The Woodlands will never be annexed by Houston, but the deal that sealed that guarantee is drawing sharp criticism from inside Houston's own government.

Houston City Council voted 13-1 on Wednesday, Sept. 2, to approve a permanent anti-annexation agreement with The Woodlands Township. The deal sends Houston roughly $50 million over four years in exchange for giving up any future right to absorb the community.

The vote ended a 19-year arrangement dating to 2007, when Houston agreed to defer annexation through 2057 in exchange for a share of Woodlands sales tax revenue. Under the new terms, that arrangement is over for good.

But Houston City Controller Chris Hollins, the city's top elected financial official, called it "a bad deal," Houston Public Media reported. Hollins estimated the city could lose as much as $173 million in potential revenue through 2057. Houston Finance Director Melissa Dubowski told the Tuesday, Sept. 1, Budget and Fiscal Affairs committee the city would have received $132 million over the life of the original agreement, according to Community Impact.

Houston Mayor John Whitmire dismissed Hollins' projections as "wild speculation," though his administration did not provide a counter estimate.

"We better be responsible and accept this $50 million because we may never see it again, and Lord knows we need it," Whitmire said at the Sept. 2 council meeting, according to Houston Public Media.

The first $22.6 million comes from a Regional Participation Fund built over 20 years from one-sixteenth of 1% of Woodlands sales tax revenue. That fund had not been tapped since 2018. The remaining $27.4 million breaks down into $7.9 million already owed under the original agreement and $19.5 million from Woodlands Township cash reserves, paid through 2029.

For Houston, the $22.6 million goes straight into the general fund, closing most of a projected $25-26 million budget deficit, Community Impact reported.

District C Council member Joe Panzarella cast the lone "no" vote. He said he learned of the fund only two weeks before the vote and opposed unrestricting money originally earmarked for infrastructure and parks.

What it means for Woodlands residents

The Woodlands Township Board of Directors had already voted 7-0 on Aug. 27 to approve the deal at a special meeting. Township Chairman Brad Bailey called the agreement a permanent fix.

"The annexation boogeyman is dead," Bailey told Houston Public Media after the Sept. 2 vote. He noted that while a 2017 state law already required voter approval before annexation, state law can change. The new agreement locks the protection in place regardless.

Starting in 2030, the roughly $4.5 million in annual sales tax revenue that previously flowed to Houston will stay in The Woodlands. The township forecasts nearly $51 million in property tax collection in 2027, with a tax rate three times lower than Houston's.

Vice Chairman Craig Eissler stressed the financial incentive at the Aug. 27 special meeting. "The sooner we do this, the sooner we can stop paying the city of Houston and keep that money for ourselves," Eissler said at the time.

The agreement keeps The Woodlands within Houston's extraterritorial jurisdiction and does not affect the community's ability to consider incorporation, which remains a decision for voters. Woodlands voters rejected incorporation in 2021 by a margin of 67% against.

The first payment of $22.63 million is due by Dec. 31.