Kerrville’s new rules effectively block data centers, battery storage without an outright ban

The City Council unanimously approved sweeping updates to the city’s zoning code May 26, including regulations designed to make it virtually impossible to build battery energy storage systems or data centers within city limits — without ever explicitly banning them.

The strategy, explained publicly by Councilmember Jeff Harris during the meeting, reflects a careful legal calculation: an outright ban could expose the city to property rights litigation, while overlapping development requirements accomplish the same goal on firmer legal ground.

“So we don’t want them but we have to be proactive in the way that we say we don’t want them,” Harris said.

How the strategy works

Under Ordinance 2026-07, approved on its second and final reading May 26, battery energy storage systems and data centers are prohibited within 500 feet of public parks, playgrounds, public and private schools, hospitals, churches, childcare facilities, and residential zoning districts.

But the restrictions don’t stop there. Any developer who could somehow find a parcel meeting all those distance requirements would still face three additional hurdles: a 300-foot setback from any major or minor arterial roadway, an 8-foot solid masonry screening wall around the entire property, and a completed water capacity analysis before a permit could be issued.

Harris said the mathematical reality of those overlapping buffers “is going to limit or eliminate even anywhere in the city of Kerrville that one of those” facilities could practically be built. Director of Planning and Development Drew Paxton publicly confirmed that assessment was correct.

Harris addressed public concern that the council’s vote to formally regulate the facilities implied the city actually wanted them in Kerrville. He clarified that city leadership had advised against a blanket restriction — such as a one-mile setback — because doing so would effectively shift the dispute from local zoning authority to the state level, where property owners could bypass the city’s wishes entirely.

Why an outright ban was off the table

Some community members have argued the city could have simply banned BESS facilities and data centers altogether. But Texas law and the Texas Constitution present significant obstacles to that approach.

Article I, Section 17 of the Texas Constitution states that no person’s property shall be taken, damaged, or destroyed for public use without adequate compensation. That protection extends beyond physical seizures. Under Texas law, an inverse condemnation may occur when the government places a regulation or other restriction on property that unreasonably restricts its use — and if the government goes too far when it imposes restrictions, denies permits, or eliminates all practical use of the property, there may be an entitlement to compensation.

A Texas appellate court applied that principle directly in 2022, ruling in City of Dallas v. Trinity East Energy that a Dallas ordinance prohibiting all gas well drilling in the city constituted a taking because it rendered an existing lease without any economic value — even though the city never physically seized any property.

The legal parallel to sexually oriented business regulations is instructive. Texas cities have long used layered distance requirements — rather than outright bans — to effectively limit where adult businesses can operate. Under Texas Local Government Code Chapter 243, municipalities may prohibit sexually oriented businesses within a certain distance of schools, places of religious worship, residential neighborhoods, or other specified land uses, and may restrict the density of such businesses. Courts have consistently upheld that approach precisely because it regulates rather than prohibits outright. Texas courts have scrutinized outright bans and overly broad operating restrictions, forcing some cities to refine their rules — noting that cities retain authority to address concerns through narrower requirements rather than blanket prohibitions.

Kerrville’s BESS and data center ordinance follows the same legal template.

What is a ‘taking’ — and why does it matter here?

The legal concept at the center of this debate has roots in both the U.S. Constitution and the Texas Constitution, and it goes back further than most people realize.

The Fifth Amendment to the U.S. Constitution prohibits the government from taking private property for public use without just compensation. That protection, known as the Takings Clause, is most familiar in the context of eminent domain — when a government physically seizes land to build a road or a school and must pay the owner fair market value.

But courts have long recognized a second, murkier category: the regulatory taking. Texas courts have recognized two broad types of takings — a physical occupation or invasion of property, and a regulatory action that is so restrictive or intrusive that it effectively takes the property.

Texas goes a step further than the federal standard. Both the Fifth Amendment and Article I, Section 17 of the Texas Constitution prohibit the taking or damaging of private property for public use without adequate compensation. That word — “damaging” — matters. Texas’s constitutional protection is broader than the federal floor, covering not just outright seizures but government actions that diminish the value or usability of property even without touching it.

The practical consequence for local governments trying to restrict land use is significant. If the government goes too far when it imposes restrictions, denies permits or variances, or eliminates all practical use of the property, there may be an entitlement to compensation — even though the property owner still technically owns the land.

The U.S. Supreme Court addressed this directly in Lucas v. South Carolina Coastal Council in 1992, establishing that when a regulation deprives a landowner of all economically beneficial use of their property, the government has effectively taken it and must pay up. A Texas appellate court applied that same logic in 2022 in City of Dallas v. Trinity East Energy, finding that Dallas’s blanket prohibition on gas well drilling rendered an existing drilling lease economically worthless — and therefore constituted a compensable taking.

That is the legal minefield Kerrville was navigating. A city can regulate. It can restrict. It can impose conditions so burdensome that a use becomes practically impossible. But if it crosses the line into eliminating all viable economic use of a property — or is perceived to have done so — it risks writing a check to the developer it was trying to turn away.

The line between aggressive regulation and an unconstitutional taking is not always clear. But Harris’s strategy, confirmed by the city’s planning director, was designed to stay firmly on the regulatory side of it.

The county’s hands were tied

The contrast with Kerr County’s situation underscores just how significant the city’s regulatory options actually were.

When Commissioners Court confronted the same question — how to respond to the prospect of BESS facilities and data centers moving into Kerr County — it ran into a wall that the city never faced. Texas counties have limited land-use regulation authority, which does not include zoning. Without the ability to pass ordinances governing land use, Kerr County had almost none of the tools the city of Kerrville was able to deploy.

The county’s primary legal avenue was narrower and more reactive: implementing fire code regulations that follow state standards, and hiring a part-time fire marshal to oversee the safety dimensions of any such facilities that might seek to locate in unincorporated parts of the county. It is a meaningful step, but a far cry from the overlapping buffer zones, setback requirements, masonry walls, and water capacity mandates the city was able to layer into its zoning code.

The gap illustrates a structural inequity baked into Texas law. A city like Kerrville can use its zoning authority as a sophisticated regulatory tool — engineering outcomes without triggering a takings claim. A county, facing the same threat, largely has to hope state fire codes and a part-time marshal are enough.

The stakes, illustrated in real time

The council’s caution is validated by events that unfolded in rapid and costly fashion just up the road — a cautionary tale that played out almost entirely within the same two weeks Kerrville was finalizing its own approach.

According to reporting by the Texas Tribune, Hill County’s Commissioners Court voted 3-2 on May 12 to impose a yearlong moratorium on data center and power plant construction in unincorporated areas of the county — what may have been the first county-level moratorium on data centers in Texas history, prompted by an influx of as many as eight proposed developments.

Before commissioners voted, Hill County Attorney David Holmes cautioned them that they risked being sued. “You’re damned if you do and damned if you don’t,” Holmes said, according to the Tribune. Hill County Judge Shane Brassell told Texas Standard he received lawsuit threats within 24 hours of the vote. “We’re gonna get sued,” he said.

He was right. Developer RCM Hill, LLC filed suit in federal court against the county, Brassell, and two commissioners, seeking to have the moratorium declared void and immediately blocked. The suit claimed just compensation under the Fifth and Fourteenth Amendments, argued the county had “exceeded its lawful powers,” and estimated damages in excess of $100 million.

Two weeks later, it was over. According to the Tribune’s Taylor Goldenstein, Hill County commissioners voted unanimously on June 5 to rescind the moratorium entirely, replacing it with a checklist of requirements for data center developers. Brassell framed it as a partial win — saying some less desirable projects had already left the county and the moratorium had bought time to learn more about others — but the retreat was unambiguous.

“Ultimately, we would have loved to have just been able to stop every project and everything, and that’s not what the moratorium did,” Brassell told the Tribune.

The Tribune noted this week that almost half of all planned data centers in Texas are expected to be built in unincorporated areas — precisely because counties, unlike cities, typically lack the zoning authority to block or meaningfully restrict development. Hill County’s brief, failed moratorium illustrated that reality in the starkest possible terms.

Kerrville’s layered approach — strict but not absolute, regulatory rather than prohibitory — was built with exactly that kind of outcome in mind. Whether it holds up if a developer ever does come calling remains to be seen. But the city at least enters that fight on firmer legal ground than Hill County did.