2005 Texas Water Code CHAPTER 67. NONPROFIT WATER SUPPLY OR SEWER SERVICE CORPORATIONS

WATER CODE

CHAPTER 67. NONPROFIT WATER SUPPLY OR SEWER SERVICE CORPORATIONS

SUBCHAPTER A. GENERAL PROVISIONS


	§ 67.001. DEFINITIONS.  In this chapter:                                    
		(1)  "Board" means the board of directors of a 
corporation.                 
		(2)  "Corporation" means a water supply or sewer 
service corporation operating under this chapter.
		(3)  "Director" means a member of the board of 
directors.                   

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.           


	§ 67.002. PURPOSE OF CORPORATION.  A corporation may be 
organized under this chapter to provide:
		(1)  water supply, sewer service, or both for a 
municipality, a private corporation, an individual, or a military 
camp or base;  and
		(2)  flood control and a drainage system for a 
political subdivision, private corporation, or another person. 

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.           


	§ 67.003. CREATION OF CORPORATION.  (a) Three or more 
individuals who are citizens of this state may form a corporation by 
making an application to the secretary of state in the same manner 
as provided by law for an application for a private corporation.
	(b)  The application for charter must include the number of 
directors and the name of each director.
	(c)  The name designated for the corporation must include the 
words "Water Supply Corporation." 

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.           


	§ 67.004. APPLICATION OF TEXAS NON-PROFIT CORPORATION 
ACT.  To the extent it does not conflict with this chapter, the 
Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., 
Vernon's Texas Civil Statutes) applies to a corporation created 
under:
		(1)  this chapter;  or                                                        
		(2)  Chapter 76, Acts of the 43rd Legislature, 1st 
Called Session, 1933 (Article 1434a, Vernon's Texas Civil 
Statutes). 

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.           


	§ 67.005. DIRECTORS.  (a) A corporation may not have more 
than 21 directors.
	(b)  The corporation may increase the number of directors by 
amendment to the bylaws but may not exceed the limit imposed by 
Subsection (a).
	(c)  The bylaws of the corporation may provide that directors 
serve staggered terms of approximately two or three years.
	(d)  At the first annual meeting of the shareholders, the 
directors shall be divided into two or three classes according to 
the length of the terms the directors serve.  The classification of 
directors may not take effect before that meeting.
	(e)  The division of the directors and the corresponding 
terms must be set so that:
		(1)  one-half of the directors, as nearly as possible, 
are elected annually, if a two-year term is provided;  or
		(2)  one-third of the directors, as nearly as possible, 
are elected annually, if a three-year term is provided.
	(f)  After the implementation of two-year or three-year 
terms for directors, as directors' terms expire, the members shall 
elect their successors to serve until the second or third 
succeeding annual meeting after their election, as appropriate. 

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.           


	§ 67.006. OFFICERS.  (a) The board shall elect a 
president, a vice president, and a secretary-treasurer following 
the issuance of a charter and after each annual meeting of the 
membership or shareholders.  At the meeting, each member or 
stockholder may be allowed only one vote regardless of the number of 
memberships or stock certificates held by the person.
	(b)  The board may require a bond of an officer for faithful 
performance of the officer's duties.
	(c)  The salary of an officer of the corporation other than 
secretary-treasurer or a manager employed under Section 67.012 may 
not exceed $5,000 a year.  The board shall set the 
secretary-treasurer's salary at an amount commensurate with the 
secretary-treasurer's duties. 

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.  
Amended by Acts 1999, 76th Leg., ch. 62, § 18.18(a), eff. Sept. 
1, 1999.


	§ 67.007. ANNUAL OR SPECIAL MEETING.  (a) The annual 
meeting of the members or shareholders of the corporation must be 
held between January 1 and May 1 at a time specified by the bylaws or 
the board.
	(b)  The board shall adopt written procedures for conducting 
an annual or special meeting of the members or shareholders, which 
shall include the following:
		(1)  notification to eligible members or shareholders 
of the proposed agenda, location, and date of the meeting;
		(2)  establishment of a quorum consisting of proxies 
and the votes of members or shareholders present;
		(3)  nomination and election procedures;                                      
		(4)  approval of the proxy and ballot form to be used;  
and                 
		(5)  validation of eligible voters, proxies, ballots, 
and election results. 
	(c)  The board shall adopt an official proxy and ballot form 
to be used in conducting the business of the corporation at any 
annual or special meeting.  No other proxy or ballot form will be 
valid.  Proxies and ballots from members or shareholders are 
confidential and are exempted from disclosure by the corporation 
until after the date of the relevant election.

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.  
Amended by Acts 1999, 76th Leg., ch. 54, § 1, eff. May 10, 1999.


	§ 67.008. DISTRIBUTION OF PROFITS.  (a) The incorporators 
may provide in the charter of the corporation that a dividend will 
not be paid on the stock and that all profits of the corporation 
will be paid annually to political subdivisions, private 
corporations, or other persons that have transacted business with 
the corporation during the previous year.
	(b)  The corporation shall distribute any profits under 
Subsection (a) in direct proportion to the amount of business the 
corporation transacts with each entity during that year.
	(c)  The corporation may not make a distribution under 
Subsection (a) if the corporation has unpaid indebtedness.
	(d)  A corporation may allocate to a sinking fund an amount 
of the annual profits as determined necessary by the board for 
maintenance, operation, and replacements. 

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.           


	§ 67.009. FACILITIES.  A corporation may construct, 
acquire, lease, improve, extend, or maintain a facility, plant, 
equipment, or appliance helpful or necessary to provide more 
adequate sewer service, flood control, or drainage for a political 
subdivision. 

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.           


	§ 67.010. POWER TO CONTRACT WITH OTHER ENTITIES.  (a) A 
corporation may enter into a contract with any political 
subdivision, federal agency, or other entity for the acquisition, 
construction, or maintenance of a project or improvement for an 
authorized purpose.
	(b)  A corporation may obtain money from any political 
subdivision of this state, federal agency, or other entity to 
finance the acquisition or construction of a project or improvement 
for an authorized purpose.
	(c)  A corporation may encumber the project or improvement 
and may encumber any income, fees, rents, and other charges derived 
from the operation of the project or improvement.  The corporation 
may issue bonds, notes, or warrants to secure payment of funds 
received.  Indebtedness authorized by this subsection is a charge 
only on specifically encumbered property and revenues and is not a 
general obligation of indebtedness of the corporation.
	(d)  A political subdivision may contract with a corporation 
under Section 402.014, Local Government Code, to carry out this 
chapter.  If a corporation issues bonds secured by a contract 
entered into under Section 402.014, Local Government Code, the 
corporation is considered to be acting for or on behalf of that 
political subdivision for the purposes of Section 1201.002(1), 
Government Code.  A political subdivision is authorized to approve 
by ordinance, resolution, or order the articles of incorporation 
and the bylaws of a corporation that is created for the purpose of 
constructing facilities under a contract as provided by Section 
402.014, Local Government Code.

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.  
Amended by Acts 2003, 78th Leg., ch. 248, § 56, eff. June 18, 
2003.


	§ 67.0105. CONTRACT FOR WATER FOR FIRE SUPPRESSION.  (a) 
A corporation may enter into a contract with a municipality or a 
volunteer fire department to supply water either to municipally 
owned fire hydrants or to corporation fire hydrants for use in fire 
suppression by the municipality's fire department or a volunteer 
fire department.  The contract must be under terms that are mutually 
beneficial to the contracting parties.
	(b)  The furnishing of a water supply and fire hydrant 
equipment by a municipality or a volunteer fire department directly 
or through another entity by a lease, contract, or any other manner 
is an essential governmental function and not a proprietary 
function for all purposes, including the application of Chapter 
101, Civil Practice and Remedies Code.
	(c)  A corporation that contracts with a municipality or 
volunteer fire department to provide a water supply or fire hydrant 
equipment may be liable for damages only to the extent that the 
municipality or volunteer fire department would be liable if the 
municipality or volunteer fire department were performing the 
governmental function directly.

Added by Acts 1999, 76th Leg., ch. 62, § 18.19(a), eff. Sept. 1, 
1999.   


	§ 67.011. ADDITIONAL POWERS OF CORPORATION.                                 

Text of section as amended by Acts 2003, 78th Leg., ch. 46, § 1
	In addition to other powers granted by this chapter, a 
corporation may:      
		(1)  own, hold, lease, or otherwise acquire water 
wells, springs, or other sources of water supply;
		(2)  build, operate, and maintain pipelines to 
transport water or wastewater;
		(3)  build and operate plants and equipment necessary 
to distribute water or to treat and dispose of wastewater;  and
		(4)  sell water or provide wastewater services to a 
political subdivision, a private corporation, or an individual.

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.  
Amended by Acts 2001, 77th Leg., ch. 669, § 151, eff. Sept. 1, 
2001;  Acts 2003, 78th Leg., ch. 46, § 1, eff. May 15, 2003.

For text of section as amended by Acts 2003, 78th Leg., ch. 512, 
§ 1, see § 67.011, post.


	§ 67.011. POWERS OF CORPORATION IN CERTAIN COUNTIES.                        

Text of section as amended by Acts 2003, 78th Leg., ch. 512, § 1
	(a)  In a county with a population of less than 3.3 million, a 
corporation may:
		(1)  own, hold, lease, or otherwise acquire water 
wells, springs, or other sources of water supply;
		(2)  build, operate, and maintain pipelines to 
transport water or wastewater;
		(3)  build and operate plants and equipment necessary 
to distribute water or to treat and dispose of wastewater;
		(4)  sell water or provide wastewater services to a 
political subdivision, a private corporation, or an individual;  
and
		(5)  establish and enforce reasonable customer water 
conservation practices and prohibit excessive or wasteful uses of 
potable water.
	(b)  A corporation may enforce customer water conservation 
practices under Subsection (a)(5) by assessing reasonable 
penalties as provided in the corporation's tariff.  A penalty may be 
appealed in the same manner as provided for appeal of new customer 
service costs under Section 13.043(g).  In an appeal, the 
commission shall approve a corporation's penalty if the commission 
determines that the penalty is clearly stated in the tariff, that 
the penalty is reasonable, and that the corporation has deposited 
the penalty in a separate account dedicated to enhancing water 
supply for the benefit of all the corporation's customers.

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.  
Amended by Acts 2001, 77th Leg., ch. 669, § 151, eff. Sept. 1, 
2001;  Acts 2003, 78th Leg., ch. 512, § 1, eff. June 20, 2003.

For text of section as amended by Acts 2003, 78th Leg., ch. 46, § 
1, see § 67.011, ante.


	§ 67.012. USE OF MANAGER.  The board may employ a manager 
to handle the business of the corporation under the direction of the 
board.  The board shall set the salary for the manager. 

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.           


	§ 67.013. USE OF COUNSEL.  The board may employ and 
compensate counsel to represent the corporation as the board 
determines is necessary. 

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.           


	§ 67.014. DEPOSITORY FOR FUNDS;  PERMITTED 
INVESTMENTS.  (a) The board shall select as depository for the 
funds of the corporation a bank in this state that is insured by the 
Federal Deposit Insurance Corporation and require from the 
depository a bond in an amount the board finds necessary to protect 
the corporation.
	(b)  Funds allocated by the board to a sinking fund for 
replacement, amortization of debts, and the payment of interest 
that are not required to be spent in the year in which deposited 
shall be:
		(1)  invested in bonds or other evidence of 
indebtedness of the United States;
		(2)  placed with the depository in an interest-bearing 
savings account;     
		(3)  invested in shares or share accounts in a savings 
and loan association insured by the Federal Deposit Insurance 
Corporation;  or
		(4)  invested in an investment that is authorized under 
Subchapter A, Chapter 2256, Government Code, and by a written 
investment policy approved by the board that complies with Section 
2256.005, Government Code.

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.  
Amended by Acts 1999, 76th Leg., ch. 258, § 1, 2, eff. May 28, 
1999.


	§ 67.015. EXEMPTION FROM SECURITIES ACT.  The Securities 
Act (Article 581-1 et seq., Vernon's Texas Civil Statutes) does not 
apply to:
		(1)  a note, bond, or other evidence of indebtedness 
issued by a corporation doing business in this state to the United 
States;
		(2)  an instrument executed to secure a debt of a 
corporation to the United States;  or
		(3)  the issuance of a membership certificate or stock 
certificate of a corporation. 

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.           


	§ 67.016. TRANSFER OR CANCELLATION OF STOCK, MEMBERSHIP, 
OR OTHER RIGHT OF PARTICIPATION.  (a) A person or entity that owns 
any stock of, is a member of, or has some other right of 
participation in a corporation may not sell or transfer that stock, 
membership, or other right of participation to another person or 
entity except:
		(1)  by will to a person who is related to the testator 
within the second degree by consanguinity;
		(2)  by transfer without compensation to a person who 
is related to the owner of the stock or other interest within the 
second degree by consanguinity;  or
		(3)  by transfer without compensation or by sale to the 
corporation.        
	(b)  Subsection (a) does not apply to a person or entity that 
transfers the membership or other right of participation to another 
person or entity as part of the conveyance of real estate from which 
the membership or other right of participation arose.
	(c)  The transfer of stock, a membership, or another right of 
participation under this section does not entitle the transferee to 
water or sewer service unless each condition for water or sewer 
service is met as provided in the corporation's published rates, 
charges, and conditions of service.  A transfer and service 
application must be completed on the corporation's standardized 
forms and filed with the corporation's office in a timely manner.  
The conditions of service may not require a personal appearance in 
the office of the corporation if the transferee agrees in writing to 
accept the rates, charges, and conditions of service.
	(d)  The corporation may make water or sewer service provided 
as a result of stock, a membership, or another right of 
participation in the corporation conditional on ownership of the 
real estate designated to receive service and from which the 
membership or other right of participation arises.
	(e)  The corporation may cancel a person's or other entity's 
stock, membership, or other right of participation if the person or 
entity fails to:
		(1)  meet the conditions for water or sewer service 
prescribed by the corporation's published rates, charges, and 
conditions of service;  or
		(2)  comply with any other condition placed on the 
receipt of water or sewer service under the stock, membership, or 
other right of participation.
	(f)  Consistent with Subsection (a), the corporation may 
reassign canceled stock or a canceled membership or other right of 
participation to a person or entity that has legal title to the real 
estate from which the canceled membership or other right of 
participation arose and for which water or sewer service is 
requested.
	(g)  Notwithstanding Subsection (a), the corporation shall 
reassign canceled stock or a canceled membership or other right of 
participation to a person or entity that acquires the real estate 
from which the membership or other right of participation arose 
through judicial or nonjudicial foreclosure.  The corporation may 
require proof of ownership resulting from the foreclosure.
	(h)  Service provided following a transfer under Subsection 
(f) or (g) is made subject to compliance with the conditions for 
water or sewer service prescribed by the corporation's published 
rates, charges, and conditions of service. 

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.           


	§ 67.017. VOLUNTARY CONTRIBUTIONS ON BEHALF OF EMERGENCY 
SERVICES.  (a) A corporation may as part of its billing process 
collect from its customers a voluntary contribution, including a 
voluntary membership or subscription fee, on behalf of a volunteer 
fire department or an emergency medical service.
	(b)  A corporation that collects contributions under this 
section shall provide each customer at the time that the customer 
first subscribes to the water or sewer service, and at least 
annually thereafter, a written statement:
		(1)  describing the procedure by which the customer may 
make a contribution with the customer's bill payment;
		(2)  designating the volunteer fire department or 
emergency medical service to which the corporation will deliver the 
contribution;
		(3)  informing the customer that a contribution is 
voluntary;  and          
		(4)  describing the deductibility status of the 
contribution under federal income tax law.
	(c)  A billing by the corporation that includes a voluntary 
contribution under this section must clearly state that the 
contribution is voluntary and that it may be deducted from the 
billed amount.
	(d)  The corporation shall promptly deliver contributions 
that it collects under this section to the designated volunteer 
fire department or emergency medical service, except that the 
corporation may keep from the contributions an amount equal to the 
lesser of:
		(1)  the corporation's expenses in administering the 
contribution program;  or
		(2)  five percent of the amount collected as 
contributions.                 

Added by Acts 1997, 75th Leg., ch. 166, § 2, eff. Sept. 1, 1997.           

SUBCHAPTER B. DISSOLUTION


	§ 67.051. DEFINITION.  In this subchapter, "executive 
director" means the executive director of the Texas Commission on 
Environmental Quality.

Added by Acts 2005, 79th Leg., ch. 443, § 2, eff. June 17, 2005;  
Acts 2005, 79th Leg., ch. 772, § 2, eff. June 17, 2005.


	§ 67.052. APPLICABILITY OF SUBCHAPTER.  This subchapter 
applies only to a corporation and municipality located in a county:
		(1)  with a population of 650,000 or more;  and                               
		(2)  adjacent to an international border.                                     

Added by Acts 2005, 79th Leg., ch. 443, § 2, eff. June 17, 2005;  
Acts 2005, 79th Leg., ch. 772, § 2, eff. June 17, 2005.


	§ 67.053. TRANSFER OF ASSETS AND LIABILITIES;  REQUEST FOR 
DISSOLUTION ORDER.  (a) A board may transfer to a municipality the 
corporation's assets and liabilities in accordance with the 
corporation's written request for the municipality to take over the 
management of the corporation's water supply system.
	(b)  On favorable action of the municipality, the board shall 
notify the executive director and request an order of dissolution.
	(c)  The board shall provide the executive director with any 
information or documentation the executive director requests to 
monitor the corporation's progress toward the complete transfer of 
its assets and liabilities to the municipality.

Added by Acts 2005, 79th Leg., ch. 443, § 2, eff. June 17, 2005;  
Acts 2005, 79th Leg., ch. 772, § 2, eff. June 17, 2005.


	§ 67.054. ORDER OF DISSOLUTION;  TRANSFER OF ASSETS AND 
LIABILITIES.  (a) On receipt of the notice and request from the 
corporation, the executive director shall investigate to verify 
whether the parties have met all the necessary conditions for the 
transfer.
	(b)  After investigation, the executive director shall issue 
an order of dissolution if the executive director determines:
		(1)  the corporation is ready to be dissolved;                                
		(2)  all of the corporation's assets and liabilities 
are ready to be transferred to the municipality for incorporation 
into the municipality's water system;
		(3)  the municipality is prepared to accept the 
transfer;  and              
		(4)  the governing body of the municipality has adopted 
a resolution accepting the transfer.
	(c)  In issuing an order of dissolution under Subsection (b), 
the executive director shall:
		(1)  direct the board to provide to the municipality 
and the secretary of state all transfer documents, including all 
deeds, easements, and bills of sale in the possession of the board, 
and any other information necessary or appropriate to transfer all 
corporation assets and liabilities to the municipality;
		(2)  order the corporation dissolved;  and                                    
		(3)  order that all assets and liabilities of the 
corporation be transferred to the municipality for incorporation 
into the municipality's water system.
	(d)  The consideration and adoption of an order of 
dissolution under this section is not a contested case under 
Chapter 2001, Government Code.
	(e)  The order of dissolution issued under this section is 
wholly sufficient and effective to accomplish the dissolution of 
the corporation and the transfer of its assets and liabilities to 
the municipality.
	(f)  The executive director shall file with the secretary of 
state and in the deed records of the county in which the corporation 
and municipality are located a certified copy of the order of 
dissolution issued under this section together with a certified 
copy of the resolution of the governing body of the municipality 
accepting the transfer.

Added by Acts 2005, 79th Leg., ch. 443, § 2, eff. June 17, 2005;  
Acts 2005, 79th Leg., ch. 772, § 2, eff. June 17, 2005.


	§ 67.055. COLLECTION OF MONEY OWED THE CORPORATION.  On 
or after the date the dissolution order is issued under Section 
67.054, the municipality may collect all money owed the corporation 
on the date the order is issued including:
		(1)  taxes, fees, or charges imposed by the corporation 
that were due and owing on the date of the dissolution order issued 
under Section 67.054;  and
		(2)  the corporation's accounts receivable.                                   

Added by Acts 2005, 79th Leg., ch. 443, § 2, eff. June 17, 2005;  
Acts 2005, 79th Leg., ch. 772, § 2, eff. June 17, 2005.


	§ 67.056. RATES FOR SERVICE.  (a) The municipality may 
charge county residents living in the service area formerly served 
by the corporation water supply rates that exceed the rates paid by 
water supply customers who are residents of the municipality if the 
higher rates are necessary or appropriate to fully cover the cost of 
service to the area, as determined by the municipality.
	(b)  The water supply rates the municipality charges county 
residents living in the service area formerly served by the 
corporation may include an amount necessary to recover:
		(1)  the costs of operation and maintenance of the 
water supply or improvements serving the area;  and
		(2)  debt service, including the cost of loans accepted 
to improve the water supply system serving the area.
	(c)  Section 16.349 does not affect the amount of the fee 
charged under this section.

Added by Acts 2005, 79th Leg., ch. 443, § 2, eff. June 17, 2005;  
Acts 2005, 79th Leg., ch. 772, § 2, eff. June 17, 2005.