San Marcos becomes the first city in Texas to ban data centers, testing its local control
San Marcos, Texas, became the first city in the state to ban data centers within its limits through a 4-3 City Council vote on June 16, citing concerns over water and energy resources. This novel approach leverages the city's home rule powers and sets a precedent, though it is expected to face legal challenges from state officials and potentially developers. Other cities in Texas are also exploring similar restrictions or bans on data center development.
San Marcos, Texas, has enacted the state's first city-wide ban on data centers, with its City Council voting 4-3 on June 16 to amend zoning laws to make data centers ineligible for any part of the city. The decision was driven by concerns over the potential strain on local water and energy resources and is seen as a test of the city's home rule authority to control development. Although no data centers are currently proposed within San Marcos, nearby Hays County has two proposals, and a prior developer, Highlander SM One LLC, had an annexation request rejected by the city council in February after residents raised concerns about water consumption.
The ban is expected to face legal challenges, with state Sen. Paul Bettencourt, a Houston Republican, stating his intent to challenge it under House Bill 2559 and the 2023 Death Star Law, which restrict municipal moratoriums and local laws contradicting state law. However, land law experts suggest San Marcos's zoning change is distinct from a moratorium and may withstand such challenges. The Data Center Coalition criticized the ban, saying it signals San Marcos is "closed for business."
San Marcos's action is prompting other Texas municipalities to consider similar strategies, with some like Lockhart and Kerrville adopting strict zoning rules or special use permits to restrict data center development without an outright ban, hoping to avoid direct legal confrontation. Alvin has passed symbolic resolutions. State lawmakers are expected to address the issue in the next legislative session, potentially impacting local control over data center development. Gov. Greg Abbott has also called for regulation, including potentially eliminating state sales tax exemptions for data centers.