Everything You Need To Know About AI Data Centers: Part 6
In the spring of 2026, residents of San Marcos, Texas, came out for the second time to oppose a proposed $1.5 billion data center project at 904 Francis Harris Lane.
And they won.
After hours of public testimony, the San Marcos City Council voted 5–2 against the land-use change needed for the project to move forward.
We believe this is one of the most important data center case studies in the United States.
It reflects a community-wide effort to protect an area connected to crucial Texas Hill Country water systems, including the Edwards Aquifer, San Marcos Springs, the Blanco River, and the Guadalupe River.
And there is something we can learn from it.
By following the San Marcos story from 2025 through 2026, we were able to recognize some of the important steps developers have to take before a hyperscale data center becomes operational—and where communities may have an opportunity to get involved.
So, if you’re wondering whether a data center could be coming to your area, here are some things to watch for.
1. Site Selection
A hyperscale data center needs access to power—and a lot of it.
That’s why one of the first things to look for is proximity to major electrical infrastructure: high-voltage transmission lines, substations, and large power plants.
In the San Marcos case, the proposed site was located next to the Hays Energy Power Plant and high-voltage transmission infrastructure.
Purchasing land near power infrastructure doesn’t guarantee that a data center will actually receive the electricity it needs. But it can make a location significantly more attractive to developers.
So if you see hundreds of acres being purchased near major transmission infrastructure, pay attention.
It might be nothing. But it’s worth asking questions.
2. Going Industrial
The next clue may appear in a place most people never think to look: zoning documents.
Once land is purchased, a developer may need to change its zoning or land-use designation before a data center can be built.
Agricultural, conservation, residential, or undeveloped land may suddenly be proposed for commercial or industrial use.
This is where things get interesting.
Rezoning and land-use changes can require public hearings, depending on the jurisdiction and the type of approval being requested. These meetings can give residents an opportunity to learn about a project, submit comments, and speak on the official record.
And sometimes, this is where a community has the most leverage.
In San Marcos, the proposed project required changes to the city’s Preferred Scenario Map and zoning before it could move forward. The fight over those changes ultimately became the obstacle the project couldn’t overcome.
Know Your Jurisdiction
Before you can follow a project, you need to know who actually has authority over it.
Depending on the location, a proposed data center may fall:
Within city limits
Within an Extraterritorial Jurisdiction (ETJ), where applicable
Outside city limits, on county or unincorporated land
Why does this matter?
Because it determines which government bodies you need to watch.
Inside a city, that may mean the city’s planning and zoning commission and City Council. Outside city limits, county authorities may play a larger role. ETJ powers vary by state and locality.
Following the San Marcos story taught us something important: Don’t wait until construction equipment arrives.
By then, some of the most important decisions may already have been made.
3. Follow the Money
Another place to look is tax incentives.
There are two major types of tax benefits commonly associated with data center development:
State-level sales and use tax exemptions
Local property tax abatements
These agreements can reveal a lot about a project before most people have even heard about it.
Take CyrusOne’s DFW10 project in Bosque County, Texas. The county approved a ten-year agreement waiving 30% of certain county property taxes. The agreement also placed responsibility for construction-related road damage on CyrusOne and encouraged the use of local vendors—but did not impose a strict local-hiring requirement.
And that’s a relatively modest example.
Louisiana provides qualifying data centers with sales and use tax exemptions for eligible equipment and development expenses.
So if you want to know whether a large project could be coming to your community, don’t only watch zoning agendas.
Watch the tax deals.
Sometimes the money trail tells the story before the construction site does.
4. Follow the Power
Being located next to a transmission line doesn’t automatically mean a data center can plug into it.
Large facilities generally have to secure electrical service and, when connecting directly to the transmission system, go through an interconnection process involving utilities and grid operators.
And right now, those systems are under enormous pressure.
In December 2025, PJM—the regional transmission organization operating the largest U.S. power grid—held its capacity auction for the 2027–2028 delivery year.
The result?
PJM’s came up 6.6 GW short of its 20% installed reserve margin target.
Data center developers are keeping their options open by applying for multiple grid interconnections across mutiple electric grids, even if they’re not intending to build.
This has been causing a massive inflation in forecasting and wholesale electricity prices.
This is why power agreements, interconnection requests, new substations, transmission upgrades, and proposed power plants are all worth watching. They can reveal what is coming.
When the Grid Isn’t Enough
Developers are also finding other ways to power enormous facilities.
Some data centers are being built next to existing power plants. Others sign long-term Power Purchase Agreements (PPAs) with electricity producers.
And some are going even further—building their own power generation.
That can mean large fleets of natural gas turbines operating almost like a private power plant beside the data center.
Which brings us to another stage communities should watch very closely.
5. Environmental Permits
A data center isn’t only a building full of servers.
Large facilities can require backup generators, cooling infrastructure, water infrastructure, substations, and—increasingly—on-site power generation.
Those systems can trigger environmental permitting requirements, including air and water permits.
And those permits create another paper trail.
Look for applications filed with state environmental agencies, county health departments, air-quality agencies, water authorities, and other regulators.
Let’s learn from xAI’s Colossus 1 and Colossus 2 to see how things can unfold—and what communities should watch for. Read the full case study in Chapter 11 of our Report.
Whether you support or oppose a particular project, the lesson is the same:
Environmental permits can tell you what a data center actually plans to operate—not just what the project looks like on a rendering.
Learn to Recognize the Signs
A data center doesn’t appear overnight.
Before the walls go up, there can be land purchases, zoning applications, annexation requests, tax agreements, interconnection studies, power contracts, environmental permits, public hearings, and government votes.
Individually, these things may look boring. Together, they tell a story.
And the earlier communities recognize that story, the more time they have to ask questions.
Who is the developer?
How much electricity will the facility need?
Where will the water come from?
Will the land need to be rezoned?
Are tax breaks being offered?
Will new transmission infrastructure be required?
Will there be gas turbines or hundreds of backup generators?
And, perhaps most importantly:
When is the public allowed to speak?
San Marcos showed that community involvement can matter. Hundreds of people showed up, local organizations mobilized, thousands signed a petition, and residents stayed at City Hall into the early hours of the morning before the final vote.
The project was stopped, for now.
That doesn’t mean every data center can be stopped—or that every project follows exactly the same approval process. But it does mean communities don’t have to wait until construction begins to start paying attention.
Spotting a project early is the first step, having the knowing where else to look is the second, and acting is the third.
Want to learn how a hyperscale data center moves from an idea to a fully permitted facility—and where communities can get involved along the way? Read Chapter 11 of our Report.
Read the rest of our Data Center stories here.