First Texas city to ban data centers faces promise of legal challenge
A small town in Central Texas became the first city in the state to ban data centers, testing the limits of local power.
San Marcos is positioned between San Antonio and Austin. It lies primarily in Hays County, which President Donald Trump lost by just under six points in the 2024 election.
In June, the San Marcos City Council voted 4-3 to make data centers ineligible in the city’s zoning laws, citing concerns they could drain water and energy resources from the community. There are no data centers currently in the works for San Marcos after the city council blocked the pathway for one in February. But the development already faces the threat of a legal challenge, as Republican state Sen. Paul Bettencourt this week promised to appeal the ban.
“They should not use zoning to ban anything everywhere in the city, because that’s not lawful under the state of Texas guidelines,” Bettencourt told the Texas Tribune Monday.
The lawmaker believes the ban defies House Bill 2559, which restricts the ability of municipalities to issue indefinite moratoriums on certain types of property development, and the state’s 2023 Death Star Law, which restricts municipalities from enacting local laws that contradict state law, according to the outlet. He is optimistic Texas will make San Marcos reverse its ban if a developer doesn’t file a private lawsuit first.
“If you overuse existing legal principles, eventually they get challenged, and/or … laws are changed to make it clear that this can’t happen,” Bettencourt said.
The battle over San Marcos comes as Texas Republicans divide over the path of data center development in the state. Most acknowledge expansion is necessary to support the artificial intelligence revolution but have split on how much control local authorities should wield over the process.
State Rep. Cody Vasut and Brazoria County Executive Matt Sebesta are among those who favor more local freedom, expressing concern that leaders upstream “don’t trust us to make those decisions.” State Rep. Helen Kerwin in March called on Gov. Greg Abbott (R-TX) to impose an immediate moratorium on data center projects to give locals the chance to do impact studies, in a move Hays County flirted with following.
“When you develop in the county, it’s been viewed kind of as the Wild West, but I think as time has gone on, more and more projects are being developed near residences in the county, and that’s something we need to look at changing,” Vasut said at a Brazoria County meeting in the spring.
“All I’m asking the governor to do is just, let’s just pause — not stop. I don’t want to halt,” Kerwin said, in comments to the Texas Tribune. “We all know we have to embrace this, or we’re going to be left behind, and we may already be behind with China, who knows? — but we have to do it right, and we have to protect our water, our aquifers, not for decades but for generations.”
Bettencourt, the chair of the Senate’s Local Government Committee, believes otherwise.
He’s long pushed for greater state control over development, including by pushing SB 2038 into law, which allows landowners to remove property from city jurisdiction and be overseen solely by county and state regulation. As part of nearly 100 Texas Republican legislators invited to the White House in March to discuss the Trump administration’s goal of data center expansion in the Lone Star state, he said following the meeting that the state needs to make sure that “the future of having growth” is kept alive. Top-down authority structures are needed to keep Texas on the rise, he argued.
“These should be statewide, top-down guidelines,” he said. “You can’t have 254 different counties and 1,000 cities all coming up with different answers. Stuff would never get built.”
Abbott has sought to toe the line in the debate, recently urging state regulators to repeal data center sales tax exemptions and require them to tackle energy and water concerns, while also hailing Texas as the “epicenter” of AI development, including through announcing three new data centers in West Texas and the Panhandle in November.