$10 Billion Data Center Ignites Honest Texas Battle

A $10 billion data center proposal is advancing in central Texas, as InfraKey Capital moves to carve 521 acres out of Waco’s extraterritorial jurisdiction to make way for what would rank among the largest hyperscale computing facilities ever proposed in the United States. The petition, filed along Taylor Lane north of Lacy Lakeview, has set off a collision of municipal politics, community anxiety, and infrastructure improvisation that illustrates just how disruptive AI-driven capital investment can be when it lands in a small town unprepared for it. KWTX first reported the petition’s advancement on May 13.

Inside the $10 Billion Data Center Proposal

InfraKey Capital’s petition targets 521 acres along Taylor Lane, positioned just north of Lacy Lakeview — a city of roughly 8,000 residents in McLennan County. The company is seeking release of the land from Waco’s extraterritorial jurisdiction, a legal designation that gives Waco planning authority over unincorporated land surrounding its borders. Once released, the acreage would become eligible for annexation by Lacy Lakeview, enabling the smaller municipality to extend its governance — and collect tax revenue — from the proposed facility.

Under Texas law, Waco has 45 days to act on the ETJ release petition. Critically, if the statutory requirements are met, Waco is required to release the land — no public hearing, no city council vote. That procedural reality has left Waco officials in an uncomfortable position. Waco Tribune reporting notes that city officials have openly acknowledged being “kept in the dark” about the project’s development — a striking admission given the scale of investment proposed on their doorstep.

Lacy Lakeview City Manager Calvin Hodde has been supportive from the start, and the financial incentive is not difficult to understand: analysts estimate the facility could generate approximately $50 million per year in tax revenue for the city. For a municipality of 8,000 people, that figure represents a generational fiscal transformation. InfraKey, meanwhile, is operating under investor pressure — the company has made clear it wants to break ground within two years, and capital commitments of this magnitude do not wait patiently for local deliberation.

The Technical Hurdles

The path from petition to groundbreaking is not straightforward. One of the most unusual obstacles is geographic: Lacy Lakeview’s existing city limits do not physically connect to the proposed data center site. To annex the 521 acres, the city must first annex an intervening corridor — approximately three miles long and 1,000 feet wide — running through private property. This kind of linear annexation, sometimes called a “flag lot” or corridor annexation, is legally permissible under Texas law but operationally complex and politically sensitive when it crosses land owned by parties who may not welcome municipal authority.

The cooling infrastructure plan presents its own layer of complexity. Data centers at hyperscale require enormous quantities of water for thermal management, a need that has made these facilities flashpoints in water-scarce regions. InfraKey’s proposed solution is a technique informally called “sewer mining” — intercepting an existing sewer line, running the wastewater through membrane filtration and treatment systems, and using the resulting effluent to cool the facility in a closed-loop system. Critically, the plan does not draw from Lake Waco’s drinking water supply.

The arrangement carries an unusual upside for Waco: the city currently bears the cost of treating that wastewater. Under the proposed arrangement, Waco would offload treatment costs, gain capacity headroom for future population growth, and earn revenue from selling effluent to the facility. KXXV reported on the municipal negotiations surrounding this wastewater arrangement. Whether the sewer mining system can reliably meet the facility’s cooling demands at full operational scale remains an open engineering question.

Community Pushback

Residents near the proposed site have not been passive observers. Neighbors have packed city council meetings in recent weeks, raising concerns about noise from industrial-scale cooling equipment, increased truck and construction traffic, and the thermal footprint of a facility operating continuously at extreme power loads. The community response has carried genuine political weight.

In the May 2 municipal election, Amy Gage — who ran on an explicitly anti-data-center platform — was elected to the Lacy Lakeview city council, finishing as the top vote-getter. Her election injects a formal voice of opposition into the body that would need to approve annexation and infrastructure agreements, adding procedural friction to a timeline InfraKey’s investors are already pressing to accelerate.

Resident Karmay Huskey emerged as one of the more vocal skeptics at public meetings, challenging the project’s water consumption claims directly. “Data centers use an immense amount of water,” she told the Texas Tribune, questioning whether the closed-loop effluent system would truly insulate the region’s water supply from pressure. Her skepticism reflects a broader pattern playing out in communities across the Sun Belt, where data center developers have at times overstated the environmental neutrality of their water management strategies. The gap between a developer’s technical claims and a community’s lived experience of industrial-scale infrastructure rarely closes quickly — and in Lacy Lakeview, that gap is already widening.

Why This Matters Beyond Waco

This $10 billion data center proposal is not an anomaly. It is a symptom of a structural shift in the American economy driven by the accelerating demand for AI computing capacity. Hyperscale data centers — facilities capable of housing tens of thousands of servers and consuming hundreds of megawatts of power — are being proposed at a pace and scale the industry has never seen. The economics of large language models, inference infrastructure, and AI training require physical facilities of enormous density, and developers are racing to secure land, power contracts, and water rights ahead of competitors.

Texas has become a primary destination for this capital. The state’s relatively permissive land-use laws, available acreage, and deregulated energy markets have made it attractive to hyperscale developers. The ETJ release mechanism that InfraKey is now using — a provision designed to allow orderly land-use transitions — was not written with $10 billion data centers in mind, and the Waco situation is likely to prompt broader conversations in Austin about whether Texas’s municipal annexation framework is equipped for the current investment cycle.

The ripple effects of this infrastructure buildout extend far beyond real estate and municipal finance. AI is becoming embedded in the operational fabric of businesses at every scale. Tools that small businesses rely on for customer engagement, sales automation, and communications — from marketing automation platforms to AI chatbots to AI voice agents — run on the same underlying infrastructure being debated in Lacy Lakeview council chambers. The automation and CRM capabilities that small businesses increasingly depend on are, ultimately, downstream of capital investment decisions being made in places like McLennan County, Texas. The distance between a hyperscale data center and a small business’s customer pipeline is shorter than it appears.

For Waco and Lacy Lakeview, the immediate question is whether local governance structures — designed for incremental growth — can process a $10 billion data center without fracturing the relationships between municipalities, residents, and investors that any major project ultimately requires to succeed.

FAQ: Data Centers and AI Infrastructure

What is a hyperscale data center?
A hyperscale data center is a facility built to support massive-scale computing operations. These installations typically occupy hundreds of thousands of square feet and draw hundreds of megawatts of power. They serve major technology companies and AI infrastructure providers with concentrated computing capacity at a scale that conventional facilities cannot match. As a $10 billion data center, the proposed Lacy Lakeview facility would rank among the largest single data center investments in U.S. history.

What is an extraterritorial jurisdiction (ETJ), and why does it matter here?
In Texas, municipalities hold planning and zoning authority over a buffer zone of unincorporated land surrounding their borders — the extraterritorial jurisdiction. This prevents neighboring cities from annexing land that a city may eventually want to incorporate. InfraKey Capital’s petition asks Waco to release 521 acres from its ETJ so Lacy Lakeview can annex the site. Texas law requires Waco to comply within 45 days if statutory conditions are satisfied, giving Waco limited leverage over the outcome despite being the larger city.

How do data centers use water, and what is “sewer mining”?
Most large data centers use water-based cooling systems to manage the heat generated by servers running at high load. This can require millions of gallons per year, making water access a critical siting factor. “Sewer mining” refers to intercepting municipal wastewater before it reaches a treatment plant, processing it through membrane filtration, and reusing the effluent — in this case, for cooling. The approach avoids drawing from potable water supplies and can reduce municipal treatment costs, though its long-term reliability at hyperscale remains a subject of scrutiny.

What are the main concerns residents have raised?
Neighbors near the proposed site have flagged several issues:

• Noise pollution from industrial cooling systems running around the clock
• Increased heavy truck and construction traffic on local roads
• Heat output raising surrounding temperatures in residential areas
• Water consumption claims that may understate actual demand
• Loss of rural character and property value impacts

Why are so many large data centers being proposed right now?
The rapid expansion of artificial intelligence — particularly large language models and inference infrastructure — has created unprecedented demand for computing capacity. Training and running AI systems requires vast numbers of specialized processors operating continuously, which in turn requires the physical facilities, power infrastructure, and cooling systems that only hyperscale data centers can provide. Investment in this infrastructure has accelerated sharply, with developers competing to secure sites, power contracts, and regulatory approvals ahead of rivals. The Lacy Lakeview proposal is one of dozens of similarly scaled projects advancing across the United States.