The green glass building at 1601 McGee towers over the Crossroads. It has sat empty since 2019, when the Kansas City Star closed its printing press there, and was once the Royals’ preference for a downtown ballpark.
Now the building is a data center. And it’s one of the first in the nation to receive a clean energy loan. Kansas City-based Patmos is undergoing a $1 billion retrofit of the 400,000-square-foot structure, which will also include office, event and conference space.
The company says retrofitting an existing building makes it cheaper, faster and more environmentally friendly to build. But critics say that doesn’t go far enough, and they argue AI data centers of all sizes need to be more regulated. The Kansas City Council is considering a change to its zoning law that would add more restrictions to data center developments.
Patmos received a $100 million commercial property assessed clean energy, or C-PACE, loan provided by PACE Loan Group, a private funding source. That’s the largest C-PACE loan granted in Missouri and one of the first in the country for a data center.
The loan will be used as financing to optimize the company’s HVAC system, which cools the data center load. That change should reduce the amount of electricity the center consumes over the 20 years of the loan agreement.
Josh Campbell, the executive director of Missouri Energy Initiative and administrator of Show Me PACE, said he thinks incentives like the clean energy loans could encourage data centers that are already planning to come to the state to be more energy efficient.
“My hope is that PACE loans can put that on their balance sheet, in their business plan, that they want to be more energy efficient,” Campbell said. “If this financing tool makes them look at it, then that's great.”
How a data center gets a clean energy loan
Joe Morgan, the chief operating officer at Patmos, said the data center is working to be a good neighbor to its Crossroads community. That includes making the decision not to put ventilation on the east side of the building so it wouldn’t impact the restaurants neighboring Patmos on Oak Street.
“It was important as part of this project that we pay our fair share and come in and not be a tax to the community by offsetting our stuff,” Morgan said.
C-PACE loans can only be used for parts of the project that save energy in some form. In Missouri, the loans are a public-private partnership through which the Show Me PACE board and staff approve projects requested by a property owner. Then, a private lending group loans the money, which is paid back over time through an additional line item on the developer’s property tax bill.
Campbell said he believes the loans will become more common for smaller data centers as that market grows.
Massive, hyperscale data centers like the ones by Google and Meta in Kansas City’s Northland likely won’t qualify for PACE loans. But Campbell said he hopes the financing tool will encourage other developers to use the loan to make their projects more energy efficient.
“What we're doing is trying to make sure that energy conservation is part of the conversation when any project is developed,” Campbell said. “That property will last longer, stay there better, produce more because their costs are lower, and they'll do so with a lower energy demand than they would have likely without PACE.”
More regulation for data centers
The rapid boom of data centers is putting a strain on the environment. The International Energy Agency predicts that electricity demand from data centers worldwide is set to double by 2030, and climate pollution from the power plants that run them could more than double by 2025.
Communities across the country where data centers are built often complain about noise and the strain on utilities. And more than 230 environmental groups have written to Congress to ask for a nationwide moratorium on data centers that power AI.
There aren’t many other regulations or restrictions on data centers in Missouri. In fact, most data centers don’t have to pay sales tax on construction materials, machinery or equipment. Patmos did not receive financial incentives from Kansas City, but did get a sales tax break from the state.
Missouri’s and Kansas’ public service commissions recently approved a tariff on energy bills to large data centers that use more than 75 megawatts of peak load energy per month.
Though the utility tariffs include protections for residential rate payers, the staff report from the Missouri Public Service Commission notes that the large users still add to the overall system, which could increase costs.
Morgan said Patmos is committed to creating a mixed-use space that redevelops an existing building. The data center takes up a small part of the building, he said, and the rest will be dedicated to event and coworking spaces. Three companies have already begun to lease space in the building.
Morgan said the company is working with its engineering team to “ensure air, noise, and water demands are appropriately accounted for in our plans.” Patmos hasn’t conducted any environmental impact studies to see how the center will affect air and noise pollution or water demands.
Patmos also plans to use 12 diesel generators to power the center during peak energy times or when there’s a blackout. Morgan said they will be in a basement and shouldn’t have a large effect on noise in the neighborhood.
Ashley Sadowski serves on the Show Me PACE Clean Energy and Development Board and lives in Kansas City. She said PACE loans can be helpful to ensure that energy efficient measures are taken on big projects and to relieve the cost pressures that could affect other rate payers. But the loans can’t be prescriptive or make something like a data center completely environmentally friendly.
Environmental impact studies aren’t part of the review for PACE loans, and Show Me PACE can’t make demands from developers or factor in water usage or savings like the lending bodies can in other states.
Sadowski wants to see more regulation on data centers and thinks the city and other financial incentive bodies should tighten their restrictions before allowing them to be built.
“It is unclear how its (Patmos’) energy and water needs will impact others who are connected to the downtown district energy system,” Sadowski said. “I am glad to see the KC Star building utilized, but the Crossroads is an important neighborhood for our city, and we need to make sure surrounding residents and businesses are not harmed by this development.”
The city council will weigh in
More regulation could be coming. The Kansas City Council will consider a change to the city’s zoning code at its meeting Thursday. The change would limit where data centers could be located in the city and would require a review to ensure there’s adequate utility service for the projects when the council considers applications.
Morgan submitted a public testimony on behalf of Patmos in support of the zoning change.
“It's good for the community that they create some of these rules to make sure that they're good stewards of the citizens’ property,” Morgan said.
Some city council members also expressed interest in changing the city’s code to have more defined rules on the water and energy use of data centers.
