On July 14, 2026, Governor Kathy Hochul issued Executive Order No. 62 establishing a statewide pause on certain large data center projects.  One part of the Executive Order directed New York State Empire State Development (“ESD”) to develop guidance for municipalities when it comes to community investments and data center projects over 50MW’s in scale. ESD just released New York’s Community Investment Framework (“CIF”), described as the nation’s first statewide Host Community Investment Framework for Data Center Development. Delivering the State’s CIF guidance to municipalities on time in furtherance of the Governor’s Executive Order is commendable.

The CIF is styled as a voluntary resource guide with a template to assist municipalities in identifying, documenting and potentially negotiating site specific agreements with large scale data center developers. The stated goal of the CIF is to provide a practical tool that enables local governments and Industrial Development Agencies (“IDAs”) considering large data center applications to assess and incorporate the economic benefits of projects into their decision-making. Notably, the CIF states that communities may use the template or disregard the CIF’s guidance altogether in meeting local needs.

The CIF, which acknowledges the need for data centers, identifies relevant areas of environmental impact inquiries for early disclosures even before a SEQRA process may be started, an appropriate conversation locally with decision-makers. It should not be a surprise to anyone that on-grid energy consumption, water conservation, and sound attenuation are listed for evaluation as key environmental metrics for any large data center project. We anticipate the CIF’s framework, along with anticipated action by the NYS PSC and DEC in the coming year, will accelerate and incentivize private sector data center developers to implement best technologies and practices into their project designs well before seeking benefits or entitlements.

The CIF goes on to introduce a new concept suggesting that data center developers make a $1 million payment for each MW on a project’s nameplate as a local impact fee.  That impact fee is generally and very loosely tied to the hypothetical displacement of alternative industrial and manufacturing land uses that could be developed at data center sites and with potentially higher levels of local job creation. The CIF then identifies a laundry list of potential community investments local governments could make from a data center fund, like libraries, parks and police stations, services typically provided by local governments and which are not at all implicated by the potential impacts of data center development. These aspects of the CIF raise troubling legal questions if sought to be fully implemented by local communities, whether as part of the entitlement process or a threshold to entertaining IDA and other benefits.

What if a large-scale data center has no industrial displacement impacts because the land in question has been fiscally unproductive for the community? What if the technologies used as part of a specific data center do not present SEQRA environmental impacts? What if the project actually creates community benefits without costs like added grid reliability or additional water or electric capacity by utilities to serve other local economic development? What if the real property taxes to be levied on a data center site would far exceed any potential fiscal costs to local government or public-school budgets as the host community? What if IDA or other benefits would provide a local economic return at multiples of what the collection of sales tax revenues on construction would? And how might a community benefits agreement be lawfully implemented in the land use and zoning context without it being an exaction or beyond the scope of authority as related to labor agreements?

The CIF recommends that local governments and IDAs work with their attorneys to evaluate projects. As private sector counsel, we wholeheartedly agree that the municipal bar has been and will remain a critical part of shaping successful projects, particularly given the CIF’s introduction of community benefits agreements in the arena of data center development. Indeed, without careful legal advice and engagement by all stakeholders, the CIF’s fiscal benchmarks could simply end up a special and mandatory data center tax applied locally that effectively prohibits large data centers across New York. Ultimately, the CIF is merely guidance and thus a conversational framework with transparency in mind – a useful tool to facilitate outcomes for developers and communities alike. We’ll have to see if it catches on…