Bill Text: TX HB1407 | 2025-2026 | 89th Legislature | Comm Sub

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Bill Title: 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.

Sponsorship: Bipartisan Bill

Status: (Introduced - Dead) 2025-05-06 - Laid on the table subject to call [HB1407 Detail]

Download: Texas-2025-HB1407-Comm_Sub.html

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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.