directly to new data center demand. Residents raised alarms about water scarcity, with some downstate Illinois communities building pipelines to Lake Michigan just to secure supply. An existing facility failed to meet state noise requirements.
City officials declared a moratorium on new data center approvals on September 25 of last year, giving themselves roughly six months to figure out what to do.
“We wanted to ensure that some kind of public process was put in place,” Allison Lindberg, director of sustainability and economic development for the city of Aurora, Ill., said during a webinar hosted Monday by the National League of Cities on local policy responses to data center development. “We weren’t necessarily allowed to ban or prohibit data centers, but we did want them to become good neighbors.”
Staff researched other cities’ ordinances, surveyed residents, and met one-on-one with more than a dozen other Illinois municipalities, industry representatives and labor unions. An open house drew roughly 200 people. The city used the input to adopt permanent regulations this spring, just before the moratorium expired.
Data centers required to source 25% of load from renewable energy
Under the new rules, all new data centers are required to source at least 25 percent of their load from renewable energy and maintain on-site battery storage covering 50 percent of peak load for 15 minutes, with alternative compliance available if neither is feasible on site.
Developers must submit a water study, an energy plan and a sound study verified before final occupancy. The city set daytime and nighttime noise limits, vibration limits and energy and water consumption caps.
Aurora prohibited modular nuclear generation outright, classified natural gas generation as a conditional utility use, and wrote state biometric privacy protections directly into its local code – a response, Lindburg said, to concerns that the industry was lobbying to weaken Illinois's Biometric Information Protection Act at the state level.
The city also now requires a water plan disclosing any chemicals used on-site, including in closed-loop cooling systems. Despite industry pushback that the requirement was excessive, Lindburg said subsequent water quality has validated the decision.
The city collects little sales tax from data centers and modest property tax, but does collect a utility tax Lindburg estimated at roughly $10,000 per megawatt annually. Under that metric, a single 100-megawatt facility would generate about $1 million a year for the city.
Still, several data center projects had already rushed to secure approval under the old rules, submitting their applications on the day the city’s moratorium took effect.
Aurora sits in what Lindberg described as the fourth largest area for data center development in the country, drawing developers with its available fiber, water and urban access.
Anchorage’s zoning code had the same problem
The city of Anchorage, Alaska took a more proactive approach. The city hadn’t yet received a major data center application, when Anchorage Assembly Chair Anna Brawley helped write a new data center ordinance before developers came knocking.
Brawley, whose background is in city planning, said the effort traced back to a National League of Cities conference last November, where the question of how Anchorage would handle a data center proposal first crossed her mind.
When Brawley reviewed Anchorage’s existing zoning code, she found the same structural blind spot Aurora had: no category actually fit a modern data center.
“Warehouse” referred to buildings used to store physical goods. An older “data processing center” designation described a distinctly 1990s-era use for offices where employees processed transactions such as credit card records. Neither category contemplated the enormous energy, water, and land use demands associated with a modern data center.
City officials adopted the ordinance in March, establishing a new land use and permitting framework for data centers and similar energy-intensive facilities.
Under the ordinance, data centers are limited to commercial and industrial zones and barred from residential areas outright. Developers must obtain a conditional use permit, triggering public notice and a review process that gives residents a chance to weigh in.
The ordinance also sets design standards meant to address noise and visual impact, including screening and enclosure requirements for equipment, landscaping buffers, and setbacks of roughly 200 feet from residential or other noise-sensitive uses.
Applicants must show that adequate electrical, water and wastewater capacity exists to support the project. If it doesn’t, the city can require the developer to fund infrastructure upgrades as a condition of approval.
Even a proactive ordinance has limits, though. Brawley noted several active data centers are being proposed just outside Anchorage’s regulatory reach.
Those include a request for proposals from Joint Base Elmendorf-Richardson, a joint U.S. Air Force and Army base, seeking private operators on land the municipality cannot regulate; interest from the Matanuska-Susitna Borough, which has land but limited water infrastructure; and a proposal on Alaska’s North Slope tied to stranded natural gas.
She noted that at least one candidate in Alaska’s current gubernatorial race has proposed a New York-style moratorium on AI data centers specifically.
Anchorage, is Alaska’s largest city, with roughly 300,000 residents in a state of just over 770,000, and has some natural draws for the industry, including cold weather and ample water, but is also grappling with a looming natural gas shortage of its own.
A national pattern
Aurora and Anchorage represent two ends of the same problem, according to Dr. Lauren Bridges, an assistant professor of media studies at the University of Virginia, who tracks state and local data center legislation.
At the local level, she pointed to a wave of moratoriums that has “spread like wildfire” in recent months, alongside zoning and land-use changes, noise ordinances and growing attention to water use.
The overall trajectory, she said, is a shift from an incentive-based paradigm, which once offered data center developers generous tax breaks and streamlined permitting, toward a phase of intense community scrutiny, tighter oversight and, in some cases, outright bans.
A U.S. data center moratorium tracker, maintained by Interconnected Capital, counted 219 local moratoriums nationwide as of August 4, including 183 that remained active, underscoring the scale of the regulatory backlash to data center development.
