Proposed Data Center Policy and Regulatory Framework

This report provides an update to the City Council on the Planning and Development
Department's (PDD) proposed Data Center policy and regulatory framework.

THIS ITEM IS FOR DISCUSSION AND POSSIBLE ACTION.

Summary
According to the US Census, Phoenix was the fastest-growing major city in the United
States between 2010 and 2020. The Mayor and City Council’s steadfast commitment
to responsible long-range planning created the foundation that allows for targeted
economic development opportunities to attract key employers that help fuel rapid
growth while maintaining a high quality of life for City residents. These forces
combined created the success we are seeing in Downtown Phoenix, in North Phoenix
employment hubs like the W.L. Gore Campus to redevelopment areas like Park
Central Mall into a high quality medical/educational village core area. It is also the
foundation of current successes such as the Taiwan Semiconductor Manufacturing
Company. Maintaining this momentum requires regular evaluation of City policies and
the regulatory framework that implements those policies, market conditions and other
quality of life metrics to ensure appropriate balances are maintained that best ensure
continued successful fiscally responsible development of the City.

The General Plan designates more than a dozen Employment Centers. Land uses in
Employment Centers are envisioned to provide jobs to minimize commute times for
area residents. The General Plan's Village Cores are areas within each of the City's 15
urban villages designated for jobs, housing and destinations. Employment Centers and
Village Cores are limited land areas intended to be the area of the City's most intense
land uses that are served by multiple transportation options. Any land within these
centers and the village cores should be focused on creating a significant number of
jobs or housing units. Any land uses within these areas that don't create significant
jobs or significant housing units is creating a negative impact because the use does
not take advantage of public taxpayer infrastructure investments that are planned and
likely built for much more intense land uses.





Data centers are an area of heightened investment and new development over the last
several years, not only in Phoenix, but across the country in response to significant
demand for virtual and online services as well as new growth in the artificial
intelligence sector. Storage of data will continue to grow significantly in the coming
years. The size of larger data centers can be in excess of 100 acres which will
continue to put development pressures on existing parts of the City designated for
more employment and housing.

Phoenix does not define data centers in the City's General Plan, which provides policy
guidance for the preservation, redevelopment and growth in the City nor are data
centers defined in the Zoning Ordinance. Data centers have been permitted through
informal interpretations to the Zoning Ordinance that have been allowed via
interpretations in commercial and commerce park zoning districts.

An additional challenge that is being caused by the rapid growth of data centers is their
tremendous demand on the power grids. In the past, their challenge was to water
portfolios as the facilities were cooled by chillers. With the water challenges and
attention across the world, data centers have now moved to cooling by electricity. This
allows data centers to follow the announcements of electrical substation expansion,
buying up significant portions of available land, and power demand, when it is
announced. It is vital for cities to plan for employment areas and mixed use cores that
allow for targeted locational/infrastructure investments that facilitate economic
development .

The Planning and Development Department, in collaboration with the Community and
Economic Development Department, proposes the introduction of a conceptual policy
and regulatory framework that will position Phoenix to continue to prioritize
investments providing jobs and housing. The framework is organized into three parts -
(1) Land use and design policy in the General Plan, (2) Process changes for rezoning
requests and development agreements, and (3) updates to the Zoning Ordinance.

New General Plan policies could include location criteria and enhanced design
standards for all new data centers. New process changes may include new rezoning
requirements in Planned Unit Development applications and reinforcement of the
City's commitment not to execute development agreements with any projects that
include a data center as a primary use. Lastly, the conceptual framework proposes an
addition to the Planning and Development Department's text amendment work
program that would establish definitions for data centers and public hearing
requirements for new data centers. Additional regulatory requirements for data centers
may also be evaluated.



Responsible Department
This item is submitted by Deputy City Manager Alan Stephenson and the Planning and
Development Department.