SB1243

Regular Session

Relating to the dissolution of a public utility agency.

LowStandard timeline

Low Cost

Effective:2025-09-01

Enforcing Agencies

Participating Public Entities (Municipal Utility Districts, Special Utility Districts, etc.)

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: September 1, 2025
Compliance Deadline: Immediate upon the passage of a dissolution ordinance by the PUA and the surviving entity. There is no statutory transition period; the transfer of liability is instantaneous.
Agency Rulemaking: No new agency rulemaking is mandated by this bill. However, a "regulatory gray zone" will exist between the effective date of the local ordinance and the administrative processing of permit transfers by the TCEQ.

Immediate Action Plan

Audit Client List: Immediately query your CRM/ERP for any entity designated as a "Public Utility Agency."
Review Assignment Clauses: Determine if your current contracts allow for automatic assignment to a successor public entity or if you have grounds to renegotiate terms based on the change in credit risk.
Verify Insurance Tail: If you insure a PUA, determine if the absorbing entity’s policy includes retroactive coverage for the PUA’s prior acts, or if a "tail" policy is required before the dissolution closes.
Monitor Local Agendas: Watch the meeting agendas of client PUAs for "Dissolution Ordinances" starting Q4 2025.

Operational Changes Required

Contracts

Counterparty Substitution: Legal departments must identify all active Master Service Agreements (MSAs) with PUAs. While the statute mandates the transfer of obligations, you must verify if your contract contains "Change of Control" or "Notice" provisions that require the PUA to inform you prior to dissolution.
Bond Indentures: Counsel for bondholders must review trust indentures immediately. The dissolution of the issuer (the PUA) may trigger technical defaults or require legal opinions to confirm the tax-exempt status of the debt under the new obligor.

Hiring/Training

Accounts Receivable Training: Billing departments must be trained to recognize payments from the *successor entity* (e.g., a specific MUD or Municipality) to clear invoices originally issued to the dissolved PUA. Failure to update this will result in payment application errors.

Reporting & Record-Keeping

Vendor Master Updates: You must obtain a certified copy of the dissolution ordinance to legally justify changing the tax ID and billing entity in your vendor management system.
Chain of Title: Real estate and easement managers must ensure the absorbing entity files the ordinance or a deed transfer in county real property records to maintain a clear chain of title for any land or easements your contracts rely upon.

Fees & Costs

Administrative Costs: Expect internal administrative costs related to updating vendor files, re-issuing certificates of insurance, and legal review of credit risks. There are no new statutory fees imposed by the state.

Strategic Ambiguities & Considerations

Regulatory vs. Legal Transfer: The statute makes the transfer of permits (like TPDES or water rights) legal immediately upon the ordinance date. However, TCEQ databases will not reflect this change for weeks or months. Operators must clarify with the absorbing entity who has the authority to sign compliance reports during this interim period.
Contingent Liabilities: The law requires the assumption of "all obligations." It is ambiguous whether this covers contingent liabilities (e.g., potential lawsuits for prior acts not yet filed). Successor entities may attempt to dispute claims that were not "booked" at the time of dissolution.
Debt Capacity Conflicts: It is unclear how this statute interacts with a surviving entity's existing debt caps. If a MUD absorbs a PUA's debt but is near its own statutory or voter-authorized debt limit, the enforceability of that debt assumption could be litigated.

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Legislative Timeline

This bill's path through the Texas Legislature

TopicsSpecial Districts & Authorities Special Districts & Authorities--municipal Utility Districts Utilities Utilities--general

Official Analysis

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BILL ANALYSIS

Senate Research Center	S.B. 1243
89R9468 ANG-F	By: Birdwell
	Local Government
	3/28/2025
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

In 2011, Acton Municipal Utility District (AMUD) and Johnson County Special Utility District (JCSUD) together purchased the Surface Water Advanced Treatment System (SWATS) plant from the Brazos River Authority. In order to accomplish this two party ownership, legislation was passed in the Texas Legislature to allow for the creation of the Brazos Regional Public Utility Agency (BRPUA).

AMUD has now purchased JCSUD's interest in the plant, and is now the sole owner, giving them the capacity to provide enough water to serve their growing customer base for many years to come. Since AMUD is now the sole owner of the SWATS plant assets, the BRPUA as an entity is no longer needed, and now exists as an extra layer of government. In order to increase government efficiency and decrease administrative costs, dissolving BRPUA would integrate those operations within the AMUD organization.

In drafting the original dissolution legislation, some legal issues arose in which BRPUA cannot be dissolved because it is not a special utility district or a unit of government that is provided for in the Constitution. This legislation will allow for the dissolution of a public utility agency into a public entity, but only if the public entity is the only remaining participant in the public utility agency, allowing for better governmental efficiency.

As proposed, S.B. 1243 amends current law relating to the dissolution of a public utility agency.

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 572.053, Local Government Code, as follows:

Sec. 572.053. New heading: CHANGES IN PUBLIC ENTITIES PARTICIPATING IN OR DISSOLUTION OF PUBLIC UTILITY AGENCY.� (a) Creates this subdivision from existing text. Authorizes the public entities that participate in a public utility agency by concurrent ordinances to:

(1)� add a public entity to, or delete a public entity from, participation in the public utility agency; or

(2)� dissolve the public utility agency and transfer all obligations, assets, permits, and licenses of the public utility agency to the remaining public entities.

(b)� Authorizes a public entity that is the only remaining participant in a public utility agency by ordinance to dissolve the public utility agency in accordance with Subsection (a)(2).

SECTION 2.� Effective date: September 1, 2025.

Senate Authors

Sen. Brian BirdwellRepublican · Primary Author

House Sponsor

Rep. Shelby SlawsonRepublican · Primary Sponsor

Bill Text(with markup)

S.B. No. 1243

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

	AN ACT
	relating to the dissolution of a public utility agency.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. Section 572.053, Local Government Code, is
	amended to read as follows:
	Sec. 572.053. CHANGES IN PUBLIC ENTITIES PARTICIPATING IN
	OR DISSOLUTION OF PUBLIC UTILITY AGENCY. (a) The public entities
	that participate in a public utility agency may by concurrent
	ordinances:
	(1) add a public entity to, or delete a public entity
	from, participation in the public utility agency; or
	(2) dissolve the public utility agency and transfer
	all obligations, assets, permits, and licenses of the public
	utility agency to the remaining public entities.
	(b) A public entity that is the only remaining participant
	in a public utility agency may by ordinance dissolve the public
	utility agency in accordance with Subsection (a)(2).
	SECTION 2. This Act takes effect September 1, 2025.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION


March 28, 2025

TO:	Honorable Paul Bettencourt, Chair, Senate Committee on Local Government

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	SB1243 by Birdwell (Relating to the dissolution of a public utility agency.), As Introduced

No fiscal implication to the State is anticipated.

Local Government Impact

No significant fiscal implication to units of local government is anticipated.

Source Agencies:

LBB Staff:

JMc, SZ, BC, CWi

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Frequently Asked Questions

Common questions about SB1243

What does Texas SB1243 do?

SB1243 authorizes the unilateral dissolution of a Public Utility Agency (PUA) by a sole remaining participating public entity, mandating the automatic transfer of all assets, permits, and obligations to that surviving entity. Contractors, lenders, and insurers dealing with PUAs must prepare for immediate counterparty substitution and verify the creditworthiness of the absorbing entity, as this statute bypasses standard assignment negotiations. Implementation Timeline Effective Date: September 1, 2025 Compliance Deadline: Immediate upon the passage of a dissolution ordinance by the PUA and the surviving entity.

Who authored SB1243?

SB1243 was authored by Texas Senator Brian Birdwell during the Regular Session.

When was SB1243 signed into law?

SB1243 was signed into law by Governor Greg Abbott on June 20, 2025.

Which agencies enforce SB1243?

SB1243 is enforced by Participating Public Entities (Municipal Utility Districts, Special Utility Districts, etc.).

How urgent is compliance with SB1243?

The compliance urgency for SB1243 is rated as "low". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of SB1243?

The cost impact of SB1243 is estimated as "low". This may vary based on industry and implementation requirements.

What topics does SB1243 address?

SB1243 addresses topics including special districts & authorities, special districts & authorities--municipal utility districts, utilities and utilities--general.

Legislative data provided by LegiScanLast updated: November 25, 2025

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