CHAPTER 67. NONPROFIT WATER SUPPLY OR SEWER SERVICE CORPORATIONS
WATER CODE
TITLE 4. GENERAL LAW DISTRICTS
CHAPTER 67. NONPROFIT WATER SUPPLY OR SEWER SERVICE CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 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, Sec. 2, eff. Sept. 1,
1997.
Sec. 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, Sec. 2, eff. Sept. 1,
1997.
Sec. 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, Sec. 2, eff. Sept. 1,
1997.
Sec. 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, Sec. 2, eff. Sept. 1,
1997.
Sec. 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, Sec. 2, eff. Sept. 1,
1997.
Sec. 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, Sec. 2, eff. Sept. 1,
1997. Amended by Acts 1999, 76th Leg., ch. 62, Sec. 18.18(a),
eff. Sept. 1, 1999.
Sec. 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, Sec. 2, eff. Sept. 1,
1997. Amended by Acts 1999, 76th Leg., ch. 54, Sec. 1, eff. May
10, 1999.
Sec. 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, Sec. 2, eff. Sept. 1,
1997.
Sec. 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, Sec. 2, eff. Sept. 1,
1997.
Sec. 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 552.014, Local Government Code, to carry out this
chapter. If a corporation issues bonds secured by a contract
entered into under Section 552.014, 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 552.014, Local Government Code.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997. Amended by Acts 2003, 78th Leg., ch. 248, Sec. 56, eff.
June 18, 2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 3.77(32), eff. April 1, 2009.
Sec. 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, Sec. 18.19(a), eff. Sept.
1, 1999.
Text of section as amended by Acts 2003, 78th Leg., ch. 46, Sec.
1
Sec. 67.011. ADDITIONAL POWERS OF CORPORATION. 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, Sec. 2, eff. Sept. 1,
1997. Amended by Acts 2001, 77th Leg., ch. 669, Sec. 151, eff.
Sept. 1, 2001; Acts 2003, 78th Leg., ch. 46, Sec. 1, eff. May 15,
2003.
Text of section as amended by Acts 2003, 78th Leg., ch. 512, Sec.
1
Sec. 67.011. POWERS OF CORPORATION IN CERTAIN COUNTIES. (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, Sec. 2, eff. Sept. 1,
1997. Amended by Acts 2001, 77th Leg., ch. 669, Sec. 151, eff.
Sept. 1, 2001; Acts 2003, 78th Leg., ch. 512, Sec. 1, eff. June
20, 2003.
Sec. 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, Sec. 2, eff. Sept. 1,
1997.
Sec. 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, Sec. 2, eff. Sept. 1,
1997.
Sec. 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, Sec. 2, eff. Sept. 1,
1997. Amended by Acts 1999, 76th Leg., ch. 258, Sec. 1, 2, eff.
May 28, 1999.
Sec. 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, Sec. 2, eff. Sept. 1,
1997.
Sec. 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, Sec. 2, eff. Sept. 1,
1997.
Sec. 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, Sec. 2, eff. Sept. 1,
1997.