In a legal battle that could shape the future of urban development in Phoenix, a Texas-based developer is demanding over $54 million from the city due to new regulations impacting data centers. While one of the legal challenges has been dismissed, the developer’s claim under state law remains unresolved.
West Buckeye Road LP (WBR), the business behind the lawsuit, acquired industrial land in Phoenix in 2021 with the intent of establishing a data center. However, the landscape changed in 2025 with the introduction of a zoning ordinance by Phoenix, mandating special permits for data center construction within city limits.
WBR argues that these regulations hinder their original plans, necessitating significant investments in advanced cooling systems and soundproofing to comply with the rules, thus incurring millions in unforeseen expenses.
The developer is seeking compensation under Proposition 207, also known as the Private Property Rights Protection Act. This law, ratified by Arizona voters in 2006, obligates governments to compensate property owners if new regulations adversely affect property values, with exemptions for public health-related measures like fire codes and waste management.
In addition to Prop. 207 claims, WBR seeks reimbursement based on the city’s data center ordinance. However, a Maricopa County Superior Court judge recently dismissed this claim, citing a lack of provisions in the ordinance for developers to claim compensation from the city.
The court is set to hear arguments concerning WBR’s claim under Prop. 207, with Phoenix Mayor Kate Gallego recognizing the partial legal victory on X.
For Phoenix to fully resolve the lawsuit, it must demonstrate that its zoning ordinance is vital for protecting public health, with a full evidentiary hearing scheduled for November 17.
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