A Data Center Revolt in Missouri

0:08In March, more than 100 residents of a small Missouri town gathered in a high school gymnasium to watch a city council vote.

0:21Things got heated. You got brought out! I hope your kids hate you for life! People were there to do quite a bit of shouting. That's our colleague Will Parker. I hope you have nightmares! And to make it clear how angry they are sometimes with, you know, a peppery, expletive-laden language. Don't do it! Get off your face! Don't do it! The city council vote, and all the chaos that surrounded it, was over a proposal to build a data center. No data center! Residents swore at the council members as they were called on to vote. — — — — — — — — — — — — — — — — —

1:12But despite the opposition, the data center proposal passed.

1:31Nationwide, data center construction has been largely unwelcome. One of the most recent polls is from Quinnipiac, and it showed that a majority of people, a pretty strong majority, would oppose the construction of an AI data center in their community. So they're not necessarily opposed to the concept of artificial intelligence or to the concept of data centers, but they don't want them next door. And it was a majority of Democrats and Republicans in that poll that said that. So it sounds like there's a lot of not-in-my-backyard energy out there right now. There's a lot of that, which is not unique to data centers, right?

2:06I mean, housing is, I think, the area where most people are familiar with, you know, strong organized opposition to construction. But it feels different. This feels more intense. And Will says that probably nowhere in the U.S. has the backlash been more intense than in this one Missouri town called Festus. And the opposition there has been especially hot. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Thursday, May 7th.

2:43Coming up on the show, small town versus big data center.

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3:32You cover real estate, so how did data centers become such a big part of your beat? Because data centers are hot property. There's a lot of construction of them all over the country. We're building more data centers than we are office buildings at this point. Huh. So it's becoming one of the biggest property sectors in the country. What is behind this data center boom? Well, first is the internet. We still need data centers to host all of the things that we do, that we stream, that we swipe, right? But we have an even bigger demand for data centers now for artificial intelligence platforms, and that's what's really driving the construction boom.

4:11Developers usually secure the location of a data center first, and then strike a deal with a tech company that would use it. So the intention is that one of the major AI companies, so there's like half a dozen, Amazon, Meta, Google, Oracle, etc. The idea is that one of them would be the tenant. While there's been a boom in construction, there's also been a boom in backlash, which is what brought Will to Festus. So Festus, this is a town of about 14 ,000 people near the Mississippi River. It's a town in the hills about 35 miles south of St. Louis. It's forested hilltops. and limestone, and it's somewhat rural, but it's also somewhat suburban.

4:51It has a bit of an industrial past. It has a sister city next to it that used to have a big glass factory that employed a lot of people. But, you know, big industry is mostly a thing of the past in this particular part of Missouri. Will says a developer called CRG had originally been looking to build in another St. Louis suburb, but that project faced local opposition and fell apart. So they tried a different area nearby. So they also are checking out Festus, where they found a bunch of land near an interstate with power lines. Those are kind of the main qualifications. The developers saw potential on a 300-acre plot of land outside of Festus and approached the city with a proposal for a$6 billion data center.

5:35And city leadership was interested. And why did the elected officials support it? I mean, I think the economic benefits are the major draw here. The estimate is that this project could produce over$30 million a year in local tax revenue. And that's really an enormous amount of money for this town and county. The proposed data center is projected to generate about as much tax revenue as the city's entire budget. Money that could potentially be used on stuff like schools and roads. But before they could break ground, the city and the developer needed to take some steps. They needed a zoning designation for data centers, like something on paper that says you can build a data center and it has these specifications and rules that you have to follow.

6:24So that was the first thing. And that was really when the town found out that there was this developer and this potential project. Some residents were against it from the start. They created a Facebook group to organize opposition. And they also filed public records requests to try and learn more about the city's plans. And the documents they got back made the residents furious. There were messages that not only potentially indicated that they wanted to keep certain information from the public, but then also ones that referred to data center opponents in kind of disparaging terms. One message refers to them as a sideshow of uneducated people.

7:06And another is a joke that appears to suggest that if you gave the townspeople an Olive Garden, they would simply be satisfied and they wouldn't care about the data center anymore. Olive Garden is pretty good. Yeah, yeah. The breadstick solution here. And those things got memed and shared on Facebook and became kind of like rallying cries for people kind of ironically embracing the sideshow of uneducated people line. It reminds me of Hillary Clinton's infamous line, basket of deplorables. It is kind of similar to that. Or in this case, I guess it'd be a bread basket of deplorables. Yeah, yeah.

7:46So it sounds like they started out on a pretty bad foot. Yeah, I mean, once that opposition did present itself, I think it caught some of the elected government officials off guard, including the mayor, who told me that he had seen nothing like this in the past. The outrage was profound. Residents took to city council meetings. The city has four months trying to stifle public engagement and knowledge about this deal. That's why they're lying on not having a development. Remember who sold you out. I will not set foot in the Isle of Darden and I've got a point high. Any sellout where I can. This is a dishonorable way to serve the public that you were elected to serve.

8:25In violation of all of your health. You know, at city council hearings, you have a guy with a megaphone and then some people with some banners draped over their vehicles and some pretty motivated folks out there regularly.

8:43What are they so concerned about with this data center? The ones that came up the most in this particular case were concerns about homes and home values. Will met with a handful of Festus residents to talk through their worries about the data center. So I live approximately 300 yards as the crow flies from the entrance to where this will happen. Okay. And this is the property outline, okay? Gathered around a kitchen table, one of the residents laid out satellite images. Everybody put a dot on the map where your house is. They showed Will just how close some of their homes are to the proposed site.

9:24You know, what's it going to do to the home value? And my life is on hold right now, as is everybody's at this table, for the most part, trying to know what's going to happen. We don't have a lot of savings. All of our money is in our home. We have to fight this. We can't decide if we're going to sell our house. We don't know if we should build. We can't do anything, like any kind of decision. And in good conscience, how do you sell your house to someone knowing what's coming in? And who's going to want to necessarily buy it? Will says there's no definitive research about how data centers impact home prices.

10:00Still, the idea that a construction project of this size and magnitude, you know, dragging on and on for years, would just make it a less attractive place to live and that the value of their homes would go down. And they're really scared about that. The developer is offering to buy out a dozen Festus homeowners whose houses are near the proposed site. Some residents say the amount they're being offered isn't enough. But for many of the homeowners Will spoke to, it's not just about the money. How much water is this used? What does that mean for our water supply? Does it pollute the water supply?

10:36Missouri has a history of droughts. We're very drought-pronged. And I know from your research, these things guzzle water. Not knowing what the water situation was going to be, not knowing what this monstrosity is going to do to the environment. They're also worried that the data center could increase utility costs for locals, something that's happened near other data centers. There's going to be more infrastructure that has to be built, so that's going to raise our utility prices. The amount of electricity that this is going to need, that's going to be reflected on our utility bills. The chairman of the development company has said the project won't pollute the water and that the state has taken steps to protect residents from rising utility bills.

11:26All of these resident concerns were brewing in the lead-up to that explosive city council vote where the story began. A lot of people were there screaming and shouting at the council members and mayor to not do it. And most of them did vote for it. Festus made a major step toward the possibility of bringing a data center to their community. the decision was met with... Opponents of the data center had been defeated, but they weren't done fighting. After the city council vote, they declared a new mission. Vote out every city council member who supported the data center and recall the mayor. That's next.

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12:43Not long after that data center vote in March, four out of eight city council seats in Festus were up for re-election. And those four members had at least, at some point in the process, been supportive of the data center. And they had backing from construction unions who obviously want the labor and are supportive of the project. So everyone said they were inundated with television ads and mailers to re-elect these four city council members. But each of them faced an anti-data center challenger. When the votes came in last month, it was a blowout. Some big changes are coming to the Festus City Council after all four incumbents on the ballot were defeated in last night's election.

13:24That election, it came not too long after the Festus City Council approved that controversial data center project. Since getting elected, they feel pretty emboldened to try to stop this project. One of the newly elected city council members told a local TV station that he'll do everything he legally can to stand in the way of the data center. I'm not against data centers as a whole. It's the process that unfolded and where they're putting it is the problem. After taking out four council members, residents are now looking to recall Festus' mayor, Sam Richards. The mayor is kind of a cool customer.

14:03He is 81 years old. And when did you become mayor? Will sat down with the mayor during his trip to Festus. 2019. Oh, okay. I've been mayor for seven years. He does not wear his emotions on his sleeve at all. And he says that he has been caught off guard by the animus directed towards him, that he thinks it's a good project. He thinks that the economics of it are good for the city and the area, the revenue it will produce, the construction jobs it will produce. What would money like that mean to the residents? It would mean better streets. It might mean a rec center. Fixing our main street here, fixing the sidewalks, and making Festus a better place to live.

15:02Why do you feel like that hasn't been convincing enough?

15:15because they're all worried about the other things. They think I've sold them out for the money, which I haven't. So you had four members of your council that were replaced, but now there are petitions to recall the four other members of the council. And myself. And yourself. Yeah. Yes.

15:43You know, I'm thick-skinned. I was a police officer. I got spit on when I came home from Vietnam in the 60s, in the late 60s. So it's not worse than that. So it doesn't bother me. More than 4 ,000 people have signed petitions to recall the mayor and three other council members who supported the project, but have yet to face re-election. Well, it sounds like in Festus, the people that live in that community have made up their mind. Yes. They do not want this. I think so. They just don't want it there. They just, they're not, they don't want it. So what's going to happen to the data center then?

16:23Is it going to get built? The company plans to build the$6 billion data center. They don't believe that the city, even with new leadership, would have the right to revoke their development agreement. But the founder of the company said that they have a lot more work to do to convince more people to support it. They think they can. But if they don't, ultimately they said they won't build a project if they feel like not enough people have supported it.

16:52Around the country, other communities are looking to head off these fights before they begin by passing moratoriums on new data center construction. The city of St. Charles may ban large data centers for good. City staff say that big facilities could strain water and electricity. Get a data center ban on the ballot. And now it's been verified by the Ohio Attorney General. The pause on any future data center projects in Fulton County is now effective immediately. It's often in more rural, small towns and counties, suburban areas, a lot in the Midwest, places in Michigan, Indiana, Ohio. and that's happening while there are also states where there's bills being introduced that would do something similar although none of those have been successful.

17:39The closest that we've seen to a state-level ban was in Maine but the governor chose to veto that bill. The Maine governor said she vetoed the temporary ban because she wanted to carve out for a data center project that was already in the works. Will says that one result of these types of protests is that data centers could wind up clustered in parts of the country where there's just less opposition. One of the concerns that people have is that there could be an AI bubble. And so if there's an AI bubble and it bursts, what might that mean for this giant data center that could be midstream? There's really not a good answer to this.

18:15But the issue of, will we need so much space? I mean, even if the AI boom doesn't bust, there's also the question of, well, as the technology develops, Will we need these cavernous warehouses that are the size of several football fields? Will we be able to do all of this activity in a much smaller space? That's another possibility that people are talking about as well. Do you see data centers becoming any less central to your real estate beat? No, not now. I mean, the pipeline of projects is still really strong. So, you know, we're looking at just a ton of activity and more building. So I don't know.

18:51It's not clear that opposition movements are dinging the AI build out so badly that it's having financial repercussions at this point. But the backlash seems to be growing rather than abating. And even though the industry is powering forward, it's still feeling that heat. I've talked to a lot of people in the site selection business who work with data center companies on finding the right place to build. And what they're telling me is that, well, if we see organized opposition to data centers in some places, that's immediately moving that place down the list. So it is having an impact on whether companies pitch a project at all.

19:43That's all for today. Thursday, May 7th. The Journal is a co-production of Spotify and The Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.