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Signed Into Law
Signed June 20, 2025Effective 2025-06-20
HB5652

Regular Session

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.

Government Affairs & Regulatory Compliance Analysis

HB5652: Government Affairs Overview

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.

Rep. William Metcalf·House Bill·Regular Session

Moderate
Medium Cost
Effective:2025-06-20
Enforcing Agencies

Montgomery County Commissioners Court (regarding road standards in unincorporated areas) • Montgomery County Municipal Utility District No. 258 Board of Directors • Texas Commission on Environmental Quality (TCEQ) • Texas Transportation Commission (regarding state road specifications)

Business Impact

Who HB5652 Affects

This legislation has regulatory implications for the following Texas businesses and organizations:

Regulatory Priority: moderate

Notable regulatory updates (effective 2025-06-20). Consider how these changes may affect your operations.

💧

Water

Affected business types:

  • Water utilities
  • Wastewater treatment facilities
  • Municipal water districts
  • Agricultural water users
View all water legislation

Estimated Cost Impact

mediumModerate costs expected for implementation.

Enforcing Agencies

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HB5652
Relating to the creation of the Montgomery County Municipal Utility District No. 258; granting a limited power of eminent domain; providing authority ...
Moderate Urgency
Heavily Contested
House Vote107 - 41
YEA
NAY
72% in favor148 voting
Senate Vote27 - 4
YEA
87% in favor31 voting
45
Total Opposition Votes
Cost Impact
Medium
Effective
2025-06-20
Enforcing Agencies
Montgomery County Commissioners ...Montgomery County Municipal Util...TCEQTexas Transportation Commission
Primary Author: Rep. William Metcalf
89th Texas Legislature
jdkey.com
01

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.

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Legislative Timeline

This bill's path through the Texas Legislature

Filed
Mar 20, 2025
Passed House
May 7, 2025
Passed Senate
May 28, 2025
Signed
Jun 20, 2025
Effective
Jun 20, 2025
TopicsSpecial Districts & AuthoritiesSpecial Districts & Authorities--municipal Utility DistrictsSpecial Districts & Authorities--water & UtilityMontgomery County Municipal Utility District No. 258
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House Authors

Rep. William MetcalfRepublican · Primary Author

Senate Sponsor

Sen. Charles CreightonRepublican · Primary Sponsor

Bill Text(with markup)

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Quick Reference

Frequently Asked Questions

Common questions about HB5652

Q

What does Texas HB5652 do?

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 Montgomery County Commissioners Court (regarding road standards in unincorporated areas), Montgomery County Municipal Utility District No. 258 Board of Directors, Texas Commission on Environmental Quality (TCEQ) and Texas Transportation Commission (regarding state road specifications).

Q

How significant are the changes in HB5652?

The regulatory priority for HB5652 is rated as "moderate". Businesses and organizations should review the legislation to understand potential impacts.

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.

Q

What are the key dates for HB5652?

Key dates for HB5652: Effective date is 2025-06-20. Consult with legal counsel regarding applicability.

Need Strategic Guidance on This Legislation?

JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.

Legislative data provided by LegiScanLast updated: January 11, 2026