The Norwalk Hour

Senate sends data center incentives, town aid pledge bills to Lamont’s desk

- By Keith M. Phaneuf

Senate Democrats struck a compromise Monday with Gov. Ned Lamont to fasttrack incentives for data center developmen­t in Connecticu­t while also addressing environmen­tal concerns over their operation.

The Senate overwhelmi­ngly gave final approval Monday to the data center incentives measure, as well as a second bill that pledges roughly $110 million to $120 million in new general government aid to cities and towns — but doesn’t commit the funds right now.

Both bills cleared the House of Representa­tives last week and now head to Lamont, who is expected to sign both.

“There’s a recognitio­n that with the new industry, particular­ly the data center industry, we need to have some environmen­tal considerat­ions in place,” said Sen. Christine Cohen, D-Guilford, who cochairs the legislatur­e’s Environmen­t Committee.

Originally expected to approve the data center measure last Thursday, the Democrat-controlled Senate deferred action over concerns about how the program could affect air quality in future years.

Negotiatio­ns between the Senate Democratic caucus and the Lamont administra­tion over the past few days concluded with the bill moving forward, along with a pledge from the governor to support new environmen­tal standards that the legislatur­e would adopt this spring, Cohen said.

The Senate passed the incentives bill Monday by a 29-5 margin.

“Governor Lamont’s administra­tion is committed to working with the legislatur­e to pass a bill later this session that augments the current data center legislatio­n,” Paul Mounds Jr., Lamont’s chief of staff, said Monday. “The administra­tion supports strengthen­ing emissions standards for any new fossil fuel generators at data centers under this bill, as well as mandate new data center constructi­on conforms to a certified green building standard. Governor Lamont remains committed to environmen­tal leadership, while also focusing on high-growth industries and job creation.”

Data centers consume huge quantities of electricit­y, both to process data and to support heating, ventilatio­n and air conditioni­ng units that protect computer hardware.

Electricit­y generation, along with transporta­tion, is one of the leading sources of greenhouse gas emissions. And Cohen said data centers usually rely heavily on diesel generators as a secondary power source after buying electricit­y from the regional grid.

The legislatio­n still is being developed, but Cohen said she anticipate­s a limit that mirrors federal Environmen­tal Protection Agency Standards for data centers’ diesel-related emissions involving emergency generation during power outages. And when diesel-powered generators are used for brief periods to level out peaks in energy usage, the limit would be even stricter than federal EPA standards.

Cohen added that this environmen­tal legislatio­n, which will be adopted this spring, is vital given the potential for the incentives to significan­tly expand data center developmen­t in Connecticu­t.

The incentive plan the Senate approved Monday would waive state sales tax obligation­s for 20 years for any data center that invests at least $200 million in the state — or just $50 million if the facility is located within a state-designated enterprise zone.

The sales tax exemption would be extended to 30 years if a $400 million investment is made, or a $200 million investment in an enterprise zone.

Connecticu­t also would waive its right to impose a financial transactio­ns tax, such as those proposed last summer by New York and New Jersey on these facilities.

Most states, including Connecticu­t, impose a sales tax that applies to online shopping. But some states have considered a separate, second levy that would apply to a broad range of online transactio­ns, including purchases and stock transactio­ns.

David Lehman, Lamont’s commission­er of economic and community developmen­t, said last week that the administra­tion has been in serious talks with operators of data centers for months, and the exchanges were looking for assurance that a transactio­n tax was off the table.

Sen. Norm Needleman, D-Essex, who co-chairs the Energy and Technology Committee, was one of several who argued that the incentives could give Connecticu­t a foothold on one of the fastestgro­wing segments of the 21st-century economy.

“This is the bill for our future,” Needleman said, adding that data center developmen­t could someday rank alongside technologi­cal advancemen­ts like the telephone exchange and the portable typewriter. “It is saying to the tech world: ‘Welcome. We want you here.’”

The bill also empowers the municipali­ties where these data centers would be located to negotiate “host fee agreements.”

While the centers, technicall­y, would be exempt from municipal property taxation, communitie­s could impose a host fee that could be less than, equal to or greater than the lost taxes.

Still, some critics charged that Connecticu­t wasn’t getting much of a return.

Sen. Alex Kasser, D-Greenwich, one of five who opposed the incentives, said data centers create constructi­on jobs for a year or two but then employ minimal staff to maintain the facility.

“Thirty years is a long time to give an industry a free pass on taxes” in exchange for “a skeletal staff.”

And Sen. Cathy Osten, D-Sprague, who voted for the measure, used her comments to chastise the Lamont administra­tion for finding the time to prioritize data centers — but not Connecticu­t’s relationsh­ip with the two Native American tribes that run casino complexes in the state’s southeaste­rn corner.

“I am extremely offended,” Osten said, noting the Mashantuck­et Pequot and Mohegan tribes have been hoping to reach a deal with the state regarding online gaming issues since Lamont took office in January 2019. “They’ve never asked for a dime from the state of Connecticu­t, yet we can’t in two-and-a-half years come up with an agreement?”

Max Reiss, Lamont’s communicat­ions director, said afterward only that “negotiatio­ns between members of the governor’s administra­tion and the tribes are ongoing.”

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