AWBD Omnibus Bill – Senate Bill 1444

AWBD worked closely with Senator J. E. “Buster” Brown and Representative Gary Walker to draft and lobby for the passage of Senate Bill 1444.Many thanks are owed to Senator Brown and Representative Walker and their fine staffs for their strong and persistent leadership.The AWBD effort was led by Chairman Gordon Landwermeyer and Joe B. Allen and Trey Lary of Vinson & Elkins L.L.P.Provisions from the previous session’s omnibus bill, which did not pass, formed the core of SB 1444.To round out the bill, district directors and consultants from around the state contributed new provisions.Late in the Session, it was apparent that SB 1444 was one of the few viable pieces of legislation amending the Water Code and the bill became a vehicle for other groups concerned with water resources and water districts.We are pleased to report that AWBD accomplished its entire legislative agenda. 

Public Funds Investment Act.Clarifies that a treasurer is not subject to the training requirements of the Public Funds Investment Act unless the treasurer is also the investment officer.The bill further clarifies that the board may appoint one of its consultants to serve as the investment officer of the district. 

Director Per Diems.Increases the maximum director per diem (the daily fees of office allowed) from $100 to $150.The annual cap of $6,000 did not change. 

Fire Plan.Streamlines the process required to adopt a plan for the provision of fire protection services to district residents.SB 1444 repeals the prior law requiring public hearings on the fire plan to be held by the district board of directors and the TNRCC.SB 1444 also allows a fire plan election to be held in conjunction with a confirmation election. 

Staleness of Bond Authorizations.Provides that the doctrine of “staleness” (bond authorizations becoming invalid by the simple passage of time) should not apply to district bond authorizations. 

Taxation Procedures.Provides that Sections 26.04, 26.05, and 26.07, Tax Code, do not apply to maintenance, debt service, or contract taxes levied and collected by districts.(These sections of the Tax Code require:(i) calculation of effective tax rates and rollback tax rates, (ii) direct mailing or newspaper publication of notices regarding effective and rollback tax rates, (iii) public hearings (and newspaper notices thereof) if a district adopts a tax rate that exceeds the lower of the rollback tax rate or 103 percent of the effective tax rate, and (iv) adoption of the tax rate before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the taxing unit.Section 26.07, Tax Code, provides for rollback tax elections.) 

Disbursements of District Money.Clarifies that a board of directors may adopt procedures for the wire transfer of district funds. 

Payment of Expenses.Removes the three-year limitation relating to the use of bond proceeds for the payment of interest during construction. 

Bond Sales.Allows a district to advertise for a bond sale prior to the final approval of the bond issue by the Commission.The bonds may not actually be sold prior to final approval by the Commission. 

Ownership of Property for District Creations and Annexations.Provides that the central appraisal district is the appropriate entity to certify property ownership information for landowners signing petitions to create a district or to add land to a district.Prior law required the county tax assessor collector to certify as to the ownership of landowners who sign petitions to create a district or to add land to a district.Since the advent of the central appraisal district, the county tax assessor collector is no longer the custodian of property ownership information.

Tap or Connection Fees.Clarifies that a district may pledge tap fees to the payment of revenue bonds. 

Granting Easements.Amends Section 49.218, Water Code, by providing that a district or water supply corporation may require, as a condition for service, that an applicant for service grant a permanent recorded easement to allow the district to serve the applicant as well as the district’s purposes in providing system-wide services.Additionally, as a condition of service to a new subdivision, a district or water supply corporation may require a developer to provide permanent recorded easements to and throughout the subdivision adequate for service for the subdivision’s anticipated service demands when the subdivision is fully occupied.(See also HB 924.) 

Sale of District Property.Clarifies that a board of directors, in its discretion, may sell property of the district.If the district has outstanding tax bonds, the proceeds of the sale shall be applied to retire outstanding bonds of the district.The bill eliminates potential conflicts between Chapter 272, Local Government Code, and the Water Code. 

Prohibition of Septic Systems.Provides that a district may prohibit the installation of new private on-site wastewater holding or treatment facilities.A district that prohibits such installation shall agree to pay the owner of the tract the costs of connection if the distance along a public right-of-way or utility easement from the nearest point of the district’s system to the boundary line of the tract is 300 feet or more. 

Contracts.Clarifies that competitive bidding requirements only apply to construction (and not to procurement and service contracts).The bill also clarifies that payment and performance bonding requirements apply only to construction contracts. 

The bill also provides that Subchapter I of Chapter 49, Water Code (relating to Construction, Equipment, Materials, and Machinery Contracts), does not apply to contracts for services or property for which there is only one source or for which it is otherwise impracticable to obtain competition. 

Change Orders in Construction Contracts.Provides that a board of directors may authorize a change order to a construction contract as long as all change orders to the contract do not increase the price of the contract by more than 10 percent of the original contract price.Additional change orders may be issued only as a result of unanticipated conditions encountered during construction, repair, or renovation or changes in regulatory criteria or to facilitate project coordination with other political entities. 

Repairs.Provides that a board of directors is not required to advertise or seek competitive bids for the repair of district facilities if the scope or extent of the repair work cannot be readily ascertained or if the nature of the repair work does not lend itself to competitive bidding. 

Prevailing Wage Rates.Provides that a district located wholly or partially within the corporate limits or ETJ of one or more municipalities may adopt the prevailing wage rate of the municipality or the county in which it is located.A district not located within the ETJ of a municipality may adopt the prevailing wage rate of the county in which it is located.If the county in which a district is located has not adopted a prevailing wage rate, then the district may adopt the prevailing wage rate of an adjacent county. 

Adding and Excluding Land Before Confirmation.Allows the adjustment of boundaries after creation by the Commission but prior to the confirmation of the district by the voters.If land is added or excluded prior to the confirmation election, the election to confirm the district shall be to confirm the district as modified. 

Voluntary Collections for Fire-Fighting and EMS Organizations.Clarifies that districts may collect voluntary contributions to volunteer fire departments and EMS groups.The district must notify customers that the contributions are voluntary and a district may not discontinue water and sewer service for failure to contribute. 

Recreational Facilities / Street Lighting.Grants to all districts governed by Chapter 49, Water Code, the recreational facility powers previously granted only to municipal utility districts.Levee improvement districts, water control and improvement districts and others now have the ability to provide recreational facilities. 

The bill also authorizes districts to purchase, install, operate and maintain street and security lighting.Previous law granted this power only to municipal utility districts that were required by the City to provide lighting. 

The definition of “recreational facilities” is expanded to include “landscaping, parkways, greenbelts, sidewalks, trails, and public right-of-way beautification projects.” 

The bill reiterates that districts may not issue bonds supported by ad valorem taxes to finance recreational facilities. 

Rules and Regulations.Grants water control and improvement districts and levee improvement districts the ability to adopt and enforce rules and regulations relating to their facilities and services. 

Penalty for Violation.Provides for a criminal penalty for violation of the regulations of a water control and improvement district. 

Election of Tax Assessor/Collectors in Fresh Water Supply Districts.Repeals the requirement that the tax assessor/collector of a fresh water supply district be elected. 

Services Outside a Levee Improvement District.Clarifies a potential conflict between Chapter 57 and Chapter 49, Water Code, by providing that a levee improvement district may provide services and improvements inside and outside the district. 

No Liability for Joint Enterprises.Provides that the common law doctrine of vicarious liability because of participation in a joint enterprise does not impose liability on a water district. 

Contracts with Cities.Provides that bonds issued by a city secured by contract tax payments of a districtare not subject to Commission review and approval. 

The bill also provides that if a district contracts with a municipality to provide all or part of the water or wastewater services to the municipality, the municipality may issue bonds payable from the revenues of its water and wastewater system to provide funds to make payments owed by the municipality to the district under the contract. 

Municipal Water Systems.Allows a municipality, without an election, to sell to a water district a water or sewer system owned by the municipality. 

If a municipality creates a board of trustees to manage a municipal water, wastewater or drainage system, that board may not employ or contract with an individual who was a member of the board within the previous two years. 

North Harris County Regional Water Authority.Makes minor amendments to the act creating the North Harris County Regional Water Authority. 

Repeal of conflicting LID Statutes.Repeals Sections 57.512 and 57.153, Water Code (relating to the right of a levee improvement district to enter land within the district), which were in conflict with Section 49.221, Water Code. 

Validation.Validates certain acts of a district taken two years or more prior to the effective date of the bill. 

(Senate Bill 1444 became effective June 17, 2001.) 

OTHER WATER DISTRICT BILLS

House Bill 742 – Water District Validation

Validates governmental acts or proceedings of districts operating under Chapter 36 or Chapter 49, Water Code, upon the third anniversary of the effective date of the act or proceeding unless a lawsuit to annul or invalidate the act or proceeding has been filed.(See also validation provisions in SB 1444.)(Effective May 28, 2001.) 

House Bill 924 – Easements Required for Service by a District

Amends Section 49.218 of the Water Code by providing that a district or water supply corporation may require, as a condition for service, that an applicant for service grant a permanent recorded easement to allow the district to serve the applicant as well as the district’s purposes in providing system-wide services.Additionally, as a condition of service to a new subdivision, a district or water supply corporation may require a developer to provide permanent recorded easements to and throughout the subdivision adequate for service for the subdivision’s anticipated service demands when the subdivision is fully occupied.(See also identical provisions in SB 1444.) (Effective September 1, 2001.) 

TNRCC SUNSET REVIEW

House Bill 2912

Continues the operation and functions of the Texas Natural Resource Conservation Commission (TNRCC) which is renamed the Texas Commission on Environmental Quality (effective January 1, 2004).The functions of the TNRCC are largely unchanged.The Commission is provided with greater flexibility in the utilization of water and wastewater fee revenue.The bill mandates a permitting program for class B sludge.The Commission is required to implement “performance based permitting,” which involves examining a permittee’s compliance history when granting or renewing permits.(Staggered effective dates; generally September 1, 2001.) 

PUBLIC FUNDS INVESTMENT ACT

House Bill 675 – Investment Officers for Water Districts

Reduces the number of hours of investment training required of an investment officer of a water district to six hours within the first year of assuming such duties, and four hours within each two-year period thereafter.The Board may contract with a person to serve as the investment officer for the district.Any organization that provides training under the Public Funds Investment Act shall submit a report to the Comptroller.(Effective May 14, 2001.) 

House Bill 2957

Amends Chapter 2256.009, Government Code (the Public Funds Investment Act), to provide that letters of credit of the United States or its agencies and instrumentalities are authorized investments to the same extent as obligations of the United States or its agencies or instrumentalities.(Effective September 1, 2001.) 

ELECTIONS

Senate Bill 79 -- Uniform Election Dates / Bond Elections

Texas law provides four uniform election dates with certain exceptions permitting political subdivisions to hold elections on other days.SB 79 changes the designated uniform election dates and eliminates several of the exceptions.The first Saturday in February rather than the third Saturday in January and the second Saturday in September rather than the second Saturday in August are now uniform election dates.(The August date may be used for elections in 2001.)The first Saturday in May and the first Tuesday after the first Monday in November remain uniform election dates.Under prior law, there was an exception to the uniform date requirement for elections to approve bonds or maintenance taxes.SB 79 narrows this exception so that it is no longer available to water districts.Thus all water district elections must be held on uniform dates.(Effective September 1, 2001.) 

The uniform election dates for the upcoming two years are as follows:

Amends the Election Code to require that if the location of a polling place is different from the location used in the preceding election, if possible, notice should be posted at the entrance to the previous polling place stating that the location has changed.(Effective September 1, 2001.) 

Senate Bill 1023 – Pay for Election Judges and Clerks

Prior law provided that pay for election judges and clerks could not exceed $6.00 per hour.SB 1023 amends the Election Code to remove this cap on compensation and provides that the authority holding the election may fix the compensation.The hourly rate must be at least the federal minimum hourly wage.(Effective September 1, 2001.)

OPEN MEETINGS

Senate Bill 170 – Attendance at a Legislative Committee or Agency Meeting

Provides an exception to the posting requirements of the Texas Open Meetings Act for a quorum of a governmental body, such as a water district board of directors, attending a meeting of a committee or agency of the legislature if the deliberations at such meeting consist only of publicly testifying, publicly commenting, and publicly responding to questions asked by a member of the legislative committee or agency.(Effective June 4, 2001.) 

Senate Bill 695 – Consultations with Attorneys

Provides that a governmental body may use a telephone conference call, video conference call, or communications over the Internet to conduct a public consultation with its attorney in an open meeting of the governmental body or a private consultation with its attorney in a closed meeting of the governmental body.The bill does not exempt such consultations from the requirements of the Texas Open Meetings Act.Each part of a public consultation must be audible to the public at the location specified in the notice of the meeting as the location of the meeting.These provisions do not authorize the members of a governmental body to conduct a meeting by telephone conference call, video conference call, or communications over the Internet.(Effective May 7, 2001.) 

House Bill 35 – Video Conferencing

Amends Chapter 551, Government Code, to permit certain state governmental bodies or governmental bodies that extend into three or more counties to hold meetings by video conference call only if a majority of the quorum of the governmental body is physically present at one location for the meeting.In exercising such a right, the notice of meeting must specify the location where a majority of the quorum of the governmental body will be physically present and specify such intent.(Effective September 1, 2001.) 

WATER LAW

Senate Bill 2

Senate Bill 2 overshadowed this session as it related to water law matters.SB 2 was a sequel to Senate Bill 1 which was adopted in the 1997 legislative session. 

Texas Water Advisory Council.Creates the 13-member “Texas Water Advisory Council.”Representatives of the Texas Natural Resource Conservation Commission (TNRCC), the Texas Water Development Board (TWDB), the Texas Parks and Wildlife Department (TPWC), the Texas Department of Agriculture (TDA) and the General Land Office (GLO) will serve on the Council in addition to three Representatives, two Senators and three members of the public (one each to represent groundwater management, surface water management, and the environmental community). 

The Water Advisory Council will provide focus and recommendations on state water issues, including:(i) furthering the key tenets of SB2, (ii) promoting regionalization of water projects and public/private partnerships relating to water projects, and (iii) promoting adequate financing for surface water and groundwater projects. 

The Water Advisory Council may not:(i) promulgate rules, (ii) regulate water use, water quality, or any other aspect of water resource management, (iii) plan or construct water resource projects, or have such projects planned or constructed, and (iv) grant or lend any funds for the construction of water resource projects. 

The Water Advisory Council will provide a forum for state-level analysis of river authorities and similar agencies.On a five-year review cycle, each river authority will present its annual self-assessment report to the Water Advisory Council.The TNRCC will expand the applicability of its rules (currently 30 TAC, Chapter 292) to include all river authorities and similar agencies. 

Surface Water and Groundwater Conjunctive Management.Defines “conjunctive use” to mean the combined use of groundwater and surface water sources that optimizes the beneficialcharacteristics of each source of water. 

Defines “river basin” as a river or coastal basin as designated by the TWDB, which does not include water originating in bays or arms of the Gulf of Mexico.This clarifies that movement of desalinated ocean or bay water could not be considered an interbasin transfer. 

Provides definitions of “agriculture,” “agricultural uses” and “nursery grower”to replace existing definitions of “irrigation,” “stock raising” and “crop or livestock production.”The new definitions encompass additional activities such as confined animal feeding operations, the cultivation of plants in containers, viticulture (wine making), and leaving land idle for certain purposes, including crop or livestock rotations. 

In the list of preferences for the appropriation of water, SB 2 moves “agricultural uses” up from third to second on the list on par with “industrial uses.” 

Makes no changes to existing law relating to the junior rights status of interbasin transfers. 

Expands exemptions from cancellation of water rights for non-use to include water rights to meet long-term public water supply, electric generation needs, long-term water planning, or if the water right was obtained due to construction of a reservoir funded, in whole or in part, by the holder of the right. 

Provides that groundwater districts are the preferred method of groundwater management through rules developed, adopted and promulgated by a district in accordance with the provisions of Chapter 36. 

Provides a streamlined process for groundwater conservation district creation uponpetition of landowners to the TNRCC. 

Clarifies that groundwater districts may regulate spacing and production of wells based on tract size and distance from property lines.Also, expands the issues for which groundwater districts are authorized to make and enforce rules to include protection of groundwater quality. 

Clarifies authority of groundwater districts relating to the transfer of groundwater out of a district:(i) district rules can require permit amendment in order to transfer groundwater, (ii) districts cannot regulate exporters more restrictively than in-district users, (iii) allows districts to assess an export surcharge, (iv) prohibits denial of a well permit based on the intention to export, (v) provides that the term for the authorization to transfer water from a groundwater conservation district must be at least 30 years, unless otherwise negotiated by the parties, and (vi) a district shall not adopt rules expressly prohibiting the export of groundwater. 

Authorizes groundwater districts to assess production fees -- to be based on the amount of groundwater authorized to be withdrawn or on the amount actually withdrawn.Districts may assess production fees instead of, or in addition to, any taxes levied by the district. 

Amends enabling statute of the Edwards Aquifer Authority (EAA) to: (i) add the new definitions for agriculture, agricultural uses and nursery grower to the enabling legislation of the Edwards Aquifer Authority, (ii) cap fees for agricultural uses of water in the EAA at $2.00 per acre foot, and (iii) authorize the EAA to contract for injection or artificial recharge only if provision is made to protect and maintain the quality of groundwater in the receiving portion of the aquifer and the water used is from the Edwards aquifer or the water is recharged through a natural recharge feature. 

District Ratifications and Creations.Ratifies the creation or creates 15 groundwater conservation districts and one “utility” district. 

Water Infrastructure Financing.Creates the Water Infrastructure Fund, as a fund in the state treasury, to be administered by the TWDB, to provide funding for the implementation of water projects recommended through the state and regional water planning process. 

The Fund consists of money from:(i) appropriations from the legislature, (ii) any source of revenue the legislature may dedicate for deposit to the water infrastructure fund, (iii) repayments of loans made from the water infrastructure fund, (iv) interest earned on money credited to the fund and depository interest allocable to the water infrastructure fund held at the state treasury, and (v) proceeds from the sale of any political subdivisions’ bonds or obligations held in the Water Infrastructure Fund and not otherwise pledged. 

The Fund is intended to provide financial incentives to facilitate the implementation of strategies recommended in the State Water Plan. 

Creates the Rural Water Assistance Fund to be administered by the TWBD.The Fund is intended to provide financial assistance to smaller, rural water suppliers.The Fund consists of appropriations, loan repayments and TWDB general obligation bond proceeds. 

Joint Committee on Water Resources. 

The Joint Committee shall conduct an interim study and make recommendations regarding: (i) increasing the efficient use of existing water resources, (ii) developing sufficient long-term financing strategies, (iii) improving existing water conveyance systems, (iv) water marketing, (v) determining the appropriate role of environmental and wildlife concerns in water permitting and water development, and (vi) protection of the natural condition of beds and banks of the state-owned watercourses. 

The Joint Committee has 6 members consisting of the Chairs of the Senate and the House Committees on Natural Resources, 2 Senators appointed by the Lt. Governor, and 2 Representatives appointed by the Speaker of the House. 

Rulemaking Procedures for the Edwards Aquifer Authority (EAA).Provides that the EAA is no longer subject to the Administrative Procedures and Texas Register Act but is subject to open meetings and open records requirements.Sets out additional requirements for the EAA, including requirement for a contested case hearing on a permit application if a person with a related justiciable interest requests the hearing. 

Revocation of Certificate of Public Utility.Allows a city to request the TNRCC to revoke the certificate of convenience and necessity (CCN) of a public utility if it finds that the utility has never provided, is no longer providing, or has failed to provide continuous and adequate service, or if the utility has been grossly or continuously mismanaged or grossly or continuously noncompliant with state law or TNRCC rules.If the CCN is revoked, the city must operate the utility and request TNRCC approval to acquire the utility at fair market value. 

Water Utility Systems.Amends multiple provisions in Chapter 13, Water Code, relating to requirements for water utilities regarding rate making, billing procedures, disclosure of related interests, and regional consolidation of rates. 

Miscellaneous Provisions.Provides that property subject to a permit or a plat in one city’s ETJ may not be subjected to new or additional water pollution regulations if the property is transferred to another city’s ETJ. 

Prohibits a local government, except for the EAA, from adopting regulations or ordinances that impose standards for underground petroleum storage tanks since there is a unified and state-wide program for groundwater and surface water protection relating to underground storage tanks. 

Prohibits the TNRCC from authorizing injection wells into or through the Edwards Aquifer. 

(Senate Bill 2 will be effective September 1, 2001.) 

Texas Water Development Fund II

Texas voters will decide whether to approve the proposed Constitutional amendment at an election on November 6, 2001, to authorize the TWDB to issue additional general obligation bonds in an amount not to exceed $2 billion.$50 million of those bonds shall be used for the water infrastructure fund created by SB 2.