June 24, 2025

Inside Texas’ $20B Water Investment Plan: A Guide for Municipalities

The 89^th Texas Legislature passed a set of bills that allocate $20 billion in funding for water infrastructure, marking the most significant investment in water the state has ever seen. Senate Bill 7 and House Joint Resolution 7 support diverse new water source development projects and strategies like desalination and address improvements to existing or aged water systems for supply, wastewater or flood infrastructure. SB 7 expands the types of projects eligible for funding to include water reuse, wastewater, flood control and agricultural water conservation. House Bill 500 will allow $2.5 billion to become immediately available for water projects, including $581 million for specific, previously identified projects.

If Texas voters approve a constitutional amendment this fall, the plan will commit $1 billion a year from state sales tax revenue starting in 2027. Regardless of the vote’s outcome, the $2.5 billion allocation for the Texas Water Fund (TWF) is secured. The Texas Water Development Board will oversee project selection and funding distribution as the state continues its regionally driven approach to water management.

Heather Keister, manager of Freese and Nichols’ West Texas office, attended the June 18 ceremony in Lubbock where Governor Greg Abbott signed Senate Bill 7 into law, joined by Senator Charles Perry and Representative Cody Harris.

Sen. Charles Perry (left) and Rep. Cody Harris (right), coauthors of the bill, pictured with Heather Keister.

SB7 Highlights for Municipalities

Below are summaries of how SB 7, HJR 7 and HB 500 affect some areas of water infrastructure.

New Water Supply

At least half of the $1 billion in annual water funding must go to the New Water Supply for Texas Fund and State Water Implementation Fund for Texas (SWIFT).
Eligible projects expanded beyond construction and transport of marine and brackish desalination, aquifer storage and recovery, and produced water projects to include permitted reservoirs with full land acquisition, water and wastewater reuse projects and out-of-state water purchases.
Purchase of state water rights is prohibited.

Water Supply

At least 50% of funds must support water supply, wastewater or flood infrastructure. A key focus of the bill is to repair and replace aging and leaking water pipes.
Funding is expanded to include surface and out-of-state water transport projects.
Funding is restricted for non-brackish groundwater pipelines (with some exceptions)
The Texas Water Development Board is tasked with guiding best practices for water supply conveyance projects related to eminent domain, existing easements and project design and construction.

Wastewater

At least 50% of funds must support water supply, wastewater or flood infrastructure.
Wastewater and technical assistance are added to the existing priority in the TWF for small/rural infrastructure projects.
A study of adding wastewater to the state water planning process is required.

Disaster

During a state of disaster, the Legislature is allowed to suspend the funding allocation and appropriate funds for any purpose, with the intent of restoring the funds to the TWF when practicable.

Flood Infrastructure Fund, Ag. Water Conservation Fund and Economically Distressed Areas Program

At least 50% of funds must support water supply, wastewater or flood infrastructure.
Funding eligibility is expanded to include Flood Infrastructure Fund, Ag. Water Conservation Fund, and Economically Distressed Areas Program, making all of TWDB’s financial assistance programs eligible for TWF funding.
For the Economically Distressed Areas Program, TWDB’s bonding authority limitation is increased to $100 million annually and raises the cap on the grant component from 70% to 90%.

Texas Water Fund

TWF funds can’t be reallocated to other programs without legislative approval.
The measure establishes a TWF advisory committee and expands TWDB reporting requirements.

What Should Municipalities Do Now?

Prepare to Vote

In November, Texas voters will have the opportunity to cast their ballots on a constitutional amendment that could finalize $1B of funding for water projects annually, beginning in 2027. If the measure passes, some funds would be available immediately to address critical water infrastructure needs throughout the state.

Stay Connected

Freese and Nichols’ water, wastewater, stormwater and funding experts continuously monitor state legislative developments related to infrastructure. In 2024 alone, Freese and Nichols helped our clients secure more than $1.5 billion in commitments from the TWDB.

Questions?

Contact Funding Specialist Mark Evans, mark.evans@freese.com