In an unprecedented move, San Marcos has become the first to ban data centers within city limits.
Residents packed the city hall in February and aired concerns about how a proposed 200-acre development by Highlander SM One LLC, a Fort Worthbased developer, could consume more than 25 million gallons of water annually from local aquifers. The council ultimately rejected the developer’s request to annex into the city. The first ban was proposed in March.
The San Marcos City Council most recently voted 4-3 to define data centers and make them ineligible for any part of the city in its zoning laws, citing concerns that these developments would funnel water and energy resources from the local community. At least two data centers have been proposed in surrounding unincorporated parts of Hays County and commissioners for the county recently passed a symbolic resolution to pause data center development over severe water scarcity - but the resolution isn’t legally binding.
According to legal experts, San Marcos is attempting ban data centers by exerting its home rule powers, which gives certain bigger cities the right to create their own zoning codes and control development, land law, which would offer the city a better chance at surviving legal challenges to ban data centers.
While San Marcos is the first to outright ban data centers, local officials across Texas are using whatever authority they have to restrict the them. Other home-rule cities are amending their land development code to restrict data centers. Cities and counties are also including restrictions in incentive agreements with developers. While some counties have tried to restrict data centers, most have failed.
Recently Hill County rescinded its data center moratorium after a developer sued the county for $100 million. Hood County commissioners also tried to pass a moratorium, but pulled it after state Sen. Paul Bettencourt asked for an attorney general opinion on whether counties have the right to enact such restrictions.
According to Bettencourt, he plans to challenge San Marcos’ ban, arguing that it violates 2025’s House Bill 2559, which restricts the ability of municipalities to issue indefinite moratoriums on certain types of property developments and the state’s 2023 Death Star Law, which restricts municipalities from enacting local law that contradicts state law.
According to Robert Paterson, UT professor specializing in land use and environmental planning, as long a ban aligns with a city’s comprehensive plan which governs the protection of public health, safety and general welfare, it may fall within the city’s power. But the Death Star law complicates the city authority, which theoretically curbs home rule authority and bars cities from exercising powers stricter than those the state has. On the other side, land experts said that the law would not apply to San Marcos because the city changed its zoning laws to ban data centers and did not issue a moratorium.
Bans aren’t the only way to stop data centers. Smaller cities like Lockhart and Kerrville have adopted strict zoning rules that make it difficult for data centers to build, hoping the effect will feel like a ban without immediately triggering legal challenges. Places without the authority to approve development counties and cities that don’t have homerule authority are exploring other tools to signal or impose restrictions, including through resolutions and tax abatement agreements.
In any case, state lawmakers will be faced with giving counties more authority or stripping cities of power to establish bans, depending on the general reaction from constituents. San Marcos will be the first test.