Data Centers in North Texas: Why They're Booming and What It Means Locally
When Fort Worth's city council recently moved toward a temporary moratorium on new data centers, it put a local spotlight on a trend playing out across the entire state. Here's why data centers have exploded across North Texas, why cities are suddenly pumping the brakes, and what it means for residents.
How Texas Became a Data Center Magnet
Texas has offered tax incentives for data centers for more than a decade, but the industry didn't truly take off until artificial intelligence demand surged. In 2013, the state created a sales tax exemption for data center projects investing more than $200 million, covering equipment, electricity, and cooling systems. At the time, the exemption was projected to cost the state about $14.6 million through 2015. That figure has since ballooned to a projected $3.3 billion for the 2028-2029 budget cycle, reflecting just how much larger and more numerous these projects have become.
Statewide, at least 335 data centers are already operating in Texas, with roughly 225 more planned or proposed, according to industry tracking. The Dallas-Fort Worth market alone saw a 30 percent increase in data center leasing activity between 2020 and 2021, and growth has continued since.
Why Cities Are Reconsidering
Data centers consume enormous amounts of electricity and, in many designs, significant water for cooling. As proposals have multiplied, local governments across Texas — not just Fort Worth — have started pumping the brakes, delaying tax incentive votes or debating zoning restrictions in response to resident concerns about strain on the power grid, water supply, and nearby property values. Fort Worth's own $1.1 billion data center proposal in the Veale Ranch area, for example, has drawn scrutiny over power consumption and water use, prompting city officials to delay consideration of a tax incentive package after public pushback.
State-Level Response
Governor Greg Abbott directed the Public Utility Commission of Texas and ERCOT, the state's grid operator, to conduct a comprehensive audit of data centers seeking to connect to the grid, with new projects paused pending review. The directive calls for examining each project's electricity and water demand, taxpayer-funded incentives, ownership, and plans to mitigate impact on surrounding communities. Abbott has said data centers should pay for the electric infrastructure needed to serve them, reuse water where possible, and avoid disrupting residential neighborhoods. The Texas Senate Finance Committee has also taken up the cost of the state's sales tax exemption as a formal interim study topic ahead of the next legislative session.
What This Means for Electric Bills
Some of the infrastructure cost tied to serving new data centers could be passed on to ratepayers, and researchers have found that residential electricity customers currently bear a larger share of rising grid costs than industrial customers. How much of the buildout cost data centers themselves will ultimately absorb is still being worked out by state regulators.
The Local Trade-Off
Supporters argue data centers generate substantial new tax revenue and jobs, and can allow fast-growing communities to fund services without raising tax rates on residents. Critics counter that the incentive packages often reduce what these companies would otherwise pay, while placing new strain on shared infrastructure. That tension is exactly what's playing out in Fort Worth's moratorium debate and in similar zoning fights happening in cities across the DFW region.
For continuing coverage of local data center proposals and city council votes affecting North Texas communities, see our Business news section.
