HB4370

Regular Session

Relating to the projects undertaken by a public improvement district, municipal management district, water control and improvement district, fresh water supply district, or municipal utility district.

LowStandard timeline

Low Cost

Effective:2025-06-20

Enforcing Agencies

Public Utility Commission of Texas (PUC) • Municipal Utility Districts (MUDs) • Public Improvement Districts (PIDs) • Water Control and Improvement Districts (WCIDs) • Fresh Water Supply Districts (FWSDs) • Municipal Management Districts (MMDs)

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: June 20, 2025 (Immediate effect due to supermajority vote).
Compliance Deadline: Immediate. Districts may begin contracting for geothermal projects and authorizing reimbursements today. There is no grace period for updating relocation reimbursement protocols.
Agency Rulemaking: TCEQ/PUC Regulatory Gap. While the law is effective, the Texas Commission on Environmental Quality (TCEQ) has not yet updated bond application checklists to include geothermal engineering standards. Expect a 6-12 month "gray zone" where applications involving these assets face heightened scrutiny and Requests for Information (RFIs).

Immediate Action Plan

Immediate: Audit active Development Agreements and insert "geothermal water conveyance" into the definition of authorized improvements.
Immediate: Direct accounting teams to create specific General Ledger codes for geothermal infrastructure costs to ensure clean segregation for future bond applications.
Short-Term: For MMDs, review all pending utility relocation orders to ensure the district is prepared to pay relocation costs as now required by law.
Short-Term: Instruct District Engineers to update the Capital Improvement Plan (CIP) to reflect geothermal assets before the next bond election.

Operational Changes Required

Contracts

Reimbursement Agreements: Developers must amend existing agreements with districts to explicitly define "Geothermal Water Conveyance Facilities" as "Qualified Projects" or "Reimbursable Improvements."
Master Service Agreements (MSAs): District operators must update MSAs to include the maintenance and operation of geothermal loops.
Utility Relocation Agreements: For Municipal Management Districts (MMDs), contracts regarding utility relocation must reflect that the District bears the cost of moving geothermal lines, per Section 375.093(c).

Hiring/Training

Engineering Scope: Civil engineering firms must expand Capital Improvement Plan (CIP) scopes to design geothermal conveyance systems that meet public utility standards.
Operator Certification: District operators require training on the specific maintenance protocols for geothermal loops (pressure maintenance, leak detection) distinct from potable water systems.

Reporting & Record-Keeping

Cost Segregation: Accounting teams must track "conveyance" costs (pipes, loops, pumps) separately from "generation" or "end-user equipment" (heat pumps). Only conveyance is explicitly authorized for reimbursement; commingling these costs risks bond application denial.
Asset Conveyance: Deeds and Bills of Sale transferring assets from developer to district must specifically list geothermal infrastructure.

Fees & Costs

Bond Authorization: No new state fees, but District Engineer Reports must now quantify geothermal costs to justify increased bond issuance amounts.
Relocation Reimbursement: MMDs must budget for 100% reimbursement of relocation costs for geothermal lines displaced by district projects.

Strategic Ambiguities & Considerations

"Conveyance" vs. "Equipment": The statute authorizes "conveyance" systems. It does not explicitly authorize the heat exchange units located within private buildings or central generation plants. The TCEQ is likely to interpret this strictly. Strategy: Structure reimbursement requests to isolate the piping/loop infrastructure (the "conveyance") to avoid regulatory rejection of the entire asset bundle.
PUC vs. TCEQ Jurisdiction: Section 2 references projects benefiting entities regulated by the Public Utility Commission (PUC). This creates potential jurisdictional friction regarding which agency's engineering standards apply. Strategy: Adhere to the stricter of the two standards until a Memorandum of Understanding is established between agencies.

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Legislative Timeline

This bill's path through the Texas Legislature

TopicsEnergy Energy--geothermal Special Districts & Authorities Special Districts & Authorities--miscellaneous Special Districts & Authorities--municipal Utility Districts Special Districts & Authorities--water & Utility Special Districts & Authorities--water Control Improve Dist.

Official Analysis

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BILL ANALYSIS

C.S.H.B. 4370

By: Metcalf

Intergovernmental Affairs

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The bill author has informed the committee that growing interest in renewable energy and sustainable infrastructure has led to the identification of efficient energy sources, such as geothermal water conveyance systems. The bill author has also informed the committee that special purpose districts should be allowed to support development and undertake infrastructure projects for these energy sources to promote innovative, sustainable projects while reducing strain on the Texas electric grid and preserving local control and fiscal accountability in public infrastructure development. C.S.H.B. 4370 seeks to address this issue by expanding the scope of permissible projects for certain special districts to include the development of geothermal water conveyance systems.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 4370 amends the Local Government Code and Water Code to provide for the authority of certain special districts to authorize a project related to geothermal water conveyance.

Public Improvement Districts

C.S.H.B. 4370 authorizes a public improvement project under the Public Improvement District Assessment Act to include the acquisition, construction, or improvement of geothermal water conveyance facilities or improvements. The bill establishes that the payment of expenses relating to the acquisition, construction, or improvement of water, geothermal water conveyance, wastewater, or drainage facilities or improvements may also include expenses related to the operation and maintenance of a geothermal water conveyance facility or improvement. The bill establishes that the costs of improvements may be paid or reimbursed by any combination of qualifying methods if the improvements are dedicated, conveyed, leased, or otherwise provided to or for the benefit of an entity subject to the regulatory jurisdiction of the Public Utility Commission of Texas.

Municipal Management Districts

C.S.H.B. 4370 requires the relocation, adjustment, raising, lowering, rerouting, or changing the grade of or altering the construction of geothermal water conveyance facilities to be accomplished at the sole cost and expense of a municipal management district and establishes that damages that are suffered by the owners of the facilities must be borne by the district, if the district requires such an action in exercising any of its applicable powers. The bill authorizes an improvement project or services provided by a municipal management district to include the construction, acquisition, improvement, relocation, operation, maintenance, or provision of geothermal water conveyance facilities or improvements.

Water Control and Improvement Districts

C.S.H.B. 4370 authorizes a water control and improvement district to provide for the preservation and conservation of all natural resources of the state through the use of geothermal water conveyance systems. The bill authorizes such a district to construct all works and improvements necessary for the construction of geothermal water conveyance systems necessary for the conservation of natural resources.

Fresh Water Supply Districts

C.S.H.B. 4370 authorizes a fresh water supply district to do the following:

·purchase, construct, acquire, own, operate, repair, improve, and extend geothermal water conveyance systems in the district; and

·issue bonds payable from property taxes, revenues, or a combination thereof for such purposes.

Municipal Utility Districts

C.S.H.B. 4370 specifies that the purpose of preserving all natural resources of the state for which a municipal utility district is created includes the use of geothermal water conveyance systems for the preservation of natural resources. The bill authorizes a municipal utility district to issue bonds for the purpose of purchasing, constructing, acquiring, owning, operating, repairing, improving, or extending any geothermal water conveyance system.

EFFECTIVE DATE

September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 4370 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

While both the introduced and the substitute require the relocation, adjustment, raising, lowering, rerouting, or changing the grade of or altering the construction of geothermal water conveyance facilities to be accomplished at the sole cost and expense of a municipal management district, the introduced applied that requirement to any geothermal water conveyance facilities or property, whereas the substitute removes the specification that the requirement applies to any such facilities or property.

The substitute includes provisions absent from the introduced that do the following:

·authorize a water control and improvement district to construct all works and improvements necessary for the construction of geothermal water conveyance systems necessary for the conservation of natural resources; and

·authorize a fresh water supply district to purchase, construct, acquire, own, operate, repair, improve, and extend geothermal water conveyance systems in the district and to issue bonds payable from property taxes, revenues, or a combination thereof for such purposes.

The substitute omits the provision included in the introduced requiring a fresh water supply district to hold an election in an applicable manner before the district may exercise the power given under the bill's provisions.

House Authors

Rep. William MetcalfRepublican · Primary Author

Joint Authors

Coauthors (3)

Senate Sponsor

Sen. Cesar BlancoDemocrat · Primary Sponsor

Bill Text(with markup)

H.B. No. 4370

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

	AN ACT
	relating to the projects undertaken by a public improvement
	district, municipal management district, water control and
	improvement district, fresh water supply district, or municipal
	utility district.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. Section 372.003, Local Government Code, is
	amended by amending Subsection (b) and adding Subsection (b-2) to
	read as follows:
	(b) A public improvement project may include:
	(1) landscaping;
	(2) erection of fountains, distinctive lighting, and
	signs;
	(3) acquiring, constructing, improving, widening,
	narrowing, closing, or rerouting of sidewalks or of streets, any
	other roadways, or their rights-of-way;
	(4) construction or improvement of pedestrian malls;
	(5) acquisition and installation of pieces of art;
	(6) acquisition, construction, or improvement of
	libraries;
	(7) acquisition, construction, or improvement of
	off-street parking facilities;
	(8) acquisition, construction, improvement, or
	rerouting of mass transportation facilities;
	(9) acquisition, construction, or improvement of
	water, geothermal water conveyance, wastewater, or drainage
	facilities or improvements;
	(10) the establishment or improvement of parks;
	(11) projects similar to those listed in Subdivisions
	(1)-(10);
	(12) acquisition, by purchase or otherwise, of real
	property in connection with an authorized improvement;
	(13) special supplemental services for improvement
	and promotion of the district, including services relating to
	advertising, promotion, health and sanitation, water and
	wastewater, public safety, security, business recruitment,
	development, recreation, and cultural enhancement;
	(14) payment of expenses incurred in the
	establishment, administration, and operation of the district; and
	(15) the development, rehabilitation, or expansion of
	affordable housing.
	(b-2) Payment of expenses under Subsection (b)(9) may also
	include expenses related to the operation and maintenance of a
	geothermal water conveyance facility or improvement.
	SECTION 2. Section 372.023(a), Local Government Code, is
	amended to read as follows:
	(a) Costs of improvements may be paid or reimbursed by any
	combination of the methods described by this section if the
	improvements are dedicated, conveyed, leased, or otherwise
	provided to or for the benefit of:
	(1) a municipality or county;
	(2) a political subdivision or other entity exercising
	the powers granted under this subchapter as authorized by other
	law; [or]
	(3) an entity that:
	(A) is approved by the governing body of an
	entity described by Subdivision (1) or (2); and
	(B) is authorized by order, ordinance,
	resolution, or other official action to act for an entity described
	by Subdivision (1) or (2); or
	(4) an entity subject to the regulatory jurisdiction
	of the Public Utility Commission of Texas.
	SECTION 3. Section 375.093(c), Local Government Code, is
	amended to read as follows:
	(c) If a district, in exercising any of the powers conferred
	by this chapter, requires the relocation, adjustment, raising,
	lowering, rerouting, or changing the grade of or altering the
	construction of any street, alley, highway, overpass, underpass, or
	road, any railroad track, bridge, or other facilities or property,
	any electric lines, conduits, or other facilities or property, any
	telephone or telegraph lines, conduits, or other facilities or
	property, any gas transmission or distribution pipes, pipelines,
	mains, or other facilities or property, any water, geothermal water
	conveyance, sanitary sewer or storm sewer pipes, pipelines, mains,
	or other facilities, or property, any cable television lines,
	cables, conduits, or other facilities or property, or any other
	pipelines and any facilities or properties relating to those
	pipelines, those relocations, adjustments, raising, lowering,
	rerouting, or changing of grade, or altering of construction must
	be accomplished at the sole cost and expense of the district, and
	damages that are suffered by the owners of the property or
	facilities shall be borne by the district.
	SECTION 4. Section 375.112(a), Local Government Code, is
	amended to read as follows:
	(a) An improvement project or services provided by the
	district may include the construction, acquisition, improvement,
	relocation, operation, maintenance, or provision of:
	(1) landscaping; lighting, banners, and signs;
	streets and sidewalks; pedestrian skywalks, crosswalks, and
	tunnels; seawalls; marinas; drainage and navigation improvements;
	pedestrian malls; solid waste, water, sewer, and power facilities,
	including electrical, gas, steam, cogeneration, and chilled water
	facilities and geothermal water conveyance facilities or
	improvements; parks, plazas, lakes, rivers, bayous, ponds, and
	recreation and scenic areas; historic areas; fountains; works of
	art; off-street parking facilities, bus terminals, heliports, and
	mass transit systems; theatres, studios, exhibition halls,
	production facilities and ancillary facilities in support of the
	foregoing; and the cost of any demolition in connection with
	providing any of the improvement projects;
	(2) other improvements similar to those described in
	Subdivision (1);
	(3) the acquisition of real property or any interest
	in real property in connection with an improvement, project, or
	services authorized by this chapter, Chapter 54, Water Code, or
	Chapter 365 or 441, Transportation Code;
	(4) special supplemental services for advertising,
	economic development, promoting the area in the district, health
	and sanitation, public safety, maintenance, security, business
	recruitment, development, elimination or relief of traffic
	congestion, recreation, and cultural enhancement; and
	(5) expenses incurred in the establishment,
	administration, maintenance, and operation of the district or any
	of its improvements, projects, or services.
	SECTION 5. Section 51.121(b), Water Code, is amended to
	read as follows:
	(b) A water control and improvement district organized
	under the provisions of Article XVI, Section 59, of the Texas
	Constitution, may provide for:
	(1) the control, storage, preservation, and
	distribution of its water and floodwater and the water of its rivers
	and streams for irrigation, power, and all other useful purposes;
	(2) the reclamation and irrigation of its arid,
	semiarid, and other land which needs irrigation;
	(3) the reclamation, drainage, conservation, and
	development of its forests, water, and hydroelectric power;
	(4) the navigation of its coastal and inland water;
	(5) the control, abatement, and change of any shortage
	or harmful excess of water;
	(6) the protection, preservation, and restoration of
	the purity and sanitary condition of water within the state; and
	(7) the preservation and conservation of all natural
	resources of the state, including through the use of geothermal
	water conveyance systems for the conservation of natural resources.
	SECTION 6. Section 51.125, Water Code, is amended to read as
	follows:
	Sec. 51.125. CONSTRUCTION OF IMPROVEMENTS. A district may
	construct all works and improvements necessary:
	(1) for the prevention of floods;
	(2) for the irrigation of land in the district;
	(3) for the drainage of land in the district,
	including drainage ditches or other facilities for drainage;
	(4) for the construction of levees to protect the land
	in the district from overflow;
	(5) to alter land elevations where correction is
	needed; [~~and~~]
	(6) to supply water for municipal uses, domestic uses,
	power and commercial purposes, and all other beneficial uses or
	controls; and
	(7) for the construction of geothermal water
	conveyance systems necessary for the conservation of natural
	resources.
	SECTION 7. Subchapter D, Chapter 53, Water Code, is amended
	by adding Section 53.123 to read as follows:
	Sec. 53.123. GEOTHERMAL WATER CONVEYANCE SYSTEMS. A
	district may purchase, construct, acquire, own, operate, repair,
	improve, and extend geothermal water conveyance systems in the
	district.
	SECTION 8. Section 53.182, Water Code, is amended by adding
	Subsection (d) to read as follows:
	(d) For the purposes of Section 53.123, a district may issue
	bonds payable from ad valorem taxes, revenues, or a combination
	thereof.
	SECTION 9. Section 54.012, Water Code, is amended to read as
	follows:
	Sec. 54.012. PURPOSES OF A DISTRICT. A district shall be
	created for the following purposes:
	(1) the control, storage, preservation, and
	distribution of its storm water and floodwater, the water of its
	rivers and streams for irrigation, power, and all other useful
	purposes;
	(2) the reclamation and irrigation of its arid,
	semiarid, and other land needing irrigation;
	(3) the reclamation and drainage of its overflowed
	land and other land needing drainage;
	(4) the conservation and development of its forests,
	water, and hydroelectric power;
	(5) the navigation of its inland and coastal water;
	(6) the control, abatement, and change of any shortage
	or harmful excess of water;
	(7) the protection, preservation, and restoration of
	the purity and sanitary condition of water within the state; and
	(8) the preservation of all natural resources of the
	state, including through the use of geothermal water conveyance
	systems for the preservation of natural resources.
	SECTION 10. Section 54.501, Water Code, is amended to read
	as follows:
	Sec. 54.501. ISSUANCE OF BONDS. The district may issue its
	bonds for any purpose authorized by this chapter, Chapter 49, or
	other applicable laws, including the purpose of purchasing,
	constructing, acquiring, owning, operating, repairing, improving,
	or extending any district works, improvements, facilities, plants,
	equipment, and appliances needed to accomplish the purposes set
	forth in Section 54.012 for which a district shall be created,
	including works, improvements, facilities, plants, equipment, and
	appliances needed to provide a waterworks system, sanitary sewer
	system, storm sewer system, geothermal water conveyance system, and
	solid waste disposal system.
	SECTION 11. This Act takes effect September 1, 2025.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION


April 14, 2025

TO:	Honorable Cecil Bell, Chair, House Committee on Intergovernmental Affairs

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	HB4370 by Metcalf (Relating to the projects that may be undertaken by a public improvement district, municipal utility district, fresh water supply district, water control and improvement district or municipal management district.), As Introduced

No fiscal implication to the State is anticipated.

Local Government Impact

No significant fiscal implication to units of local government is anticipated.

Source Agencies:

LBB Staff:

JMc, SZ, BC, CWi

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Frequently Asked Questions

Common questions about HB4370

What does Texas HB4370 do?

Effective June 20, 2025, HB4370 expands the statutory authority of Texas special districts (MUDs, PIDs, WCIDs, MMDs) to finance, construct, and maintain "geothermal water conveyance systems. " This legislation unlocks tax-exempt bond financing for geothermal infrastructure in real estate developments, allowing developers to treat these energy systems as reimbursable public utilities similar to water and sewer lines. Implementation Timeline Effective Date: June 20, 2025 (Immediate effect due to supermajority vote).

Who authored HB4370?

HB4370 was authored by Texas Representative William Metcalf during the Regular Session.

When was HB4370 signed into law?

HB4370 was signed into law by Governor Greg Abbott on June 20, 2025.

Which agencies enforce HB4370?

HB4370 is enforced by Public Utility Commission of Texas (PUC), Municipal Utility Districts (MUDs), Public Improvement Districts (PIDs), Water Control and Improvement Districts (WCIDs), Fresh Water Supply Districts (FWSDs) and Municipal Management Districts (MMDs).

How urgent is compliance with HB4370?

The compliance urgency for HB4370 is rated as "low". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of HB4370?

The cost impact of HB4370 is estimated as "low". This may vary based on industry and implementation requirements.

What topics does HB4370 address?

HB4370 addresses topics including energy, energy--geothermal, special districts & authorities, special districts & authorities--miscellaneous and special districts & authorities--municipal utility districts.

Legislative data provided by LegiScanLast updated: November 25, 2025

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