* Crain’s in June…

Envious of the data center boom in the suburbs and elsewhere around the country, Ald. Gilbert Villegas, 36th, thinks he has the ticket to boost the city’s share of the pie and increase property tax revenue.

Villegas, who chairs the City Council’s Committee on Economic, Capital & Technology Development, proposes 8% of the city’s new data spending go to vendors who are required to store the information in Chicago facilities. He predicts the ordinance would spur data center construction in the city that could one day generate $50 million to $100 million a year in property tax revenue, as well as jobs to build the facilities.

Villegas is hoping the city can replicate the success of Loudoun County, Va., which has one of the nation’s largest concentrations of data centers just outside Washington, D.C. The county gets $800 million a year in taxes from property and equipment related to data centers, which it says has led to a reduction in the overall tax rate over the past 12 years, according to a presentation at a committee hearing in February. […]

The Chicago region is the nation’s third-largest market for data centers, the often-massive buildings that house computer servers required to run websites, process stock trades or route wireless calls and data.

But much of the local construction boom has taken place in the suburbs near O’Hare Airport, where land is cheaper and access to electricity and optical-fiber networks is plentiful. Despite having 29% of the Chicago metro area’s population, the city has just 21% of the region’s data center capacity, according to Intelligence & Strategic Advisors, a consulting firm based in Oak Brook.

* The ordinance was blocked by the mayor’s office and the business community in July…

The ordinance has been amended several times since it was first introduced by Ald. Gil Villegas, 36th, who chairs the committee. He says the incentive would encourage data center construction in Chicago, which would boost the city’s property tax base without burdening taxpayers. […]

Ahead of the vote, Johnson’s intergovernmental affairs team whipped votes against the ordinance, and the administration told the committee it was thankful for the amendments but still had concerns. […]

Brad Tietz, vice president of government relations at the Chicagoland Chamber of Commerce, told the committee the chamber appreciated Villegas’ attempt to lure data centers to the city, but argued the best way forward was through zoning and permitting reforms to make it easier to construct the centers.

Tietz also alleged the ordinance was meant to “support only one company, while simultaneously doing nothing to attract data centers to Chicago, yet imposing antiquated procurement requirements on Chicago government agencies.”

*The ordinance passed the Economic, Capital and Technology Development Committee yesterday. The Tribune…

An ordinance requiring Chicago’s data be stored within the United States and adding incentives to encourage data be stored locally is moving forward in the City Council. The measure passed the Economic, Capital and Technology Development Committee on Wednesday and is set to face a full council vote next week.

The ordinance broadly defines data, suggesting the information generated by the city in the many tasks it and its employees complete — such as issuing tickets, collecting fees, sending emails and more — would be affected. No rules govern where Chicago’s data is stored now and it is likely scattered at many locations, said Ald. Gilbert Villegas, 36th, sponsor of the measure and chair of the committee.

The bid to leverage the millions Chicago spends on data storage to spur storage center development is another step toward turning Chicago into the “Silicon Prairie,” Villegas said. State incentives for data centers have already sparked $3 billion in economic development, he added.

“How much of that has come to Chicago? I’ll tell you: less than 15%,” Villegas said. “We have to demonstrate that Chicago is open for business.” […]

The data storage incentives advanced Wednesday are lower than those proposed in a first draft of the ordinance Villegas initially shared. That version faced opposition from the Johnson administration, but the mayor’s team is now “neutral” on the ordinance after a series of changes, Villegas said.

* Sun-Times…

A single data center could generate as much as $13 million annually in property taxes, according to ordinance supporters. But many centers are located in Chicago’s suburbs such as Hoffman Estates, where construction has started at the former Sears headquarters to build a massive data center campus.

Advocates say that data centers would create short-term construction jobs and permanent positions, ranging from tech roles to security and maintenance positions. Data center jobs don’t necessarily require a four-year degree and are more accessible to diverse job seekers.

Craig Huffman, CEO of Metro Edge Development Partners and supporter of the ordinance, said in a statement, “As the only Black developer of data centers in Illinois, I am dedicated to paving the way for others who look like me to enter this expanding market, and create new career opportunities and economic growth in underserved communities.”

In 2022, Metro Edge announced plans for the company’s first data center in Illinois Medical District. The 191,000-square-foot facility will provide data storage for hospitals, healthcare providers, universities and corporations, according to the company’s website. A groundbreaking is scheduled for next year.

* Chicagoland Chamber of Commerce…

“The Chicagoland region has become a national and global hub for data center growth, which has led to billions of dollars of investment into our local communities, significant property tax revenues generated, and thousands of union construction jobs. However, despite claims made by proponents, the data residency ordinance before City Council today will give data centers a reason to cross Chicago off their list for site selection. This ordinance would be the first in the country to legislatively mandate data residency requirements and will result in unintended consequences, including increased costs on city vendors and city agencies at a time when the city is already facing a nearly $1 billion budget gap, decreased cybersecurity protections, and reduced efficiency, security and innovation. Data residency is a fundamentally flawed and antiquated concept that contradicts modern data processing and storage practices.

As Chicago nears a precarious fiscal moment, we urge members of City Council to instead focus on ways to actually encourage data center growth and grow Chicago’s tax base, like establishing tax credits for minority-owned data centers, employment incentives to hire from City Colleges of Chicago, and zoning and permitting reforms for data centers. We stand ready to continue working with Alderman Villegas and other members of City Council to ensure Chicago remains a leader in the data center space.”

* The Software & Information Industry Association…

The Software & Information Industry Association (SIIA) urges the City Council of the City of Chicago to reject Ordinance 2-68-050, Data Residency Requirements for City Data (“the Ordinance”). SIIA is the principal trade association for those in the business of information, including its aggregation, dissemination, and productive use. Our members include roughly 375 companies reflecting the broad and diverse landscape of digital content providers and users in academic publishing, education technology, and financial information, along with creators of software and platforms used worldwide, and companies specializing in data analytics and information services.

The Ordinance would represent a shift in City policy toward data localization, something unprecedented in the United States. We believe the Ordinance would have significant unintended consequences. Chief among these are decreased cybersecurity protections and a reduction in the general efficiency of data storage practices that accompany localization. The Ordinance would also lead to an increase in data storage costs that will hurt the City’s revenue base.

First, the Ordinance would increase the risk that City data could be exposed to cybersecurity incidents. By centralizing all City data in centers located within the City or the state, rather than taking advantage of hyperscale cloud computing solutions, the Ordinance would in effect put a target on the local data centers readily knowable by a malicious actor. A significant percentage of cloud breaches target on-premises or localized systems as the weakest link. As such, the approach incentivized by the Ordinance would weaken the protection of all City data storage. It would also reduce the ability of service providers to use innovative technologies to improve cybersecurity protections and implement efficient data storage methods that can reduce costs.

Second, localizing data as provided for in the Ordinance would actually increase the City’s storage costs in several ways. Currently, data centers can reduce costs to customers by providing economies of scale. Requiring that data be stored locally would require increased costs to create local architectures and infrastructure to store data, which increases storage costs. This will inevitably have a negative impact on the City’s costs, hurting the goal of increasing the City’s revenue.

…Adding… President of the Chicago Urban League Karen Freeman-Wilson…

Dear Alderman Villegas:

I am writing to express my full endorsement of Ordinance 2-68-050, Data Residency Requirements for City Data, which I believe is an important ordinance that will garner many positive results in our communities, especially in the South and West Side neighborhoods. As the President and CEO of the Chicago Urban League, our organization has been at the forefront of providing strategic and impactful advocacy, programming, and outreach in education, economic development, and social justice. Born out of a national movement to meet the needs of Black people migrating to urban areas in search of a better life, the Urban League has been fearless in our efforts to remove barriers that prevent individuals and families from opportunities that enable them to strengthen their lives and their communities. And this is one of those moments, Alderman Villegas.

The proposed Ordinance for data residency offers significant benefits, particularly for communities of color and underserved areas. By localizing data storage and management, the city can generate substantial economic growth through job creation and increased property tax revenues. This influx of resources can be directed toward improving infrastructure, education, and public services in historically marginalized communities, thereby reducing disparities and promoting equity.

Additionally, local data centers can provide new employment opportunities in tech and related sectors, offering pathways to well-paying jobs and career advancement for residents. By fostering an environment that prioritizes local investment and community engagement, data residency can act as a catalyst for sustainable development and empowerment in Chicago’s diverse neighborhoods. The ordinance has the potential to foster partnerships with minority and women-owned enterprises. This approach ensures that the technology sector’s economic growth, driven by data center developments that prioritize inclusive opportunities for diverse businesses, thrives. By supporting local talent and businesses, we can build a more equitable economy.

The Data Residency Ordinance is necessary and creates accountability in our city agencies. This proposal will help drive economic growth and create opportunities for underserved communities, and I fully support this initiative and look forward to contributing to its success. Thank you for your leadership and dedication to making Chicago a better place for all its residents.

…Adding… Alderman Gilbert Villegas…

The data residency ordinance is designed to stimulate economic activity and create jobs at a critical time for our city. By incentivizing the storage of data in Chicago, we can encourage data center development which would generate new property tax revenue without raising taxes on working families and small businesses. It is bizarre to oppose a measure that drives economic growth, creates jobs, and doesn’t ask taxpayers to bear the burden of closing our almost $1 billion budget gap.

While we appreciate points around zoning and permitting reforms, that doesn’t mean we should pass on opportunities to compete with other regions to host data centers and create a reliable source of new revenue and good-paying jobs.

Also, the ordinance does not require that all city data get stored within city limits, as opponents claim. We’re simply looking to expand our piece of the data center pie and all the benefits that come with it by providing incentives to store more data in Chicago, which is neither a mandate nor a requirement.

We need to be innovative and find new ways to generate revenue without relying on the same old mechanisms of fines, fees, property taxes, and TIF surplus sweeps, which too often fall on the backs of everyday Chicagoans. It’s puzzling to see opposition coming from those who often ask local government to come up with revenue solutions that don’t involve tax increases.

I will continue to push for the passage of this ordinance and urge my colleagues at City Council to join me in positioning Chicago as a leader in the data-driven economy and investing in our city and residents.

Thoughts?