Building Resilient and Sustainable Water Infrastructure with District Financing in Texas

Climate change-induced extreme weather conditions and environmental disasters have elevated the importance of building resilient and sustainable infrastructure globally. This case study analyzes the use of special district financing in Texas as an example of a land-based financing tool for building resilient and sustainable infrastructure. The case of Bridgeland, an 11,400-acre master-planned community near Houston, Texas, is used to extract lessons for a successful implementation of such a district financing tool.

The performance of Bridgeland’s water infrastructure—drainage systems and water and wastewater treatment facilities—have exceeded the industry norms and expectations. Bridgeland’s homes and structures went undamaged during two recent historic flood events: the Tax Day flood in 2016, and Hurricane Harvey in 2017. In fact, the community’s lakes took in the overflow from the regional watershed, Cypress Creek, enhancing its drainage capacity and reducing more severe flooding along the creek. Moreover, the stormwater detained in the lakes is treated and reused to irrigate common area landscaping, reducing reliance on groundwater reservoirs.

The use of special districts is largely responsible for the construction of such resilient and sustainable water infrastructure in Bridgeland. At the most basic level, special districts issue municipal bonds to borrow money and pay for infrastructure construction costs. However, as this case study demonstrates, not all special districts are created equal. The specific ways in which the tools are designed, implemented, and regulated largely determines their efficacy and fiscal health, and who pays and who benefits. Two types of water districts, Municipal Utilities District (MUD) and Water Control and Improvement District (WCID), were used to finance the water infrastructure in Bridgeland. A total of $332 million worth of bonds were issued between 2007 and 2022. Bond proceeds were used to build $268 million worth of water, wastewater, stormwater drainage facilities, and detention ponds, and to pay for the ongoing operation and maintenance of these infrastructures.

An in-depth analysis of the water districts’ design and their regulatory frameworks reveals important lessons for designing and implementing a financially sustainable and equitable land-based financing tool. The case discusses these lessons in detail and evaluates the tool’s potential as an equitable, efficient, land-based infrastructure financing strategy. The broader questions and critiques around the use of special districts for managing water resources and financing real estate developments are also addressed. The conclusion reached is that special districts are a double-edged sword whose impact depends on the specific contexts in which the tool is applied. When applied in an appropriate setting, special districts can be a balanced and equitable financing tool for building climate-resilient infrastructure.