San Marcos has made history as the first city in Texas to prohibit data centers within its limits, taking a decisive stand against the surge of these facilities and potentially paving the way for other cities to follow suit.
On June 16, the San Marcos City Council approved a 4-3 vote to officially define data centers and declare them ineligible for zoning within the city, motivated by concerns that such developments would drain local water and energy resources.
Currently, there are no proposed data center projects within San Marcos, but two have been suggested in the neighboring unincorporated areas of Hays County, as indicated by Data Center Map, an industry tracking tool. Hays County’s commissioners have attempted to halt data center developments by passing a largely symbolic resolution due to severe water shortages, but this measure lacks legal enforceability.
San Marcos is employing a unique strategy by utilizing its home rule powers, which enables larger cities—of which there are 352 in Texas—to establish their own zoning regulations and oversee development. Experts believe that cities like San Marcos, with home rule authority, are better positioned to withstand legal challenges against their bans compared to those without such powers.
While some counties have encountered setbacks in their efforts to limit data centers, San Marcos’ approach could serve as a model. Earlier this month, Hill County reversed its own data center moratorium following a $100 million lawsuit from a developer, while Hood County commissioners abandoned their moratorium after state Senator Paul Bettencourt questioned its legality.
Senator Bettencourt has expressed intentions to challenge San Marcos’ ban, claiming it infringes on House Bill 2559 from 2025, which restricts municipalities from imposing indefinite moratoriums on specific property developments, as well as the 2023 Death Star Law that limits local laws conflicting with state regulations.
Bettencourt stated, “They should not use zoning to ban anything everywhere in the city, because that’s not lawful under the state of Texas guidelines. This will get challenged.”
Despite the push for data centers in Texas, many residents oppose their construction due to worries about water consumption, energy demands, and noise pollution. This concern spans across party lines, with Governor Greg Abbott recently advocating for data center regulations, including the elimination of sales tax exemptions for these facilities.
Although San Marcos stands alone in its outright ban, officials in other cities are exploring various methods to limit the rapid expansion of data centers without incurring state government backlash. Other home-rule municipalities are amending their land development codes to impose restrictions, while some cities and counties are incorporating limitations into incentive agreements with developers.
Amanda Rodriguez, a council member from San Marcos, noted, “You’re seeing a lot of cities in the age of preemption being creative about things.”
Cities such as Lockhart have expressed interest in monitoring San Marcos’ legal battles as they consider their own potential bans. “All cities are watching what happens to San Marcos,” remarked Taylor Burge, a Lockhart council member.
Concerns from residents surfaced in February during a City Hall meeting regarding a proposed 200-acre development by Highlander SM One LLC, which could have consumed over 25 million gallons of water annually from local aquifers. The council ultimately rejected the annexation request from the developer.
The proposal for a ban initially faced opposition from some council members but was revived when council member Lorenzo Gonzalez reconsidered it, seconded by Alyssa Garza. Gonzalez reflected, “The promised benefits remained speculative while many of the concerns raised by residents remained unresolved.”
The ban is implemented by defining data centers in the city’s land development code, effectively making their construction unfeasible within city limits. Garza commented, “I don’t see how any business-minded developer would want to reapproach, hoping they’ll read the room.”
In response to the ban, Dan Diorio, vice president of state policy for the Data Center Coalition, claimed it indicates that San Marcos is “closed for business,” warning that such a local moratorium could deter investment from both the data center industry and other advanced sectors.
Land use experts and city officials believe San Marcos possesses a stronger foundation for its ban due to the regulatory power cities hold over land use compared to counties. Nearly half of the 248 planned data centers in Texas are set to be established in unincorporated regions.
Though bans are uncommon, Robert Paterson, a professor at the University of Texas at Austin specializing in land use planning, stated, “Theoretically, I think the courts could uphold it,” provided the ban aligns with the city’s comprehensive plan aimed at safeguarding public health and welfare.
However, the 2023 Death Star Law complicates city authority by restricting municipalities from implementing regulations stricter than state laws. Proponents of the Death Star argue it was necessary to eliminate a “patchwork” of progressive local policies that hindered business operations.
Bettencourt expressed confidence that any development ban would not withstand legal scrutiny, predicting that the state would compel San Marcos to overturn its prohibition unless a developer intervenes with a lawsuit first. He argued that San Marcos is violating HB 2559, which limits property development moratoriums to 180 days, a claim contested by land experts who assert that San Marcos’ zoning law change differentiates it from a moratorium.
While Bettencourt supports data centers, San Marcos state senator Judith Zaffirini, a Democrat, views the city’s decision as a reflection of widespread community concerns and commended the City Council for acting “decisively and appropriately” to safeguard local interests.
Rodriguez acknowledged the potential for legal challenges, stating, “Anytime you’re operating in the state of Texas and you’re wanting to do something that goes against the grain, there’s always that thought in the back of your head.”
In response to Bettencourt’s challenges, Rodriguez emphasized the distinction between San Marcos’ ban and Hood County’s contested moratorium, asserting that they are ready to defend their decision against the Death Star law, which has yet to be tested in court.
Municipalities are exploring alternative methods to deter data centers, with smaller cities like Lockhart and Kerrville implementing strict zoning regulations that effectively create barriers to data center construction. These cities aim to achieve the desired outcomes without provoking legal disputes.
Lockhart City Council has defined data centers within its zoning codes, restricting them to a single land-use category—heavy industry—and confining development to two specific areas. Additionally, they plan to introduce special use permits that impose extra requirements on developers before construction is permitted.
Kerrville has also updated its zoning regulations to restrict data center locations while mandating water capacity approvals and disclosures on cooling systems and water usage. Drew Paxton, the city’s director of planning, noted, “An outright ban usually ends up more contested.”
In cities without zoning authority, such as Alvin, officials have passed resolutions expressing opposition to data center developments. While these resolutions lack legal weight, local leaders hope to influence state legislators to grant more protections to municipalities.
Roberts, Alvin’s assistant city manager, remarked, “Resolutions do not have a lot of meat to it, but the hope is to get the word out that the council is not interested in this kind of development.”
Despite utilizing alternative measures, cities remain aware of potential legal challenges from developers or state authorities. “We know the state’s going to keep working on this [data center policies],” Paxton stated, emphasizing the need for proactive measures.
Cities and counties can also exert control through incentive programs, such as Chapter 380, Chapter 381, and Chapter 312 agreements, which allow municipalities to negotiate property tax reductions in exchange for adhering to specific development standards.
As the legislative session approaches, state lawmakers will determine whether to grant counties more authority or restrict cities’ powers to impose bans. San Marcos’ decision will serve as a crucial test for the future direction of state policy regarding local control over data centers.
Senator Zaffirini highlighted the importance of local officials in understanding their community’s unique needs and constraints, stating, “Local officials are in the best position to understand the unique needs, infrastructure constraints and priorities of their communities.”
