Hyperscale data center gains rezoning vote after hours of opposing testimony

A crowd larger and more passionate than many can remember seeing at a Sioux Falls City Council meeting Tuesday tried to fight the city’s first hyperscale data center but didn’t prevail.

During a nearly six-hour meeting with a crowd that overflowed the council chambers, council members heard from more than five dozen people giving public input — most of it opposed to the proposed project about 1 mile south of the Veterans Parkway exit for Interstate 90, near the intersection with Rice Street.

The property is owned by Gemini Data Center SD LLC, which is connected to a California-based family office led by Michael Anvar that has a history of investing in real estate. The group acquired 164 acres from Xcel Energy in late 2023 just south of Xcel’s Split Rock substation and Angus Anson power station. The vote on Tuesday was to rezone the property to light industrial and approve a preliminary subdivision plan.

“I believe the site does line up with the city’s future or intended uses down the road as far as industrial,” Anvar said in speaking to the council. “And I think a big part of why this site has a strategic value is because it is directly across from the Split Rock substation.”

Gemni would work with Xcel to determine how to deliver the power needed for the facility, he said, adding that “those costs are falling upon the developer, us” and won’t be passed on to ratepayers.

Ultimately, Gemini is the developer of the property, not the end user, Anvar added.

“A lot of parts need to fall into place for the project to actually move forward and be leased by whoever the end user will be,” he said. “We are very conscious about who we would partner with … what company that would be, what they would be doing.”

Some hyperscale data centers are used by a single tech company such as Amazon, Meta or Alphabet, the parent company of Google, while others rent space within the data center to multiple users.

Last year, representatives of Gemini indicated that the plan would be to start construction this year and open a facility in 2028.

In approving both the rezoning and a preliminary subdivision plan, multiple stipulations were placed on the project, including minimum setbacks ranging from 45 to 200 feet on various sides of the building, requirements for buffer yards, exterior mechanical and equipment storage yards, and a restriction on water use that was added by an amendment.

About 17 acres would be zoned as conservation land, and a landscape plan would need to be approved by the Sioux Falls Planning Commission.

There had been concerns raised about potential noise issues, but the conditions combined with the city’s noise ordinance should address any issues, said Jason Bieber, senior planner.

City officials visited multiple data centers in the Omaha area, and “the noise was very minimal for a project that large,” he said.

Gemini also is responsible for building the necessary utilities to develop the site, which the city of Sioux Falls hadn’t envisioned as a growth area for at least another decade. The City Council previously approved an annexation that allowed the property to be designated as a more immediate growth area.

The water that will be used for the facility largely is planned as a “closed loop,” which significantly limits its use to what the city calls domestic use only — what’s needed for the people who work there.

“We genuinely believe this project does have a lot of significant benefits to the community,” Anvar said. “There are countless projects we can be involved with. We really try to pick ones we think are going to make an impact.”

A representative for Gemini previously said the site could support 50 to 150 full-time positions, including engineers and security, facilities and IT professionals.

“I can’t find one shred of evidence there’s any benefit to this community. None,” said Chris Larson, one of many opponents who brought forward similar themes. “Did the Amazon building lower anyone’s taxes? Has any big business project lowered our property taxes? No.”

Many opponents voiced concern about climate impacts, energy use and overall opposition to the growth of artificial intelligence.

Bob Mundt, president and CEO of the Sioux Falls Development Foundation, was one of few proponents to speak. He previously has said his organization has heard from several data center users or developers inquiring about the potential for development in Sioux Falls.

“We are not seeking to debate the specific design, operation or technical particulars of the data center,” he said, adding that “Gemini is following all city protocols and procedures” and estimating that the facility would generate “millions in property taxes” and utility taxes at a time when the state and city need additional revenue.

In ultimately voting 7-0 to approve the rezoning and the preliminary subdivision plan, councilors pointed to the appropriateness of the land use and broader economic benefits of the development.

“Data centers are coming. Why not put it in a place where we can keep our eye on it?” council member Curt Soehl said. “We can regulate it. We can take care of it. We can do the right thing. I think it’s the right thing for Sioux Falls.”

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