Relating to the provision of water or sewer service by public entities operating jointly or concurrently; providing authority to issue bonds; providing authority to impose assessments.

89(R) HB 1407 - House Committee Report version - Bill Text

89R21569 CXP-D

By: Guillen

H.B. No. 1407

Substitute the following for H.B. No. 1407:

By: Martinez

C.S.H.B. No. 1407

A BILL TO BE ENTITLED

AN ACT

relating to the provision of water or sewer service by public

entities operating jointly or concurrently; providing authority to

issue bonds; providing authority to impose assessments.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 572.001(3), Local Government Code, is

amended to read as follows:

(3) "Public entity" means a political entity or

corporate body of this state, including a county, municipality, or

district or authority created under Section 52, Article III, or

Section 59, Article XVI, Texas Constitution
, or a water supply or

sewer service corporation
.

SECTION 2. Section 572.012(a), Local Government Code, is

amended to read as follows:

(a) Each participating public entity may:

(1) use the entity's money to plan, acquire,

construct, own, operate, and maintain its interest in a facility;

(2) share in the facility;

(3) issue bonds and other securities to raise money

for a purpose described by Subdivision (1) in the same manner and to

the same extent and subject to the same conditions as would be

applicable if the public entity had sole ownership of the facility;

(4) acquire, for the use and benefit of each

participating public entity, land, easements, and property for a

facility by purchase or by exercising the power of eminent domain;

[
and
]

(5) transfer or otherwise convey the land, property,

or property interest or otherwise have the land, property, or

property interest become vested in other participating public

entities to the extent and in the manner agreed between the

entities
;

(6)

make an acquisition described by Subdivision (4)

through a purchase from a public or private entity; and

(7)

for the use and benefit of each participating

public entity, acquire by purchase a public utility, as defined by

Section 13.002, Water Code, other than an affected county
.

SECTION 3. Sections 572.051(2) and (3), Local Government

Code, are amended to read as follows:

(2) "Obligation" means a [
revenue
] bond or note

secured by a revenue, fee, charge, assessment, or other revenue of

an agency available for that purpose
.

(3) "Public utility agency" means an agency created

under this subchapter by two or more public entities to
acquire,

plan, finance, construct, own, operate, or maintain facilities.

SECTION 4. Sections 572.052(c) and (d), Local Government

Code, are amended to read as follows:

(c) A public utility agency is a:

(1) separate agency;

(2) political subdivision of this state; [
and
]

(3) political entity and corporate body
; and

(4)

retail public utility for the purposes of Chapter

13, Water Code
.

(d) A public utility agency may not impose a tax but has all

the other powers
and obligations
that are related to facilities and

that are provided by law to a municipality that owns a facility
,

except as provided by Section 572.061
.

SECTION 5. Section 572.053, Local Government Code, is

amended to read as follows:

Sec. 572.053. CHANGES IN PUBLIC ENTITIES PARTICIPATING IN

PUBLIC UTILITY AGENCY.
(a)
The public entities that participate in

a public utility agency may by concurrent ordinances add a public

entity to, or delete a public entity from, participation in the

public utility agency.

(b)

A participating public entity may withdraw from a public

utility agency by providing an ordinance or resolution of the

governing body of the participating public entity to the agency not

later than the 180th day before the proposed date of withdrawal.

A

participating public entity may not withdraw from a public utility

agency under this subsection if bonds, notes, or other obligations

of the agency are secured by the revenues of the participating

public entity, unless the agency adopts a resolution approving the

withdrawal.

Upon withdrawal, a participating public entity assumes

the outstanding debt attributable to that entity from the agency on

a prorated basis equal to that entity's benefit and has, without

compensation from the agency, no further rights, duties, or

obligations relating to the agency or ability to receive service

from the facilities of the agency.

SECTION 6. Section 572.058, Local Government Code, is

amended by amending Subsection (b) and adding Subsection (c) to

read as follows:

(b) A public utility agency may:

(1) perform any act necessary to the full exercise of

the agency's powers
, including acts necessary to acquire, finance,

own, operate, or manage a facility of the agency
;

(2) enter into a contract, lease, or agreement
,

including an interlocal contract as authorized by Chapter 791,

Government Code,
with or accept a grant or loan from
any of the

following entities for the management and operation of an agency

facility or the acquisition, construction, financing, maintenance,

operation, provision, or receipt of a facility, service, or product

[
a
]:

(A)
a
department or agency of the United States;

(B)
a
department, agency, or municipality or

other political subdivision of this state; or

(C)
a
public or private corporation or person;

(3) sell, lease, convey, or otherwise dispose of
all

or a portion of
any right, interest, or property the agency

considers to be unnecessary for the efficient operation or

maintenance of its facilities; and

(4) adopt rules to govern the operation of the agency

and its employees, facilities, and service.

(c)

Except as limited by a concurrent ordinance under which

the public utility agency is created, an agency may exercise any

right or power granted by general law to a county or municipality or

a district or authority created under Section 59, Article XVI,

Texas Constitution, to accomplish the purposes of the agency,

including issuing bonds payable from special assessments in the

manner provided by Chapter 372. This subsection does not authorize

a public utility agency to impose a tax.

SECTION 7. Subchapter C, Chapter 572, Local Government

Code, is amended by adding Section 572.0581 to read as follows:

Sec.

572.0581.

NO POWER OF EMINENT DOMAIN.

Except as

provided by Section 572.0585, a public utility agency does not have

the power of eminent domain.

SECTION 8. Sections 572.061(d) and (e), Local Government

Code, are amended to read as follows:

(d) Notwithstanding Subsection (a),
the Public Utility

Commission of Texas has appellate jurisdiction over
[
the state

reserves its power to regulate and control
] the rates and charges
of

[
by
] a public utility agency
in the manner provided by Section

13.043, Water Code
.

(e)
This
[
Until obligations issued under this subchapter

have been paid and discharged, this
] state pledges to and agrees

with the purchasers and successive holders of [
the
] obligations

issued under this subchapter
that
in any appeal proceeding

regarding the public utility agency conducted under Section 13.043,

Water Code, the Public Utility Commission of Texas
[
it
] will [
not

limit or alter the powers of the agency to
] establish [
and collect
]

rates and charges that will produce revenue sufficient to pay for

those items specified in Subsections (a) and (b) and any other

obligations of the agency in connection with those items.

SECTION 9. Section 572.062, Local Government Code, is

amended by amending Subsections (a) and (b) and adding Subsections

(b-1) and (b-2) to read as follows:

(a) A public utility agency may
:

(1)
issue obligations
, including anticipation notes,

to accomplish the purposes of the agency
; and

(2)

finance or refund the acquisition, construction,

expansion, and improvement of all or a portion of a facility

relating to an agency purpose
.

(b)
Except as provided by Subsection (b-1), the
[
The
] public

utility agency may pledge to the payment of the obligations
:

(1)
the revenue of all or part of its facilities,

including facilities acquired after the obligations are issued
;

(2)

revenues received from a public entity by contract

as authorized by a concurrent ordinance;

(3) special assessments:

(A)

imposed by the agency in the manner provided

by Chapter 372; or

(B)

imposed by a public entity and provided by

contract to the agency; or

(4) any other funds of the agency
.

(b-1) Operation
[
However, operation
] and maintenance

expenses, including salaries and labor, materials, and repairs of

facilities necessary to render efficient service, are a first lien

on and charge against the pledged revenue.

(b-2)

A public utility agency may not use a facility owned

by the agency to secure or collateralize a new facility without the

approval by resolution of each participating public entity

participating in the joint financing of the new facility. This

subsection does not apply to the use of revenue from a facility

owned by the agency to secure or collateralize a new facility.

SECTION 10. Subchapter C, Chapter 572, Local Government

Code, is amended by adding Sections 572.065 and 572.066 to read as

follows:

Sec.

572.065.

LIABILITY. Liability for the facilities and

management of the public utility agency must be transferred to the

agency on ownership of the facilities by the agency.

Sec.

572.066.

INFRASTRUCTURE INVESTMENTS. A public utility

agency may create a funding mechanism to jointly invest in and

leverage funding for water infrastructure in Texas with the North

American Development Bank.

SECTION 11. Chapter 572, Local Government Code, is amended

by adding Subchapter D to read as follows:

SUBCHAPTER D.

RECEIVERSHIP AND TEMPORARY MANAGEMENT

Sec. 572.101. DEFINITIONS. In this subchapter:

(1)

"Commission" means the Texas Commission on

Environmental Quality.

(2)

"Utility" and "water supply or sewer service

corporation" have the meanings assigned by Section 13.002, Water

Code.

(3)

"Utility commission" means the Public Utility

Commission of Texas.

Sec.

572.102.

APPLICABILITY; JURISDICTION. (a)

For

purposes of this subchapter, a reference in Chapter 13, Water Code,

to a person includes a public utility agency.

(b)

For purposes of this subchapter, the utility commission

has the same jurisdiction over a water supply or sewer service

corporation that the utility commission has over a utility under

Chapter 13, Water Code.

Sec.

572.103.

RECEIVERSHIP. (a)

At the request of the

utility commission or the commission, the attorney general shall

bring suit for the appointment of a receiver that is a public

utility agency in the manner provided by Section 13.412, Water

Code, to collect the assets and carry on the business of a utility

or water supply or sewer service corporation that:

(1) has abandoned operation of its facilities;

(2)

informs the utility commission or the commission

that the owner is abandoning the system;

(3)

violates a final order of the utility commission

or the commission;

(4)

allows any property owned or controlled by it to be

used in violation of a final order of the utility commission or the

commission;

(5)

violates a final judgment issued by a district

court in a suit brought by the attorney general under:

(A) Chapter 7 or 13, Water Code; or

(B) Chapter 341, Health and Safety Code; or

(6)

violates a final judgment issued by a court in a

proceeding to enforce a provision of a permit issued by a

groundwater conservation district under Chapter 36, Water Code.

(b)

To facilitate the regionalization of water and sewer

service, the utility commission shall prioritize an application

submitted under Section 13.412(g), Water Code, by a public utility

agency.

The utility commission shall issue an order approving the

acquisition proposed in the application not later than the 120th

day after the date the utility commission determines the

application is complete.

Sec.

572.104.

TEMPORARY MANAGEMENT. The utility commission

or the commission, after providing to the utility or water supply or

sewer service corporation notice and an opportunity to be heard by

the commissioners at a utility commission or commission meeting,

may authorize a public utility agency to temporarily manage and

operate a utility or water supply or sewer service corporation in

the manner provided by Section 13.4132, Water Code, if the utility

or corporation:

(1)

has discontinued or abandoned operations or the

provision of services;

(2)

has been or is being referred to the attorney

general for the appointment of a receiver under Section 572.103;

(3)

violates a final order of the utility commission

or the commission; or

(4)

allows any property owned or controlled by it to be

used in violation of a final order of the utility commission or the

commission.

SECTION 12. Section 13.002, Water Code, is amended by

adding Subdivision (16-a) and amending Subdivisions (19) and (23)

to read as follows:

(16-a)

"Public utility agency"

means a public utility

agency created under Chapter 572, Local Government Code.

(19) "Retail public utility" means any person,

corporation, public utility, water supply or sewer service

corporation, municipality,
public utility agency,
political

subdivision or agency operating, maintaining, or controlling in

this state facilities for providing potable water service or sewer

service, or both, for compensation.

(23) "Water and sewer utility," "public utility," or

"utility" means any person, corporation, cooperative corporation,

affected county, or any combination of these persons or entities,

other than a municipal corporation,
public utility agency,
water

supply or sewer service corporation, or [
a
] political subdivision

of the state, except an affected county, or their lessees,

trustees, and receivers, owning or operating for compensation in

this state equipment or facilities for the transmission, storage,

distribution, sale, or provision of potable water to the public or

for the resale of potable water to the public for any use or for the

collection, transportation, treatment, or disposal of sewage or

other operation of a sewage disposal service for the public, other

than equipment or facilities owned and operated for either purpose

by a municipality or other political subdivision of this state or a

water supply or sewer service corporation, but does not include any

person or corporation not otherwise a public utility that furnishes

the services or commodity only to itself or its employees or tenants

as an incident of that employee service or tenancy when that service

or commodity is not resold to or used by others.

SECTION 13. Section 13.043, Water Code, is amended by

amending Subsections (b), (c), and (i) and adding Subsections (i-1)

and (j-1) to read as follows:

(b) Ratepayers of the following entities may appeal the

decision of the governing body of the entity affecting their water,

drainage, or sewer rates to the utility commission:

(1) a nonprofit water supply or sewer service

corporation created and operating under Chapter 67;

(2) a utility under the jurisdiction of a municipality

inside the corporate limits of the municipality;

(3) a municipally owned utility, if the ratepayers

reside outside the corporate limits of the municipality, including

a decision of a governing body that results in an increase in rates

when the municipally owned utility takes over the provision of

service to ratepayers previously served by another retail public

utility;

(4) a district or authority created under Article III,

Section 52, or Article XVI, Section 59, of the Texas Constitution

that provides water or sewer service to household users;

(5) a public utility agency;
and

(6)
[
(5)
] a utility owned by an affected county, if the

ratepayer's rates are actually or may be adversely affected. For

the purposes of this section ratepayers who reside outside the

boundaries of the district or authority shall be considered a

separate class from ratepayers who reside inside those boundaries.

(c) An appeal under Subsection (b) must be initiated by

filing a petition for review with the utility commission and the

entity providing service within 90 days after the effective day of

the rate change or, if appealing under Subdivision (b)(2) or
(6)

[
(5)
], within 90 days after the date on which the governing body of

the municipality or affected county makes a final decision. The

petition must be signed by the lesser of 10,000 or 10 percent of

those ratepayers whose rates have been changed and who are eligible

to appeal under Subsection (b).

(i) The governing body of a municipally owned utility or a

political subdivision,
other than a public utility agency,
within

60 days after the date of a final decision on a rate change, shall

provide individual written notice to each ratepayer eligible to

appeal who resides outside the boundaries of the municipality or

the political subdivision. The notice must include, at a minimum,

the effective date of the new rates, the new rates, and the location

where additional information on rates can be obtained. The

governing body of a municipally owned utility or a political

subdivision may provide the notice electronically if the utility or

political subdivision has access to a ratepayer's e-mail address.

(i-1)

The board of directors of a public utility agency,

within 60 days after the date of a final decision on a rate change,

shall provide individual written notice to each ratepayer eligible

to appeal the rates. The notice must include, at a minimum, the

effective date of the new rates, the new rates, and the location

where additional information on rates can be obtained.

The board of

directors of the public utility agency may provide the notice

electronically if the agency has access to a ratepayer's e-mail

address.

(j-1)

Notwithstanding Subsection (j), in an appeal under

this section of a rate charged by a public utility agency, the

utility commission shall ensure that the rate complies with Section

572.061(e), Local Government Code.

SECTION 14. Section 13.242, Water Code, is amended by

adding Subsection (e) to read as follows:

(e)

The utility commission may by rule allow a public

utility agency that includes a water supply or sewer service

corporation as a participant in the agency to render retail water or

sewer service without a certificate of public convenience and

necessity.

SECTION 15. This Act takes effect immediately if it

receives a vote of two-thirds of all the members elected to each

house, as provided by Section 39, Article III, Texas Constitution.

If this Act does not receive the vote necessary for immediate

effect, this Act takes effect September 1, 2025.