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

What is actually in the $22.5 billion?

A 20-year sales tax dedication plus a one-time 2025 appropriation. Three 2025 measures work together.

• House Joint Resolution 7, approved by voters as Proposition 4 on November 4, 2025, sends the first $1 billion a year of state sales and use tax revenue above $46.5 billion to the Texas Water Fund, from September 1, 2027 through August 31, 2047. That is up to $20 billion.
• House Bill 500 put about $2.5 billion toward water infrastructure projects and programs, per Texas 2036's summary of the 2025 water package.
• Senate Bill 7 sets the rules: which TWDB funds can receive the money, the funding priorities and which projects qualify.

"Up to" matters. TWDB's Proposition 4 FAQ says each year's deposit depends on a legislative appropriation and on sales tax collections above the $46.5 billion line. In a year that falls short, nothing transfers.

Why is Texas putting this much into water?

Growth. The same TWDB FAQ cites the 2026 regional water plans, which project Texas growing 53 percent between 2030 and 2080, from 34.2 million people to 52.3 million.

The need is far larger than the money. Texas 2036 puts the state's water infrastructure need at about $154 billion over the next 50 years. Take away the $20 billion Proposition 4 dedicated and roughly $134 billion is still uncovered. For a developer, that means public money will be competed for hard, and projects with their homework done will win it.

Can a developer apply for the money directly?

No. The Texas Water Fund is not a financial assistance program and cannot make loans or grants itself. It transfers money to TWDB programs, and those programs lend or grant to eligible public entities.

The New Water Supply for Texas Fund, which gets at least half of the dedicated money along with SWIFT, finances political subdivisions. TWDB's FAQ says it can also fund a qualifying public-private partnership under Government Code Chapter 2267, but the applicant must still be a political subdivision of Texas.

So your partner is a city, a county, a river authority or a district. A municipal utility district under Water Code Chapter 54 is a governmental agency and a body politic, which is why a developer-MUD partnership is the most common route for a master-planned community.

Which projects can the new supply money pay for?

Projects that create new water. As expanded by SB 7, the New Water Supply for Texas Fund can finance:

• Seawater and brackish desalination
• Produced water treatment, other than projects only for oil and gas exploration
• Aquifer storage and recovery
• Water and wastewater reuse, added by SB 7
• Water or water rights from outside Texas
• Reservoirs, only once the land is acquired and both the federal Section 404 permit and the TCEQ water right are issued
• Pipelines and other infrastructure that move water into a supply system

Two limits catch people. The fund cannot pay for infrastructure to move groundwater pumped from a well in Texas, unless the well is part of one of the listed projects. And for the dedicated sales tax money, groundwater counts as brackish only at 3,000 mg/L total dissolved solids or more when pumped.

TWDB is also directed to finance projects through this fund that lead to 7 million acre-feet of new supply by December 31, 2033.

Does any of it pay for wastewater?

Yes, through reuse or through the Clean Water State Revolving Fund, and always through a public applicant.

A plain treatment plant that discharges is not new supply. A reuse system is. Effluent piped to irrigation, cooling or other nonpotable uses can count as new supply under SB 7 when a political subdivision sponsors it. Our post on Senate Bill 7 funding for Texas water reuse projects covers that path.

The Texas Water Fund can also transfer money to the Clean Water and Drinking Water State Revolving Funds, the Rural Water Assistance Fund and the Economically Distressed Areas Program. Those programs already fund wastewater collection and treatment for public entities.

One piece of the 2025 money does not. TWDB's Water Supply and Infrastructure Grants page says the $1.038 billion of HB 500 grants excludes wastewater and flood projects, and water supply corporations cannot receive them.

What does TWDB put first when it ranks projects?

Need, size and readiness. SB 7 lists the priorities TWDB must fund a portion of the money toward:

• Water and wastewater projects, including rehabilitation of deficient infrastructure, prioritized by risk or need, with grants for rural political subdivisions and cities under 150,000
• Projects whose required state or federal permits are substantially complete
• Water conservation and water loss mitigation
• Technical assistance for applicants

The permitting priority is the one a developer can act on. A reuse system or a supply line whose permits are done ranks ahead of one that is still a concept.

TWDB funds only projects that meet every requirement, rank within the money available and receive a formal Board commitment. Each program has its own rules and, for some, an Intended Use Plan.

When will the dedicated money be available?

Not before fall 2029. TWDB's FAQ gives this timeline:

• May 2027: the next General Appropriations Act
• Summer 2028: the first expected transfer to the Texas Water Fund, if revenue clears $46.5 billion
• Fall 2029: money available through TWDB programs

That suits development schedules. A community entering planning now could have its partner, permits and engineering in place by the time the money reaches the programs.

What does the new conveyance role mean for a project's pipelines?

More coordination on routes and specifications. SB 7 added Subchapter H, Water Supply Conveyance Coordination, to Water Code Chapter 6, with TWDB as the lead.

The Senate committee's SB 7 bill analysis describes joint planning among governmental entities, utilities and project sponsors, with the aim of using existing transportation and utility easements to reduce eminent domain. If your project needs a long supply or reuse line, expect questions about shared corridors.

What should a developer do now?

Use this as a readiness check before you count on state money.

1. Name the public partner: a city, a county, a river authority or a MUD you will create.
2. Decide whether reuse belongs in the project, so part of the system can be presented as new supply.
3. Start the permits early, because substantially complete permitting is a funding priority.
4. Get a site feasibility study that sets out water supply, wastewater and the funding path side by side.
5. Plan to finance the first phase without state money, since the dedicated funds are not expected before fall 2029.

A note on limits: this is general education on Texas law and TWDB programs as of October 2026. Appropriations, rules and Intended Use Plans change, so confirm eligibility with TWDB and your public partner before you plan around any of it.

Frequently asked questions

Is the $22.5 billion guaranteed?

No. The $20 billion is a ceiling. Each year needs an appropriation and sales tax revenue above $46.5 billion before anything transfers.

Does the money come as grants or loans?

Both, depending on the program. TWDB says the Rural Water Assistance Fund, the state revolving funds, EDAP, the Flood Infrastructure Fund, the agricultural water conservation fund and the New Water Supply for Texas Fund can offer grants or principal forgiveness, while SWIFT and the Texas Water Development Fund cannot.

Can a public-private partnership get funding?

Yes, from the New Water Supply for Texas Fund, for a qualifying project under Government Code Chapter 2267. The applicant must still be a political subdivision.

I'm developing a 900-lot community outside a Texas city and plan to create a MUD. Could reuse make our wastewater system eligible for state funding?

Possibly. Once the MUD exists, it is the applicant, not you. A reuse system it sponsors can count as new supply under SB 7. Talk to TWDB staff early. The reuse system will also need its own TCEQ reclaimed water authorization under 30 TAC Chapter 210, and permits that are substantially complete are a funding priority.

I'm building a commercial project inside a small Texas city whose sewer plant is near capacity. Can I use this money to expand it?

Not yourself. The city can apply to a TWDB program, such as the Clean Water State Revolving Fund, for the expansion. Ask where the project sits on its capital plan and whether a cost share would move it up.

Related resources

• Texas Water Infrastructure Crisis: $134 Billion Funding Gap
• The State Water Implementation Fund for Texas (SWIFT) for Rural Water and Sewer Communities
• When does a Texas development need a municipal utility district (MUD), and what comes before the TCEQ petition?
• Reuse vs. Discharge: Which Wastewater Strategy Fits Your Texas Development?

Planning a Texas development that could qualify for state water funding?

MES works with developers and their public partners on the engineering behind a funding application, from water supply and reuse options to permits and design.

We specialize in:

• Site feasibility studies for water supply and wastewater
• Wastewater treatment and reuse system design
• Chapter 210 reclaimed water authorizations
• Engineering support for MUD creation
• Preliminary engineering reports for TWDB applications
• Construction administration

Modern Engineering Solutions, McKinney, Texas. Contact: (214) 833-6748 or mod-eng.com