Putting Public Utility Agency Plans Into Regional Action

by David J. Klein

Since at least as far back as 1999, the Texas Legislature has enacted statutes providing for the creation and operation of public utility agencies. What is a public utility agency (“PUA”)? Historically, a PUA is a political subdivision of the State of Texas, created by the concurrent ordinances of two or more “public entities,” for the purposes of acquiring, planning, financing, constructing, owning, operating, and/or maintaining water and wastewater facilities. In other words, it is a governmental entity, made up of other governmental entities, presumably in the vicinity of each other, with a regional focus on developing and delivering water and/or wastewater supplies and service on a wholesale and/or retail basis to potentially tens of thousands of customers. Like regional water districts and river authorities in Texas, a PUA can put on a “master class” of delivering water and wastewater utility services at the lowest rates through economies of scale, typically funded through low-interest tax-exempt debt instruments, and other governmental funding programs.

While these laws have been on the books for over 25 years, they received a significant boost from the Texas Legislature in 2025. Through Senate Bill 1169, approved in the 89th Legislative Session (Regular Session), the applicable laws governing PUAs in Texas Local Government Code (TLGC), Chapter 572, were enhanced by clarifying a PUA’s authority in the financing of water and wastewater capital projects. For example, through this Bill, it is now expressly stated that a PUA can leverage financing from the North American Development Bank (NADB). Additionally, SB 1169 made the creation and regulation of PUAs more user-friendly for member entities and the public. From the PUA perspective, the provisions of the Bill have made it easier for public entities to become (or withdraw as) member entities of a PUA, and from a public perspective, there have been clarifications regarding the role of the Public Utility Commission in the regulation over PUAs. Plus, with SB 1169, a public entity now includes a water supply or sewer service corporation.

While the benefits of a PUA are many, it is important to at least note that as of 2025, as to generating revenue, a PUA does not have the power to levy an ad valorem tax, but it has the authority to adopt impact fees and rates. Further, a PUA’s ability to condemn land is narrow, which is more specifically laid out in TLGC Section 572.0585, where one of those conditions is that it is only available to a PUA domiciled in a county with a population of more than 1.2 million.

Since the enactment of SB 1169, there have been initiatives by governmental entities across the State to explore the advantages of creating a PUA. With the clearer pathways for bringing in public entities to partner up for water and wastewater projects and to finance those solutions through (1) revenue bonds, (2) public-private partnerships, and/or (3) governmental programs from NADB and the Texas Water Development Board programs, it is anticipated by many that we are only at the beginning. The enhancements to this governmental vehicle are timely, as the costs of designing and constructing water and wastewater capital improvements are on the rise and the benefits of economies of scale through regional projects are needed more than ever to drive the local needs and local economies of the State.

David Klein is a Principal in the Firm’s Districts and Water Practice Groups. If you would like additional information or have questions related to these or other matters, please contact David at 512.322.5818 or dklein@lglawfirm.com.