A city subcommittee approved an ordinance Wednesday aimed at incentivizing developers to build data centers in Chicago.

The Chicago Data Residency Ordinance, spearheaded by 36th Ward Alderman Gilbert Villegas, aims to influence companies to store city data within city limits and support the development of new data centers within Chicago. The city's Committee on Economic, Capital and Technology Development approved the proposal and it is now scheduled for a full city council vote on Sept. 18.

The move could help Chicago generate millions in new revenue without having to additionally tax residents as the city grapples with a nearly $1B budget deficit for 2025.

“We have to be creative and innovate in identifying unique ways to generate revenue without relying on the traditional mechanisms of raising taxes or fines and fees on Chicagoans to close our budget gaps,” Villegas said in a press release.

“The city spends hundreds of millions of dollars in IT contracts that, in part, store its data in other cities and states, allowing them to benefit from Chicagoans' data and their tax dollars without giving anything back.”

Ordinance supporters say a single data center could generate as much as $13M in annual property taxes. Many data centers in the Chicago area are in the city's suburbs, like in Hoffman Estates, where developers are converting the site of the former Sears headquarters into a sprawling data center campus.

The measure's proponents also say it will help create both short-term construction jobs and permanent positions within data centers, from tech roles to security and maintenance positions. Data center jobs don't always require a four-year degree and are accessible to communities that are historically underrepresented in tech, according to proponents.

“Encouraging data residency is a pivotal move toward making smart investments in our city and generating much-needed revenue and jobs for our residents,” said Craig Huffman, CEO of Metro Edge Development Partners, in the release.

“As the only Black developer of data centers in Illinois, I am dedicated to paving the way for others who look like me to enter this expanding market, and create new career opportunities and economic growth in underserved communities.”

But data centers have not been uniformly popular with residents. South Loop residents pushed back against Digital Realty Trust's proposal for a data center in the Prairie Avenue District last year. Northern Virginia, the epicenter of the data center boom, has increased tax rates on data center equipment in response to complaints too many are invading places like Loudoun County.