Texas Sets Aside Up To $22.5 Billion For Water: What It Means For Developers

Updated October 2026. As of October 2026, Texas voters have approved the new water money, but deposits do not start until September 1, 2027. The Texas Water Development Board (TWDB) expects the money to reach its programs in fall 2029. Developers cannot apply for it directly.

The Numbers That Matter to Your Bottom Line

Wastewater infrastructure is a major cost in many new developments. State financing can lower that cost when a public partner, such as a city or a utility district, owns the project and wins TWDB support.

Texas 2036, a policy group, puts the state’s long-term water infrastructure need at nearly $154 billion. Projections cited by TWDB show Texas growing from 34.2 million people in 2030 to 52.3 million in 2080. Every new development needs water, and the old model of simply connecting to city systems isn’t sustainable. Developers who build water-smart communities today position themselves as industry leaders tomorrow.

What’s Actually in This Package

The funding comes in three parts. First, HJR 7 proposed a constitutional amendment, which voters approved as Proposition 4 on November 4, 2025. From September 1, 2027, through August 31, 2047, it sends up to $1 billion a year of state sales tax revenue to the Texas Water Fund—up to $20 billion in all. Deposits come only from sales tax revenue above $46.5 billion a year, and the Legislature must appropriate them before TWDB can use them.

Second, HB 500 appropriated $2.5 billion to TWDB in 2025. About $1.04 billion of that is one-time water supply and infrastructure grants, which exclude wastewater projects, flood projects and private entities. Third, Senate Bill 7 sets the rules: which TWDB funds can receive the money, the funding priorities, and which projects qualify.

The Legislature split the money after months of debate. Senator Charles Perry’s Senate version sent 80% to new supplies; the House version left the split to TWDB. The final law sends at least half to the New Water Supply for Texas Fund or the State Water Implementation Fund for Texas (SWIFT). The rest can go to other programs, including repairs, so century-old pipe replacement and desalination plants can both compete.

What Projects Qualify

As expanded by Senate Bill 7, the New Water Supply for Texas Fund can finance political subdivisions for projects including:

• Desalination projects: Both seawater and brackish water
• Produced water treatment: Treating oilfield wastewater, other than projects only for oil and gas exploration
• Aquifer Storage and Recovery: Banking water underground during wet years
• Water and wastewater reuse: Added by SB 7
• Reservoirs: Only those with the land acquired, a federal 404 permit and a state water right permit already issued
• Water transportation infrastructure: Pipelines and conveyance systems connecting supplies to users

Important restriction: the dedicated sales tax money cannot fund pipelines that move fresh groundwater pumped in Texas. Groundwater counts as brackish only if it has at least 3,000 mg/L total dissolved solids when pumped. The money must create new water supplies.

How Developers Can Access Funding

Here’s the key: The Texas Water Fund isn’t just for cities. Political subdivisions including special districts qualify for funding. Developers cannot apply directly, and the fund itself makes no loans or grants; TWDB programs do. Your path runs through a public partner, such as a city or district, that applies for the wastewater infrastructure. Even a qualifying public-private partnership needs the public partner to apply.

TWDB manages distribution through multiple programs with different benefits:

• The first $1 billion (2023) offered full grants for water loss work in systems under 1,000 people and 90% grants up to 10,000; all committed by September 2026
• Rural political subdivisions and cities under 150,000 are a priority, including for grants
• Water and wastewater reuse projects now count as new water supply
• Programs offer low-cost loans, and some also offer grants or principal forgiveness

The process requires working through an eligible political subdivision. Expect an engineering feasibility report, a TWDB environmental review and, for many programs, a water conservation plan. TWDB funds only projects that rank within the money available and win a formal Board commitment.

Critical Timeline

Here is where things stand. Future dates come from TWDB’s Proposition 4 FAQ:

• June 2025: Governor Abbott signed SB 7 and HJR 7
• November 4, 2025: Voters approved Proposition 4
• May 2027: The Legislature’s next budget must appropriate the money
• September 1, 2027: The sales tax dedication takes effect
• Summer 2028: First expected transfer to the Texas Water Fund, if revenue tops $46.5 billion
• Fall 2029: Money expected to be available through TWDB programs
• August 31, 2047: The dedication expires

There is no application round for the dedicated money yet. Early preparation still pays off: state law makes projects with their required permits substantially complete a funding priority.

New Coordination Role

SB 7 gives TWDB a new water supply conveyance coordination duty, subject to funding. The Board will plan shared use of existing easements to reduce eminent domain, guide standard specifications and materials so systems can interconnect, and recommend building excess capacity where practical.

Think of it as building highways for water. Just as TxDOT ensures roads connect between cities, this role aims to make sure water systems can connect too.

Strategic Opportunities for Development Projects

Developers can design projects with funding eligibility in mind. Instead of viewing wastewater treatment as a necessary evil, consider it a potential revenue center. Water reuse—irrigation systems, purple pipe networks, or industrial reuse—can qualify as new water supply under SB 7 when a political subdivision sponsors it.

When a public partner wins state financing for shared infrastructure, the math can change:

• Use lower-cost public financing in place of some private financing
• Reduce carrying costs during development
• Market “sustainable water district” features to buyers
• Create long-term value through water independence

Timing matters. The dedicated money is not expected in TWDB programs until fall 2029, so projects planned now can be ready. Developments that establish eligible structures early in the planning process can modify their TCEQ applications to emphasize reuse components. The key is positioning your project as a water supply solution, not just another subdivision needing services.

Transform Your Infrastructure Costs into Funded Assets

At Modern Engineering Solutions, we’ve helped developers across Texas and Colorado navigate complex water infrastructure challenges. We understand both the engineering and the funding rules, including how cities and districts apply for state funds for projects that serve new development.

Our team specializes in designing water reuse systems that can qualify for funding while meeting TCEQ requirements. We’ll help position your project to maximize state funding opportunities, whether you’re planning a master-planned community or commercial development.

Contact us at mod-eng.com or email Sales@mod-eng.com to explore how your next project can benefit from this historic funding opportunity. We’ll show you how to turn mandatory infrastructure into competitive advantage.