The Woodlands to Pay Houston $50 Million to End Annexation Threat for Good

The Woodlands Township board voted unanimously this week to pay the City of Houston $50 million by 2030 in exchange for a permanent guarantee that Houston will never annex the community. The question of annexation has come up periodically since the township was founded more than 50 years ago.

The agreement, approved Wednesday, would amend the 2007 Regional Participation Agreement between the two governments. That original deal, struck under Mayor Bill White's administration, already bars Houston from annexing The Woodlands until 2057. But it also requires the township to keep sending Houston a slice of its sales tax revenue, an arrangement that has built up roughly $22.6 million in a fund over the years.

Under the new terms, Houston would get immediate access to that $22.6 million. The Woodlands would then pay Houston about $9 million a year over the following three years, with more than $22 million due by Dec. 31 and additional installments through 2029, bringing the total to $50 million by 2030. After that, the payments stop for good, and so does Houston's cut of Woodlands sales tax revenue, which currently runs about $4 million annually at one-sixteenth of every dollar spent in the township.

Township Board Chair Shanna Tinsley said the amendment would replace the current long-term payment structure and free up the money already sitting in the Regional Participation Fund for Houston to use now rather than later. The Woodlands would also get to keep its one-sixteenth of 1% sales tax starting in 2030, revenue that currently flows to Houston.

Woodlands Township Chairman Brad Bailey said the sitting fund amounts to dead money for both sides. "In today's budgetary constraints that they're facing, that money is like a bridge to nowhere, just sitting in that account accumulating and accumulating interest, and that's really it," Bailey said.

Township officials say the deal would not create any new tax on Woodlands residents. It restructures how existing sales tax revenue gets split between the township and the city, rather than adding a levy.

State law already blocks Houston from annexing The Woodlands under current statute. But that protection depends on the law staying the same, and township leaders have pushed for years to lock in independence regardless of what the Texas Legislature does in the future. The amended agreement would make that protection permanent, removing the annexation question from state law entirely and writing it into a binding contract between the two governments.

Houston City Council was scheduled to take up the agreement this week but pushed the vote back after several members said they needed more time to go through the terms. Councilmember Edward Pollard said the city cannot weigh the proposal on the size of the upfront payment alone. "You can't just always think of the short term and grab what's there today, but you have to think about maybe some of the unintended consequences for the future," Pollard said. He argued the proposal should go through the committee process first, giving both council members and the public more time to review it before a vote.

The city's Budget and Financial Committee is expected to take up the agreement next, with a full council vote to follow afterward. Houston would trade a smaller, steady annual revenue stream, roughly $4 million a year going forward, for a larger lump sum now and in the next few years. The Woodlands would end a payment obligation that has no fixed endpoint under the 2007 deal and gain full control of its own sales tax base starting in 2030.

The Woodlands has operated as a special township district since Texas lawmakers granted it that status in 2007, giving it many of the governing powers of a city without full municipal incorporation. Annexation by Houston has been raised periodically as a possibility over the decades, even as state law and the existing interlocal agreement have kept it off the table.

Houston City Council has not set a firm date for its vote. Township officials have already signed off on their end of the deal. The Budget and Financial Committee's review will determine when the full twelve-member council takes up the agreement.