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Signed Into Law
Signed June 20, 2025Effective 2025-09-01
HB5699

Regular Session

Relating to the authority of the Harris County Municipal Utility District No. 405 to exclude territory; validating and confirming all previous acts of the district.

Government Affairs & Regulatory Compliance Analysis

HB5699: Government Affairs Overview

HB5699 establishes a statutory mechanism for landowners within Harris County Municipal Utility District No. 405 to remove undeveloped territory from the District's jurisdiction, effective September 1, 2025. This legislation allows property owners to exit the tax base only upon executing a contract that guarantees repayment of the land's pro rata share of existing district debt, either via lump-sum settlement or continued specific taxation.

Rep. Mike Schofield·House Bill·Regular Session

Low
Low Cost
Effective:2025-09-01
Enforcing Agencies

Harris County Municipal Utility District No. 405 Board of Directors

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HB5699
Relating to the authority of the Harris County Municipal Utility District No. 405 to exclude territory; validating and confirming all previous acts of...
Low Urgency
Heavily Contested
House Vote91 - 40
YEA
NAY
69% in favor131 voting
Senate Vote28 - 3
YEA
90% in favor31 voting
43
Total Opposition Votes
Cost Impact
Low
Effective
2025-09-01
Enforcing Agencies
Harris County Municipal Utility ...
Primary Author: Rep. Mike Schofield
89th Texas Legislature
jdkey.com
01

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

  • Effective Date: September 1, 2025
  • Compliance Deadline: To remove property from the 2026 tax roll, the Order of Exclusion must be recorded with Harris County Real Property Records prior to January 1, 2026.
  • Agency Rulemaking: No state-level rulemaking required. However, the HCMUD 405 Board of Directors effectively acts as the regulatory body, setting the specific terms and "advantageous" conditions for exclusion contracts on a case-by-case basis.

Immediate Action Plan

  • 1. Asset Review: Identify any undeveloped acreage within HCMUD 405 intended for exclusion and determine if utility service is currently required.
  • 2. Debt Analysis: Commission a preliminary financial analysis to estimate the pro rata debt share based on the District's most recent audit.
  • 3. Draft Term Sheet: Prepare a term sheet for the District Board proposing the exclusion, specifically defining "indebtedness" to exclude unissued bonds.
  • 4. Utility Transition: If the land requires utilities, secure alternative service provider commitments (e.g., City of Houston or private utility) before the Effective Date.
  • 5. Calendar Filing: Schedule the recording of the Exclusion Order for late 2025 to ensure the property is removed from the District's tax rolls for the 2026 tax year.

Operational Changes Required

Contracts

  • New Exclusion Agreements: Landowners seeking exit must negotiate and execute a written contract with the District. This contract must explicitly state:
  • The method for calculating the property's pro rata share of district debt.
  • The payment election (lump sum vs. continued tax levy).
  • Terms for the cessation of district services (water/sewer/drainage).
  • Lender Covenants: Borrowers must review loan covenants regarding "Material Adverse Changes" or Loan-to-Value ratios, as removing land from a MUD eliminates future reimbursement potential for infrastructure and alters the tax status of the collateral.

Hiring/Training

  • Legal & Finance Coordination: In-house counsel and finance directors must collaborate to validate the District's debt calculation. Do not rely solely on the District's figures; independent verification of the "pro rata share" is required before signing.
  • Title Operations: Title officers must update search protocols for this District to identify "Orders of Exclusion" and verify whether the statutory lien for debt service has been released or remains active.

Reporting & Record-Keeping

  • County Filings: The District is legally required to file the Order of Exclusion in the Real Property Records of Harris County.
  • Lien Releases: Upon full payment of the debt obligation, the landowner must secure and record a formal Release of Lien to clear the title.
  • Audit Trail: Maintain certified copies of the Exclusion Order and payment receipts to defend against any future erroneous tax assessments by the District or County Tax Assessor-Collector.

Fees & Costs

  • Debt Settlement Cost: The primary cost is the "Exit Fee"—the pro rata share of the District's total outstanding indebtedness. This is a significant capital event.
  • Administrative Fees: Expect to reimburse the District for legal and engineering fees incurred during the exclusion process, as permitted under the "advantageous terms" provision.

Strategic Ambiguities & Considerations

  • "Advantageous" Terms: Section 8024A.0201(a) grants the Board broad discretion to require terms "advantageous to the district." The Board may leverage this to demand concessions beyond debt repayment, such as retaining easements, rights-of-way, or requiring drainage interconnectivity agreements.
  • Debt Calculation Methodology: The statute does not mandate a specific formula for the "pro rata share."
  • *Risk:* The District may attempt to include *authorized but unissued* bonds in the calculation to maximize the exit fee.
  • *Mitigation:* Define "indebtedness" strictly in the contract to apply only to bonds actually sold and outstanding at the time of exclusion.

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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
May 1, 2025
Passed House
May 16, 2025
Passed Senate
May 27, 2025
Signed
Jun 20, 2025
Effective
Sep 1, 2025
TopicsHarris County Municipal Utility District No. 405Special Districts & AuthoritiesSpecial Districts & Authorities--municipal Utility Districts
03

House Authors

Rep. Mike SchofieldRepublican · Primary Author

Senate Sponsor

Sen. Joan HuffmanRepublican · Primary Sponsor

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

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View more Harris County Municipal Utility District No. 405 legislation
Quick Reference

Frequently Asked Questions

Common questions about HB5699

Q

What does Texas HB5699 do?

HB5699 establishes a statutory mechanism for landowners within Harris County Municipal Utility District No. 405 to remove undeveloped territory from the District's jurisdiction, effective September 1, 2025. This legislation allows property owners to exit the tax base only upon executing a contract that guarantees repayment of the land's pro rata share of existing district debt, either via lump-sum settlement or continued specific taxation.

Q

Who authored HB5699?

HB5699 was authored by Texas Representative Mike Schofield during the Regular Session.

Q

When was HB5699 signed into law?

HB5699 was signed into law by Governor Greg Abbott on June 20, 2025.

Q

Which agencies enforce HB5699?

HB5699 is enforced by Harris County Municipal Utility District No. 405 Board of Directors.

Q

How significant are the changes in HB5699?

The regulatory priority for HB5699 is rated as "low". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of HB5699?

The cost impact of HB5699 is estimated as "low". This may vary based on industry and implementation requirements.

Q

What topics does HB5699 address?

HB5699 addresses topics including harris county municipal utility district no. 405, special districts & authorities and special districts & authorities--municipal utility districts.

Q

What are the key dates for HB5699?

Key dates for HB5699: Effective date is 2025-09-01. 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