Annex or Lose It: Why Texas Towns Are Cornered Into Data Center Deals

October 2026

📘 Summary

On Oct. 8, Taylor's City Council voted unanimously to approve a deal for a 664-acre data center campus and power plant just outside city limits. Residents packed the room and many asked the council to wait. Council members and staff gave the same answer the city had given all along: if Taylor didn't bring the site into the city, it would have no authority over the project at all.

That's the bind facing towns across Texas. The biggest data center sites usually sit just past city limits, where cities can't zone and counties generally can't either. A city's real leverage comes when a developer wants something from it, such as annexation, utilities or a development agreement. Saying yes gets a town a seat at the table. Saying no can leave it watching from the curb.

• Taylor traded annexation for rules on water, noise and setbacks, plus $28.2 million in pledges.
• Granbury annexed about 2,000 acres for a proposed power and data center campus, and the fallout became a recall fight that three of the targeted officials are now suing to stop.
• Brownsville is trying a third option: pausing applications in the city and its extraterritorial jurisdiction before the next developer shows up.

🗺️ The Map Problem

Texas land falls into three zones, and a data center's location decides who gets a say:

The City of Georgetown's planning department puts it plainly: there is no zoning in the ETJ. And since 2023, even the ETJ's limited reach can be escaped. Senate Bill 2038 lets property owners petition to leave a city's ETJ, putting them under county government alone. The bill's sponsor, Sen. Paul Bettencourt, described it as giving residents unhappy with city rules a way out.

Put those together and a developer with land just outside town has options, and the town has fewer. That's why annexation, which usually needs the landowner's consent, has become the main bargaining chip.

🤝 Taylor: Trading Annexation for Rules

The Taylor Technology Campus, formerly Project Mustang, is being developed by Big Watt Digital and PowerHouse Data Centers at 3301 FM 112 in unincorporated Williamson County. The developers first asked for annexation and zoning over the summer. After residents packed meetings and petitioned to ban data centers, the planning commission delayed the application for 90 days, and the developers withdrew it. The city kept negotiating. The result is a 20-year development agreement, under which the developers will voluntarily request annexation.

What Taylor got, according to KUT, the Taylor Press and the Austin American-Statesman, as reported in our Oct. 7 briefing:

Big Watt's John Stokes told the Taylor Press the project would average about $69 million a year in gross tax revenue, more than three times the city's roughly $21 million in property tax revenue for FY2026. Those are developer and consultant projections, not guarantees.

Residents' objections were about process as much as substance. Critics said the deal was negotiated behind closed doors and rushed, and urged the council to wait for the 2027 Legislature. The vote also came five days before the planning commission's Oct. 13 meeting on the city's own proposed digital infrastructure guidelines. And some protections are outside the city's control no matter what: the gas plant's air permit is TCEQ's call, not Taylor's.

⚖️ Granbury: When the Annexation Becomes the Fight

Granbury shows what can happen when residents feel an annexation was decided without them. Earlier this year the city annexed and rezoned roughly 2,000 acres known as Knox Ranch, where Dallas-based Bilateral Energy has proposed Project Patriot, a power generation and AI data center campus, KERA reported. Hood County property owners sued, alleging Texas Open Meetings Act violations in the annexation. Those claims are unproven in court.

In July, residents filed recall petitions against Mayor Jim Jarratt and four council members. More than 1,300 voters, about 15% of the city's registered voters, signed. Residents needed a state appeals court to get the petitions accepted. Then, on Oct. 6, a Houston attorney sued to stop the recall election minutes before the council was set to schedule it. FOX 4 later reported that the plaintiffs are Jarratt, Mayor Pro Tem Bruce Wadley and Councilman Skip Overdier, three of the officials facing recall. The suit alleges "fraud, forgery and other non-accidental defects" by people who gathered signatures. None of the three mentioned their role at the meeting.

The city says any formal development plan for the site would still go through normal zoning and development review. That's the point of annexation: once land is in the city, the city's rules apply. But residents' anger shows the other side. Annexation also makes the city a partner in the project, and the council that approves it owns the result.

⏸️ Brownsville: Pausing Before Anyone Applies

Brownsville is trying to get ahead of the problem. After a data center application was filed and then withdrawn this summer, the city began work on a temporary pause, KRGV reported. As our Oct. 8 briefing covered, the City Commission voted unanimously on Oct. 7 to send the 90-day moratorium to a final vote on Nov. 4. If it passes, the city wouldn't accept, process or approve data center applications from Nov. 5 through Feb. 3, 2027, and the city expects to approve a second 90-day pause after that.

The detail that sets Brownsville apart: as ValleyCentral reported, the ordinance would apply in the city's extraterritorial jurisdiction as well as inside city limits. Most large sites sit outside town, so a city-only pause would miss them. How far a moratorium can reach into an ETJ, where the city can't zone, is a question worth asking the city attorney. State law also caps how long a city moratorium can last and sets procedures for adopting one, so the pause buys time, not a permanent answer.

🧾 If Your Town Is Considering an Annexation Deal

An annexation paired with a development agreement can give a town real protections. It can also lock in weak ones for decades. Questions worth asking at the microphone:

• How long does it last, and who's bound? Does the agreement transfer to a new owner if the developer sells the site?
• What's measured, and where? A noise limit means little without a decibel level, a measuring point at the property line and a way to enforce it.
• Where does the water come from? A one-time closed-loop fill is different from ongoing makeup water and cooling for an on-site power plant.
• When does the money arrive? Are community pledges paid up front, on a schedule, or only when buildings come online?
• What does the city not control? Air permits belong to TCEQ, grid connections to ERCOT and the PUC. Ask what the developer has filed with each.
• What happens if the city says no? Ask staff to explain, in writing, what authority the city would keep if the site stays in the county.

Our Data Center Near You guide covers the records to request and the agencies to call.

🧭 What Texans Should Be Watching

• Taylor's Oct. 13 planning commission meeting on digital infrastructure guidelines, and the annexation steps that follow the agreement.
• The Granbury lawsuit: which court hears it, when the first hearing is set, and what evidence backs the forgery claims.
• Brownsville's Nov. 4 final vote on its moratorium.
• The 2027 Legislature. County land-use authority keeps coming up in candidate surveys. A bill giving counties limited power over large data centers would change the math in every town on this list.

🧾 Conclusion

Taylor's council didn't really vote on whether a data center and gas plant would be built near town. Under Texas law, that question was largely out of its hands. It voted on whether Taylor would have any say over how it's built. That's the choice Texas leaves its towns: annex the project and own it, or stay out and accept whatever happens next door. Until lawmakers give cities and counties more tools, residents should expect more deals like Taylor's, more fights like Granbury's, and more towns like Brownsville trying to write the rules before the next developer arrives.

For more analysis on Texas energy and AI, visit PowerGrabTX.com.