Texas Public Finance in Motion: The Engine of Growth

An experienced trustee and agent perspective

The population of Texas exceeded 31 million by mid-2024, achieving the largest gain of any U.S. state in that one-year period. Growth and demographic shifts, including increased urbanization, put policy priorities like growth, mobility, and resilience at the top of the state’s agenda.

Public Financing for such priorities depends on coordination across multiple local entities, especially given the state’s property- and sales-tax revenue base and decentralized framework, where hundreds of local governments, school districts, and special-purpose entities issue debt independently, subject mainly to Attorney General review rather than a centralized state approval process. Each program requires working cash flows, documented controls, and clear communication among issuers, underwriters, counsel, trustees, with bond financings that can span decades.

Housing and community build-out (PIDs, MUDs, Multifamily)

Texas continues to leverage a wide array of land-based financing tools to keep pace with housing demand. Public Improvement Districts (PIDs) finance essential infrastructure such as roads, drainage, and utilities that support single-family development on the urban fringe. Certificates of Obligation (COs) help cities move quickly on urgent projects without waiting for bond elections, while conduit and multifamily revenue bonds support new rental supply across growing metros. Together, these mechanisms allow communities to match rapid population growth with the physical systems that sustain it.

Each structure carries its own revenue source—assessments, utility fees, or project rents—and timing differences that must line up with debt-service obligations. Administrators and trustees coordinate assessment rolls, utility-billing cycles, and reserve tests to maintain smooth cash flow. During active development, strong requisition procedures and authenticated disbursement controls are critical to prevent delays or fraud. Longer term, clarity in coverage calculations and continuing-disclosure calendars ensures investors receive consistent, verifiable data.

Resilience and water infrastructure

Flood mitigation, stormwater control, and long-term water supply remain central to Texas’s capital needs. The Texas Water Development Board and regional water authorities, including and Municipal Utility Districts (MUDs), support resilience in flood-prone and high-growth areas. Urbanization increases runoff volumes, while prolonged drought cycles and groundwater stress drive investment in reservoirs, reuse systems, and distribution networks.

Resilience financings often span multiple phases and jurisdictions, producing long spend-down horizons and complex funding blends. Investment policies must preserve liquidity for near-term construction while meeting long-term reserve objectives. Inconsistent definitions across trust indentures, loan agreements, and disclosure documents can create reconciliation issues once funds begin to flow.

Trustees and paying agents help issuers calibrate coverage and additional-bond tests that anticipate future program phases. Clearly defined calendars sustain investor confidence by providing predictability during multi-year construction and transition periods. Establishing these rhythms early, before Attorney General approval and closing, ensures that draw requests, coverage certifications, and reserve releases remain timely and auditable as projects evolve.

Growth and mobility (transportation & airports)

Rapid population and economic expansion across the Texas Triangle (Dallas–Fort Worth, Houston, Austin, and San Antonio) continues to drive major capital programs for airports, toll systems, and public transit. The resident population in the Dallas-Fort Worth-Arlington, TX MSA now exceeds eight million.

DFW, Love Field, and Austin–Bergstrom are all expanding capacity through multi-phase projects financed with a mix of bonds, grants, and airline-agreement revenues. In addition, toll-road authorities and regional mobility agencies issue debt to widen, extend, and modernize corridors that keep pace with the growth of freight and commuters across metro areas.

These programs often span multiple funding sources and fiscal years. They rely on layered pledges—from passenger facility charges and concession revenues to tolls and local sales-tax receipts—and must coordinate construction drawdowns with long spend-down horizons. Managing capitalized-interest periods, maintaining rate & compliance covenants, and integrating new phases into existing indentures all require precision.

Account governance and diligent administration of project, capitalized interest, reserve, and other accounts contained within the trust estate ensures dollars move on schedule and in compliance with the governing documents. During construction, notices and certifications should also flow consistently among counsel, financial advisors, and trustees so that coverage and covenant tests remain current.

Key mechanics in Texas transportation bonds

Beyond these core areas, Texas transportation financings often include subordinate-lien debt, major maintenance or renewal funds, and insurance or condemnation provisions that determine how proceeds are reapplied after a system event.

Each feature affects the flow of funds and long-term performance of the trust estate. Clear documentation and early coordination among counsel, engineers, and trustees help ensure these provisions work smoothly in practice.

Common Texas financing terms

Together, these financing models illustrate how Texas communities translate population growth into lasting infrastructure.

What newer issuers need to know

Texas continues to attract new and infrequent issuers to its public finance market, from fast-growing school districts and special districts, to cities using Certificates of Obligation for urgent projects. Many of these entities operate with lean administrative staff and limited experience managing financings after closing.

Aligning definitions, calendars, and account controls at the term-sheet stage helps first-time issuers avoid compliance gaps once the bonds are outstanding. Five fundamentals anchor that alignment.

1. Disclosure calendar ownership: assign responsibility for all continuing-disclosure filings and EMMA postings.
2. Coverage math and definitions: confirm how ratios will be calculated and when they reset.
3. Permitted investments and draw rules: agree on documentation for requisitions and reserve releases, and ensure thorough review of permitted investment definitions and language
4. Callback and verification protocols: list named contacts and call-back procedures for disbursement of funds or other value-bearing activities requiring authentication.
5. Role mapping: define how the trustee, paying agent, custodian, and dissemination agent interact throughout the lift of the transaction.

Establishing these basics early gives new issuers a stable foundation to operate confidently for the life of their financings.

Our public finance professionals understand what it takes to make a transaction successful. They are here to support you and provide answers to any questions you may have.

Let’s talk about your next issuance

The Wilmington Trust Public Finance team provides thoughtful guidance and reliable support for public finance transactions. Our professionals work with state and local governments, agencies, and institutions to address financing needs and administrative requirements.

If you have questions about structuring, administration, or current market developments, our team is available to discuss your objectives and provide information tailored to your situation.