Transcript WATER LAW UPDATE: CCNs, MUDs AND OTHER ISSUES

Leonard H. Dougal
Jackson Walker L.L.P.
[email protected] • (512) 236-2000
Who Should Pay for Costly Water and
Sewer Infrastructure?
The Legal Considerations
TRWA / TWCA Water Law Seminar
January 24 – 25, 2013
Austin, Texas
Introduction
• Public-Private Efforts in
Project Development
• Revenue Sources: Rates and Impact Fees
• Classes of Service
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Public-Private Partnerships (P3)
• Comprehensive P3 statute adopted in 2011
• Authorizes governmental entities to contract with
private parties for qualifying public projects,
including:
– water supply facilities
– public works
– waste treatment facilities
Tex. Gov’t Code Ch. 2267.
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Public-Private Partnerships (P3)
• Governmental entity must adopt a resolution indicating it
elects to operate under Ch. 2267
• Before requesting or considering a P3 project, guidelines
must be adopted & made available to the public
• May receive solicited or unsolicited proposals
Tex. Gov’t Code Ch. 2267.
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Public-Private Partnerships (P3)
• Comprehensive Agreement for P3 must
include:
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Delivery of letters of credit or other security
Delivery of performance & payment bonds
Review & approval of plans & specifications
Maintenance of public liability insurance policy
Reimbursement to governmental entity for services
provided
– Any user fee, lease payment or service payment
Tex. Gov’t Code § 2267.058(a).
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Proposed Lake Columbia
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Public-Private Project: Example
• Lake Columbia
– Proposed new reservoir to supply East Texas
– Partnership of Angelina and Neches River
Authority & Tomlin Infrastructure Group
– $330 Million Project
– Grants Tomlin 47% of the lake’s water rights
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Friday, January 11, 2013
Texas Bills Would Dedicate $2 Billion for Water
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Ratemaking Jurisdiction
• TCEQ Original Jurisdiction for IOUs
serving outside city limits
• TCEQ Appellate Jurisdiction for:
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Districts
WSCs
IOUs serving inside city limits
City customers outside city limits
Wholesale water rates
Tex. Water Code §§ 13.042, 13.043.
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Rate Appeals – Retail
• Affected customers must file a
petition within 90 days of final decision
• Petition must be signed by lesser of 10,000 or 10% of
ratepayers whose rates have been changed and who are
eligible to appeal
• TCEQ reviews appeals de novo and will order the rates
the governing body should have fixed
Tex. Water Code § 13.043; 30 TAC § 291.41.
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Wholesale Rate Appeals –
Bifurcated Process at SOAH
1. Determination of Public Interest
• protested rate impairs seller’s ability to continue to provide service;
• protested rate impairs purchaser’s ability to continue to provide
service to its retail customers; or
• protested rate evidences seller’s abuse of monopoly power
• protested rate is unreasonably preferential, prejudicial, or
discriminatory, compared to the wholesale rates the seller charges
other wholesale customers
2. Determination of Cost of Service
• Will rely on any reasonable methodologies set by contract
30 TAC §§ 291.128-138.
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Proposed Transfer of Rate
Regulation to PUC
• Legislature considering transfer of water and
wastewater rate regulation from TCEQ to PUC
• Recommended by Sunset Advisory Commission
• Would consolidate most utility regulation within one
agency
• Proposal for PUC’s Office of Public Utility Counsel to
represent customer interests
Sunset Commission Report, Jan. 2013
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Impact Fees
“A charge or assessment imposed by a
political subdivision against new development
in order to generate revenue for funding or
recouping the costs of capital improvements or
facility expansions necessitated by and
attributable to the new development.”
Tex. Loc. Gov’t Code § 395.001(4).
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Impact Fees
• May be imposed only to pay costs of constructing capital
improvements or facility expansions
• May not be used for:
– Construction, acquisition, or expansion of facilities not identified
in the capital improvements plan;
– Repair, operation, or maintenance;
– Upgrading, expanding, or replacing existing capital
improvements to serve existing development;
– administrative and operating costs;
– principal payments and interest or other finance charges on
bonds or other indebtedness.
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Impact Fees – Adoption
• TCEQ Process
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Develop Capital Improvements Plan (CIP)
Adopt resolution requesting approval of Impact Fee
Submit application to TCEQ
Public notice
TCEQ approval if impact fee is “reasonable, equitable, and
necessary”
• Local Gov’t Code Ch. 395 Process
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Develop CIP
Public notice and hearing on CIP
Board order approving CIP
Public notice and hearing on Impact Fee
Board order adopting Impact Fee
Classes of Service
• Districts may establish different charges among
classes of customers based on any factor the district
considers appropriate, including:
– (1) similarity of the type of customer to other customers in
the class (e.g. residential, commercial, industrial, out-ofdistrict)
– (2) type of services provided to the customer class;
– (3) cost of facilities, operations, and administrative services
(e.g. for security, recreational facilities, or fire protection)
– (4) total revenues received relative to cost of service
Tex. Water Code § 49.2122.
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Classes of Service
• District is presumed to have weighed and considered
appropriate factors and to have properly established
charges, fees, rentals, and deposits absent a showing
the district acted arbitrarily and capriciously.
Tex. Water Code § 49.2122(c).
• Rates may not be unreasonably preferential,
prejudicial, or discriminatory in application to each
class of customers.
30 TAC § 291.41.
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Improvement Triggers
• Water – 85% rule
– System demand at 85% of design
capacity; submit planning report
to TCEQ
30 TAC § 291.93(3).
• Wastewater – 75/90 rule
– 75% permitted flow – initiate engineering and
financial planning
– 90% permitted flow – obtain authorization to
30 TAC § 305.126.
commence construction
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QUESTIONS?
Leonard H. Dougal
Jackson Walker L.L.P.
100 Congress Avenue, Suite 1100
Austin, Texas 78701
Telephone: (512) 236-2000
[email protected]
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