SB14

2nd Special Session

Relating to the provision by a political subdivision of credits against impact fees to builders and developers for certain water conservation and reuse projects.

ModeratePlan for compliance

Low Cost

Effective:2026-01-01

Enforcing Agencies

Political Subdivisions (Municipalities) • Municipal Utility Districts (MUDs) • Water Control and Improvement Districts

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: January 1, 2026.
Compliance Deadline: Immediate Action Required. While the law takes effect in 2026, engineering and entitlement work occurring *now* for projects delivering in 2026 must incorporate the necessary technical justifications to qualify for these credits.
Agency Rulemaking: Local political subdivisions must establish specific procedures for calculating and awarding credits by the effective date. Warning: Expect significant delays and inconsistency across jurisdictions. You must be prepared to submit your own credit calculation methodology in the absence of finalized local rules.

Immediate Action Plan

Audit 2026 Pipeline: Identify all projects scheduled for impact fee assessment on or after January 1, 2026.
Strategic Delay: If a project is nearing fee assessment in late 2025, evaluate the ROI of delaying payment until January 2, 2026, to utilize the credit.
Pre-empt Local Rules: Do not wait for the City to publish forms. Instruct your engineers to draft a "Credit Eligibility Memo" now, quantifying savings based on the statutory text, and submit it during the platting phase.
Update Pro Formas: Add a line item for "Impact Fee Credits" to project budgets to accurately reflect improved margins.

Operational Changes Required

Contracts

Development Agreements: Update Chapter 380 and 395 agreements to explicitly reference SB14 rights. Define clearly whether the Master Developer or the vertical builder retains the benefit of the impact fee credit.
Vendor Warranties: Purchase agreements for reuse systems (graywater, rainwater harvesting) must include warranties guaranteeing performance metrics that meet local "service unit" reduction requirements.
MUD Reimbursements: Ensure that the valuation of conservation infrastructure in reimbursement agreements does not offset or negate the statutory impact fee credit.

Hiring/Training

Civil Engineering Scope: Amend engagement letters with engineering firms to include "Impact Fee Credit Analysis" as a deliverable. Engineers must be capable of quantifying "gallons per day" savings against the specific municipality's LUE (Living Unit Equivalent) baseline.
Sales Teams: Train commercial and residential sales staff to articulate the long-term utility savings of these systems, as the upfront capital cost is now partially subsidized by the fee credit.

Reporting & Record-Keeping

Technical Justification: You must generate engineering certifications proving that the proposed facility or system reduces the load on the municipal water supply.
Verification Data: Be prepared to submit post-installation monitoring data. Municipalities may condition the finalization of the credit on operational proof that the system works as designed.

Fees & Costs

Fee Reduction: This legislation lowers total development costs. Pro formas for 2026 projects should reflect a reduction in impact fees proportional to the projected water savings.
Upfront Costs: Anticipate a slight increase in soft costs for engineering analysis and legal negotiation to secure the credit.

Strategic Ambiguities & Considerations

"Fair and Consistent Manner": The statute requires credits but does not mandate a specific calculation formula. Municipalities may attempt to offer nominal credits (e.g., 1%) for significant savings. You must be prepared to challenge arbitrary calculations that do not reflect the actual reduction in capital burden on the utility.
The "Standard" Baseline: Credits are awarded for exceeding "standard compliance." As municipalities adopt stricter building codes, the baseline for "standard" rises, potentially shrinking the available credit. Lock in the baseline standard in your development agreement early.
Maintenance Perpetuity: The law is silent on long-term maintenance. Expect municipalities to demand that HOAs or commercial owners maintain reuse systems in perpetuity as a condition of the credit, creating long-term liability.

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Legislative Timeline

This bill's path through the Texas Legislature

TopicsCity Government City Government--general County Government County Government--general Environment Environment--water Fees & Other Nontax Revenue Fees & Other Nontax Revenue--local Political Subdivisions Water Water--conservation

Official Analysis

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BILL ANALYSIS

Senate Research Center	S.B. 14
89S20043 DNC-F	By: Perry et al.
	Finance
	8/15/2025
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

Under existing law, political subdivisions charge developers impact fees for new developments to cover costs associated with the additional needs placed on the political subdivisions' water and wastewater systems associated with the new development.

S.B. 14 is intended to incentivize the use of more efficient water and wastewater infrastructure and appliances in new developments by providing for credits against those impact fees when such equipment is installed by the developer, ultimately reducing both the cost of new housing and the impact of new developments to existing water and wastewater systems.

As proposed, S.B. 14 amends current law relating to the provision by a political subdivision of credits against impact fees to builders and developers for certain water conservation and reuse projects.

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 Subchapter B, Chapter 395, Local Government Code, by adding Section 395.0231, as follows:

Sec. 395.0231. CONSERVATION AND REUSE CREDITS AGAINST WATER AND WASTEWATER FEES. (a) Requires a political subdivision to provide a credit against water and wastewater impact fees otherwise assessed to a development to a builder or developer for the construction, contribution, or dedication of an eligible facility, system, or product that results in water reuse, conservation, or savings.

(b) Provides that a facility, system, or product eligible for a credit under this section includes a facility, system, or product that meets certain requirements.

(c) Requires a political subdivision that provides a credit under this section to establish procedures for calculating and applying the credits in a fair and consistent manner and for reviewing and approving credits under this section.

SECTION 2. Effective date: January 1, 2026.

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Bill Text(with markup)

S.B. No. 14

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

	AN ACT
	relating to the provision by a political subdivision of credits
	against impact fees to builders and developers for certain water
	conservation and reuse projects.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. Subchapter B, Chapter 395, Local Government
	Code, is amended by adding Section 395.0231 to read as follows:
	Sec. 395.0231. CONSERVATION AND REUSE CREDITS AGAINST WATER
	AND WASTEWATER FEES. (a) A political subdivision shall provide a
	credit against water and wastewater impact fees otherwise assessed
	to a development to a builder or developer for the construction,
	contribution, or dedication of an eligible facility, system, or
	product that results in water reuse, conservation, or savings.
	(b) A facility, system, or product eligible for a credit
	under this section includes a facility, system, or product that:
	(1) reduces per service unit water consumption, supply
	requirements, or necessary treatment and distribution
	infrastructure per service unit;
	(2) decreases the need of wastewater collection and
	treatment facilities per service unit;
	(3) diminishes the demand for stormwater and drainage
	facilities per service unit; or
	(4) integrates practices or technologies that achieve
	water efficiency, reuse, or conservation performance that exceeds
	standard compliance requirements.
	(c) A political subdivision that provides a credit under
	this section shall establish procedures for:
	(1) calculating and applying the credits in a fair and
	consistent manner; and
	(2) reviewing and approving credits under this
	section.
	SECTION 2. This Act takes effect January 1, 2026.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATURE 2nd CALLED SESSION 2025


August 15, 2025

TO:	Honorable Joan Huffman, Chair, Senate Committee on Finance

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	SB14 by Perry (Relating to the provision by a political subdivision of credits against impact fees to builders and developers for certain water conservation and reuse projects.), As Introduced

No fiscal implication to the State is anticipated.

Local Government Impact

There could be an impact on political subdivisions relating to the provision of credits against impact fees to builders and developers for certain water conservation and reuse projects as would be required by the bill.

Source Agencies:

LBB Staff:

JMc, CMA, SD, FV

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Frequently Asked Questions

Common questions about SB14

What does Texas SB14 do?

SB14 mandates that political subdivisions (municipalities, MUDs, WCIDs) provide financial credits against water and wastewater impact fees for developments incorporating water conservation or reuse systems. This legislation creates a statutory right to fee reductions for developers and builders, requiring immediate adjustments to pro formas and engineering workflows to capture these savings starting January 1, 2026. Implementation Timeline Effective Date: January 1, 2026.

Who authored SB14?

SB14 was authored by Texas Senator Charles Perry during the 2nd Special Session.

When was SB14 signed into law?

SB14 was signed into law by Governor Greg Abbott on September 17, 2025.

Which agencies enforce SB14?

SB14 is enforced by Political Subdivisions (Municipalities), Municipal Utility Districts (MUDs) and Water Control and Improvement Districts.

How urgent is compliance with SB14?

The compliance urgency for SB14 is rated as "moderate". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of SB14?

The cost impact of SB14 is estimated as "low". This may vary based on industry and implementation requirements.

What topics does SB14 address?

SB14 addresses topics including city government, city government--general, county government, county government--general and environment.

Legislative data provided by LegiScanLast updated: November 25, 2025

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