DISTRICTS:
Back to Basics
2013 TRWA Districts Conference
October 2013
2705 Bee Cave Road, Suite 200
110
Austin, Texas 7874...
Part 1
Overview of Operations
including district powers and duties, service
standards and responsibilities, board member
r...
What is a Utility District?
• Utility Districts are local political
subdivisions that may provide water,
wastewater, drain...
Utility District Authority in
Texas

2705 Bee Cave Road, Suite 200
110
Austin, Texas 78746
(512) 614-0901
www.carltonlawau...
Constitution
Article III, Section 52
– (b) Under Legislative provision, …any …defined
district now or hereafter to be desc...
Constitution
Article III, Section 52 (cont.)
• Improvement of rivers, creeks, and streams to
prevent overflows, and to per...
Constitution
Article XVI, Section 59
• The conservation and development of all of the natural
resources of this State… inc...
Constitution
Article XVI, Section 59
• There may be created within the State of Texas,
or the State may be divided into, s...
The Statutes
• Chapter 49 – General Statute
• Chapter 65 – Special Utility Districts
• Chapters 51-67 – Other types of
spe...
Utility Districts in Texas
• 1663 Active Utility Districts in Texas*
– 64 Special Utility Districts
– 879 Municipal Utilit...
2705 Bee Cave Road, Suite 200
Austin, Texas 78746
(512) 614-0901
www.carltonlawaustin.com
©2013
Creating a District

2705 Bee Cave Road, Suite 200
110
Austin, Texas 78746
(512) 614-0901
www.carltonlawaustin.com
©2011
©...
Why create a Utility District?
• Utility Districts ensure adequate funding
of water supply and wastewater collection
syste...
Creation
• Legislative Process
– Local Bills

• Administrative Process
– State
– County

• Creation Records are Important!...
Creation
• Voters must approve creation and
authorize any taxing and bonding
authority.
• Elections must comply with State...
District Governing Body

2705 Bee Cave Road, Suite 200
110
Austin, Texas 78746
(512) 614-0901
www.carltonlawaustin.com
©20...
Board of Directors
• Composition of board varies by type of Districts (most
5 members)
• Election to 4-year terms (3-year ...
Board Member
Requirements
• Oaths of office and statements for public
officials.
• Post Bonds of $10,000 for each board
me...
Local Oversight
• County Attorney
– Can file suit in court to remove board
members for:
•
•
•
•

Misconduct
Official Misco...
Meetings
• Required to hold regular and special
meetings as necessary to conduct
District’s business
• Required to keep co...
Recordkeeping
• Approve a Records Management
Program, including:
– Order Establishing Records Management
Program, Appointi...
Offices and Meetings
• District must establish District
administrative office and publish notice of
location of meeting pl...
Accountability Issues

2705 Bee Cave Road, Suite 200
110
Austin, Texas 78746
(512) 614-0901
www.carltonlawaustin.com
©2011...
Accountability Issues
•
•
•
•

State Laws
State Agencies
Voters
Customers, Residents and Property
Owners
2705 Bee Cave Roa...
State Agencies with Oversight
• Texas Commission on Environmental
Quality
– District Oversight
– Bond Approval
– Rate juri...
Open Meetings Act
• Chapter 551, Texas Government Code
• Attorney General Approved Training Required

• Open Meetings Made...
Open Meetings
• 72 Hours Notice of meeting (unless
emergency)
• Notice must state time, date and place of
meeting
• Notice...
Open Meetings
Closed Sessions
•
•
•
•
•

Consult with District’s attorney
Real Property Acquisition
Personnel Matters
Gift...
Public Information Act
• Chapter 552, Texas Government Code
– formerly the Open Records Act

• Attorney General Training R...
Public Information
• Districts and “the part, section, or portion of
an organization, corporation, commission,
committee, ...
Public Information
• Making a Request
– A request for records or information triggers
the Act.

• Creating Records to Resp...
Public Information
• Charges to the Requestor
– Generally no charges allowed to view or
inspect records and information. C...
Public Information
• Exceptions to the Act
– the governmental body generally must,
refer the matter to the Office
of the A...
Ethical Issues
• Conflict of Interest
• Nepotism
• Dual Office Holding/Incompatibility

AG Handbook: Public Officers: Trap...
Conflict of Interest
• Common Law
If a public official directly or indirectly has a pecuniary
interest in a contract, no m...
Conflict of Interest
• A local public official commits an offense if the
official knowingly:
– violates Local Government C...
Conflict of Interest
• If a local public official has a substantial interest
in a business entity or in real property, the...
Conflict of Interest
• A person has a substantial interest in a business
entity if:
– the person owns 10 percent or more o...
Nepotism
• A public official may not appoint, confirm the
appointment of, or vote for the appointment or
confirmation of t...
Nepotism
• Except as provided by Texas Government
Code, Section 573.043, this chapter
applies to relationships within the ...
Nepotism

2705 Bee Cave Road, Suite 200
Austin, Texas 78746
(512) 614-0901
www.carltonlawaustin.com
©2013
Nepotism
Consanguinity
Civil Law Degrees Of Relationship
1st
Officer

2nd

3rd

4th

Child

Grandchild

Great
Grandchild

...
Nepotism
Affinity
Civil Law Degrees Of Relationship

1st
Officer

2nd

3rd

Spouse

Spouse’s Sibling

Child of Spouse’s
Si...
Dual Office Holding
• Article XVI, Section 40, of the Texas
Constitution prohibits a person from
holding or exercising mor...
Incompatibility
• Self Appointment
• Self Employment
• Conflicting Loyalties

2705 Bee Cave Road, Suite 200
Austin, Texas ...
Incompatibility
• Self Appointment
– “It is because of the obvious incompatibility of
being both a member of a body making...
Incompatibility
• Self Employment
– Ordinarily, self-employment incompatibility will
arise only where one position is an o...
Incompatibility
• Conflicting Loyalties
– both positions must be “offices”
– the relationship between the positions create...
Laws Governing District
Operations
The “Bylaws”

2705 Bee Cave Road, Suite 200
110
Austin, Texas 78746
(512) 614-0901
www....
Revenue
• Ad Valorem Taxes
• Utility Rates
• Fees and Charges

2705 Bee Cave Road, Suite 200
Austin, Texas 78746
(512) 614...
Ad Valorem Taxes
• Property Tax (Ad Valorem) Limits
– Voter Approved Autority
– Not for SUDs (65.235)

• Truth-in-Taxation...
District Utility Rates
• Governed by Chapter 13 of Texas Water
Code
• Subject to Appellate Jurisdiction of TCEQ

2705 Bee ...
Fees and Charges
• May adopt and enforce all necessary
,
in addition to taxes, for providing or
making available any distr...
Fees and Charges
• Impact Fees
– Charge against new development for capital
improvements
– More than 3X the actual and rea...
Expenditures
•
•
•
•

Purchases
Bonds
Loans
Bidding

2705 Bee Cave Road, Suite 200
Austin, Texas 78746
(512) 614-0901
www....
Expenditures
Generally
• District's money may be disbursed only by
check, draft, order, or other instrument that is
signed...
Acquiring Property
• A District is authorized to purchase,
construct, acquire, own, operate,
maintain, repair, improve, or...
Bonds
• A district may issues bonds or notes
secured by a pledge of ad valorem taxes
– The “Pledge” allows a bond holder t...
Notes
• Revenue Notes
– Do not require election
– Pledged solely by revenues of system after
costs to maintain and operate...
Questions?

2705 Bee Cave Road, Suite 200
110
Austin, Texas 78746
(512) 614-0901
www.carltonlawaustin.com
©2011
©2013
Break!

But be back at 3:30!
2705 Bee Cave Road, Suite 200
Austin, Texas 78746
(512) 614-0901
www.carltonlawaustin.com
©20...
Part 2
Contractual Relationships
including wholesale and emergency service
contracts and interlocal agreements, as well as...
Contracting
• Districts may enter into contracts for all
types of services.
• Proper procedures must be followed
before en...
Governmental Immunity
• Utility Districts enjoy certain immunity from suit
under Texas law that private entities do not.
–...
Tort Liability
• Utility Districts otherwise immune from
liability for torts.
• Utility District tort claims limited to
$1...
Bidding
• A district must publish notice of and
submit to competitive bids an expenditure
of more than $75,000 for one ite...
Bidding - Options
• For Public Works (ie Buildings) – Must
Use Government Code, Chapter 2267,
Contracting and Delivery Pro...
Bidding – Chapter 2267
• Competitive Bidding
• Competitive Sealed Proposals
• Construction Manager-Agent Method
(“CMA”)
• ...
Bidding - Prohibitions
• Professional Services Procurement Act
prohibits bidding the following
professional services:
– Ac...
Bidding - Prohibitions
• Additional Prohibitions
– Medicine
– Optometry
– Professional engineering
– Real estate appraisin...
Bidding – Professional Services
How to secure contracts for architectural,
engineering, and surveying services:
• Select m...
Bidding – Professional Services
How to secure contracts for architectural,
engineering, and surveying services:
• If negot...
Construction Projects
• Payment and Performance Bonds
– A governmental entity making a public work
contract must require t...
Construction Projects
• Prevailing Wage Rates
– District must pay prevailing wage rates for
public work construction contr...
Miscellaneous Issues
•
•
•
•
•

Audits
Annual Reports
Depositories
Public Funds Investment Act
Public Funds Collateral Act...
Audit
• Annual Audit is required within 120 days of fiscal
year end
• Audit must be completed by certified public
accounta...
Depositories
• The board shall designate one or more banks
to serve as depositories for district funds.
• The board shall ...
Depositories
• The district may not deposit funds in a
depository or trustee bank in an amount that
exceeds the maximum am...
Public Funds Investment Act
• Government Code, Chapter 2256
• A District must designate an Investment
Officer
– Training r...
Public Funds Investment Act
• A district must adopt by rule, order,
ordinance, or resolution, as appropriate, a
regarding
...
Public Funds Investment Act
• A district must
, by rule,
order, ordinance, or resolution, as
appropriate, one or more offi...
Public Funds Investment Act
• Not less than quarterly, the investment
officer shall prepare and submit to the
district a w...
Public Funds Collateral Act
• Government Code, Chapter 2257
• A deposit of public funds shall be secured
by eligible secur...
Other Service Contracts for
Districts

2705 Bee Cave Road, Suite 200
110
Austin, Texas 78746
(512) 614-0901
www.carltonlaw...
Contracts for Other Services
•
•
•
•
•

Contract for Insurance and Director Bonds
Contract for bookkeeping services.
Contr...
Miscellaneous Financial Issues
• Adopt Resolution Establishing District
Fiscal Year
• Establish District Depository
• Open...
Reporting and Registrations
• Register/File Report with TCEQ annually
• Obtain a federal tax identification number
for the...
Utility Issues

2705 Bee Cave Road, Suite 200
110
Austin, Texas 78746
(512) 614-0901
www.carltonlawaustin.com
©2011
©2013
Service Area
• Districts NOT required to have CCN
– May consider obtaining CCN to proactively
secure/defend service area

...
CCN Issues
• Expedited Release
– 50 acres or more and no service

• Streamlined Expedited Release
– 25 acres or more in 33...
Rates
• Districts may set rates and fees to recover costs
of providing services
• Changes in rates subject to appeal to TC...
Wholesale Contracts
• Contracts for wholesale water supply
from another entity
• Limited appellate right to TCEQ regarding...
Wholesale Contracts
• Important to protect District through contract
language (whether supplier or recipient of water)
– C...
Organizations/Agencies for
Assistance
• Texas Attorney General (Open
Government)
• Texas Commission on Environmental
Quali...
Helpful Websites
• TX Rural Water Association
– www.trwa.org

• TCEQ
– www.tceq.texas.gov

• PUC
– www.puc.texas.gov

• Te...
Questions?

2705 Bee Cave Road, Suite 200
110
Austin, Texas 78746
(512) 614-0901
www.carltonlawaustin.com
©2011
©2013
Districts: Back to Basics
John J. Carlton
The Carlton Law Firm, PLLC
2705 Bee Cave Road, Suite 200
Austin, Texas 78746
(51...
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2013 TRWA Districts Conference: Districts - Back to Basics

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Basic introduction to the legal aspects of the administration and operation of Special Purpose Districts providing water in Texas, including meetings, finances, contracting and ethical issues.

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2013 TRWA Districts Conference: Districts - Back to Basics

  1. 1. DISTRICTS: Back to Basics 2013 TRWA Districts Conference October 2013 2705 Bee Cave Road, Suite 200 110 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2011 ©2013
  2. 2. Part 1 Overview of Operations including district powers and duties, service standards and responsibilities, board member responsibilities and policies, conducting meetings, adopting and enforcing service policies, and the challenges of serving urbanizing areas. 2705 Bee Cave Road, Suite 200 110 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2011 ©2013
  3. 3. What is a Utility District? • Utility Districts are local political subdivisions that may provide water, wastewater, drainage and other services – Typically governed by board members elected by qualified voters from within the District – Can be funded by utility revenues and property taxes 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  4. 4. Utility District Authority in Texas 2705 Bee Cave Road, Suite 200 110 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2011 ©2013
  5. 5. Constitution Article III, Section 52 – (b) Under Legislative provision, …any …defined district now or hereafter to be described and defined within the State of Texas, …may issue bonds … in any amount not to exceed one-fourth of the assessed valuation of the real property of such district… and levy and collect taxes to pay the interest thereon and provide a sinking fund for the redemption thereof, as the Legislature may authorize, and in such manner as it may authorize the same, for the following purposes to wit: 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  6. 6. Constitution Article III, Section 52 (cont.) • Improvement of rivers, creeks, and streams to prevent overflows, and to permit of navigation thereof, or irrigation thereof, or in aid of such purposes. • Construction and maintenance of pools, lakes, reservoirs, dams, canals and waterways for the purposes of irrigation, drainage or navigation, or in aid thereof. • Construction, maintenance and operation of macadamized, graveled or paved roads and turnpikes, or in aid thereof. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  7. 7. Constitution Article XVI, Section 59 • The conservation and development of all of the natural resources of this State… including • the control, storing, preservation and distribution of its storm and flood waters, the waters of its rivers and streams, for irrigation, power and all other useful purposes, • the reclamation and irrigation of its arid, semiarid and other lands needing irrigation, • the reclamation and drainage of its overflowed lands, and other lands needing drainage, • the conservation and development of its forests, water and hydroelectric power, • the navigation of its inland and coastal waters, and • the preservation and conservation of all such natural resources of the State are each and all hereby declared public rights and duties; and the Legislature shall pass all such laws as may be appropriate thereto. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  8. 8. Constitution Article XVI, Section 59 • There may be created within the State of Texas, or the State may be divided into, such number of conservation and reclamation districts as may be determined to be essential to the accomplishment of the purposes of this amendment to the constitution, which districts shall be governmental agencies and bodies politic and corporate with such powers of government and with the authority to exercise such rights, privileges and functions concerning the subject matter of this amendment as may be conferred by law. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  9. 9. The Statutes • Chapter 49 – General Statute • Chapter 65 – Special Utility Districts • Chapters 51-67 – Other types of special districts related to water 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  10. 10. Utility Districts in Texas • 1663 Active Utility Districts in Texas* – 64 Special Utility Districts – 879 Municipal Utility Districts * Based upon TCEQ Water Utility Database Records 11/05/2013 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  11. 11. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  12. 12. Creating a District 2705 Bee Cave Road, Suite 200 110 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2011 ©2013
  13. 13. Why create a Utility District? • Utility Districts ensure adequate funding of water supply and wastewater collection systems for local communities – Spread costs to all customers and landowners through rates and taxes • Utility Districts enjoy sovereign immunity and limited tort liability. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  14. 14. Creation • Legislative Process – Local Bills • Administrative Process – State – County • Creation Records are Important! 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  15. 15. Creation • Voters must approve creation and authorize any taxing and bonding authority. • Elections must comply with State and Federal election laws. • Creation and confirmation election records are a District’s “incorporation” documents. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  16. 16. District Governing Body 2705 Bee Cave Road, Suite 200 110 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2011 ©2013
  17. 17. Board of Directors • Composition of board varies by type of Districts (most 5 members) • Election to 4-year terms (3-year terms for SUDs) • Qualification for Office – at least 18 years of age; and – a resident citizen of the state that is: • a qualified voter within district (not WCIDs, WIDs, Irrig. Districts or FWSDs); • a user of the facilities of the district (SUDs only), or • an owner of land subject to taxation in the district (not Drainage District). • Vacancies (most filled by Board appointment) 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  18. 18. Board Member Requirements • Oaths of office and statements for public officials. • Post Bonds of $10,000 for each board member • Open Meetings and Open Records Training to be completed by all Board Members. – Must be completed within 90 days of taking office. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  19. 19. Local Oversight • County Attorney – Can file suit in court to remove board members for: • • • • Misconduct Official Misconduct Incompetency Intoxication 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  20. 20. Meetings • Required to hold regular and special meetings as necessary to conduct District’s business • Required to keep complete account of all meetings and proceedings. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  21. 21. Recordkeeping • Approve a Records Management Program, including: – Order Establishing Records Management Program, Appointing Records Management Office, and Appointing Public Information Coordinator; and – Declaration of Compliance with Records Scheduling Requirement of the Local Government Act. – File with State Library and Archives Commission. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  22. 22. Offices and Meetings • District must establish District administrative office and publish notice of location of meeting places outside the District in newspapers. • Election of President, Vice President, Treasurer, and Secretary. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  23. 23. Accountability Issues 2705 Bee Cave Road, Suite 200 110 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2011 ©2013
  24. 24. Accountability Issues • • • • State Laws State Agencies Voters Customers, Residents and Property Owners 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  25. 25. State Agencies with Oversight • Texas Commission on Environmental Quality – District Oversight – Bond Approval – Rate jurisdiction until September 1, 2014 • Public Utility Commission of Texas – Rate jurisdiction as of September 1, 2014 • Texas Attorney General – for Open Government and Records Issues 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  26. 26. Open Meetings Act • Chapter 551, Texas Government Code • Attorney General Approved Training Required • Open Meetings Made Easy • Open Meetings Act Handbook • Training Required Upon Assumption of Office • https://www.oag.state.tx.us/open/publications_og.shtml 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  27. 27. Open Meetings • 72 Hours Notice of meeting (unless emergency) • Notice must state time, date and place of meeting • Notice must describe matters to be discussed sufficiently • Public has right to attend 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  28. 28. Open Meetings Closed Sessions • • • • • Consult with District’s attorney Real Property Acquisition Personnel Matters Gifts to District Other Exceptions 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  29. 29. Public Information Act • Chapter 552, Texas Government Code – formerly the Open Records Act • Attorney General Training Required • Open Records Made Easy • Public Information Act Handbook • Training Required Upon Assumption of Office • https://www.oag.state.tx.us/open/publications_og.shtml 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  30. 30. Public Information • Districts and “the part, section, or portion of an organization, corporation, commission, committee, institution, or agency that spends or that is supported in whole or in part by public funds “ are subject to the act. • Non-profit WSCs specifically subject to the act. • Unless excluded, all public information is subject to disclosure under the act. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  31. 31. Public Information • Making a Request – A request for records or information triggers the Act. • Creating Records to Respond to Request – The Act does not require a governmental body to create new information, to do legal research, or to answer questions. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  32. 32. Public Information • Charges to the Requestor – Generally no charges allowed to view or inspect records and information. Charges may be allowed for copies and certain staff time. • Amount of Charges – All charges must comply with the Texas Building and Procurement Commission’s rules. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  33. 33. Public Information • Exceptions to the Act – the governmental body generally must, refer the matter to the Office of the Attorney General (the OAG) for a ruling. • Questions or Complaints. (877) 673-6839 (877-OPEN TEX). • Complaints Regarding Charges. Contact the Texas Building and Procurement Commission (512) 475-2497. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  34. 34. Ethical Issues • Conflict of Interest • Nepotism • Dual Office Holding/Incompatibility AG Handbook: Public Officers: Traps for the Unwary https://www.oag.state.tx.us/open/publications_og.shtml 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  35. 35. Conflict of Interest • Common Law If a public official directly or indirectly has a pecuniary interest in a contract, no matter how honest he may be, and although he may not be influenced by the interest, such a contract so made is violative of the spirit and letter of our law, and is against public policy. Meyers v. Walker 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  36. 36. Conflict of Interest • A local public official commits an offense if the official knowingly: – violates Local Government Code Section 171.004 (Next Slide) – acts as surety for a business entity that has work, business, or a contract with the governmental entity; or – acts as surety on any official bond required of an officer of the governmental entity. • An offense under this section is a Class A misdemeanor – punishable by up to 1 year in jail and/or up to $4000 penalty. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  37. 37. Conflict of Interest • If a local public official has a substantial interest in a business entity or in real property, the official must: – file an affidavit stating the nature and extent of the interest before a vote or decision on any matter involving the business entity or the real property, and – abstain from further participation in the matter if: • the action on the matter will have a special economic effect on that business entity that is distinguishable from the effect on the public; or • it is reasonably foreseeable that an action on the matter will have a special economic effect on the value of the property that is distinguishable from its effect on the Road, Suite 200 2705 Bee Cave Austin, Texas 78746 public. (512) 614-0901 www.carltonlawaustin.com ©2013
  38. 38. Conflict of Interest • A person has a substantial interest in a business entity if: – the person owns 10 percent or more of the voting stock or shares of the business entity or owns either 10 percent or more or $15,000 or more of the fair market value of the business entity; or – funds received by the person from the business entity exceed 10 percent of the person's gross income for the previous year. • A person has a substantial interest in real property if the interest is an equitable or legal ownership with a fair market value of $2,500 or more. • Applies to Spouse, Child and Parent Interests Too. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  39. 39. Nepotism • A public official may not appoint, confirm the appointment of, or vote for the appointment or confirmation of the appointment of an individual to a position that is to be directly or indirectly compensated from public funds or fees of office if: – the individual is related to the public official within a degree described by Texas Government Code, Section 573.002; or – the public official holds the appointment or confirmation authority as a member of a state or local board, the legislature, or a court and the individual is related to another member of that board, legislature, or court within a degree described by Section 573.002. Suite 200 2705 Bee Cave Road, Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  40. 40. Nepotism • Except as provided by Texas Government Code, Section 573.043, this chapter applies to relationships within the third degree by consanguinity or within the second degree by affinity. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  41. 41. Nepotism 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  42. 42. Nepotism Consanguinity Civil Law Degrees Of Relationship 1st Officer 2nd 3rd 4th Child Grandchild Great Grandchild Great Great Grandchild Parent Sibling Niece/Nephe w Grand Niece/Nephe w Grandparent Great Grandparent Great Great Grandparent Aunt/Uncle Great Aunt/Uncle 1st Cousin 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  43. 43. Nepotism Affinity Civil Law Degrees Of Relationship 1st Officer 2nd 3rd Spouse Spouse’s Sibling Child of Spouse’s Sibling Spouse’s Parent Spouse’s Grandparent Spouse’s Great Grandparent Child’s Spouse Parent of Child’s Spouse Grandparent of Child’s Spouse Sibling’s Spouse Parent of Sibling’s Spouse Spouse’s Aunt/Uncle 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  44. 44. Dual Office Holding • Article XVI, Section 40, of the Texas Constitution prohibits a person from holding or exercising more than one civil office of emolument at a time. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  45. 45. Incompatibility • Self Appointment • Self Employment • Conflicting Loyalties 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  46. 46. Incompatibility • Self Appointment – “It is because of the obvious incompatibility of being both a member of a body making the appointment and an appointee of that body that the courts have with great unanimity throughout the country declared that all officers who have the appointing power are disqualified for appointment to the offices to which they may appoint.” • Ehlinger v Clark, 8 S.W.2d 666 (Tex. 1928). 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  47. 47. Incompatibility • Self Employment – Ordinarily, self-employment incompatibility will arise only where one position is an office and the other an employment. – But, can arise when position is subordinate to the governing body in some of its principal duties. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  48. 48. Incompatibility • Conflicting Loyalties – both positions must be “offices” – the relationship between the positions creates conflict • if authorized to contract with each other • if both have the power of taxation – even if one district imposes an ad valorem property tax and the other imposes a sales tax that must be approved by the voters. • if boundaries overlap • whenever one governmental body has authority to impose its will on the other in any matter whatsoever. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  49. 49. Laws Governing District Operations The “Bylaws” 2705 Bee Cave Road, Suite 200 110 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2011 ©2013
  50. 50. Revenue • Ad Valorem Taxes • Utility Rates • Fees and Charges 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  51. 51. Ad Valorem Taxes • Property Tax (Ad Valorem) Limits – Voter Approved Autority – Not for SUDs (65.235) • Truth-in-Taxation Process – Notice and Hearings if exceed Effective Rate • Rollback Elections – 108% of Previous Effective O&M Rate • http://www.window.state.tx.us/taxinfo/proptax/tnt/ 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  52. 52. District Utility Rates • Governed by Chapter 13 of Texas Water Code • Subject to Appellate Jurisdiction of TCEQ 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  53. 53. Fees and Charges • May adopt and enforce all necessary , in addition to taxes, for providing or making available any district facility or service. • May require a for any services or facilities furnished and the district may or may not provide that the deposit will bear interest. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  54. 54. Fees and Charges • Impact Fees – Charge against new development for capital improvements – More than 3X the actual and reasonable cost to tap or connect • Local Government Code, Chap. 395, process or TCEQ Approved 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  55. 55. Expenditures • • • • Purchases Bonds Loans Bidding 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  56. 56. Expenditures Generally • District's money may be disbursed only by check, draft, order, or other instrument that is signed by at least a majority of the directors. • Board may adopt resolution allowing the general manager, treasurer, bookkeeper, or other employee of the district to sign disbursements. • Board may allow disbursements of district money to be transferred by federal reserve wire system. The board by resolution may allow the wire transfers to accounts in the name of the district or accounts not in the name of the district. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  57. 57. Acquiring Property • A District is authorized to purchase, construct, acquire, own, operate, maintain, repair, improve, or extend inside and outside its boundaries any and all land, works, improvements, facilities, plants, equipment, and appliances necessary to accomplish the purposes of its creation or the purposes authorized by this code or any other law. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  58. 58. Bonds • A district may issues bonds or notes secured by a pledge of ad valorem taxes – The “Pledge” allows a bond holder to force District to levy tax to make debt payments • A district must hold an election to authorize the issuance of bonds or notes. • Bonds generally approved by TCEQ and Texas Attorney General 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  59. 59. Notes • Revenue Notes – Do not require election – Pledged solely by revenues of system after costs to maintain and operate – Not longer than 3 years unless to: • • • • Farmers Home Administration; United States Department of Agriculture; Texas Water Development Board; or North American Development Bank. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  60. 60. Questions? 2705 Bee Cave Road, Suite 200 110 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2011 ©2013
  61. 61. Break! But be back at 3:30! 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  62. 62. Part 2 Contractual Relationships including wholesale and emergency service contracts and interlocal agreements, as well as professional service contracts, including how to manage those relationships. This session will also discuss potential pitfalls regarding these relationships, liability and waivers, and how to protect the district before signing on the dotted line. 2705 Bee Cave Road, Suite 200 110 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2011 ©2013
  63. 63. Contracting • Districts may enter into contracts for all types of services. • Proper procedures must be followed before entering into contracts. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  64. 64. Governmental Immunity • Utility Districts enjoy certain immunity from suit under Texas law that private entities do not. – Can be liable for property damage, personal injury, and death caused an employee acting within his scope of employment while operating a motor-driven vehicle or equipment and if the employee would be personally liable according to Texas law; and – Can be liable for personal injury and death so caused by a condition or use of tangible personal or real property if the governmental unit would, were it a private person, be liable to the claimant according to Texas law. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  65. 65. Tort Liability • Utility Districts otherwise immune from liability for torts. • Utility District tort claims limited to $100,000 to single person and $300,000 per occurrence for personal injury or death and $10,000 per occurrence for property damage. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  66. 66. Bidding • A district must publish notice of and submit to competitive bids an expenditure of more than $75,000 for one item or service or more than one of the same or a similar type of item or service in a fiscal year. • A district must solicit bids for contracts between $25,000 and 75,000 from at least three bidders. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  67. 67. Bidding - Options • For Public Works (ie Buildings) – Must Use Government Code, Chapter 2267, Contracting and Delivery Procedures for Construction Projects 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  68. 68. Bidding – Chapter 2267 • Competitive Bidding • Competitive Sealed Proposals • Construction Manager-Agent Method (“CMA”) • Construction Manager-At-Risk Method (“CMAR”) • Design-Build Contracts • Job Order Method Government Code Chapter 2267 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  69. 69. Bidding - Prohibitions • Professional Services Procurement Act prohibits bidding the following professional services: – Accounting – Architecture – Landscape architecture – Land surveying 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  70. 70. Bidding - Prohibitions • Additional Prohibitions – Medicine – Optometry – Professional engineering – Real estate appraising – Professional nursing • Government Code Chapter 2254 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  71. 71. Bidding – Professional Services How to secure contracts for architectural, engineering, and surveying services: • Select most qualified provider on basis of demonstrated competence and qualifications • Attempt to negotiate contract at fair and reasonable price 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  72. 72. Bidding – Professional Services How to secure contracts for architectural, engineering, and surveying services: • If negotiations fail: 1) formally end negotiations 2) select next most highly qualified provider 3) attempt to negotiate contract at fair and reasonable price 4) continue process until contract is entered 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  73. 73. Construction Projects • Payment and Performance Bonds – A governmental entity making a public work contract must require the contractor, before beginning the work, to execute to the governmental entity: – a payment bond, if the contract is in excess of $25,000 – a performance bond where contract is in excess of $100,000 Government Code Chapter 2253 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  74. 74. Construction Projects • Prevailing Wage Rates – District must pay prevailing wage rates for public work construction contract (not maintenance) – Must either: • Survey wage rates prevailing in the area; or • Use wage rates determined by US Department of Labor under Davis-Bacon Act – Must specify wage rates in bid solicitation and contract documents 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  75. 75. Miscellaneous Issues • • • • • Audits Annual Reports Depositories Public Funds Investment Act Public Funds Collateral Act 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  76. 76. Audit • Annual Audit is required within 120 days of fiscal year end • Audit must be completed by certified public accountant (CPA) • Audit must comply with TCEQ rules • Exemptions and alternative requirements for dormant and low revenue districts 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  77. 77. Depositories • The board shall designate one or more banks to serve as depositories for district funds. • The board shall deposit all district funds in a depository bank, except that the board: (1) may deposit funds pledged to pay bonds or notes with banks named in the trust indenture or in the bond or note resolution; and (2) shall remit funds for the payment of the principal of and interest on bonds and notes to the bank of payment. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  78. 78. Depositories • The district may not deposit funds in a depository or trustee bank in an amount that exceeds the maximum amount secured by the Federal Deposit Insurance Corporation unless the excess funds are secured in the manner provided by law for the security of county funds. (Currently $250,000) • The resolution or trust indenture securing the bonds or notes may require that any or all of the funds must be secured by obligations of or unconditionally guaranteed by the federal government. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  79. 79. Public Funds Investment Act • Government Code, Chapter 2256 • A District must designate an Investment Officer – Training required for Investment Officer – Six initial hours within a year, then four hours every two years 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  80. 80. Public Funds Investment Act • A district must adopt by rule, order, ordinance, or resolution, as appropriate, a regarding the investment of its funds and funds under its control. • A district must review its investment policy and investment strategies not less than . 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  81. 81. Public Funds Investment Act • A district must , by rule, order, ordinance, or resolution, as appropriate, one or more officers or employees of the district as to be responsible for the investment of its funds consistent with the investment policy adopted by the entity. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  82. 82. Public Funds Investment Act • Not less than quarterly, the investment officer shall prepare and submit to the district a written for all funds covered by this chapter for the preceding reporting period. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  83. 83. Public Funds Collateral Act • Government Code, Chapter 2257 • A deposit of public funds shall be secured by eligible security to the extent and in the manner required by Chapter 2257. • A public entity may contract with a bank that has its main office or a branch office in Texas to secure a deposit of public funds. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  84. 84. Other Service Contracts for Districts 2705 Bee Cave Road, Suite 200 110 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2011 ©2013
  85. 85. Contracts for Other Services • • • • • Contract for Insurance and Director Bonds Contract for bookkeeping services. Contract for general legal services. Contract for audit services. Contract for Tax Assessment and Collection services. • Purchasing Agreements with Cooperatives. (i.e. HGAC, Buy Board, State) 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  86. 86. Miscellaneous Financial Issues • Adopt Resolution Establishing District Fiscal Year • Establish District Depository • Open District bank account(s), and investment account(s) • Adopt Investment Policy 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  87. 87. Reporting and Registrations • Register/File Report with TCEQ annually • Obtain a federal tax identification number for the District • Obtain a taxing unit identification number from the Texas Comptroller 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  88. 88. Utility Issues 2705 Bee Cave Road, Suite 200 110 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2011 ©2013
  89. 89. Service Area • Districts NOT required to have CCN – May consider obtaining CCN to proactively secure/defend service area • CCN obligates the District to serve area and gives TCEQ oversight of how service is provided 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  90. 90. CCN Issues • Expedited Release – 50 acres or more and no service • Streamlined Expedited Release – 25 acres or more in 33 counties and no service • Decertification – Refusal to provide service • What is “service” and how can you provide it? – Contracts with landowners are key 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  91. 91. Rates • Districts may set rates and fees to recover costs of providing services • Changes in rates subject to appeal to TCEQ – Lesser of 10% or 10,000 of affected ratepayers file petition within 90 days of final decision – Wholesale customers may appeal within 90 days as well. – Rates must be just and reasonable and sufficient, equitable, and consistent in application to each class of customers. – Rates may not be unreasonably preferential, prejudicial, or discriminatory. 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  92. 92. Wholesale Contracts • Contracts for wholesale water supply from another entity • Limited appellate right to TCEQ regarding rates – Public Interest Test Barrier – Some options for Districts contracting with Cities 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  93. 93. Wholesale Contracts • Important to protect District through contract language (whether supplier or recipient of water) – Clearly identify method for calculating rates, both calculation and process – Clarify whether supplier may unilaterally increase rates – Clarify options for other sources of water supply • TCEQ will not decide disputes about contract language • Contract enforcement will be in District Court, not TCEQ 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  94. 94. Organizations/Agencies for Assistance • Texas Attorney General (Open Government) • Texas Commission on Environmental Quality (Rate, Fees and Bonds) • State Library and Archives Commission (Records) • Texas Comptroller (Sales Tax) • Texas Secretary of State (Elections) 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  95. 95. Helpful Websites • TX Rural Water Association – www.trwa.org • TCEQ – www.tceq.texas.gov • PUC – www.puc.texas.gov • Texas Attorney General – www.oag.state.tx.us • Texas Comptroller of Public Accounts – www.window.state.tx.us • Texas Secretary of State – www.soc.state.tx.us 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013
  96. 96. Questions? 2705 Bee Cave Road, Suite 200 110 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2011 ©2013
  97. 97. Districts: Back to Basics John J. Carlton The Carlton Law Firm, PLLC 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 john@carltonlawaustin.com 2705 Bee Cave Road, Suite 200 Austin, Texas 78746 (512) 614-0901 www.carltonlawaustin.com ©2013

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