New Law Empowers Developers to Challenge Municipal Regulation in ETJ

By: Kaitie Moore Underwood | REALTOR®, Blue Collar Commercial Group

A new legal tool has emerged for developers to counter municipal regulations within the Extraterritorial Jurisdiction (ETJ), sparking a debate between cities and developers over land use. The enactment of Senate Bill 2038 by the Texas Legislature marks a significant shift in how development is managed in areas beyond city limits.

Recent legal battles have underscored the tension between developers and municipalities in unincorporated regions, such as the ETJ. In one instance, Meritage faced opposition due to wastewater management plans for its Legacy Trails project, leading to a lawsuit contesting city code violations. Lennar, another developer, challenged a similar denial of a plat for the Cibolo Farms project, arguing that project delays compromised its viability.

The passage of SB 2038 heralds a change in ETJ governance. Landowners within the ETJ can now petition for release from city oversight, transitioning to county regulation instead. The legislation aims to address concerns about municipalities overstepping their authority and allows landowners a say in their regulations.

Developers welcome SB 2038 as a tool to combat barriers posed by municipalities during the development process. Blake Yantis of Mosaic Land Development highlights the benefit of having more control over design collaboration with cities but acknowledges that disagreements can arise. Critics, however, worry that the law might lead to a patchwork of regulations around cities and complicate long-term infrastructure planning.

Milestone Community Builders, for instance, has struggled with its Persimmon project in the ETJ, illustrating the challenge of obtaining utilities outside city boundaries. The debate centers on the balance between developer autonomy and harmonious city development, with SB 2038 giving developers more sway in their projects.

The legislation’s impact is evident as developers consider the possibility of leaving the ETJ to avoid conflicts. This newfound agency offers a path forward for projects that were previously at an impasse due to regulatory issues.

Despite its advantages, SB 2038 does not resolve all challenges. The need for utilities remains a significant concern, with options like Municipal Utility Districts (MUDs) providing infrastructure but not water supply. MUDs require complex approval processes and can incur substantial upfront costs, driving developers to seek alternatives. While annexation into cities offers utility access, it also involves navigating fees and regulations.

The evolving landscape of development within the ETJ highlights the complexities of balancing economic growth and municipal control. SB 2038 offers developers a way to challenge obstacles posed by municipalities, reshaping how projects are realized in these areas. As cities and developers navigate these changes, the outcome will shape the future of development in the ETJ and beyond.

(Source: Ramzi Abou Ghalioum and Justin Sayers of San Antonio Business Journal)