December 18, 2025

What cities should know about Texas impact fee changes

Texas cities, public utilities and water districts that charge impact fees to help pay for water, wastewater, roadway and stormwater infrastructure in developing areas should be incorporating new state requirements into their processes, plans and timelines. That means factoring in more time to understand, account for and apply the changes.

New rules enacted into law in 2025 include extended approval processes for impact fee adoptions and updates, more time for public review, and an independent financial audit.

Cities also need a plan for granting water and wastewater impact fee credits to developers who adopt water-conservation or reuse measures.

The Texas Local Government Code allows for charging developers a one-time fee for capital improvements, such as for water, wastewater, stormwater and roads, to serve growing areas and ease the burden on current ratepayers. Public entities with impact fee ordinances must update the program at least every five years. The new state rules generally won’t affect existing impact fee schedules but will apply to updates and fee programs enacted after Sept. 1, 2025, when most of the new rules took effect.

What are the key changes?

Senate Bill 1883

(Changes are now part of Chapter 395 of the Texas Local Government Code.)

• REVISION: Documents must be made available to the public at least 60 days before the first publication of a hearing notice about modifying impact fees, adoption or amendment of land-use assumptions, or updating of capital improvement plans.
• REVISION: The impact fee process must include an advisory committee that now draws 50% of its membership from the development, building or real estate industries (up from 40%). Further, a Planning and Zoning Commission can’t act as the advisory committee.
• REVISION: Actions on impact fees, land-use assumptions or capital improvement plans require a two-thirds majority vote of the governing body instead of simple majority vote.
• NEW: A third-party audit must be conducted by a Certified Public Accountant who hasn’t worked with the city in the past 12 months before adoption of an updated impact fee. Specific items are required as part of the audit, and a public hearing must be held before an impact fee update. (Impact fees can pay for the audit.)
• NEW: Once set, impact fees can’t be increased for three years unless increases are phased in at the time of adoption.
• NEW: The Texas Attorney General can sue on behalf of a property owner challenging an impact fee or seeking a refund.

Senate Bill 14

• Developers can receive a credit against water or wastewater impact fees for adding systems that result in water reuse, conservation or savings.
• Credit-qualifying actions include technology or practices that lower per-unit water consumption or need for treatment and distribution capacity, decrease wastewater collection and treatment needs, or reduce stormwater demands.
• Cities have to create procedures for calculating, reviewing, and applying the credits fairly and consistently.
• This act took effect on January 1, 2026.
• In developing plans, cities should consider factors such as the credit amounts, verification of water use reductions and the application process.

What should public entities be doing?

• Review SB 1883 (Chapter 395) and SB 14 with your legal counsel for guidance.
• If you already charge impact fees, review your renewal/update schedule and build in extra time for the added steps to comply with the new requirements. For the audit, consider professionals with a municipal background.
• If you’re considering adopting impact fees, start planning in advance for the timelines needed to put a program in place.
• Determine how you will apply water conservation credits and adopt a plan to comply with the new requirement.

How Freese and Nichols can help

Freese and Nichols’ water/wastewater master planning team brings broad and deep expertise to helping Texas cities large and small to meet their customers’ needs and regulatory compliance obligations.

• We are versed in all facets of road, water and wastewater, and stormwater impact fee programs, including technical and administrative requirements and policy considerations.
• We can review current impact fee programs and help identify changes needed for compliance.
• We can assist with impact fee revenue projections and proportionality challenges.

To learn more: Contact Jessica Brown, jessica.brown@freese.com, Melissa Brunger, melissa.brunger@freese.com or Eddie Haas, eddie.haas@freese.com