Sioux Falls, South Dakota: Council Votes 7-0 to End Data Center Tax Breaks

The Sioux Falls City Council voted 7 to 0 on Tuesday, November 10, to remove data centers from the list of businesses that can get reduced property taxes in the city. The council revised the industrial property tax reduction program and took data processing and storage operations off the list of businesses eligible for reduced property tax assessments, The Dakota Scout reported.

Mayor Christine Erickson backed the change. “I have consistently maintained that data centers must pay their own way. This ordinance will ensure that they do,” Erickson told The Dakota Scout. She thanked the council for its support in making the change real.

The proposal came from the Sioux Falls Planning and Development Services Department, which brought the council a plan to overhaul the property tax relief programs the city offers. The vote was unanimous, with no council member voting against removing data centers from the program.

A long local argument behind the vote

Data centers have been the hardest fought development question in Sioux Falls this year. On October 27, about 200 residents turned out for a joint meeting of the City Council and the Lincoln County Commission to speak against hyperscale data centers and the Gemini project, the Argus Leader reported. Residents raised sound, water and power use, taxes and accountability, and some asked the council for a temporary pause on new projects.

The Gemini Data Center is a proposed 500 megawatt facility on 164 acres near Veterans Parkway and East Rice Street, the Argus Leader reported. Gemini Data Center SD is tied to Gemini Family Office, based in California. The project drew months of public opposition, and residents at the October meeting said the council should put sensible rules in place before another project of that size moves forward.

The council set up a Regulatory Oversight Committee in October to study data center rules and take public input, South Dakota Public Broadcasting reported. The committee held a listening session on November 9 and is set to meet again on November 30 and January 4.

The developer case, heard a day earlier

One day before the tax vote, Gemini Capital founder Michael Anvar spoke to the city Regulatory Oversight Committee and answered questions about water, power and money, the Argus Leader reported. Anvar said the company's models show the project would produce about 5 million dollars a year in municipal electricity taxes for the city and about 10.6 million dollars a year in revenue for the state, and he noted that the figures depend on what is actually built.

Anvar told council members he did not expect a hyperscale data center to break ground in Sioux Falls until late 2028 or 2029. He did not name a tenant for the project and did not point to temporary or permanent job numbers in that session, the Argus Leader reported.

What the vote changes

The ordinance changes who can apply for the city's industrial tax relief. Data processing and storage operations no longer qualify for reduced property tax assessments under the program, so a data center built in Sioux Falls pays under the standard assessment. The vote does not ban data centers, and it does not end the committee work on water, power and siting rules, which runs into January.