San Marcos Data Center, San Marcos, Texas

The San Marcos City Council voted 5-2 early on February 18, 2026, to deny the rezoning that Highlander SM One LLC needed for a $1.5 billion data center on a 200-acre site at 904 Francis Harris Lane in San Marcos, Hays County, Texas. Four months later, on June 16, the council voted 4-3 to ban data centers anywhere in the city, the first Texas city to do so, and the ban stands unless the council reverses it or a court strikes it down.

The site sits next to the Hays Energy power plant between San Marcos and New Braunfels. When the vote came at 2:14 a.m., the overflow room roared with cheers. At least 300 people attended the meeting, which ran past 2:30 a.m., and residents from across Hays County, where droughts have been felt for years, spoke overwhelmingly against the project. An earlier attempt to approve the project failed in August 2025, when the council lacked the supermajority needed to overturn the Planning and Zoning Commission's recommendation of denial.

The campus would have had five buildings of 76 megawatts each, 380 megawatts in all, and a closed-loop cooling system needing a one-time fill of 60,000 to 70,000 gallons of water, from the Crystal Clear utility rather than the city. "We're working with the city to, first, cut water use in half, and then cut it in half again," said John Maberry, a managing partner at Highlander Real Estate Partners.

"You are either going to greatly harm your relationship with your community or you're going to buckle down and work with us and come up with an alternative which we are all willing and eager to help you on," said Torrie Martin, who lives on a ranch next to the site. Mario Jimenez, whose family has lived on Francis Harris Lane since 1992, worried about a heat island effect on farmland and livestock.

Mayor Jane Hughson said the question was less the data center's own cooling than "the water from the power generation." Union construction workers backed the project, and Matthew Gonzales of Laborers' Local 1095 told the council it offered "good, quality jobs on a construction project like this."

The ban defines data centers in the city's land development code and makes them ineligible everywhere in the city. "I don't see how any business minded developer would want to reapproach, hoping they'll read the room," said Council Member Alyssa Garza. State Sen. Paul Bettencourt has said he will challenge the ban under state laws limiting local moratoriums and ordinances, while land use experts say the city's home rule powers give it a better chance than counties.

Hays County, which cannot zone, voted in June to set up a water review board and suspend discretionary approvals such as tax abatements for data centers and other water-intensive projects through the end of 2026. Another developer, CloudBurst, is planning a data center south of San Marcos in the county.