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A lawsuit and the threat of tens of millions of dollars in damages have dampened a victory for neighbors opposed to data center development in Inver Grove Heights, Minnesota.

In June, city government approved a one-year moratorium on data center construction after public outcry came in response to QLevr LLC’s proposal to build a “small” data center on Carmen Avenue East.

The developer threatened legal action and made good on that threat once the moratorium took effect. QLevr LLC’s legal team argued that the City of Inver Grove Heights had no legal basis to reject their proposal because it ticked every box under current ordinances. The city rejected the idea that the moratorium was “capricious” and other allegations in a legal filing. 

City attorney Jason Kuboushek said that there was a risk that the city would be on the hook for $20 million if they lost in court. According to city leaders, that figure would be passed directly to taxpayers, explaining that the city’s insurance policy for a matter like this was capped at $1 million.

“My job is to try to minimize the risk for the city,” Kuboushek said. “Certainly $20 million is the low number that was proposed; they also threw out in their initial letters $150 million.”

The developer made the estimates based on contracts and other sunk costs related to the data center, even though the Inver Grove Heights City Council hasn’t formally approved the major site plan. The lawsuit argues that councilors’ hands are tied when it comes to that approval process because they wouldn’t have a legal argument to deny it. Three councilors appeared to agree with that assessment on Monday, voting 3-1 to approve carving QLevr LLC’s project out of the moratorium requirements.

It means that while other data centers cannot be built in Inver Grove Heights until at least next June, QLevr LLC will likely be able to proceed. Councilors will vote on the major site plan on Sept. 28, at which point the developer is expected to agree to certain safeguards against noise and other issues neighbors have raised concerns about. Throughout the process, developers have stated that the data center – intended to “support regional digital services” – will be quiet and have a low impact on utilities.

Zane Hebert said that he feels councilors dropped the ball by not being more prepared for data centers in general ahead of time.

“They just weren’t aware of what was going on. That’s the biggest concern to me,” Hebert said.

He believes that, given the circumstances, voting to approve the moratorium carve-out was the best move.

“Let them build this one, gotta know when you’re beat,” Hebert said.

Councilor Mary T’Kach was the lone “no” vote, believing that the city may have prevailed in court. T’Kach said that she’s committed to re-evaluating local ordinances to avoid similar situations in the future.

“I think, like a lot of communities, we didn’t realize how quickly data centers had changed,” T’Kach said.

Councilor Tony Scales accused T’Kach of casting her vote knowing that her three colleagues would vote in favor of the carve-out. Scales said during the meeting that it had been a long and difficult process, but he saw no alternative.

Scales, John Murphy and Sue Glvia declined to speak with WCCO.