Title
Consider and take action on an ordinance establishing a Capital Improvements Advisory Committee pursuant to Texas Local Government Code Chapter 395 and procedural rules for the review and consideration of land use assumptions, capital improvements plans, and capital recovery fees (Executive Director of Development Services)
Background:
Approval of this ordinance will establish a stand-alone Capital Improvements Advisory Committee (CIAC) to support the City’s review and update of capital recovery fees in accordance with Texas Local Government Code Chapter 395.
Chapter 395 authorizes municipalities to impose impact fees, referred to by the City as Capital Recovery Fees (CRFs), to help fund or recoup the costs of capital improvements or facility expansions needed to serve new development. These fees must be supported by adopted land use assumptions, a capital improvements plan, and an impact fee calculation prepared in accordance with the statutory process.
The City has historically used existing City committees, including the Planning and Zoning Commission and/or the Transportation and Infrastructure Committee, to serve as the CIAC during prior impact fee updates. This approach was permissible under the version of Chapter 395 in effect when the City began its last update process in 2023. Since that time, the Texas Legislature has amended Chapter 395 and related statutes in several material ways that affect the City’s next CRF update process.
The most direct change for this item is the amendment to the CIAC composition requirements. Under the prior law, a planning and zoning commission could serve as the advisory committee if it included at least one representative of the real estate, development, or building industry, or if one such representative was appointed as an ad hoc voting member. Senate Bill 1883, effective September 1, 2025, removed that language and increased the required industry representation from at least 40 percent to at least 50 percent of the CIAC membership. The CIAC must still include at least five members appointed by a majority vote of City Council, and the required real estate, development, or building industry representatives may not be employees or officials of a political subdivision or governmental entity.
Staff recommends establishing a separate 5-member CIAC rather than relying on an existing City board or committee. For a five-member CIAC, at least three members should qualify as representatives of the real estate, development, or building industries. For a seven-member CIAC, at least four members should qualify.
Other Chapter 395 changes since the City’s 2023 process include: (1) land use assumptions and the capital improvements plan must now be made available to the public at least 60 days before the first publication of the notice of the hearing; (2) approval of an impact fee now requires an affirmative vote of two-thirds of the members of the governing body; (3) impact fees generally may not be increased for three years from the later of the date the fee was adopted or most recently increased, though a fee collection schedule may phase in collections up to the adopted maximum over a period not to exceed 10 years; (4) the governing body now has 120 days, rather than 60 days, after receiving updated land use assumptions and the capital improvements plan to set a public hearing; (5) an independent financial audit is required before increasing an existing impact fee or adopting a new impact fee in a service area where an impact fee had previously been adopted; (6) the Attorney General may bring an action on behalf of a property owner to contest an impact fee or recover a refund; and (7) the prior substantial-compliance protection for certain notice errors was repealed.
Additional 2025 legislation also affects future CRF administration. Senate Bill 840 and Senate Bill 2477 added limitations on the imposition of impact fees for qualifying conversions of certain nonresidential or office buildings to mixed-use residential or multifamily residential use. Senate Bill 14, effective January 1, 2026, requires political subdivisions to provide credits against water and wastewater impact fees for eligible facilities, systems, or products that result in water reuse, conservation, or savings, and requires procedures for calculating, applying, reviewing, and approving those credits.
The CIAC will serve in an advisory capacity to City Council. Its statutory responsibilities include advising and assisting the City in adopting land use assumptions; reviewing the capital improvements plan and filing written comments; monitoring and evaluating implementation of the capital improvements plan; filing required reports on the progress of the plan and any perceived inequities in implementation of the plan or imposition of impact fees; and advising the City on the need to update or revise the land use assumptions, capital improvements plan, and impact fees.
Establishing the CIAC now will allow Staff and the City’s consultant team to begin the next CRF update process in compliance with the revised Chapter 395 requirements and reduce procedural risk as the City continues planning for eligible, growth-related water, wastewater, and roadway infrastructure needs.
Staff recommends approval of this ordinance.
Attachments:
1. Resolution
4. Exhibit A - CIAC Procedural Rules
2. CIAC Membership Criteria
3. Summary of TLG Code Chapter 395 Changes since 2023
FUNDING
{X} Not Applicable
STRATEGIC PLANNING
{X} Addresses Strategic Planning Critical Success Factor # 1 - Develop & Maintain our Infrastructure and Factor# 2- Financially Sustainable