ETJ Opt-Out Legislation Now in Effect

Texas SB 2038 Empowers Developers, Property Owners

During this year’s 88th Texas Legislative Session, Senate Bill 2038 was passed to provide property owners and residents an option to leave a city’s extraterritorial jurisdictions (ETJ). SB 2038, which went into effect on September 1, codifies Subchapter D, Chapter 42, Texas Local Government Code to expand property owners’ rights within ETJs, the areas outside of a city boundary in which the city can exercise certain legal powers.

“With many cities adopting anti-development regulations, SB 2038 is a step in the right direction for developers, giving them a tool to fight back against municipalities putting up barriers to development.”

SB 2038, filed by Houston area lawmakers Sen. Bettencourt and Rep. Cecil Bell Jr., allows residents to exit municipal government ETJs through letter, petition, and election procedures.
The petition for removal requires at least 51% of residents and the election requires participation from at least 5% of eligible voters. Approval for removal from the ETJ is subject to a vote during that year’s general election, although cities can expedite the process by simply agreeing to the request for removal from the ETJ.

The remedies available under SB 2038 do not apply to property within five miles of a military base where active training occurs, within 15 miles of an active military base in San Antonio or Houston’s ETJ, within an industrial district, or land subject to a strategic partnership agreement (SPA).

With many cities adopting anti-development regulations, SB 2038 is a step in the right direction for developers, giving them a tool to fight back against municipalities putting up barriers to development. As we see more cities deny plats and make it more difficult to develop within the ETJ, developers are now able to work with each respective county. The purpose behind the bill is to allow residents to be serviced by the county without any necessary interlocal cooperation with cities.

The bill serves as another logical step to annexation reform in the state of Texas. Recently the Texas Legislature has made significant annexation reforms. In 2019, HB 347 was passed into law which eliminated forced annexation in Texas altogether. Now, if a municipality wants to annex land, they need voter approval.

As the development community and local jurisdictions navigate the logistics of SB 2038, GHBA staff will continue to look at legislative fixes that may be needed when the legislature reconvenes in 2025.