St. Louis Wrote a Data Center Penalty Clause With Real Teeth. The Developer Is Suing to Pull Them.

The old Famous-Barr warehouse at Market Street and Vandeventer Avenue in Midtown St. Louis has sat empty for years. TerraWatt wants to turn it, along with the adjacent Armory building, into a $3 billion, 120-megawatt data center, and the company is promising the city $445 million in tax revenue over the next ten years to get there. A year ago, at a town hall in that same neighborhood, the number TerraWatt was using was $213 million. Before that, its own consultant had it at $304 million. The city's own release cited $432.3 million. Four figures, same project, same company, inside of twelve months.

That kind of drift is exactly why what the city did on September 15th is worth paying attention to. St. Louis didn't just approve the Armory Innovation Data Center — it signed a community benefits agreement that treats TerraWatt's revenue promise as a claim to verify, not a number to repeat, which is the whole idea behind grading evidence on an evidence ladder rather than taking a projection at face value.

A penalty clause with real teeth

The agreement, finalized by the city's Land Clearance for Redevelopment Authority, puts a number on what happens if TerraWatt's revenue promise doesn't hold up. If the city's 2029 audit finds the project has fallen short of its own projections, TerraWatt owes $15,000 for every $100,000 of shortfall. Almost $9 million of a total $15.7 million community payment is due by spring 2027, years before the facility is even finished, and the deal bars TerraWatt from coming back later to ask for local tax abatements that would cut into any of it. Mayor Cara Spencer said she couldn't responsibly turn away what the revenue could mean for city services and St. Louis Public Schools students — but her office also tied approval to real operating conditions: closed-loop, air-cooled cooling instead of a water-intensive system, limits on testing diesel backup generators on poor air-quality days, a 2.4-megawatt on-site renewable energy requirement, and job minimums climbing from 25 employees to 50 to 100 over the project's first years, each enforced with its own penalty.

The company suing over its own conditions

Two days after the city finalized that deal, TerraWatt partner David Lambiaso sued the city's Board of Adjustment. The suit argues that two of the conditions attached to the permit — the 2.4-megawatt renewable requirement and the requirement that the Board of Aldermen, not just the redevelopment authority, sign off on the community benefits agreement — exceed the board's zoning authority and would be "practically impossible" to meet. Both conditions were added in July, when the Board of Adjustment upheld the project's permit after an 11-hour hearing on appeal.

I think that's the real story here, more than the data center itself. The conditions TerraWatt is now asking a judge to strike are the ones that back the enforcement mechanism the city is using to hold the company to its own revenue promise. A deal that looked, on September 15th, like the kind of enforceable commitment this industry rarely produces is now being challenged by the same leadership that signed it.

A second lawsuit, and a judgment nobody at the table brought up

TerraWatt isn't the only party in court. The Missouri Coalition for the Environment, joined by Saint Louis University biologist Kasey Fowler-Finn, sued separately in late August, arguing the city never had the authority to grant the conditional use permit at all. Fowler-Finn told CBS News the opposition "is not a baseless panic," pointing to noise, water, and electricity use — the same concerns a Gallup poll cited by CBS found more than 70% of Americans share about having a data center sited near them.

Separately, TerraWatt CEO David Daneshforooz has a financial history that didn't come up at any public hearing. A federal court in Maryland entered a $16.18 million judgment against him in May 2025, after a bank sued over a defaulted $24 million loan tied to two Delaware entities he ran that had financed an assisted-living facility in California. It has nothing to do with data centers, and it's exactly the kind of record a city — or a bank, or a community benefits negotiator — would want on the table before trusting someone with a multibillion-dollar promise. Asked about it, Daneshforooz disputed the characterization to St. Louis Magazine and referred questions to his partners.

The fight in St. Louis isn't really about whether a data center belongs on an old warehouse lot. It's about who eats the difference when a developer's own revenue number moves four times in a year. The city built a real answer to that question on September 15th — a penalty, in writing, with a dollar figure attached. Whether that answer survives a challenge from the same company that agreed to it is the part worth watching, not the groundbreaking.