Data centers satisfy ever-increasing demand for cloud storage capacity, including the banking industry’s fintech expansion. iStock illustration

Connecticut legislators’ 2021 decision to provide tax incentives luring the fast-growing data center sector to the Nutmeg State is paying off in a series of proposals for large-scale server farms.

The proposals are receiving contrasting reviews in a group of eastern Connecticut communities with vast tracts of undeveloped land suitable for the facilities. Opposition has surfaced in suburban shoreline towns, including a recent moratorium and subsequent permanent ban on large data centers in the town of Groton. Some rural towns have welcomed the potential infusion of revenues from an emerging commercial development category.

In Bozrah, a town of under 2,500 residents whose top employers include chicken farms and a UPS distribution center, a nearly 1-million-square-foot NE Edge data center on Haughton Road near Route 2 would provide a major new source of municipal income.

Bozrah First Selectman Glenn Pianka said it’s by far the biggest commercial development during his 8-year tenure. Under the terms of the host community agreement with developer NE Edge LLC, the project would contribute $3.5 million per year, or over one-third of the town’s $10-million annual budget, Pianka said.

At an August public hearing on the financial agreement, some residents raised concerns about the scale of the project.

“They were typical to any development that comes along: noise, traffic, rural quality of life, animal [habitats],” Pianka said. “It’s just the typical list of NIMBY complaints.”

But Pianka said consultants’ studies indicated that advances in noise abatement technology can address the concerns.

NE Edge, which has floated plans for projects in four eastern Connecticut towns in recent years, has yet to submit a formal land-use application to Bozrah officials.

In August, NE Edge received Killingly town meeting approval to acquire 39 acres of town-owned land at 125 Alexander Parkway near Interstate 395 for $5 million.

Waterford, Groton Take Different Paths

In many of the local communities, the debates have pitted the promise of new revenues against concerns about noise and other negative effects upon residential neighborhoods.

Plans by NE Edge to develop a 1.5-million-square-foot data center on a portion of the Millstone Nuclear Power Station property in Waterford are currently under review. Last spring, town officials negotiated a host community agreement that would deliver $231 million in payments over 30 years.

At an Oct. 9 town meeting, Waterford residents warned of potential noise radiating up to 2.5 miles from the Millstone property, while a Connecticut State Building Trades Council predicted the project would generate 1 million hours of union labor.

NE Edge ran into stiffer opposition in Groton, another densely populated shoreline town, after it proposed a large development near Interstate 95.

The town’s Planning and Zoning Commission promptly enacted a moratorium on data center development in June 2022, after NE Edge submitted plans for a 500,000-square-foot development near Interstate 95. In June 2023, the commission banned construction of data centers larger than 12,500 square feet.

Tapping Data Sector for Revenue Growth

Demand for cloud-based storage continues to grow exponentially, driven by data generation and consumption by social media, e-commerce and artificial intelligence users. Private investors poured a record $44 billion into the data center sector in 2022, according to Synergy Research Group, after increasing an average of 50 percent for the previous five years. And there’s ample room for additional growth: brokerage JLL predicts that the data center market will grow by 11.3 percent annually through 2026.

In 2021, the Connecticut General Assembly enacted legislation exempting data centers representing at least $200 million in investment from sales and property taxes. The threshold is lowered to $50 million for data centers located in state-designated enterprise zones, which are located in at least 45 communities.

The emergency legislation was designed to help municipalities offset a decline in tax revenues during the early stages of the COVID-19 pandemic.