CHAPTER 67. NONPROFIT WATER SUPPLY OR SEWER SERVICE CORPORATIONS

State Codes and Statutes

Statutes > Texas > Water-code > Title-4-general-law-districts > Chapter-67-nonprofit-water-supply-or-sewer-service-corporations

WATER CODE

TITLE 4. GENERAL LAW DISTRICTS

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.

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).

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.

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.

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.

(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.

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.

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.

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.

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;

(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.

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.

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.

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

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