Relating to the creation of the Montgomery County Municipal Utility District No. 258; granting a limited power of eminent domain; providing authority to issue bonds; providing authority to impose assessments, fees, and taxes.
ModeratePlan for compliance
Medium Cost
Effective:2025-06-20
Enforcing Agencies
Texas Commission on Environmental Quality (TCEQ) • Montgomery County Municipal Utility District No. 258 Board of Directors • Texas Transportation Commission (regarding state road specifications) • Montgomery County Commissioners Court (regarding road standards in unincorporated areas)
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Compliance Analysis
Key implementation requirements and action items for compliance with this legislation
Implementation Timeline
Effective Date: June 20, 2025 (Immediate effect due to two-thirds vote).
Compliance Deadline:Immediate. Landowners must file a petition for temporary directors to initiate District operations. The "Notice to Purchasers" requirement for real estate sales triggers immediately upon the District's creation.
Agency Rulemaking: No new agency rulemaking is required; however, the District is subject to existing Texas Commission on Environmental Quality (TCEQ) rules regarding bond feasibility and district creation.
Immediate Action Plan
1.File Petition: Legal counsel must file the petition for appointment of temporary directors with the TCEQ immediately.
2.Update Sales Contracts: Insert the specific "Notice to Purchasers" regarding Montgomery County MUD No. 258 into all earnest money contracts for land within the District.
3.Verify ETJ: Commission a surveyor to confirm exact ETJ boundaries to determine which municipality must grant consent.
4.Secure Insurance: Purchase Public Official Bonds and Liability Insurance for the five incoming directors.
5.Draft Reimbursement Agreement: Prepare the contract defining which infrastructure costs are eligible for future repayment.
Operational Changes Required
Contracts
Reimbursement Agreements: Developers must execute a Reimbursement Agreement with the District. This contract governs the developer's advance of funds for infrastructure and the District's obligation to repay via future bond proceeds.
Public Bidding: All construction contracts funded by the District must comply with Texas Water Code Chapter 49 public bidding requirements. Private procurement policies are no longer sufficient for infrastructure work intended for reimbursement.
Municipal Consent: A development agreement or consent resolution must be negotiated with any municipality in whose Extraterritorial Jurisdiction (ETJ) the District lies prior to the confirmation election.
Hiring/Training
Board Appointments: You must identify and appoint five temporary directors. These individuals must be qualified (generally, owning land in the district or being a qualified voter) and must secure Public Official Bonds and D&O insurance immediately upon appointment.
Consultant Retention: The Board must retain Bond Counsel, a General Counsel, a District Engineer, and a Bookkeeper to manage regulatory filings and financial operations.
Reporting & Record-Keeping
Notice to Purchasers: Sellers of real property within the District boundaries must provide the statutory "Notice to Purchasers" (Texas Water Code § 49.452) to all buyers. This notice discloses the potential tax liability and bond authorization. Failure to provide this allows the buyer to terminate the contract at closing.
Election Orders: Strict retention of all confirmation election documents is required to withstand Attorney General review for future bond issuances.
TCEQ Filings: The District must file its creation order, director information, and boundary map with the TCEQ and the Montgomery County Clerk.
Fees & Costs
Election Costs: The Developer must front the cost of the confirmation and director election (likely May 2026).
Ad Valorem Taxes: Upon voter approval, the District will levy a new property tax layer. The rate is set annually by the Board based on debt service and O&M needs.
Bond Issuance Costs: Costs of issuance are paid from bond proceeds, but initial engineering and legal work are advanced by the developer.
Strategic Ambiguities & Considerations
Road Bond Cap (25% Rule): Section 8003A.0503 caps road bonds at 25% of the *assessed value* of real property. If vertical construction (homes/commercial) lags, the District cannot issue sufficient bonds to reimburse road costs. This creates a cash-flow gap risk for developers.
ETJ Jurisdiction: The bill requires consent from "each municipality." If the District boundaries overlap disputed ETJ lines between cities (e.g., Conroe vs. Willis), obtaining consent may stall until jurisdiction is resolved.
Maintenance Standards: If the County or City declines to accept the roads for maintenance, the District retains liability. This forces a higher Operation & Maintenance (O&M) tax rate, which impacts the marketability of the homes/lots.
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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.
The bill author has informed the committee of the need for a municipal utility district to be created in Montgomery County for the benefit of certain undeveloped land. H.B. 5652 seeks to provide for the creation of the Montgomery County Municipal Utility District No. 258.
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
H.B. 5652 amends the Special District Local Laws Code to create the Montgomery County Municipal Utility District No. 258, subject to applicable municipal consent and voter approval at a confirmation election. The bill, among other provisions, grants the district the power to undertake certain road projects and provides for the district's division. The bill authorizes the district, subject to certain requirements, to issue obligations and impose property, operation and maintenance, and contract taxes. The bill expressly prohibits the district from exercising the power of eminent domain if the bill does not receive a two-thirds vote of all the members elected to each house and establishes that this provision is not intended to be an expression of a legislative interpretation of the requirements of Section 17(c), Article I, Texas Constitution.
H.B. 5652 establishes that all applicable requirements relating to the following have been fulfilled and accomplished with respect to the bill:
·the legal notice of intention to introduce;
·governor action;
·Texas Commission on Environmental Quality recommendations; and
·the state constitution and laws and legislative rules and procedures.
EFFECTIVE DATE
On passage, or, if the bill does not receive the necessary vote, September 1, 2025.
Honorable Gary Gates, Chair, House Committee on Land & Resource Management
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB5652 by Metcalf (Relating to the creation of the Montgomery County Municipal Utility District No. 258; granting a limited power of eminent domain; providing authority to issue bonds; providing authority to impose assessments, fees, and taxes.), As Introduced
No significant fiscal implication to the State is anticipated.
It is assumed that any costs associated with the bill could be absorbed using existing resources.
Local Government Impact
The fiscal implications of the bill to the district cannot be determined due to the circumstances relating to the district's exercise of eminent domain power, issuance of bonds, or imposition of assessments, fees, and taxes being unknown. No fiscal implication to other units of local government is anticipated.
Source Agencies: b > td >
LBB Staff: b > td >
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Related Legislation
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HB5652 immediately establishes Montgomery County Municipal Utility District No. 258, creating a new political subdivision with the power to levy ad valorem taxes and issue tax-exempt bonds for infrastructure development on approximately 416 acres. Landowners within the District must immediately petition the TCEQ to appoint temporary directors to activate the District’s ability to execute reimbursement agreements and call a confirmation election.
Q
Who authored HB5652?
HB5652 was authored by Texas Representative William Metcalf during the Regular Session.
Q
When was HB5652 signed into law?
HB5652 was signed into law by Governor Greg Abbott on June 20, 2025.
Q
Which agencies enforce HB5652?
HB5652 is enforced by Texas Commission on Environmental Quality (TCEQ), Montgomery County Municipal Utility District No. 258 Board of Directors, Texas Transportation Commission (regarding state road specifications) and Montgomery County Commissioners Court (regarding road standards in unincorporated areas).
Q
How urgent is compliance with HB5652?
The compliance urgency for HB5652 is rated as "moderate". Businesses and organizations should review the requirements and timeline to ensure timely compliance.
Q
What is the cost impact of HB5652?
The cost impact of HB5652 is estimated as "medium". This may vary based on industry and implementation requirements.
Q
What topics does HB5652 address?
HB5652 addresses topics including special districts & authorities, special districts & authorities--municipal utility districts, special districts & authorities--water & utility and montgomery county municipal utility district no. 258.
Legislative data provided by LegiScanLast updated: November 25, 2025
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