May/June 2026 Issue

Also in this issue: Public Bidding Refresher: Changes to Public Bidding Threshold and Best Practices Reminders     |     AI and Attorney-Client Privilege: What Wisconsin Municipalities Need to Know

Municipal Regulation of Data Centers

Eric B. Hagen | 06.01.26

There is no denying that data centers have become a hot button topic. With the proliferation of AI in just about everything from phones to appliances and our continued reliance on cloud computing and storage, Wisconsin has become the latest state to see an influx of large-scale data center developments. Perhaps there is no better example of the immense scale of these developments than the $15 billion, 1.3‑gigawatt, 672-acre behemoth in development in Port Washington. The Port Washington data center alone is reported to require the same amount of power as approximately half a million homes and will consume 22,000 gallons of water per day through a closed loop system.

While these developments promise a significant increase in property tax revenue and limited job creation, many Wisconsinites are concerned. Some are concerned by the sheer quantity of resources these data centers will consume, and the potential costs borne by ratepayers to provide them. Others are worried about the potential harmful effects on the environment and nearby properties from impacts to local water supplies and noise pollution. Some have also raised the possibility that these data centers will be abandoned due to an AI bubble or obsolescence, potentially raising utility rates and property taxes, and increasing blight. These concerns range across the political spectrum, a rarity in the polarized world we live in, with a recent Marquette Law School poll showing broad bipartisan opposition.¹

This opposition has led some municipalities to seek ways of stopping these data center developments; others have pulled back after receiving public backlash. There has been consternation over municipalities entering into non-disclosure agreements related to data center development. And in Port Washington, voters approved a referendum during the Spring 2026 election to require voter approval for the creation of future TID districts of more than $10 million as a response to the $458 million TID the city already approved for the Port Washington data center. Given this landscape, municipalities should be aware of the options they have to regulate data centers in order to maximize the benefits and minimize the harms.

Zoning

Zoning is likely the strongest tool municipalities have to regulate data centers. Zoning allows municipalities to determine where data center development is appropriate, such as by limiting the districts or zones in which it is a permitted as conditional use. Zoning also allows municipalities to impose conditions and restrictions on data center development or impose uniform requirements specific to data centers, such as height, area, setback, screening, and access requirements. Under the current legal framework in Wisconsin, municipalities can even use
zoning to outright prohibit data centers if desired.

Since these large-scale data centers are so new to the state, most of the zoning regulations enacted to date have been temporary moratoriums on large-scale data center development. Such a moratorium gives a municipality time to research and determine how to regulate these data centers, and gives time to see whether the state will enact any regulatory changes to address some of the concerns.² Many of the municipalities that have enacted moratoriums in their zoning codes are taking the time to examine municipal regulations from other states where these large-scale data centers are more prevalent and identifying issues those localities have faced. Such an approach aims to ensure municipalities avoid putting the cart before the horse – development of a large-scale data center before the proper regulations or restrictions are in place to protect public health, safety, and welfare.

Unzoned municipalities are able to enact an interim zoning ordinance under Wis. Stat. § 62.23(7)(da). Such an ordinance allows unzoned municipalities to freeze land use changes for up to two years to give them time to enact a comprehensive zoning ordinance. With careful drafting, such an ordinance could operate similarly to a moratorium. One benefit of such an ordinance is that it can be enacted like a regular ordinance and does not require plan commission review/​recommendation or holding a public hearing, so it can be enacted much faster than a typical zoning ordinance. Municipalities may want to consider including exceptions in their interim zoning ordinance to provide a process to allow unobjectionable land use changes.

One important aspect of zoning to remember is that a zoning ordinance does not stop a legal non-conforming use that existed before the zoning ordinance was enacted.³ That means any pre-existing data center would still be allowed to continue, even if a subsequent zoning change prohibits it. Additionally, a developer may obtain a vested interest to complete their development despite a zoning change part way through development prohibiting or restricting it, typically once a building permit has been applied for. Due to this, municipalities will want to consider whether to take a more proactive approach to data center regulation.

As with any zoning regulation, municipalities also should remember to review their comprehensive plans to ensure any proposed zoning change is in strict conformity with the plan. Amending a comprehensive plan takes time,⁴ so municipalities should plan accordingly.

Development Moratorium

Municipalities may be able to place a development moratorium on data centers under Wis. Stat. § 66.1002. This allows for the adoption of up to a 12-month development moratorium that can be extended one time for up to 6 months. As with a zoning moratorium, this would give a municipality time to research and enact regulations on data centers. It also would provide time to adopt or make changes to a comprehensive plan needed to regulate data centers.

While municipalities have express authority to enact a development moratorium,⁵ they may only do so under certain circumstances: (i) if a municipality has enacted a comprehensive plan; (ii) is in the process of preparing its comprehensive plan; or (iii) is in the process of preparing a significant amendment to its comprehensive plan in response to a substantial change in conditions in the municipality. A municipality must also adopt a resolution stating the moratorium is needed either to prevent a shortage in, or the overburdening of, local public facilities, or to address a significant threat to public health or safety that is presented by a proposed or anticipated activity due to a request for rezoning, a plat or certified survey map, or a subdivision plan or other land division. This resolution must be accompanied by a written report from a registered engineer or a public health professional that states the moratoria is justified based on overburdened public facilities and/​or a threat to public health and safety.

Licensing

Another tool municipalities can use to regulate data centers is a licensing ordinance. A licensing ordinance can be enacted using a municipality’s general police powers to protect the health, safety, welfare and convenience of the public. This is particularly useful for municipalities that are unwilling or unable to use a zoning ordinance, such as towns that are subject to county zoning. A licensing ordinance would allow a municipality to impose some restrictions on data centers, although it would not provide the same latitude as a zoning ordinance.

Municipalities will need to be careful when drafting data center licensing ordinances to avoid them being considered a zoning ordinance. Municipalities are strongly encouraged to follow the framework identified in the Zwiefelhofer v. Town of Cooks Valley case which found a non-metallic mining licensing ordinance was not a zoning ordinance, despite impose significant land use regulations on mining throughout the town.

While a licensing ordinance cannot outright prohibit data centers to avoid being a zoning ordinance, it may dissuade some developers from pursing a data center development. Anecdotally, it appears some developers are pursuing data center developments in municipalities with little or no regulation. Unzoned towns near existing or proposed high voltage power lines appear to be particularly desirable. Due to this, a licensing ordinance may be enough to cause many developers to look elsewhere.

Development Agreement

Municipalities can also impose some regulations on data center development via development agreements. A development agreement is a consensual, binding contract between two or more parties, typically between a landowner/​land developer and a municipality. Municipalities regularly use development agreements for all manner of developments, including data centers. While a development agreement will not prevent a data center development, it could provide an avenue for municipalities to impose some regulation to minimize the potential harm from a given development. Such agreements are generally more useful in conjunction with other municipal land use and development regulations, such as zoning, subdivision, and licensing ordinances. Development agreements are also critical to any TIF provided for a project.

Conclusion

Considering the recent increase in large-scale data center developments and the likelihood of additional data center developments in the near future, Wisconsin municipalities are strongly encouraged to start considering whether municipal regulation is desired. Given the scale of these developments and the risks of non-conforming use and vested interests arising from reactive regulation, municipalities may want to pursue a proactive regulatory approach before a large-scale data center project comes to fruition. Now would be a good time to review existing zoning ordinances and comprehensive plans to determine how such developments are currently regulated and to identify any deficiencies in such regulation. Municipalities may also want to direct their plan commissions to start having discussions on data centers and explore what kind of regulations may be needed.