The Denton City Council is following other Texas cities such as Lewisville, Irving and San Marcos and taking steps to limit data center development until the council can get a handle on what has become one of Texas’ most divisive issues.
A council majority — 4-3 — gave staff direction Tuesday to proceed with a possible moratorium on data centers and amendments to the Denton development code to strengthen local regulations on data centers.
The council will set the date for the first public hearing on a proposed data center moratorium during the Aug. 18 meeting. It is tentatively scheduled to for Sept. 22, followed by a second public hearing on Oct. 27 and final adoption on Dec. 2.
Establishing the data center moratorium for 90 days would require a supermajority vote by the council.
It would take another public hearing in March to extend it up to 180 days. If extended, the data center moratorium could end on May 31, 2027.
Simultaneously, the council will move forward with public hearings to consider amendments to the development code that would apply limitations to data centers, including zoning limits and required cooling systems.
The first public hearing is scheduled for Sept. 23, the second public hearing on Oct. 13 and an effective date of Oct. 27, according to city staff.
Council member George Ferrie called doing both the moratorium and updating the development code “avenues of protection” for residents.
“I think taking that pause is doing right by the 160-something emails I got from the community saying we want a moratorium,” Ferrie said Tuesday.
Mayor Pro Tem Nick Stevens said data centers have “been a hot-button issue for a few years” that started long before any of them were on the council. Stevens stressed that both a moratorium and amendments to the development code are similar options with the same goal.
“This temporary moratorium is not just so that you can sit around for six months and do nothing,” Stevens said. “It is so that you can have action while doing it. … The community, I think, has been very clear on this, and I’m going to take their cue.”
Mayor Chris Watts said that moving forward with a possible moratorium and amendments to the development code offers more public input since each requires a public hearing.
“What’s the most important aspect of this, and that is the public opinion track,” Watts said.
Council members Suzi Rumohr, Joe Holland and Jill Jester voted against moving forward with a moratorium. All three gave direction for city staff to move forward solely with amendments to the development code.
The amendments for consideration would:
- Require a specific-use permit for all data centers in any district and further restrict allowed zoning areas.
- Add specific-use standards to require water and wastewater loading studies and closed-loop or free-air cooling systems for data center development.
Some of their reasons for voting against a moratorium included the cumbersome process to establish it, Gov. Greg Abbott’s newly announced statewide data center audit, and that development code amendments could be implemented by late October — before the moratorium even takes effect.
“What I’m hearing from the community is urgency around long-term, permanent, meaningful changes,” Rumohr said. “That’s where I feel like we should be spending our time in our meetings.”
That cumbersome moratorium process was the result of House Bill 2559, co-sponsored by state Rep. Jared Patterson, R-Frisco, who represents part of Denton County. It became law last September “to make moratoria harder to adopt and sustain,” according to the Texas Municipal League.
“Cities must now prepare for a months-long process involving extended notice, two hearings, multiple ordinance readings and a supermajority vote before development can be paused due to a shortage of essential public facilities,” the municipal league said then.
In a June 26 staff report, staff indicated that the city would need to provide evidence under the Texas government code “demonstrating a need to prevent the shortage of essential public facilities and follow the procedures for adopting the moratorium.”
Another reason allowed for a moratorium was to give the council time to update the development code.
Charlie Rosendahl, the city’s director of development services, told the council Tuesday that recent studies from Denton Municipal Electric’s perspective show the city’s electric transmission system is “already running at or near our capacity.”
New high-demand projects are also increasing pressure on the system, according to staff.
DME General Manager Antonio Puente told the council that anything above 75 megawatts “is likely beyond the capacity that we have today.”
Puente said DME has also had “a number of [data center] prospects, folks that have contacted us, but there’s nothing in the queue.”
“So, currently there’s none, but again, there is interest out there for additional development in the community,” Puente said.
Denton currently has two data centers after a council majority approved them in 2024 and earlier this year: Core Scientific’s AI data center, which is nearing full buildout for up to 391 MW of capacity, and QumulusAI, a modular data center that has contracted for up to 20 MW of capacity upon completion.
Leasing 4 acres of public property, QumulusAI is primarily an AI cloud and infrastructure company, while Core Scientific, which leases 79 acres of public property, provides power for artificial intelligence, high-performance computing and machine learning.
The moratorium would only affect future data center development.
Stevens, who originally pitched the idea for the moratorium, said “nearly 70% of Americans support a moratorium on data centers” in a social media post on Monday.
“This is not a red or blue issue,” Stevens said. “It’s a Denton issue.”
It’s also a Texas issue.
In his press release Monday announcing an audit of data centers, Abbott said the Electric Reliability Council of Texas “is currently considering approximately over 474 gigawatts of requests to the Texas grid, more than five times Texas’ record peak electricity demand for ERCOT.”
The governor’s office estimated that approximately 90% of new power requests were from data centers and called it an “unprecedented load growth” that could “endanger the reliability and stability of the Texas electric grid.”
The financial revenue from data centers seems to be one of the positive impacts that led the previous City Council to embrace them.
“Interestingly, this is about a billion-dollar investment into the community and all the tax revenues associated with that,” DME Assistant General Manager Terry Naulty told council members in August 2024 about Core Scientific switching from crypto mining to AI computing.
On Tuesday, city staff said data centers have paid more than $3.1 million in combined property taxes to Denton, Denton ISD and Denton County.
The city also received about $780,000 in property taxes, about $475,000 in sales taxes, more than $8.8 million in franchise fee revenue tied to electric use and more than $2 million in lease revenue.
City staff said they expect taxable equipment such as servers and hardware “to become a major new revenue source” in fiscal year 2026-27, according to the Tuesday presentation.
During the proposed moratorium, council members plan to look at what they can do to regulate data centers locally, such as amending the Denton Development Code to require specific-use permits for zoning districts and/or further restricting allowed zoning districts, as staff pointed out Tuesday.
A specific-use permit, for example, would allow the council to review data centers on a case-by-case basis.
They could also look at allowing data centers only in other nonresidential zoning with a specific-use permit, as other cities in the region have done.
In Lewisville, data centers are allowed in industrial districts with a specific-use permit only. Irving no longer permits them by right and only allows them strictly via a conditional-use permit, according to Denton’s staff presentation.
San Marcos no longer permits data centers in any zoning district.
City staff also pointed out Tuesday that the council could look at implementing additional use standards to limit water usage, such as requiring closed-loop or free-air cooling systems.
Core Scientific’s data center uses a closed-loop cooling system, while QumulusAI’s modular data center will use an air-cooled system, which doesn’t require water unless the air is too dry, according to staff.
The closed-loop system can use 3 million to 5 million gallons of water at one time and between 60,000 and 100,000 gallons annually, compared to a direct evaporative cooling system or indirect evaporative cooling system. Both direct and indirect systems use far more water, from 3.6 million to 1.6 billion gallons for direct and 151.9 million to 4.9 billion gallons for indirect.
Holland and Rumohr said they support requiring closed-loop systems for data centers.
CHRISTIAN McPHATE can be reached at 940-220-4299 and cmcphate@dentonrc.com.
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