Chesapeake staff propose conditional uses and higher tax rate for data centers

Jimmy McNamara, the city’s planning director, told the City Council on April 21 that staff is preparing zoning text amendments to address data centers after a previous rezoning request was denied following extensive public comment. McNamara said the current code classifies the use under SIC 7374 (computer processing and data services) and that the ordinance, drafted decades ago, does not reflect modern, large‑scale data centers. He said more than 27,000 residentially zoned parcels lie within 500 feet of property that now permits the use by right.

Staff proposed three core responses: make data centers a conditional use in industrial zoning and in the Fentress Airfield Overlay District so council review and public hearings occur on a case‑by‑case basis; adopt a policy, modeled on the city’s solar policy, to guide staff recommendations; and continue to allow the Coastal Virginia Commerce Park to host data centers by right because it already carries extensive development criteria.

Alissa Neal, the planning subject‑matter expert, outlined preliminary standards staff and stakeholders are vetting, including connecting to public water rather than private wells, requiring early coordination and a letter from the electric utility confirming access to substations and transmission capacity, limiting and screening backup generator testing near residential areas, requiring viewshed analyses from at least four vantage points, and evaluating both A‑weighted and C‑weighted noise metrics plus octave‑band analysis and pre‑ and post‑construction sound studies.

Stephen Wright, director of economic development, presented a staff recommendation to raise the special data‑center tax rate from 40 cents to $2.00 per $100 of assessed value (staff noted the city defines assessed value as 20% of original cost). Wright said the $2 rate is a midpoint intended to improve revenue yield without rendering the city noncompetitive; he noted that the Commonwealth average sits around $3.09 per $100 and that many localities that earlier lowered rates to attract centers have since increased them. "We do not believe that raising the tax rate from 40¢ to $2 will have an adverse impact on the city's ability to attract a data center," Wright said.

Council members pressed staff on likely water demands, possible special water‑rate tiers, noise enforcement costs and equipment needs for octave‑band monitoring, and whether bank‑associated data centers could be tax‑exempt under state code. Staff said the Department of Public Utilities is on the stakeholder committee and that data centers are expected to be treated as high water users unless a different policy is adopted; they warned that enforcing octave‑band standards requires specialized equipment and expert contractors and that some data centers serving banking functions are subject to unusual state code provisions that can affect expected tax revenue.

McNamara said staff will bring a draft text amendment and a companion initiating resolution to amend the comprehensive plan and that the amendment would move to the planning commission public hearing and then a city council public hearing. He emphasized that the recommendations are preliminary and subject to stakeholder comment and legal review.

Next steps: staff intends to circulate a detailed report and draft ordinance for council review, schedule the planning commission public hearing, and post Dominion Energy feedback requested by council members about grid and rate impacts.