What Is a Texas Agricultural Development District?

A Texas Agricultural Development District is a special-purpose governmental entity created under Chapter 60 of the Texas Agriculture Code to promote and diversify farming, ranching, and agricultural processing within a defined area.¹ It can build and operate agricultural facilities, issue bonds, levy assessments against property inside its boundaries, and in limited circumstances exercise eminent domain. It also stands as a conservation and reclamation district under Section 59, Article XVI of the Texas Constitution, which gives the Legislature authority to create districts that conserve and develop natural resources.²

Chapter 60 defines “agricultural facility” broadly. The term covers infrastructure for harvesting, processing, storing, packaging, distributing, and transporting agricultural products, which gives a district room to pursue projects ranging from grain elevators and cold storage to regional distribution centers.

What a District Can Do

The core function is building and running agricultural infrastructure. A district can acquire, design, construct, and operate facilities for processing, storing, packaging, and distributing agricultural products. It can also promote agricultural enterprises, encourage soil and water conservation, and fund agricultural research.¹

Transportation is a second major area. A district can develop railroads, private roads, and other distribution infrastructure for moving agricultural products, and it can cooperate with navigation districts to tie waterway transportation to its facilities.

Eminent domain is the strongest tool. An ADD can condemn private land to acquire property for agricultural facilities, but only when the district itself will own the resulting facility. That ownership requirement is a real limit. The district cannot use eminent domain to take land and hand it to a private operator.¹

How a District Is Created

Forming an ADD runs through the county commissioners court in three stages: petition, public hearing, and confirmation election.

The Petition

The petition must be signed by every landowner whose property would fall within the proposed boundaries. It must also list at least five people willing and qualified to serve as temporary directors. The document has to describe the proposed boundaries, name the district (the name must include the phrase “Agricultural Development District”), identify the counties and municipalities involved, and lay out the general nature and estimated cost of the proposed development.³

One requirement catches people off guard. The petition itself must pledge that the district will make payments in lieu of taxes to every school district and county where the district owns real property. Those annual payments must equal what those taxing entities were collecting on the property in the year the district was created. The petition must also pledge a one-time payment equal to the rollback taxes that would be owed under Section 23.55 of the Tax Code. If the district ends up employing more than 50 people, it must negotiate an additional payment with the affected school district.³

Hearing and Temporary Board

Once the petition is filed, the commissioners court holds a public hearing to review whether it meets all statutory requirements. Any interested person can appear for or against the district. If the court finds the petition sufficient and determines the district will serve the public purpose of furthering agricultural interests, it appoints five temporary directors from the names in the petition.

Confirmation Election

The temporary board then calls a confirmation election inside the proposed district. If a majority of voters approve, the temporary board orders the district into existence and the results are entered into the official records.¹ Permanent directors are selected through whatever method the creation documents establish, by election or appointment.

What It Costs Local Taxing Entities and Landowners

Because an ADD is a governmental entity, its real property would normally escape local property taxes. Chapter 60 blocks that outcome through the PILOT structure baked into the petition. The baseline payment equals whatever taxes the school district and county were already collecting on the property before the district took ownership, and the district owes the equivalent of agricultural rollback taxes on top of that. Districts with more than 50 employees owe additional negotiated amounts to the school district.³

For landowners inside a district, the exposure is different. A district can levy assessments against real property within its boundaries or against agricultural products produced on that property. Assessments are tied to specific projects or services rather than general operations, and they carry serious teeth: an assessment creates a first-priority lien against the assessed property or products, ranking ahead of nearly all other claims except county, school district, and municipal property taxes. The lien attaches from the date the assessment is imposed and stays until the full amount, plus any penalties, interest, and collection costs, is paid.⁴

The lien sits ahead of mortgages and most other creditor claims. It also becomes the personal liability of whoever owned the property when the assessment was imposed, even if the district didn’t name that person in the assessment proceeding.⁴

How a District Funds Its Projects

Assessments are one revenue source. Districts can also issue bonds to finance larger capital projects, and they may apply for financial assistance from the Texas Agricultural Finance Authority, which can issue its own bonds to support district work.¹

Chapter 60 lets districts use tax increment financing in the same manner as municipalities under Chapter 311 of the Tax Code. TIF captures increases in property tax revenue within a designated zone and directs that growth toward development projects. Districts can also accept donations and grants from any source.

On the federal side, ADDs qualify as public bodies, which makes them eligible for certain USDA programs. The USDA’s Business and Industry Guaranteed Loan program extends loan guarantees to public bodies for projects in eligible rural areas, though the funds generally cannot be used for agricultural production itself; the focus is on processing, equipment, and facility development.⁵

Who Runs the District

A board of directors manages each district’s day-to-day operations, financial decisions, and project planning. Whether directors serve by election or appointment depends on the terms set during the district’s creation. Board members must execute a bond and take an oath of office before serving.¹

The board has authority to conduct hearings and take evidence on matters before it. That hearing power matters most when the district considers imposing assessments or exercising eminent domain, because affected property owners have a right to be heard before either action takes effect.

What Happens If a District Dissolves

An ADD can be dissolved, and what happens to its property depends on who buys it. Before dissolution, the board may sell district property. If the buyer is another governmental entity, the property can retain its governmental character. If a private party buys it, the property immediately loses eligibility for tax-exempt securities, can no longer carry assessments, and forfeits any tax-exempt status it held as district property.⁶ That rule creates a strong incentive to transfer assets to another public entity rather than selling to a private buyer, because a private sale strips away the financial advantages the district structure was built to provide.

1
State of Texas. Texas Agriculture Code Chapter 60
2
State of Texas. Texas Constitution Article XVI – Section 59
3
State of Texas. Texas Agriculture Code AGRIC 60.022
4
Texas Public Law. Texas Agriculture Code Section 60.127
5
Rural Development (USDA). Business and Industry Guaranteed Loan
6
State of Texas. Texas Agriculture Code Section 60.152 – Disposition of Property of Dissolved District