Petition challenges pair of data center agreements

(Guadalupe County) — A lawsuit has been filed — against Guadalupe County, the Guadalupe County Commissioners Court and the individual members of the court — alleging violations of the Texas Open Meetings Act, state conflict-of-interest laws, and the Texas Tax Code.

It’s all in connection with the approval of agreements for the proposed CloudBurst and Palomino Alpha data center projects.

The lawsuit was filed by the Data Center Action Coalition, along with three Guadalupe County residents, who are identified as Kara Finlayson, Barry Lindsey and Torrie Martin.

The plaintiffs are asking a court to invalidate several county approvals and stop implementation of the agreements while the case is litigated.

According to the petition, the two proposed data center projects would convert more than 1,700 acres of rural land into campuses totaling more than four million square feet. The plaintiffs also allege the agreements could result in an estimated $150 million in county property tax abatements.

Bobby Levinski, senior staff attorney for Save Our Springs Alliance, is representing the plaintiffs. He says the lawsuit centers on concerns over transparency.

“There’s a big transparency concern, and the Texas Open Meetings Act requires the county to give proper notice to the public about the actions that they’re going to take,” said Levinski. “The public deserves an opportunity to relay their concerns to their elected officials before they’re making these decisions. The Texas Open Meetings Act requires government to be operated in the sunshine.”

Among the allegations are claims that county agenda postings failed to adequately identify the scope of the projects and the tax incentives under consideration, “depriving residents of meaningful notice before commissioners took action.

It also claims commissioners engaged in private communications outside public meetings and improperly discussed aspects of the projects in executive session.

The lawsuit further alleges County Judge Kyle Kutscher had a conflict of interest because he owns land included in the proposed Palomino Alpha project area that is under contract for sale to the developer. The petition claims Kutscher should have formally disclosed that interest and recused himself from participating in discussions involving the project.

“If you look at the Palomino Alpha data center — what’s required is when the judge identifies that he has a financial stake in the matter of being discussed, he’s supposed to file an affidavit of conflict of interest, so that’s a formal process that he needs to disclose —  that he’s got a conflict. And then not only just abstain from the votes, but abstain from the consideration of the items, and he proceeded to participate in the meetings, oversaw the meetings, and then there’s records showing that he was actually talking to his fellow commissioners in advance of the votes pertaining to the Palomino Alpha site — that shows that he was trying to secure their votes. That is a concern with conflicts of interest. He has millions of dollars at stake in the deal. He’s abstaining from the votes in the public meeting, but then still, trying to lobby behind the scenes for his commissioners to vote for it. He’s taking that into an open meetings act concern, where he’s engaging in these conversations outside of the public eye. There’s also evidence that they had actually brought in the applicant into executive session in October of 2024 before they voted on the policy changes that were needed for these tax abatements. So, based on what we’re seeing in the record, it looks like not only did he participate in that executive session, but the applicant did as well,” said Levinski.

Levinski says the plaintiffs believe the county failed to meet the level of transparency required under state law.

“If you look at the pattern of what happened with this situation, you just see this pattern of lack of transparency, of conversations not being fully disclosed to the public and really trying to get this rushed through without a lot of public attention,” said Levinski.

The petition also challenges the county’s handling of the CloudBurst project, alleging officials improperly reconsidered a tax abatement agreement after it had initially failed without issuing new public notice.

“Things that I noticed with CloudBurst, that I think is really disturbing is — there’s a Texas tax code for them to post notice of a proposed tax abatement agreement, and that’s something that has to be done 30 days in advance of a meeting. You’re supposed to post the notice — the actual meeting — that people can attend. Then, they had a vote on it in February after posting that notice, and voted it down. And then they didn’t repost another notice. So the public wouldn’t know that they were going to be reconsidering that item without them actually posting that notice again. So, they didn’t comply with the Texas tax code statutory requirement for that notice for the public to even know to come out and speak,” said Levinski.

Levinski says the lawsuit seeks to resolve the legal questions before the county provides any tax incentives or additional approvals for both projects.

“We’re hopeful to get this matter resolved soon,”said Levinski. “We want to make sure that it gets resolved before any tax subsidies are given to the data centers and before any of the harms that are coming to the people that are around this area. These are farmers, ranchers and this is going to really change the quality of life of the area around them and what they want to see is this thing stopped.”

Prior to the filing of the lawsuit, Judge Kutscher said that he was ready and willing to defend the reported allegations that had been made against him.

He was scheduled to sit down for an interview with KWED and the Seguin Daily News.

That interview was set to be conducted Wednesday.

However, now that there is pending litigation, Kutscher stated that “Unfortunately, due to pending litigation,” he was unable to comment.

He told KWED that he wished that he could say more at this time.

The filing of the lawsuit also comes before today’s Crystal Clear Special Utility District meeting in which board members are set to discuss and or consider the request for water to help operate the Palomino Alpha project.

That meeting is set for 6:30 p.m. today in the Geronimo Community Center located at 280 Navarro Drive.