Relating to the creation of the Fort Bend 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.
ModeratePlan for compliance
High Cost
Effective:2025-06-20
Enforcing Agencies
Texas Commission on Environmental Quality (TCEQ) • Fort Bend County Municipal Utility District No. 263 Board of Directors • Texas Transportation Commission (limited to state road projects)
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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).
Compliance Deadline:Immediate. "Notice to Purchaser" disclosures must be updated before any property transfer occurs. A petition for temporary directors must be filed to activate the District.
Agency Rulemaking: No new state rulemaking is required; however, the District itself must adopt internal orders and secure a "Consent Ordinance" from the local municipality (likely Richmond or Houston) before holding a confirmation election.
Immediate Action Plan
1.Map Verification: Confirm if your assets fall within the metes and bounds of the 1,617 acres defined in Section 2 of the Bill.
2.Update Disclosures: Halt any pending closings until the § 49.452 Notice to Purchaser is added to the contract.
3.File Petition: Submit the request for appointment of temporary directors to the TCEQ Districts Section immediately.
4.Negotiate Consent: Initiate contact with the relevant City Planning Department to secure the Municipal Consent Ordinance.
5.Secure Insurance: Obtain Directors & Officers (D&O) liability insurance and statutory bonds ($10,000) for the incoming Board members.
Operational Changes Required
Contracts
Real Estate Sales Contracts: You must immediately append the statutory "Notice to Purchaser" (Texas Water Code § 49.452) to all sales contracts within the District. Failure to do so allows buyers to terminate contracts and sue for damages.
Reimbursement Agreements: Developers must draft and execute agreements with the District to define how infrastructure costs will be repaid via future bond proceeds.
Construction Contracts: Infrastructure work intended for MUD reimbursement must now adhere to public bidding statutes (Texas Water Code Ch. 49) and potentially prevailing wage requirements mandated by the consenting municipality.
Hiring/Training
Board Appointments: You must identify and vet five (5) qualified individuals to serve as temporary directors and file a petition with the TCEQ for their appointment.
Professional Services: Retain specialized legal counsel and a bond engineer immediately to navigate the TCEQ creation audit and municipal consent negotiation.
Sales Staff Training: Sales teams must be trained to explain the new tax overlay and MUD structure to potential buyers to ensure transparency and compliance.
Reporting & Record-Keeping
TCEQ Filings: File the "Petition for Appointment of Temporary Directors" immediately.
Election Orders: The Board must adopt and record orders calling for a confirmation election (to approve the District, directors, and bond authorization).
Meeting Minutes: The District is a public entity; all Board meetings must comply with the Texas Open Meetings Act, requiring posted agendas and recorded minutes.
Fees & Costs
Election Costs: The developer must front the cost of the confirmation election (approx. $15k-$30k), reimbursable later via bond proceeds.
Bond Issuance Costs: Budget for legal, engineering, and financial advisory fees associated with future bond applications (usually 2-3% of bond par value).
New Tax Liability: Prepare for a new ad valorem tax levy (Operations & Maintenance + Debt Service) likely commencing in the 2026 tax year, subject to voter approval.
Strategic Ambiguities & Considerations
Municipal Consent Conditions: The law requires compliance with the consenting municipality's ordinance (Sec. 8018A.0305). Cities often use this leverage to impose stricter-than-county engineering standards or annexation agreements. Expect the city to dictate development standards, not just the county.
Road Powers: While the District has road powers, projects outside the municipality's corporate limits must meet county standards; projects inside must meet city standards. If the tract straddles jurisdictions, conflicting engineering requirements may arise.
Eminent Domain Scope: The "limited" eminent domain power allows condemnation for utilities and roads but excludes recreational facilities. Verify specific project alignments to ensure they fall within authorized condemnation purposes.
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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 Fort Bend County for the benefit of certain undeveloped land. H.B. 5656 seeks to provide for the creation of the Fort Bend County Municipal Utility District No. 263.
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. 5656 amends the Special District Local Laws Code to create the Fort Bend County Municipal Utility District No. 263, 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. 5656 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:
HB5656 by Lalani (Relating to the creation of the Fort Bend 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.), 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.
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Effective June 20, 2025, HB5656 creates Fort Bend County Municipal Utility District (MUD) No. 263, establishing a new taxing and regulatory jurisdiction over approximately 1,617 acres. Landowners and developers within these specific tracts must immediately initiate board appointment procedures with the TCEQ and update all real estate sales disclosures to reflect new bonding and tax liabilities, or risk contract voidability.
Q
Who authored HB5656?
HB5656 was authored by Texas Representative Suleman Lalani during the Regular Session.
Q
When was HB5656 signed into law?
HB5656 was signed into law by Governor Greg Abbott on June 20, 2025.
Q
Which agencies enforce HB5656?
HB5656 is enforced by Texas Commission on Environmental Quality (TCEQ), Fort Bend County Municipal Utility District No. 263 Board of Directors and Texas Transportation Commission (limited to state road projects).
Q
How urgent is compliance with HB5656?
The compliance urgency for HB5656 is rated as "moderate". Businesses and organizations should review the requirements and timeline to ensure timely compliance.
Q
What is the cost impact of HB5656?
The cost impact of HB5656 is estimated as "high". This may vary based on industry and implementation requirements.
Q
What topics does HB5656 address?
HB5656 addresses topics including fort bend county municipal utility district no. 263, special districts & authorities, special districts & authorities--municipal utility districts, special districts & authorities--water & utility and taxation.
Legislative data provided by LegiScanLast updated: November 25, 2025
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