Santa Clara study session reviews data center growth, power limits, recycled-water use and city revenues

City officials, utility staff and industry representatives briefed the Santa Clara City Council and Planning Commission on the local footprint of data centers, telling the joint study session that the facilities are a substantial source of city revenue but are also constrained by electric-system capacity and raise ongoing questions about water use, noise and diesel backup generators.

City Manager Javon Grogan said data centers contribute “over $40,000,000” to the city budget and represent “about 13% of our general fund.” He and other staff stressed that the presentation was informational and not a proposal for new regulations.

The discussion brought technical briefings from the Data Center Coalition and several city departments. Dan D’Aureo, senior director of state policy for the Data Center Coalition, described data centers as “specialized facilities that store, process, and distribute digital information — think of it as the brain of the Internet,” and outlined industry trends that are driving demand nationwide. Silicon Valley Power (SVP) staff described rapid load growth driven by existing and proposed data centers and the utility’s ongoing infrastructure projects.

Why it matters: Santa Clara staff said revenues tied to data centers and SVP transfers underpin services used by residents, while simultaneous questions about land use, potable and recycled water consumption, aesthetic design, and diesel generator emissions have prompted calls from commissioners and the public for further study.

Most important points from staff presentations

- Fiscal impact: Economic development staff presented a city tally for the current fiscal year showing combined contributions from SVP transfers, property tax, and sales/use tax from data centers of about $40,960,000. Rena Bridal, director of economic development and sustainability, said about $23.3 million of that is expected this year from data centers via the SVP transfer. The presentation listed $6.5 million in city-share property-tax revenue and roughly $5 million in sales and use taxes attributable to data-center activity this fiscal year; affordable-housing fees collected from data centers were reported near $4 million, with additional payments of about $1.7 million pending.

- Power and capacity: Kathleen Hughes, assistant director at Silicon Valley Power, and Nico Prokos, acting director for SVP, described a rapid increase in load. SVP reported that data centers account for roughly 60% of the utility’s sales and that projecting future needs has required large capital projects, including substation rebuilds and new transmission, funded in part with ratepayer dollars and in part with developer contributions. Staff said some major planned upgrades are in bond financing and that detailed, costly system-impact studies (about $3 million each) are required for very large new customers.

- Water and cooling: Ahmed Ali, principal engineer for water and sewer, said the city’s recycled-water distribution is well developed in the north part of Santa Clara. He reported 31 data centers currently using recycled water and six more in the pipeline, and noted that at sites using recycled water the ratio observed was roughly two-thirds recycled to one-third potable water. Staff described code requirements that new data centers maximize recycled-water use or be “recycled-water ready.”

- Land use and design: Afsha Hamid, community development director, explained that data centers are permitted in the city’s office and industrial zoning districts (conditional use permit plus architectural review for the larger facilities) and are not allowed in residential, downtown, open space or several specific-plan areas. The recently adopted zoning code (August 2024) introduced façade, lighting and noise-reduction standards in response to public comments about massing and scale; staff said some newly completed data centers followed improved aesthetic approaches (articulated facades, ground-floor office, landscaping).

- Environmental and public-health concerns: Commissioners, council members and several members of the public pressed staff on diesel backup generators, noise monitoring, and particulate emissions. Industry and staff said diesel gens remain the most widely deployed, resilient backup source today and are subject to federal, state and regional air quality rules; speakers also pointed to state and local permitting and CEQA review as avenues to require mitigation. Several commissioners urged the city to study ambient air impacts and to require environmental monitoring and reporting where appropriate.

Questions from elected officials and commissioners

Councilmembers and planning commissioners raised multiple themes: whether data-center land use crowds out other commercial or housing opportunities; the distribution of fiscal benefits among city services and other local agencies; whether new data centers should be required to install noise monitors and public-facing water/energy metering; how to treat developer “land banking” when power is not immediately available; and whether city rate structures or developer contributions could be adjusted to reflect the unique demands of large users. Staff and the city attorney stressed legal limits on rate design under state law (including Prop. 26) and said many cost-allocation matters require formal cost-of-service studies.

What the city will do next

Staff said the session was intended as an informational briefing rather than a policy decision. City Manager Grogan said staff will finalize the white paper provided in meeting materials and incorporate answers to questions raised at the session where possible. Planning and utility staff said they will review options to strengthen tools in the city’s toolbox (for example, more explicit noise/monitoring conditions where CEQA or conditional-use review identifies impacts) and to provide clearer public information on recycled-water capacity and the timing and cost of electric-system expansions. No ordinance, moratorium, or new land-use rule was proposed during the session.

Community reaction and balance

Public commenters and several commissioners urged caution or a pause on new approvals until the city and county air and public-health authorities can assess generator emissions and cumulative air impacts. Others — including labor and economic-development supporters — emphasized the revenues and job activity associated with construction and supply chains. Officials repeatedly framed data centers as one of several employment uses in the city’s industrial areas and said existing zoning limits where they can locate.

Looking ahead

Staff identified 2028 as a near-term planning milestone for SVP’s system expansion and said the city will continue to require project-level environmental review, conditional-use permits for major data centers, and coordination between community development, SVP, water and public-safety departments. The white paper will be updated with additional detail and distributed publicly; council members may direct staff to return with specific ordinance or policy proposals if they wish.