SB3037

Regular Session

Relating to the creation of La Cima Municipal Management District No. 1; providing authority to issue bonds; providing authority to impose assessments, fees, and taxes; granting a limited power of eminent domain.

ModeratePlan for compliance

High Cost

Effective:2025-09-01

Enforcing Agencies

La Cima Municipal Management District No. 1 Board of Directors • City of San Marcos • Texas Commission on Environmental Quality (TCEQ)

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: September 1, 2025 (Note: If the bill passes with a 2/3 supermajority in both houses, it becomes effective immediately upon signature).
Compliance Deadline: Immediate upon the Effective Date. Statutory notices must be included in all Purchase and Sale Agreements (PSAs) executed on or after this date to avoid contract termination rights.
Agency Rulemaking: The District Board of Directors will convene between June and September 2025 to adopt bylaws and disbursement procedures. There is no central state rulemaking; you must monitor local Board resolutions for tax rates and assessment methodologies.

Immediate Action Plan

1. Map Your Assets: Confirm which specific tracts fall within the legal description of La Cima MMD No. 1.
2. Update Legal Templates: Insert the required Texas Water Code statutory notice into all PSAs effective immediately.
3. Audit Leases: Review current commercial leases to determine if District assessments can be passed through to tenants; update future lease forms.
4. Monitor Board Formation: Identify the initial five directors and subscribe to public notice of their first meeting to track tax rate proposals.

Operational Changes Required

Contracts

Purchase and Sale Agreements (PSAs): You must amend PSAs to include the statutory "Notice to Purchaser" required by the Texas Water Code. Failure to provide this notice at or before closing grants the buyer the right to terminate the contract.
Commercial Leases: Review and amend Triple Net (NNN) lease templates. Ensure the definition of "Operating Expenses" or "Taxes" explicitly includes "special assessments" and "district administration fees." Standard "ad valorem tax" clauses may not cover infrastructure assessments, leaving the landlord liable for these costs.
Vendor Contracts: Contracts with the District for construction or services are subject to government procurement laws, including Form 1295 disclosures, prevailing wage requirements (Chapter 2258, Government Code), and payment bond requirements (Chapter 2253, Government Code).

Hiring/Training

Sales & Closing Teams: Train staff on the mandatory disclosure requirements. They must understand that the District is a separate taxing entity from the City of San Marcos and Hays County.
Accounts Payable: Instruct finance teams to treat District assessments as priority payments. Non-payment results in foreclosure proceedings identical to standard property tax foreclosures.

Reporting & Record-Keeping

Lien Tracking: Assessments create a first and prior lien superior to commercial mortgages. You must track Board resolutions imposing these assessments to avoid technical default on lending covenants regarding "permitted encumbrances."
Division Orders: If the District exercises its authority to divide into multiple districts (Sec. 4012.0310), you must record which specific new district holds jurisdiction over your assets, as tax rates and debt obligations may diverge.

Fees & Costs

Ad Valorem Taxes: A new tax layer will be applied to real property, subject to voter approval and caps set by the Board.
Infrastructure Assessments: The Board may impose assessments for improvements. These are personal liabilities of the owner (Sec. 4012.0402(b)(3)), not just in rem liens.
Petition Costs: Financing often requires a petition from owners of a majority of the assessed value. If you sign a petition, you are effectively authorizing a tax on your own holdings.

Strategic Ambiguities & Considerations

Eminent Domain Authority: The District’s power to condemn land (Sec. 4012.0311) is contingent on the final legislative vote count. If the bill passes with less than a 2/3 vote in either house, the District is legally prohibited from exercising eminent domain. Action: Verify the final Senate and House journals to confirm if this power exists.
Assessment Methodology: The law allows the Board to determine how assessments are calculated (e.g., per square foot, per front foot, or based on value). This methodology will be defined in future Board resolutions, not the statute itself.

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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.

Legislative Timeline

This bill's path through the Texas Legislature

Filed

Filed

TopicsLa Cima Municipal Management District No. 1 San Marcos, City of Special Districts & Authorities Special Districts & Authorities--miscellaneous

Official Analysis

View HRO Analysis View All Bill Documents

BILL ANALYSIS

Senate Research Center	S.B. 3037
89R11159 JTZ-F	By: Zaffirini
	Local Government
	5/2/2025
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

The ongoing development in Central Texas, particularly in Hays County, has created a need for large-scale infrastructure improvements, including water, wastewater, drainage, and roadway projects. Article XVI, Section 59, and Article III, Section 52, of the Texas Constitution authorize the creation of local districts to fund such improvements through debt issuance, taxes, and assessments.

S.B. 3037 would create the La Cima Municipal Management District No. 1 (district) in Hays County, covering approximately 1,400 acres, to finance infrastructure for the La Cima project's expansion. The bill grants authority under Chapters 49 of the Water Code and Chapter 375 of the Local Government Code, including limited eminent domain powers and the ability to issue bonds.

This legislation follows the municipal management district template but includes provisions for dividing the district as per the municipal utility district template. It also limits assessment powers to infrastructure that will be operated or maintained by the City of San Marcos.

Landowners have worked with the City of San Marcos to secure consent for the bill, including an agreement on utility services, development density, and phased annexation. This agreement is expected to be finalized by the San Marcos City Council on April 15, 2025.

Notice of intent was published in the Hays Free Press on January 29, 2025, and mailed to the landowner as required by law.

As proposed, S.B. 3037 amends current law relating to the creation of La Cima Municipal Management District No. 1, provides authority to issue bonds, provides authority to impose assessments, fees, and taxes, and grants a limited power of eminent domain.

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 Subtitle C, Title 4, Special District Local Laws Code, by adding Chapter 4012, as follows:

CHAPTER 4012. LA CIMA MUNICIPAL MANAGEMENT DISTRICT NO. 1

Sets forth standard language for the creation of the La Cima Municipal Management District No. 1 (district) in the city of San Marcos (city). Sets forth standards, procedures, requirements, and criteria for:

General provisions, creation, purpose, and approval of the district (Sections 4012.0101-4012.0108);

Size, composition, appointment, compensation, and terms of the board of directors of the district (board), including the naming of the initial directors (Sections 4012.0201-4012.0203);

Powers and duties of the district (Sections 4012.0301-4012.0311);

General financial provisions and authority to impose a tax and issue bonds and obligations for the district (Sections 4012.0401-4012.0506); and

Dissolution of the district by the board (Section 4012.0901).

Authorizes the district to exercise the power of eminent domain.

SECTION 2. Sets forth the initial boundaries of the district.

SECTION 3. Provides that all requirements of the constitution and the laws of this state and the rules and procedures of the legislature with respect to the notice, introduction, and passage of this Act are fulfilled and accomplished.

SECTION 4. (a) Provides that Section 4012.0311 (Eminent Domain), Special District Local Laws Code, as added by Section 1 of this Act, is contingent upon the passage of this Act.

(b) Provides that, if this Act does not receive a two-thirds vote of all the members elected to each house, Subchapter C (Powers and Duties), Chapter 4012, Special District Local Laws Code, as added by Section 1 of this Act, is amended by adding Section 4012.0311, as follows:

Sec. 4012.0311. NO EMINENT DOMAIN POWER. Prohibits the district from exercising the power of eminent domain.

SECTION 5. Effective date: upon passage or September 1, 2025.

Senate Authors

Sen. Judith ZaffiriniDemocrat · Primary Author

House Sponsor

Rep. Erin ZwienerDemocrat · Primary Sponsor

Bill Text(with markup)

S.B. No. 3037

relating to the creation of La Cima Municipal Management District

No. 1; providing authority to issue bonds; providing authority to

impose assessments, fees, and taxes; granting a limited power of

eminent domain.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle C, Title 4, Special District Local Laws

Code, is amended by adding Chapter 4012 to read as follows:

CHAPTER 4012. LA CIMA MUNICIPAL MANAGEMENT DISTRICT NO. 1

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 4012.0101. DEFINITIONS. In this chapter:

(1) "Board" means the district's board of directors.

(2) "City" means the City of San Marcos.

(3) "Director" means a board member.

(4) "District" means La Cima Municipal Management

District No. 1.

Sec. 4012.0102. NATURE OF DISTRICT. La Cima Municipal

Management District No. 1 is a special district created under

Section 59, Article XVI, Texas Constitution.

Sec. 4012.0103. PURPOSE; DECLARATION OF INTENT. (a) The

creation of the district is essential to accomplish the purposes of

Sections 52 and 52-a, Article III, and Section 59, Article XVI,

Texas Constitution, and other public purposes stated in this

chapter.

(b) By creating the district and in authorizing the city and

other political subdivisions to contract with the district, the

legislature has established a program to accomplish the public

purposes set out in Section 52-a, Article III, Texas Constitution.

develop, encourage, and maintain employment, commerce,

transportation, housing, tourism, recreation, the arts,

entertainment, economic development, safety, and the public

welfare in the district.

(d) This chapter and the creation of the district may not be

interpreted to relieve the city from providing the level of

services provided as of the effective date of the Act enacting this

chapter to the area in the district. The district is created to

supplement and not to supplant city services provided in the

district.

Sec. 4012.0104. FINDINGS OF BENEFIT AND PUBLIC PURPOSE.

(a) All land and other property included in the district will

benefit from the improvements and services to be provided by the

district under powers conferred by Sections 52 and 52-a, Article

III, and Section 59, Article XVI, Texas Constitution, and other

powers granted under this chapter.

(b) The district is created to serve a public use and

benefit.

and is essential to further the public purposes of:

(1) developing and diversifying the economy of the

state;

(2) eliminating unemployment and underemployment; and

(3) developing or expanding transportation and

commerce.

(d) The district will:

(1) promote the health, safety, and general welfare of

residents, employers, potential employees, employees, visitors,

and consumers in the district, and of the public;

(2) provide needed funding for the district to

preserve, maintain, and enhance the economic health and vitality of

the district territory as a community and business center;

(3) promote the health, safety, welfare, and enjoyment

of the public by providing pedestrian ways and by landscaping and

developing certain areas in the district, which are necessary for

the restoration, preservation, and enhancement of scenic beauty;

and

(4) provide for water, wastewater, drainage, road, and

recreational facilities for the district.

(e) Pedestrian ways along or across a street, whether at

grade or above or below the surface, and street lighting, street

landscaping, parking, and street art objects are parts of and

necessary components of a street and are considered to be a street

or road improvement.

(f) The district will not act as the agent or

instrumentality of any private interest even though the district

will benefit many private interests as well as the public.

Sec. 4012.0105. INITIAL DISTRICT TERRITORY. (a) The

district is initially composed of the territory described by

Section 2 of the Act enacting this chapter.

(b) The boundaries and field notes contained in Section 2 of

the Act enacting this chapter form a closure. A mistake in the

field notes or in copying the field notes in the legislative process

does not affect the district's:

(1) organization, existence, or validity;

(2) right to issue any type of bonds for the purposes

for which the district is created or to pay the principal of and

interest on the bonds;

(3) right to impose or collect an assessment or tax; or

(4) legality or operation.

Sec. 4012.0106. ELIGIBILITY FOR INCLUSION IN SPECIAL ZONES.

All or any part of the area of the district is eligible to be

included in:

(1) a tax increment reinvestment zone created under

Chapter 311, Tax Code; or

(2) a tax abatement reinvestment zone created under

Chapter 312, Tax Code.

Sec. 4012.0107. APPLICABILITY OF MUNICIPAL MANAGEMENT

DISTRICTS LAW. Except as otherwise provided by this chapter,

Chapter 375, Local Government Code, applies to the district.

Sec. 4012.0108. CONSTRUCTION OF CHAPTER. This chapter

shall be liberally construed in conformity with the findings and

purposes stated in this chapter.

SUBCHAPTER B. BOARD OF DIRECTORS

Sec. 4012.0201. GOVERNING BODY; TERMS. (a) The district is

governed by a board of five elected directors who serve staggered

terms of four years.

(b) Directors are elected in the manner provided by

Subchapter D, Chapter 49, Water Code.

Sec. 4012.0202. COMPENSATION; EXPENSES. A director is

entitled to receive fees of office and reimbursement for actual

expenses as provided by Section 49.060, Water Code. Sections

375.069 and 375.070, Local Government Code, do not apply to the

board.

Sec. 4012.0203. INITIAL DIRECTORS. (a) The initial board

consists of the following directors:

Pos. No.

Name of Director

Kevin Pogue

Doug Botts

Adam Van Ackeren

John Gurasich

James Schellhase

(b) Of the initial directors, the terms of directors

appointed for positions one through three expire June 1, 2027, and

the terms of directors appointed for positions four and five expire

June 1, 2029.

SUBCHAPTER C. POWERS AND DUTIES

Sec. 4012.0301. GENERAL POWERS AND DUTIES. The district

has the powers and duties necessary to accomplish the purposes for

which the district is created.

Sec. 4012.0302. IMPROVEMENT PROJECTS AND SERVICES. (a) The

district, using any money available to the district for the

purpose, may provide, design, construct, acquire, improve,

relocate, operate, maintain, or finance an improvement project or

service authorized under this chapter or Chapter 375, Local

Government Code.

(b) The district may contract with a governmental or private

entity to carry out an action under Subsection (a).

governmental function or service for the purposes of Chapter 791,

Government Code.

Sec. 4012.0303. NONPROFIT CORPORATION. (a) The board by

resolution may authorize the creation of a nonprofit corporation to

assist and act for the district in implementing a project or

providing a service authorized by this chapter.

(b) The nonprofit corporation:

(1) has each power of and is considered to be a local

government corporation created under Subchapter D, Chapter 431,

Transportation Code; and

(2) may implement any project and provide any service

authorized by this chapter.

nonprofit corporation. The board of directors of the nonprofit

corporation shall serve in the same manner as the board of directors

of a local government corporation created under Subchapter D,

Chapter 431, Transportation Code, except that a board member is not

required to reside in the district.

Sec. 4012.0304. LAW ENFORCEMENT SERVICES. To protect the

public interest, the district may contract with a qualified party,

including the city, to provide law enforcement services in the

district for a fee.

Sec. 4012.0305. MEMBERSHIP IN CHARITABLE ORGANIZATIONS.

The district may join and pay dues to a charitable or nonprofit

organization that performs a service or provides an activity

consistent with the furtherance of a district purpose.

Sec. 4012.0306. ECONOMIC DEVELOPMENT PROGRAMS. (a) The

district may engage in activities that accomplish the economic

development purposes of the district.

(b) The district may establish and provide for the

administration of one or more programs to promote state or local

economic development and to stimulate business and commercial

activity in the district, including programs to:

(1) make loans and grants of public money; and

(2) provide district personnel and services.

and exercise the economic development powers provided to

municipalities by:

(1) Chapter 380, Local Government Code; and

(2) Subchapter A, Chapter 1509, Government Code.

Sec. 4012.0307. PARKING FACILITIES. (a) The district may

acquire, lease as lessor or lessee, construct, develop, own,

operate, and maintain parking facilities or a system of parking

facilities, including lots, garages, parking terminals, or other

structures or accommodations for parking motor vehicles off the

streets and related appurtenances.

(b) The district's parking facilities serve the public

purposes of the district and are owned, used, and held for a public

purpose even if leased or operated by a private entity for a term of

years.

necessary components of a street and are considered to be a street

or road improvement.

(d) The development and operation of the district's parking

facilities may be considered an economic development program.

Sec. 4012.0308. DISBURSEMENTS AND TRANSFERS OF MONEY. The

board by resolution shall establish the number of directors'

signatures and the procedure required for a disbursement or

transfer of district money.

Sec. 4012.0309. ADDING OR EXCLUDING LAND. Except as

provided by Section 4012.0310, the district may add or exclude land

in the manner provided by Subchapter J, Chapter 49, Water Code, or

by Subchapter H, Chapter 54, Water Code.

Sec. 4012.0310. DIVISION OF DISTRICT. (a) The district may

be divided into two or more new districts only if the district:

(1) has no outstanding bonded debt; and

(2) is not imposing ad valorem taxes.

(b) This chapter applies to any new district created by the

division of the district, and a new district has all the powers and

duties of the district.

may not, at the time the new district is created, contain any land

outside the area described by Section 2 of the Act enacting this

chapter.

(d) The board, on its own motion or on receipt of a petition

signed by the owner or owners of a majority of the assessed value of

the real property in the district, may adopt an order dividing the

district.

(e) An order dividing the district must:

(1) name each new district;

(2) include the metes and bounds description of the

territory of each new district;

(3) appoint initial directors for each new district;

and

(4) provide for the division of assets and liabilities

between or among the new districts.

(f) On or before the 30th day after the date of adoption of

an order dividing the district, the district shall file the order

with the Texas Commission on Environmental Quality and record the

order in the real property records of each county in which the

district is located.

(g) Municipal consent to the creation of the district and to

the inclusion of land in the district granted under Section

4012.0506 acts as municipal consent to the creation of any new

district created by the division of the district and to the

inclusion of land in the new district.

Sec. 4012.0311. EMINENT DOMAIN. The district may exercise

the power of eminent domain in the manner provided by Section

49.222, Water Code.

SUBCHAPTER D. ASSESSMENTS

Sec. 4012.0401. PETITION REQUIRED FOR FINANCING SERVICES

AND IMPROVEMENTS WITH ASSESSMENTS. (a) The board may not finance a

service or improvement project with assessments under this chapter

unless a written petition requesting that service or improvement

has been filed with the board.

(b) A petition filed under Subsection (a) must be signed by

the owners of a majority of the assessed value of real property in

the district subject to assessment according to the most recent

certified tax appraisal roll for the county.

Sec. 4012.0402. ASSESSMENTS; LIENS FOR ASSESSMENTS. (a)

The board by resolution may impose and collect an assessment for any

purpose authorized by this chapter in all or any part of the

district.

(b) An assessment, a reassessment, or an assessment

resulting from an addition to or correction of the assessment roll

by the district, penalties and interest on an assessment or

reassessment, an expense of collection, and reasonable attorney's

fees incurred by the district:

(1) are a first and prior lien against the property

assessed;

(2) are superior to any other lien or claim other than

a lien or claim for county, school district, or municipal ad valorem

taxes; and

(3) are the personal liability of and a charge against

the owners of the property even if the owners are not named in the

assessment proceedings.

resolution imposing the assessment until the date the assessment is

paid. The board may enforce the lien in the same manner that the

board may enforce an ad valorem tax lien against real property.

(d) The board may make a correction to or deletion from the

assessment roll that does not increase the amount of assessment of

any parcel of land without providing notice and holding a hearing in

the manner required for additional assessments.

SUBCHAPTER E. TAXES AND BONDS

Sec. 4012.0501. TAX ELECTION REQUIRED. (a) The district

must hold an election in the manner provided by Chapter 49, Water

Code, or, if applicable, Chapter 375, Local Government Code, to

obtain voter approval before the district may impose an ad valorem

tax.

(b) Section 375.243, Local Government Code, does not apply

to the district.

Sec. 4012.0502. OPERATION AND MAINTENANCE TAX. (a) If

authorized by a majority of the district voters voting at an

election under Section 4012.0501, the district may impose an

operation and maintenance tax on taxable property in the district

in the manner provided by Section 49.107, Water Code, for any

district purpose, including to:

(1) maintain and operate the district;

(2) construct or acquire improvements; or

(3) provide a service.

(b) The board shall determine the operation and maintenance

tax rate. The rate may not exceed the rate approved at the

election.

Sec. 4012.0503. AUTHORITY TO BORROW MONEY AND TO ISSUE

BONDS AND OTHER OBLIGATIONS. (a) The district may borrow money on

terms determined by the board.

(b) The district may issue, by public or private sale,

bonds, notes, or other obligations payable wholly or partly from ad

valorem taxes, assessments, impact fees, revenue, contract

payments, grants, or other district money, or any combination of

those sources of money, to pay for any authorized district purpose.

bonds, notes, or other obligations payable wholly or partly from

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Fiscal NoteView Original

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION


May 2, 2025

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

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	SB3037 by Zaffirini (Relating to the creation of La Cima Municipal Management District No. 1; providing authority to issue bonds; providing authority to impose assessments, fees, and taxes; granting a limited power of eminent domain.), 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.

Source Agencies:

LBB Staff:

JMc, SZ, BC, CWi

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Frequently Asked Questions

Common questions about SB3037

What does Texas SB3037 do?

SB3037 establishes the La Cima Municipal Management District No. 1 in San Marcos, creating a new political subdivision with the power to levy ad valorem taxes, issue bonds, and impose infrastructure assessments. Property owners and developers within the district boundaries face immediate exposure to new superior liens and potential personal liability for assessments, requiring updates to financial modeling and real estate transaction documents.

Who authored SB3037?

SB3037 was authored by Texas Senator Judith Zaffirini during the Regular Session.

When was SB3037 signed into law?

SB3037 was signed into law by Governor Greg Abbott on May 29, 2025.

Which agencies enforce SB3037?

SB3037 is enforced by La Cima Municipal Management District No. 1 Board of Directors, City of San Marcos and Texas Commission on Environmental Quality (TCEQ).

How urgent is compliance with SB3037?

The compliance urgency for SB3037 is rated as "moderate". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of SB3037?

The cost impact of SB3037 is estimated as "high". This may vary based on industry and implementation requirements.

What topics does SB3037 address?

SB3037 addresses topics including la cima municipal management district no. 1, san marcos, city of, special districts & authorities and special districts & authorities--miscellaneous.

Legislative data provided by LegiScanLast updated: November 25, 2025

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Relating to the creation of La Cima Municipal Management District No. 1; providing authority to issue bonds; providing authority to impose assessments, fees, and taxes; granting a limited power of eminent domain.

Compliance Analysis

Implementation Timeline

Immediate Action Plan

Operational Changes Required

Contracts

Hiring/Training

Reporting & Record-Keeping

Fees & Costs

Strategic Ambiguities & Considerations

Need Help Understanding Implementation?

Legislative Timeline

Official Analysis

Senate Authors

House Sponsor

Bill Text(with markup)

Fiscal NoteView Original

Related Legislation

More from Sen. Judith Zaffirini

Related by Topic

Frequently Asked Questions

What does Texas SB3037 do?

Who authored SB3037?

When was SB3037 signed into law?

Which agencies enforce SB3037?

How urgent is compliance with SB3037?

What is the cost impact of SB3037?

What topics does SB3037 address?

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