Last night in Alameda, California, the city council gathered to talk about surveillance. On the docket was a new proposal to spend up to $500,000 for thirteen fixed-location license plate readers to complement the mobile readers already mounted to four of the city’s police cars. All of the cameras would send feedback to a database operated by Vigilant Solutions, where it would become available to other agencies for scanning against federal hot lists and other outside alert systems.

It’s the kind of proposal that would normally skate through, but this time was different. Earlier this year, Vigilant Solutions signed its first agency-wide contract with Immigration and Customs Enforcement, letting the agency flag thousands of plates for instant location alerts from cameras across the country. Three thousand law-enforcement agencies have some kind of agreement with Vigilant, giving clients the equivalent of a nation-wide dragnet. For anyone troubled by ICE’s aggressive enforcement tactics, it was an alarming proposal, and that alarm has turned into a growing problem for Vigilant itself, which is facing new opposition from local governments that had previously been interested in its technology.

The small city council meeting was attended by representatives from both Vigilant and a local fusion center that works closely with police. In the end it didn’t matter. The measure was voted down by the council, which cited new concerns over federal data-sharing. Alameda’s new license plate readers would have to wait.

According to Vice Mayor Malia Vella, the ICE connection was the heart of the issue. “Even my colleagues who were very clearly in support of license plate readers still didn’t like the idea of contracting with Vigilant,” Vella said. “It’s a problem how they share this information.”

That has rarely been a problem for Vigilant in the past. Built on a network of auto repossession agencies, the company has grown to be the largest single database for automated license plate data. Each new agency that signs with Vigilant expands the reach of the database, making the network that much more powerful and attractive for the next client. That pattern allowed Vigilant to grow quickly; it now captures as many as 100 million plates per month.

But with many municipalities in open conflict with ICE, that data-sharing may now be a liability. Last January, Alameda’s city council passed a resolution declaring itself a sanctuary city, joining San Francisco, Oakland, and many other Bay Area cities. Officially, that instructed local law enforcement not to cooperate with federal immigration orders, including direct queries from ICE. But that order didn’t explicitly include data-sharing arrangements like the one already signed with Vigilant, and protecting the data drawn from Alameda’s four on-car cameras turned out to be surprisingly complex.

Like many Vigilant clients, Alameda owns all the data produced by its cameras and can choose which partner agencies are allowed to query the data. One of those partner agencies was the local fusion center, known as NCRIC, which shared data with ICE until a state bill in October restricted data-sharing with federal immigration authorities. But even after the referendum, no one had raised the concern that sharing license-plate data directly with Vigilant might violate the sanctuary city policy until the contract became public in January. Since then, the police department has explicitly restricted ICE queries from the system.

The local police eventually opted out of the data-sharing, but it is still a sore point for many in the city government. “In my mind, they made us look like hypocrites,” says Vella. “That should be flagged for every other city that’s doing business with them.”

In a statement to The Verge, Vigilant Solutions defended its track record of assisting law enforcement. “Vigilant Solutions’ mission is to support federal, state and local governments in their efforts to save lives and make communities safer,” a representative said. “We will continue to do this unapologetically in California and across the United States.”

For Matt Cagle — an attorney at the ACLU of Northern California who also spoke at the meeting — those questions are only growing more urgent. The ACLU has already put forward model legislation for municipalities hoping to reign in police surveillance, which it hopes will be adopted more broadly in the months to come. “We expect this to spark not just scrutiny of Vigilant contracts nationwide, but also the introduction of more local ordinances that require robust public debate and oversight of surveillance proposals and data sharing with feds,” Cagle told The Verge.

Even for cities that don’t follow the ACLU’s lead, federal data-sharing has become far more political under President Trump. Vella compared the issue to Japanese internment during the Second World War, still a painful memory for many California communities. “I’m part Japanese-American,” Vella says, “and I think that is the perfect example of data that was innocuously connected through the census bureau and then used to round up innocent citizens.”

Update 5:41PM ET: Updated with more info on the nature of Alameda’s data-sharing arrangement with Vigilant and NCRIC.