CHAPTER 1502. PUBLIC SECURITIES FOR MUNICIPAL UTILITIES, PARKS, OR POOLS
GOVERNMENT CODE
TITLE 9. PUBLIC SECURITIES
SUBTITLE J. SPECIFIC AUTHORITY FOR MUNICIPALITIES TO ISSUE
SECURITIES
CHAPTER 1502. PUBLIC SECURITIES FOR MUNICIPAL UTILITIES, PARKS,
OR POOLS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1502.001. DEFINITIONS. In this chapter:
(1) "Combined system" means any combination of one or more of
the following:
(A) an electric system;
(B) a water system;
(C) a sewer system;
(D) a solid waste disposal system;
(E) a drainage utility system; and
(F) a natural gas system.
(2) "Public security" has the meaning assigned by Section
1201.002.
(3) "Utility system" means an electric, water, sewer, solid
waste disposal, drainage utility, or natural gas system. The term
includes one or more combined systems.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Amended by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff.
Sept. 1, 1999.
Sec. 1502.002. GENERAL AUTHORITY FOR UTILITY SYSTEMS, PARKS, AND
POOLS. (a) A municipality may acquire, purchase, construct,
improve, enlarge, equip, operate, or maintain any property,
interests in property, buildings, structures, activities,
services, operations, or other facilities, with respect to:
(1) a utility system;
(2) a park; or
(3) a swimming pool.
(b) The governing body of a municipality may authorize the
execution and delivery of contracts between the municipality and
any person to accomplish any purpose described by Subsection (a).
Added by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1,
1999.
Sec. 1502.003. CREATION AND MAINTENANCE OF COMBINED SYSTEM.
Notwithstanding any law or municipal charter provision to the
contrary, the governing body of a municipality may create and
maintain one or more combined systems on a finding by the
governing body that it is in the best interests of the
municipality to create and maintain the combined system. A
finding by a governing body under this section is conclusive and
incontestable.
Added by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1,
1999.
Sec. 1502.004. CONFLICT WITH MUNICIPAL CHARTER. To the extent
of a conflict between this chapter and a municipal charter, this
chapter controls.
Added by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1,
1999.
SUBCHAPTER B. PUBLIC SECURITIES FOR UTILITY SYSTEMS, PARKS, OR
POOLS
Sec. 1502.051. AUTHORITY TO ISSUE PUBLIC SECURITIES. (a) The
governing body of a municipality may provide funds to acquire,
purchase, construct, improve, renovate, enlarge, or equip
property, buildings, structures, facilities, or related
infrastructure for:
(1) a utility system;
(2) a park; or
(3) a swimming pool.
(b) In connection with exercising the authority to provide funds
for the purposes described by Subsection (a)(1), the governing
body of a municipality may provide funds to acquire, purchase, or
otherwise obtain any interest in property, including additional
water or riparian rights.
(c) The governing body of a municipality may issue public
securities and incur obligations under contracts in accordance
with this chapter for any purpose authorized by law in connection
with providing funds for a purpose described by Subsection (a) or
(b)
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Amended by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff.
Sept. 1, 1999.
Sec. 1502.052. PLEDGE OF REVENUE. (a) The governing body of a
municipality may pledge to the payment of any public securities
issued or any obligations incurred under Section 1502.051(c) all
or any part of the revenue of:
(1) a utility system;
(2) a park; or
(3) a swimming pool.
(b) The governing body of a municipality may grant a lien on the
revenue pledged under Subsection (a). The lien has the priority
determined by the governing body, subject to the provisions of
Section 1502.056.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.054 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.053. GRANT OF FRANCHISE. As additional security for
public securities issued or obligations incurred under this
chapter, the municipality by the terms of the encumbrance may
grant a purchaser under sale or foreclosure a franchise to
operate the encumbered utility system, park, or pool for a term
not to exceed 20 years from the date of purchase, subject to all
laws regulating the operation of the utility system, park, or
pool in force at the time of the sale or foreclosure.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.055 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.054. OBLIGATIONS NOT PAYABLE FROM TAXES. (a) A
public security issued or an obligation incurred under this
chapter:
(1) is not a debt of the municipality;
(2) may be a charge only on the encumbered utility system, park,
or pool; and
(3) may not be included in determining the municipality's power
to issue public securities for any purpose authorized by law.
(b) Each public security or other evidence of indebtedness
issued or included under this chapter must contain the following
provision: "The holder of this obligation is not entitled to
demand payment of this obligation out of any money raised by
taxation."
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.056 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.055. ELECTION. (a) Unless authorized by a majority
vote of the qualified voters of the municipality, a municipality
may not sell a utility system, park, or pool.
(b) The governing body of the municipality shall hold an
election under this section in the manner provided for bond
elections in the municipality.
(c) This section does not apply to the sale of an unencumbered
natural gas system owned by a municipality with a population of
more than 100,000.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.057 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 769, Sec. 12, eff. Sept. 1,
2001.
Sec. 1502.056. OPERATING EXPENSES AS FIRST LIEN. (a) If the
revenue of a utility system, park, or swimming pool secures the
payment of public securities issued or obligations incurred under
this chapter, each expense of operation and maintenance,
including all salaries, labor, materials, interest, repairs and
extensions necessary to provide efficient service, and each
proper item of expense, is a first lien against that revenue.
For a municipality with a population of more than one million,
the first lien against the revenue of a municipally owned
electric or gas utility system that secures the payment of public
securities issued or obligations incurred under this chapter also
applies to funding, as a necessary operations expense, for a bill
payment assistance program for utility system customers who have
been threatened with disconnection from service for nonpayment of
bills and who have been determined by the municipality to be
low-income customers.
(b) An expense for a repair or extension is a first lien only
if, in the judgment of the governing body of the municipality,
the repair or extension is necessary to:
(1) keep the plant or utility system in operation and provide
adequate service to the municipality and its residents; or
(2) respond to a physical accident or condition that would
otherwise impair the original securities.
(c) A contract between a municipality and an issuer, as defined
by Section 1201.002, under which the municipality obtains from
the issuer or the issuer provides part or all of the facilities
or services of a utility system to the municipality may provide
that payments made by the municipality from the revenue of the
utility system are an operating expense of the municipality's
utility system.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.058 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
166, Sec. 1, eff. May 22, 2007.
Sec. 1502.057. CHARGES FOR SERVICES. (a) A municipality shall
impose and collect charges for services provided by a utility
system in amounts at least sufficient to pay:
(1) all operating, maintenance, depreciation, replacement,
improvement, and interest charges in connection with the utility
system;
(2) for an interest and sinking fund sufficient to pay any
public securities issued or obligations incurred for any purpose
described by Section 1502.002 relating to the utility system; and
(3) any outstanding debt against the system.
(b) The rates charged for services provided by a utility system
must be equal and uniform. A municipality may not allow any free
service except for:
(1) municipal public schools; or
(2) buildings and institutions operated by the municipality.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.059 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.058. LIMITATION ON USE OF REVENUE. (a) Except as
provided by Subsection (b) or (c), by Section 1502.059, or by
Section 271.052, Local Government Code, a municipality may not
use the revenue of a utility system, park, or swimming pool to
pay any other debt, expense, or obligation of the municipality
until the debt secured by the revenue is finally paid.
(b) This section does not apply to a payment made in lieu of ad
valorem taxes previously paid by a private owner of a utility
system.
(c) This section does not apply to a payment made from surplus
revenue of a utility system, park, or swimming pool, as provided
by the proceedings authorizing the issuance of public securities
under this chapter.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.060 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.059. TRANSFER OF REVENUE TO GENERAL FUND.
Notwithstanding Section 1502.058(a) or a similar law or municipal
charter provision, a municipality and its officers and utility
trustees may transfer to the municipality's general fund and may
use for general or special purposes revenue of any municipally
owned utility system in the amount and to the extent authorized
in the indenture, deed of trust, or ordinance providing for and
securing payment of public securities issued under this chapter
or similar law.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.061 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.060. USE AND INVESTMENT OF PROCEEDS. (a) To the
extent provided by the proceedings authorizing the issuance of
the public securities issued under this chapter, a municipality
may:
(1) use proceeds from the sale of public securities issued to
provide funds for a utility system under this chapter for any
purpose authorized by Section 1502.051(a)(1) or (b);
(2) use proceeds from the sale of public securities issued to
provide funds for a park under this chapter for any purpose
authorized by Section 1502.051(a)(2); or
(3) use proceeds from the sale of public securities to provide
funds for a swimming pool under this chapter for any purpose
authorized by Section 1502.051(a)(3).
(b) A municipality may use proceeds from the sale of public
securities issued under this chapter to pay interest on the
public securities during the period of the acquisition or
construction of any facilities to be provided through the
issuance of the public securities, and for one year after
completion of the acquisition or construction of the facilities.
(c) A municipality may use proceeds from the sale of public
securities issued under this chapter to:
(1) provide a reserve for the payment of debt service on the
public securities;
(2) provide a reserve for extraordinary repairs and
replacements; or
(3) obtain a credit agreement as provided by Section 1502.064.
(d) A municipality may invest proceeds from the sale of public
securities issued under this chapter to the extent and in the
manner provided in the proceedings authorizing the issuance of
the public securities.
Added by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1,
1999.
Sec. 1502.061. ADDITIONAL OBLIGATIONS TO IMPROVE OR EXTEND
UTILITY SYSTEM. (a) A municipality that has outstanding public
securities secured by the net revenue of a utility system may
issue additional public securities or incur other obligations for
a purpose described by Section 1502.051(a)(1) or (b).
(b) Except as provided by Subsection (c), public securities
issued under Subsection (a) constitute a lien on the revenue of
the affected system:
(1) in the order of issuance; and
(2) inferior to a lien securing payment of outstanding public
securities, as determined by the governing body of the
municipality.
(c) A municipality may issue additional public securities under
this section on a parity and of equal dignity with the
outstanding public securities if the ordinance, deed of trust, or
indenture of trust authorizing or securing the outstanding public
securities provides for the subsequent issuance of additional
parity public securities, subject to that ordinance, deed of
trust, or indenture of trust.
(d) To the extent of a conflict or inconsistency between this
section and another law, this section controls.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.064 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.062. MATURITY. A public security issued under this
chapter must mature not later than 50 years after its date.
Added by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1,
1999.
Sec. 1502.063. ADDITIONAL AUTHORITY OF MUNICIPALITY WITH A
POPULATION OF 50,000 OR MORE. Notwithstanding any other
provision of this chapter, in connection with the issuance of
public securities under this chapter, the governing body of a
municipality with a population of 50,000 or more may exercise any
authority granted to a governing body under Chapter 1371 in
connection with the issuance of obligations under that chapter.
Added by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1,
1999.
Sec. 1502.064. CREDIT AGREEMENT FOR RESERVE FUND. (a) The
governing body of a municipality may provide that in lieu of or
in addition to providing a cash reserve, a credit agreement, as
defined by Section 1371.001, may be used to provide the reserve.
(b) A credit agreement obtained to provide a reserve must be
submitted to the attorney general for examination and approval.
After approval by the attorney general, the credit agreement is
incontestable in any court or other forum for any reason and is a
valid and binding obligation of the municipality in accordance
with its terms for all purposes.
Added by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1,
1999.
Sec. 1502.065. REFUNDING BONDS. A municipality may issue public
securities in the manner provided by applicable law to refund or
otherwise refinance any obligation incurred under this chapter to
which revenue has been pledged.
Added by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1,
1999.
Sec. 1502.066. RECORDS. The mayor of the municipality shall
establish and maintain a complete system of records for a utility
system, park, or swimming pool the revenue of which is encumbered
under this chapter that:
(1) shows any free service provided and the value of the free
service; and
(2) shows separately the amounts spent and the amounts set aside
for operation, salaries, labor, materials, repairs, maintenance,
depreciation, replacements, extensions, interest, and the
creation of a sinking fund to pay the public securities and debt.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff Sept. 1,
1999. Renumbered from Government Code Sec. 1502.067 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.067. RECORDS: NONCASH BASIS. (a) A municipality may
maintain its records on facilities under this chapter or any
other municipal records on a basis other than a cash basis to the
extent permitted or required under generally accepted accounting
principles for a governmental entity.
(b) A change in accounting methods does not affect the terms of
an existing contract with respect to the power to issue
additional obligations payable from the facilities.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.068 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.068. ANNUAL REPORT. (a) Annually, on the date
determined by the governing body of the municipality, the
superintendent or manager of a utility system, park, or pool or
another person designated by the governing body shall file with
the mayor and governing body of the municipality a detailed
report of the operation of the system, park, or pool for the
preceding 12-month period specified by the governing body.
(b) The report must show the total amount of money collected and
the balance due, and the total disbursements made and the amounts
remaining unpaid, resulting from the operation of the utility
system, park, or pool during that year.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.069 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.069. OFFENSES; PENALTY. (a) A mayor commits an
offense if the mayor fails to:
(1) establish the system of records required by Section 1502.066
before the 91st day after the date the utility system, park, or
pool is completed; or
(2) maintain the system of records required by Section 1502.066.
(b) The person responsible for filing a report required by
Section 1502.068 commits an offense if the person fails to timely
file the report.
(c) An offense under this section is a misdemeanor punishable by
a fine of not less than $100 or more than $1,000.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.070 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.070. MANAGEMENT AND CONTROL OF UTILITY SYSTEM. (a)
Management and control of a utility system may be vested in:
(1) the municipality's governing body; or
(2) a board of trustees named in the proceedings adopted by the
municipality and consisting of not more than:
(A) five members, one of whom must be the mayor of the
municipality; or
(B) seven members, one of whom must be the mayor of the
municipality, if the municipality is located in a county:
(i) with a population of at least 600,000; and
(ii) that is located on an international border.
(b) The compensation of the trustees shall be specified by the
proceedings. The compensation may not exceed five percent of the
gross receipts of the utility system in any year.
(c) The proceedings of the municipality may specify the terms of
office of the board of trustees, their powers and duties, the
manner of exercising those powers and duties, the election of
successor trustees, and any matter relating to the organization
and duties of the board. On any matter not covered by the
proceedings, the board of trustees is governed by the laws and
rules governing the municipality's governing body, to the extent
applicable.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.071 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
124, Sec. 1, eff. May 23, 2009.
Sec. 1502.071. RULES. (a) The governing body or board of
trustees having management and control of a utility system may
adopt rules to:
(1) govern the provision of and payment for service; and
(2) provide for the discontinuance of service for failure to pay
when due until payment is made.
(b) The governing body may provide penalties for:
(1) the violation of a rule adopted under this section;
(2) the use of service without the consent or knowledge of the
authorities in charge; or
(3) any interference with, trespass on, or injury to a system or
appliance or the premises on which the system or appliance is
located.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.072 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.072. TRUSTEE. The proceedings adopted by the
governing body of a municipality may provide for:
(1) the selection of a trustee to sell the encumbered facility
on default in the payment of principal or interest under the
contract;
(2) the selection of a successor trustee if the original trustee
is disqualified or fails to act; and
(3) the collection by the trustee of a fee of not more than five
percent of the principal.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Sec. 1502.073 and amended by Acts 1999,
76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.073. NOTICE TO GOVERNING BODY BEFORE FORECLOSURE OR
OTHER ACTION. (a) Unless written notice is given to the
governing body of the municipality and to any board of trustees
in accordance with this section that there is a default in
payment of any installment of principal of or interest on an
obligation issued under this subchapter and that payment has been
demanded:
(1) a collection fee may not accrue;
(2) a foreclosure proceeding may not be begun in a court or
through a trustee; and
(3) an option to mature any part of the obligation because of
the default may not be exercised.
(b) A notice under Subsection (a) must be sent by prepaid
registered mail to each member of the governing body and each
member of any board of trustees, addressed to the member at the
post office in the municipality.
(c) An action described by Subsection (a) may not be taken
before the 91st day after the date the notice is mailed.
(d) A payment of a delinquent installment of principal and
interest that is paid before the expiration of the period
prescribed by Subsection (c) and that is accompanied by a payment
of interest as prescribed in the contract, at a rate not to
exceed 10 percent per year, from the date of default until the
date of payment, has the same effect as if paid on the date the
installment was originally due.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.074 by Acts 1999,
76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.
Sec. 1502.074. CIVIL ENFORCEMENT. A person who resides in a
municipality and is a taxpayer or holder of a public security
issued or an obligation incurred under this chapter and secured
by the revenue of the municipality's utility system, park, or
swimming pool as provided by this chapter is entitled to enforce
this chapter by appropriate civil action in a district court in
the county in which the municipality is located.
Added by Acts 1999, 76th Leg., ch. 227, Sec. 1, eff. Sept. 1,
1999. Renumbered from Government Code Sec. 1502.076 and amended
by Acts 1999, 76th Leg., ch. 1064, Sec. 22, eff. Sept. 1, 1999.