Last November, Texas voters approved Proposition 4, a constitutional amendment aimed at strengthening the state’s ability to fund water infrastructure as population growth, aging systems and long-term supply pressures converge across much of the state.
The initiative, approved by more than 70 percent of voters according to official results from the Texas Secretary of State, directs the Comptroller of Public Accounts to deposit $1 billion of state sales and use tax revenue into the Texas Water Fund each fiscal year, as long as total revenue from that tax category exceeds $46.5 billion.
The deposit obligation expires after 20 years, establishing a two-decade track for the new income stream. Constitutional language requires funds to be held in a separate account and transferred only through a legislative appropriation, giving lawmakers ongoing control over when and how the money is distributed.
Beyond the infusion of funding, Prop. 4 also connects rails that shape how quickly money can be translated into projects headed for procurement.
The language of the amendment authorizes the Legislature to prescribe how portions, even all, of the revenues deposited among the funds and accounts administered by the Texas Water Development Board are allocated. In general, these allocation decisions cannot be changed during the first 10 years, except through a temporary suspension during a declared state of disaster.
The amendment also prohibits the use of deposited revenues to build infrastructure for transporting fresh groundwater, narrowing the range of eligible supply strategies and sharpening long-standing regional debates over what constitutes a “new supply” in practice.
Supporters argued the amendment was necessary because Texas’ water infrastructure needs have outstripped periodic appropriations and one-time funding infusions. It’s an argument bolstered by long-standing state planning documents and federal infrastructure assessments that warn that population growth, drought exposure and aging assets are taking a toll on both the potable supply and the systems needed to deliver it.
The U.S. Environmental Protection Agency’s most recent Drinking Water Infrastructure Needs Assessment and Survey estimates that Texas drinking water systems will require approximately $61 billion over the next 20 years to improve transmission, distribution, treatment and storage.
A broader assessment by Texas 2036, a nonpartisan public policy group, using EPA drinking water and wastewater surveys and the state water plan, projects at least $154 billion in combined water, drinking water and wastewater supply needs statewide by midcentury.
That estimate includes more than $3 billion annually through 2041 just to maintain and rehabilitate existing drinking water systems, stressing that while Prop. 4 expands financing capacity, only addresses part of long-term demand.
Prop. 4 in the real world
The Prop. 4 functions more as a funding pivot than a construction trigger, as Texas’ project selection discipline is more prescriptive than in states that rely on ad hoc awards or discretionary infrastructure programs.
The state’s planning framework divides Texas into 16 regional water planning areas, each required to identify needs and recommend strategies on a five-year cycle. These regional plans are incorporated into the state water plan, which serves as the gatekeeper for eligibility in various funding programs administered by the Texas Water Development Board.
The following regional snapshots illustrate how this planning discipline translates into different project profiles and levels of readiness across Texas.
Explore regional water project readiness
North Dallas Region
Upper Gulf Coast Region
Central Texas/Austin I-35 Corridor Region
South Central Texas region
East Texas/Piney Woods Region
Panhandle/High Plains Region
South Texas/Border Region
Eligibility for the State Water Implementation Fund for Texas (SWIFT) illustrates this structure. The revolving funding program generally requires proposed projects to include water management strategies recommended by adopted regional plans and to be part of the most recent state water plan when applications are submitted.
Even after projects pass the planning threshold, spending remains subject to legislative appropriation, and lawmakers’ allocation decisions can shape what TWDB can support for years at a time. TWDB then operationalizes these allocations through program rules, application cycles, prioritization criteria, and board actions, much of which is developed on a public calendar through board agendas, implementation plans, and regular funding updates.
Projects moving through the Texas planning gate still face constraints that can affect delivery schedules and risk profiles. Many large water projects trigger layered environmental reviews and permitting requirements, including statewide environmental assessments built into certain TWDB funding programs. Applicants are also typically required to demonstrate conservation planning and compliance with drought contingency plans as conditions of assistance.
Industry executives working downstream of the planning process say these regulatory layers, combined with long procurement cycles and equipment delivery times, are increasingly where projects stall, even after funding avenues are identified.
Funding capacity at the local level may further influence outcomes. TWDB assistance is often structured around market-referenced revenue and interest rate promises, and smaller or unqualified utilities may still face higher borrowing costs, even when participating in programs designed to lower rates or offer principal forgiveness.
Federal dollars add another layer of complexity. Utilities seeking State Drinking Water or Clean Water Revolving Fund assistance must align applications with annual intended use plans and federal compliance requirements, including national content standards and, for some categories, conditions attached to Bipartisan Infrastructure Act funding.
In practice, this sequencing can force local owners to weave state funding with federal capital grants and other allocations while navigating different eligibility standards, reporting obligations and procurement rules.
What does this mean for contractors and designers?
Given these procedural realities, rural and urban tensions are likely to determine how expanded funding translates into work: while the need is widespread, the ability to deliver is not.
Rapidly growing metropolitan areas tend to focus on treatment capacity, rehabilitation and system redundancy within existing footprints. Regions facing long-term supply constraints are more likely to seek transportation, pumping and non-traditional sources, which entail higher capital costs and longer lead times. The Prop. 4 does not flatten these differences; it amplifies them by favoring regions that have already translated the need into defined projects ready to be financed.
Texas 2036, citing data from the Texas Commission on Environmental Quality (TCEQ), reports an average of 2,883 boil water advisories issued annually from 2019 to 2023. Most are related to line breaks or service interruptions, with smaller systems experiencing higher rates of water loss, a pattern often associated with limited maintenance and capital capacity.
Additional TCEQ estimates indicate that at least 572,000 acre-feet of water (roughly 186 billion gallons) are lost statewide each year, highlighting the tension between high-growth urban systems that prioritize redundancy and smaller communities struggling to stabilize basic infrastructure.
Private industrial demand follows a different trajectory. Kevin Gast, CEO of Austin-based VVater, said industrial owners tend to move faster than utilities because regulatory compliance pressures and production risk leave little tolerance for multi-year delays.
“These industry players are struggling to comply with regulations, which means they have to spend money to meet these requirements,” Gast said. “They can have no problem stretching out for years and years.”
Gast said industrial users are also more likely to redesign projects or pursue reuse-focused approaches to avoid extended permits and pilot timelines, while some smaller or rural public systems, facing failing infrastructure and limited capital, are more willing to adopt non-traditional solutions than larger cities with deeply embedded assets.
The practical takeaway for industry is that the projects most likely to move forward in the short term are not new concession concepts but those that have already moved through feasibility studies, preliminary engineering and regional consensus. Treatment plant expansions, transmission upgrades, reuse systems and phased transportation projects are among the categories best positioned to compete for aid.
For companies positioning themselves for work in 2026 and beyond, the clearest signals are likely to emerge through TWDB’s public process. Board agendas, implementation plan updates, annual intended use plans, project rating reports, and public comment periods can serve as early indicators of the pace of procurement, especially in years when demand for aid exceeds available funding.
Regional pop-ups accompanying this story examine how these dynamics vary across Texas, highlighting representative projects that illustrate where planning readiness aligns with the state’s expanded funding tools and where longer horizons continue to dominate decision-making.
