How to Access $2 Billion in Senate Bill 7 Funding for Texas Water Reuse Projects

Quick Answer

Senate Bill 7 (SB7) makes $2 billion available for Texas water reuse and new water supply projects over the next 22 years. The Texas Water Development Board (TWDB) is expected to put out roughly $100 million per year (as described in the webinar), using competitive interest-rate loans that are typically at or below market. To access SB7 funding, you generally need to be an eligible public entity or work through one, which is why many private developments form a Municipal Utility District (MUD) or special district. SB7 can help fund planning, engineering, permitting, and construction, and disadvantaged communities may have access to additional assistance such as grants on certain projects and, in some cases, principal forgiveness. If you need a MUD or district to apply, start entity formation at least 90 days before the application deadline.

Texas has allocated $2 billion for water reuse infrastructure through Senate Bill 7. At the time of the webinar recording, there were only 50 applicants statewide. For developers, municipalities, mobile home parks, and industrial facilities planning wastewater projects, this represents a significant funding opportunity that remains largely untapped.

What Is Senate Bill 7?

Senate Bill 7 provides funding for water reuse projects across Texas over the next 22 years. The TWDB is expected to release roughly $100 million per year, which is a substantial increase from prior years. This funding targets new water sources and related infrastructure including water reuse plants, desalination, aquifer storage, reservoirs, and pipelines.

The loans feature competitive interest rates, typically at or below market rates. Some projects may have principal forgiveness. If you are a disadvantaged community, there may also be opportunities for grants on certain projects (as discussed in the webinar). Projects ranging from $500,000 to $5 million can be funded, and applicants can potentially stack SB7 funding with other sources such as USDA loans.

Who Qualifies for Senate Bill 7 Funding?

Can mobile home parks qualify?

Mobile home parks with nonprofit water supply corporations are eligible entities. Parks operating for profit without this structure do not qualify. Eligible mobile home parks can use this funding to help offset residential fee costs for their communities.

Can private developments (developers) qualify?

For private developments, you generally need to establish a public entity to access SB7 funding. This is where MUDs and special districts come in. These are political subdivisions that can be recognized by the TWDB to access low interest loan programs.

Developers typically work with a MUD attorney who specializes in this process, and there are ongoing costs associated with establishing and maintaining the entity. A critical timeline point from the webinar: if you are pursuing SB7 funding through this pathway, entity formation should begin 90 days before the application deadline.

The developer advantage is cost recovery. Developers can enter into a developer agreement with the MUD they establish and recoup wastewater tap fees against their investment. As single family lots are built out, tap fees can reimburse the developer’s initial investment while the MUD repays the loan.

Can industrial facilities qualify?

Industrial facilities pursuing reuse, desalination, or additional water supply projects may need to set up partnerships with a city, county, or another water district to access funding and recover costs.

What Costs Does Senate Bill 7 Cover?

SB7 funding can cover comprehensive project costs including planning and feasibility studies, environmental reports, engineering design, preliminary engineering reports, TCEQ permit submittals, county development permit fees, and construction costs.

Projects may require up to 20% down payment from other funding sources. Developers may be able to recoup this through tap fees via developer agreements and then pay the remaining balance through the MUD structure.

What Are MUDs and Special Districts, and Why Do They Matter?

Creating a political subdivision recognized by the TWDB can provide direct access to SB7 loan programs. These structures allow developers to recover costs through user fees, developer credits, and tap fees. This approach can be tailored to projects of different sizes, from smaller systems (for example, around 40,000 gallons per day) to larger reuse projects (for example, around 2 MGD).

How Do SB7 Funded Projects Typically Move From Planning to Construction?

Phase 1: Initial engineering and feasibility

Upfront engineering includes initial studies and feasibility analysis required for applications to both TCEQ and TWDB. After TWDB reviews the application and addresses comments, they can lock in interest rates, similar to a mortgage rate lock.

Phase 2: Engineering and construction

Once approved, engineering and planning costs can be reimbursed. Construction funding is released based on milestones such as mobilization, site grading completion, foundation installation, and yard piping completion. As each milestone is met, reimbursements occur until the loan is closed out and the project begins servicing the development area.