Two Mayors, One $10 Billion Data Center, and a Texas Town With No Say

When a megaproject lands on the municipal boundary, the politics of infrastructure spending get very local, very fast.

Written by Graham Vale · Bureau Finance · Jun 20, 2026

The Project and the Problem

A $10 billion AI data center development near Lacy Lakeview and Ross, Texas has done what large infrastructure projects often do: it has forced a political reckoning that the affected communities were not prepared for.

According to reporting by Fortune, the project has driven a wedge between two neighboring small-town mayors who share a border but not a common position on what the development means for their residents. The more consequential detail, however, is not the disagreement itself — it is the underlying jurisdictional reality that makes the disagreement largely academic.

Neither town appears to hold direct authority over the project. When a development of this scale is sited outside municipal limits, or structured to avoid triggering local permitting thresholds, the communities nearest to it are often left with influence but no leverage.

How Texas Land-Use Law Shapes the Outcome

Texas gives municipalities extraterritorial jurisdiction — known as ETJ — over land adjacent to city limits, but that authority is limited. It does not typically extend to the full suite of zoning and permitting controls that a city can exercise within its own boundaries. For small towns with limited staff and legal resources, asserting even those partial rights against a well-capitalized developer is a significant undertaking.

The result is a familiar asymmetry: a project worth ten figures arrives with its own legal team, its own timeline, and its own preferred regulatory interpretation. The towns nearby are left to negotiate informally, or not at all.

The Broader Capital Deployment Pattern

The data center construction wave currently underway across the United States — driven by demand for AI compute infrastructure — has accelerated this dynamic. Developers are moving quickly to secure power, land, and fiber connectivity, and they are doing so in markets where land is cheap and regulatory friction is low. Rural and exurban Texas fits that profile precisely.

For the communities involved, the economics are not straightforwardly negative. Data centers bring construction employment, property tax revenue, and in some cases utility infrastructure upgrades. But those benefits are not automatic, and they are not evenly distributed. A project that sits on a county road, draws from a regional power grid, and employs a small permanent workforce may generate less local economic activity than its headline investment figure suggests.

What the Divide Between Mayors Reveals

The reported disagreement between the two mayors is worth reading as a signal rather than a story. When adjacent communities cannot coordinate a common position on a shared infrastructure challenge, the developer's preferred outcome — minimal local friction — becomes the default.

That is not a criticism of either mayor. Coordinating across municipal boundaries without a formal intergovernmental agreement is genuinely difficult, and small-town governments rarely have the administrative capacity to move as quickly as a project of this scale demands.

What it does suggest is that the current framework for siting large capital projects in Texas — and in many other states with similar land-use structures — was not designed with $10 billion AI infrastructure deployments in mind. The gap between what communities can legally demand and what they actually need from a project of this magnitude is where the real policy question lives.

Key takeaways

A $10 billion AI data center project near two small Texas towns has created a political divide between neighboring municipalities with overlapping interests but separate jurisdictions.
Neither Lacy Lakeview nor Ross appears to hold direct regulatory authority over the project, limiting their ability to negotiate community benefits, infrastructure contributions, or land-use conditions.
The situation reflects a recurring pattern in the current data center construction wave: large capital deployments are often structured to minimize local government leverage.
Texas's relatively permissive land-use framework, which limits zoning authority outside city limits, makes extraterritorial projects particularly difficult for small towns to influence.
The divide between the two mayors signals that even adjacent communities may not coordinate effectively when a major economic development lands on their shared doorstep.

FAQ

What is a data center's typical impact on local property tax revenue?

Data centers are capital-intensive facilities with high assessed values, which can generate significant property tax revenue for the jurisdictions in which they are located. However, many states and localities offer tax abatements to attract large data center investments, which can substantially reduce or delay that revenue. The net fiscal impact depends heavily on the specific incentive structure negotiated with the developer.

What is extraterritorial jurisdiction (ETJ) in Texas?

ETJ is the area outside a city's corporate limits over which the city has limited planning and platting authority. In Texas, the size of a municipality's ETJ is tied to its population. Within the ETJ, cities can enforce subdivision regulations but generally cannot apply full zoning controls, which limits their ability to block or condition large development projects sited just outside their boundaries.

Why do data center developers often prefer rural or exurban sites?

Large data centers require substantial land, reliable high-voltage power connections, and fiber infrastructure. Rural and exurban sites often offer lower land costs, proximity to transmission lines, and less regulatory complexity than urban locations. In states like Texas, they may also fall outside the zoning jurisdiction of any municipality, further reducing permitting friction.

Can small towns negotiate community benefit agreements with data center developers?

Yes, but their leverage depends on what the developer needs from the municipality — road access, utility connections, permitting approvals. If the project can be structured to minimize dependence on local government approvals, the town's negotiating position weakens considerably. Formal community benefit agreements are more common in jurisdictions where local approval is a genuine prerequisite for the project to proceed.

Citations

Two mayors, one $10 billion AI data center, and a growing divide in small-town TexasA $10 billion AI data center project near Lacy Lakeview and Ross, Texas has created a political divide between two neighboring mayors whose towns lack direct authority to shape the development.
Fortune RSS FeedBureau research source: Fortune
Texas Local Government Code — Extraterritorial JurisdictionTexas municipalities hold extraterritorial jurisdiction over adjacent unincorporated land, but that authority is limited compared to full municipal zoning powers and scales with population size.