Q
What does Texas HB5654 do?
HB5654 establishes Montgomery County Municipal Utility District No. 263, transforming an 87. 24-acre tract into a political subdivision with eminent domain and taxation authority.
Signed Into Law
Signed June 20, 2025Effective 2025-06-20
HB5654
Regular Session
Relating to the creation of the Montgomery County Municipal Utility District No. 263; 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
HB5654: Government Affairs Overview
HB5654 establishes Montgomery County Municipal Utility District No. 263, transforming an 87. 24-acre tract into a political subdivision with eminent domain and taxation authority.
Rep. William Metcalf·House Bill·Regular Session
LowStandard timeline
Low Cost
Effective:2025-06-20
Enforcing Agencies
City of Conroe (or applicable municipality with ETJ) • Montgomery County Commissioners Court • Texas Commission on Environmental Quality (TCEQ) • Texas Transportation Commission
Business Impact
Who HB5654 Affects
This legislation has regulatory implications for the following Texas businesses and organizations:
Regulatory Priority: low
Standard regulatory changes (effective 2025-06-20). Review during normal business planning.
💧
Water
Affected business types:
- Water utilities
- Wastewater treatment facilities
- Municipal water districts
- Agricultural water users
Estimated Cost Impact
lowMinimal cost impact anticipated.
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HB5654
Relating to the creation of the Montgomery County Municipal Utility District No. 263; granting a limited power of eminent domain; providing authority ...
Low Urgency
Heavily Contested
House Vote101 - 47
YEA
NAY
68% in favor148 voting
Senate Vote27 - 4
YEA
87% in favor31 voting
51
Total Opposition Votes
Cost Impact
Low
Effective
2025-06-20Enforcing Agencies
City of ConroeMontgomery County Commissioners ...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 due to supermajority vote).
- Compliance Deadline: January 1, 2026. This is the earliest date landowners may file the petition with TCEQ to appoint temporary directors (Section 8016A.0202).
- Agency Rulemaking: No new rulemaking required. However, the District is subject to existing TCEQ rules (Title 30, Texas Administrative Code) regarding bond feasibility and director appointments.
Immediate Action Plan
- 1. Freeze Petition Filing: Do not attempt to file the petition for temporary directors with TCEQ before January 1, 2026; it will be rejected as statutorily premature.
- 2. Initiate Municipal Consent: Open negotiations with the City of Conroe (or relevant ETJ authority) immediately to secure the Consent Resolution.
- 3. Audit Engineering Plans: Review all current civil engineering plans against the specific road and utility standards of the consenting municipality to ensure future reimbursability.
- 4. Vet Directors: Select five temporary directors and ensure they meet eligibility requirements (residency or land ownership) to avoid delays in Q1 2026.
Operational Changes Required
Contracts
- Reimbursement Agreements: Developers must draft agreements stipulating that infrastructure costs incurred now will be reimbursed by the District later. Warning: Ensure these contracts align with TCEQ allowable cost rules; non-compliant costs will be rejected during the bond application process.
- Municipal Consent Agreement: You must negotiate and execute a consent agreement with the City of Conroe (or applicable municipality) prior to the confirmation election. This agreement typically imposes stricter development standards than county code.
- Public Works Transition: Future construction contracts funded by the District must include statutory requirements for public works, including prevailing wage rates, payment bonds, and performance bonds.
Hiring/Training
- Director Appointments: You must identify five qualified temporary directors. These individuals must be prepared to execute $10,000 faithful performance bonds and take the oath of office immediately upon TCEQ appointment in 2026.
- Professional Services: Retain Bond Counsel and a District Engineer immediately to prepare the creation petition and consent negotiations.
Reporting & Record-Keeping
- Petition for Creation: Prepare a petition detailing the holders of a majority of the assessed value of the land. This document must be ready for filing on January 2, 2026.
- Road Standards Verification: Per Section 8016A.0304, you must document that all road projects meet the construction standards of the municipality (if in ETJ) or county (if outside). Obtain written approval from the Texas Transportation Commission if state roads are involved.
Fees & Costs
- Ad Valorem Taxes: The District is authorized to levy operation and maintenance (O&M) taxes and unlimited contract taxes, subject to voter approval.
- Bond Issuance: The District may issue tax-exempt bonds. Note: Road bonds are strictly capped at 25% of the assessed value of real property in the district at the time of issuance.
Strategic Ambiguities & Considerations
- The "Governance Gap": The District exists legally as of June 20, 2025, but has no Board until 2026. Any infrastructure built during this interim period is at the developer's risk. If construction standards do not match what the future Board (and municipality) requires, the District cannot purchase the assets.
- Assessed Value vs. Bond Capacity: The 25% cap on road bonds creates a financing lag. You cannot issue significant road debt until vertical development creates sufficient tax base value.
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JD Key Consulting specializes in Texas regulatory compliance strategy. Work directly with James Dickey—former Chairman of the Republican Party of Texas—to understand this bill's impact on your operations and develop an actionable compliance plan.
Schedule a ConsultationInformation 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
Effective
Jun 20, 2025
Filed
Mar 24, 2025
Passed House
May 7, 2025
Passed Senate
May 28, 2025
Signed
Jun 20, 2025
Effective
Jun 20, 2025
03
House Authors
Senate Sponsor
Fiscal NoteView Original
Related Legislation
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More from Rep. William Metcalf
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- HB1894Relating to designating November as Veterans Month.
- HB2143Relating to the designation of a portion of Farm-to-Market Road 1097 in Montgomery County as the Army Specialist Joey Lenz Memorial Highway.
Related by Topic
- HB3810Relating to the dissolution of the Rose City Municipal Utility District.
- HB4370Relating 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.
- HB4894Relating to the boundaries of, and validating certain acts and proceedings of, the Creedmoor Municipal Utility District.
- HB5437Relating to the validation of the creation of and certain acts of the Austin County Municipal Utility District No. 1.
- HB5650Relating to the creation of the Travis County Municipal Utility District No. 40; granting a limited power of eminent domain; providing authority to issue bonds; providing authority to impose assessments, fees, and taxes.
Quick Reference
Frequently Asked Questions
Common questions about HB5654
Q
Who authored HB5654?
HB5654 was authored by Texas Representative William Metcalf during the Regular Session.
Q
When was HB5654 signed into law?
HB5654 was signed into law by Governor Greg Abbott on June 20, 2025.
Q
Which agencies enforce HB5654?
HB5654 is enforced by City of Conroe (or applicable municipality with ETJ), Montgomery County Commissioners Court, Texas Commission on Environmental Quality (TCEQ) and Texas Transportation Commission.
Q
How significant are the changes in HB5654?
The regulatory priority for HB5654 is rated as "low". Businesses and organizations should review the legislation to understand potential impacts.
Q
What is the cost impact of HB5654?
The cost impact of HB5654 is estimated as "low". This may vary based on industry and implementation requirements.
Q
What topics does HB5654 address?
HB5654 addresses topics including montgomery county municipal utility district no. 263, special districts & authorities, special districts & authorities--municipal utility districts and special districts & authorities--water & utility.
Q
What are the key dates for HB5654?
Key dates for HB5654: 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