HB 500 implementation letter: Maximizing opportunities for water

Jeremy B. Mazur, Director of Infrastructure and Natural Resources Policy

4 hours ago

Texas 2036 Infrastructure and Natural Resources Policy Director Jeremy Mazur submitted a comment letter on Tuesday to the Texas Water Development Board with recommendations for the agency’s proposed implementation plan for HB 500 (89-R). Texas 2036 testified in favor of HB 500 in committee during the regular session.

Here is his submitted comment letter:

Thank you for this opportunity to provide comments on the Texas Water Development Board’s proposed implementation plan for House Bill 500 (89-R). The Legislature’s approval of HB 500, combined with its passage of Senate Bill 7 and voters’ ratification of Proposition 4 last November, reflects a policy interest towards both fixing Texas’ water infrastructure challenges and providing the infrastructure necessary for economic growth.

When viewed in the context of the growing state financial strategy for addressing water infrastructure needs, HB 500 represents another major tranche of funding aimed towards closing known funding gaps. How the Legislature crafted this appropriation warrants recognition for its significance, however. Never before has the Legislature made an appropriation of this magnitude to the Board combined with the broad authorization to provide grants. This represents an extraordinary, unprecedented opportunity for the Texas Water Development Board.

The Board possesses the latitude to craft an innovative, forward-thinking funding program that aims to advance several policy priorities at once. These include prioritizing key water infrastructure projects that deliver statewide impact, leveraging state dollars to maximize fiscal benefits, advancing regional solutions, and expanding technical assistance capacity. Equally as important, the Board can develop performance and accountability metrics that weave a powerful story describing HB 500’s success through implementation. In short, the Board has reasonable, broad license to approve final program guidelines that articulate a bold, decisive policy vision needed to tackle Texas’ long-term water infrastructure challenges.

These comments and recommendations are offered in the spirit of maximizing the beneficial impact of HB 500. I have itemized these recommendations within three categories: scoring criteria, performance accountability, and technical assistance. Please note that these comments are responsive to the water supply and infrastructure grants implementation plan with edits as of January 16, 2026.

1.) Scoring Criteria.

The proposed scoring criteria appear to accomplish three policy objectives. First, the criteria aims to allocate grant funding towards water infrastructure projects serving smaller and lower-income communities that likely have a greater need for state financial assistance. Second, the emphasis on “ready to proceed” projects — as points for smaller communities and as a requirement for larger ones — encourages projects with more immediate benefit delivery. Lastly, the simplified scoring criteria reflects an interest in distributing these grant funds in an expeditious manner before the conclusion of the FY 2026-27 biennium.

The broad language of HB 500’s appropriation gives the Board substantial latitude to prescribe or incentivize other policy objectives, however. Towards that end, Texas 2036 recommends the inclusion of additional, new scoring criteria prioritizing projects of statewide importance, encouraging regional solutions, and incentivizing local leverage.

Project Prioritization

HB 500 instructs that the appropriated funds shall be applied towards the broad universe of water infrastructure and supply projects. The bill also grants the Board significant flexibility with regard to which types of water infrastructure and supply projects may receive funding. As previously mentioned, the apparent Board policy within the existing scoring criteria is to allocate funding towards projects serving lower income and/or smaller communities, where project sponsors may likely need greater state financial assistance in order to complete their project.

The Board has the option to amend the proposed guidelines for the water supply and infrastructure grant program to incentivize certain types of water infrastructure and supply projects, particularly those that may be consonant with recent legislative interest. State leaders are concerned that some communities may run out of water. In fact, several salient state water policies, including the water planning process and infrastructure development programs, are oriented towards avoiding this worst-case scenario. Fortunately for the purposes of describing this problem, the Texas Commission on Environmental Quality (TCEQ) maintains a list of communities that have, or are nearing, 180 days or less of water. Any Texas community that arrives at “Day Zero” — when it has no water — will endure profound hardship while provoking headlines asking why the state didn’t do more. In the interest of avoiding this calamity, the proposed scoring criteria should prioritize the provision of financial assistance to communities on TCEQ’s 180-day list.

The scoring criteria could also be amended to reflect recent legislative interests and advance water sector innovation. For example, legislators have frequently cited water loss — colloquially referenced as “leaky pipes” — as a major water infrastructure challenge. Given the legislative interest in solving this problem, the grant program could award extra points towards projects that fix systems with high rates of water loss. Beyond leaky pipes, the Legislature has articulated an interest in both expanding and diversifying state and regional water supply portfolios through project innovation. Here, extra points could be awarded to brackish groundwater desalination, aquifer storage and recovery, or water reuse projects. Water supply projects that also provide flood control or mitigation benefits or include a recognized nature based solution (e.g. wetland filtration) could also qualify for extra points.

Thinking further outside the box, and with an eye towards developing local and regional workforce capacity, points could be awarded to water infrastructure projects that involve a partnership with a workforce development program.

This recommendation seeks to achieve two objectives. The first is to align the scoring criteria with statewide priorities including helping communities approaching Day Zero, curbing water loss, and expanding water supply portfolios. The second objective — that is admittedly aspirational — is to make Texas a cutting-edge, successful proving ground for water sector innovation. The Board can advance both objectives here.

Regional Solutions

The Texas Legislature has frequently expressed a policy preference for regionalization and regional solutions throughout the Texas Water Code. Further, the Legislature has often instructed that TWDB prioritize regionalization when administering state financial assistance programs. This policy preference may be found in the articulated purpose of state financial assistance programs (§15.002(a), Water Code), grant criteria for the water loan assistance fund (§15.102(b)(2), Water Code), project prioritization for State Water Implementation Fund for Texas funding (§15.437(c)(3), Water Code), use of the Rural Water Assistance Fund (§15.994(a)(8), Water Code), and use of the Economically Distressed Areas Program (§17.922(b), Water Code).

Given the Legislature’s policy preference for regionalization, the scoring criteria could include additional points for projects that demonstrably advance regionalization or regional solutions. The definitions of “regionalization” in §15.001(13), Water Code and “regional facility” in §17.001(24), Water Code, provide a reasonable basis for describing the universe of eligible projects. These may include the construction of a regional water facility, an interconnect with a new or existing system, infrastructure required under a shared service agreement, or curing water infrastructure-related compliance deficiencies specified within a “safe harbor” compliance agreement entered under §7.0026, Water Code.

Updating the proposed scoring criteria to include a preference for regionalization or regional solutions makes the agency’s administration of this one-time grant program consistent with legislative preferences. Further, amending the criteria to incentivize regionalization expands the potential for this program to help the greater number of water providers in Texas.

Local Leverage

The proposed guidelines specify that TWDB will distribute HB 500 funds “in the form of a 100 percent grant.” In the absence of guidance otherwise, the presumption is that each project grant may cover the entirety of a given project’s cost. Project sponsors are not required to contribute any local financial effort. This creates a potential moral hazard where TWDB, and by extension, state taxpayers, assume the financial risks for a project’s completion and success while the project sponsor does not. Here, if a project ultimately fails, then state taxpayer dollars will be wasted as local project sponsors remain immune from pecuniary losses.

HB 500’s authorization for TWDB to provide grants for water infrastructure and supply projects does not preclude the agency from encouraging local matching funds. Again, the bill’s authorization for the provision of grants “as authorized by the board” grants substantial flexibility. Ideally project sponsors should be incentivized to “put skin in the game” through the provision of some amount of local equity or effort. This would share the risks associated with a project between the state and the project sponsor. Moreover, incentivizing local matching funds would work to leverage the state’s generous commitment of $1.038 billion in taxpayer dollars towards underwriting a greater amount of water infrastructure funding needs. While the mere commitment of $1.038 billion towards these needs is one measure of success, using this appropriation as a catalyst for a greater net investment (e.g. $2 billion or more) delivers the superior outcome.

In order to maximize this catalytic opportunity, Texas 2036 recommends that the Board consider the inclusion of scoring criteria that incentives or encourages project sponsors to commit local funding for a project. Here, the greater the level of local dollar commitment should translate into a higher number of points awarded. Understandably, some project sponsors, such as those with low-income, rural, or small service areas, may lack any financial capacity to make a local commitment. For these cases a set number of points could be awarded to project sponsors that may qualify for loan forgiveness from the Drinking Water State Revolving Fund disadvantaged community account (see §15.6041(c), Water Code).

2.) Performance Accountability.

The magnitude of the Legislature’s appropriation combined with the authorization for TWDB to provide grants creates the condition — albeit brief — for the agency to administer a positively powerful water infrastructure funding program between now and August 30, 2027. Once the Board approves the project commitments and the applications are closed, however, both the Legislature and state taxpayers deserve to know what was achieved through the Board’s use of this substantial appropriation.

The key question that must be answered is not just if the agency committed and closed the appropriated dollars timely, but what was achieved towards the betterment and improvement of local and regional water infrastructure and supplies. Which communities were removed from TCEQ’s 180-day list and avoided Day Zero? How many leaking water systems were fixed? How were families and businesses plagued by repeated boil water notices helped? Were water supplies expanded to sustain growth while enhancing resilience to drought? Did the program enhance Texas’ role as a leader in water innovation and policy? How did HB 500 make Texas better?

Senate Bill 7 approved by the 89th Legislature provides an instructive example of how performance and accountability measures for HB 500 could work. SB 7 requires that TWDB develop publicly-facing performance metrics regarding the state’s progress and achievement towards addressing water infrastructure challenges through the use of the dedicated funding stream established by Proposition 4. These include state progress towards meeting future water supply needs, net amount of water developed through agency programs, and, among other requirements, progress towards providing financial assistance to utilities with high rates of water loss. These performance measures will work to inform both legislators and taxpayers on the return on investment from dedicated state revenues for water and wastewater infrastructure needs.

This recommendation seeks to apply a similar accounting process to the agency’s administration of HB 500. Examples of possible performance and reporting requirements include:

The number of water systems removed from TCEQ’s 180-day list;
The number of water systems with high levels of water loss that were fixed;
The number of water systems brought into compliance with state and federal drinking water standards;
The number of water systems with three or more boil water notices over the past three years that received financial assistance;
The number of water systems receiving assistance from technical assistance providers;
The net amount of water projected to be developed, conserved, or reclaimed through projects receiving financial assistance;
The number of systems incorporated into a regional service;
The number of participating project sponsors receiving financial assistance for the first time through TWBD;
The total number of innovative water infrastructure projects — including desalination, water reuse, aquifer storage and recovery, nature based solutions, or workforce development partnerships — that received financial assistance;
The net amount of local funds leveraged with state grant funds provided through HB 500; and
The total amount of water infrastructure funding unlocked by HB 500 (local effort plus total appropriation amount used for grants).

These data will help tell a story of what the Board was able to accomplish through its administration of this grant program. A successful deployment narrative here will increase legislator’s confidence in the appropriation that they approved in 2025 and, ideally, better pave the way for future appropriations discussions relating to water infrastructure funding.

3.) Technical Assistance.

The proposed HB 500 implementation plan is silent on the eligibility of technical assistance providers to receive financial assistance through the water supply and infrastructure grant program. This presents a substantial challenge to successfully implementing the perceived policy intent of the proposed guidelines for allocating grant funds towards lower income and smaller communities that likely have a greater need for state financial assistance grants. Technical assistance (TA) often serves as a bridging mechanism between state financial assistance programs and small, rural, and low-income communities. TA providers work with these communities to assess their water infrastructure needs, recommend solutions, and even guide communities towards developing baseline financial documents, including water loss audits, audited financials, and cash flow models. In addition, TA providers have the capacity to recommend and develop regional solutions and even innovative, forward-thinking project designs for partner communities.

Funding for technical assistance providers must be made available if this program is to be successful towards delivering financial assistance to smaller, rural, or low-income communities across Texas. The same may be said regarding communities that have never received TWDB financial assistance, or have not received funding for a long period of time.

This recommendation does not seek broad funding for TA providers to assist communities that may, or may not, participate in the HB 500 grant program. Rather, this recommendation encourages the creation of narrowly-tailored funding authorization for TA providers working with communities that are successful in submitting applications for grant funding. There are two ways to accomplish this. First, clarify within the proposed guidelines that technical assistance qualifies as a planning or design activity for projects serving communities with a population of 10,000 or less. Second, apportion a portion of HB 500 funding to TWDB’s Water Utilities Technical Assistance Program (WUTAP) for the express purpose of assisting systems on TCEQ’s 180-day list or with water loss rates that substantially exceed the Board’s approved threshold in applying for a grant through the water supply and infrastructure grant program. These recommendations are not mutually exclusive: the Board has the option to adopt both recommendations here.

Thank you for your time and consideration of these comments and recommendations. The Board has an incredible opportunity to craft innovative, forward-thinking policies through its adoption of final guidelines for the water supply and infrastructure grant program. I earnestly look forward to hearing amazing water infrastructure success stories enjoyed by communities across Texas thanks to the Board’s leadership here. Before then, I welcome the opportunity to discuss these recommendations with you in further detail.