                                               KEN PAXTON
                                          ATTORNEY GENERAL OF TEXAS



                                               February 3, 2016



The Honorable Jane Nelson                                    Opinion No. KP-0063
Chair, Committee on Finance
Texas State Senate                                           Re: Whether a water supply district may
Post Office Box 12068                                        assign to another district certain duties and
Austin, Texas 78711-2068                                     rights, including approval of the annual
                                                             budget and contracting for certain services
                                                             (RQ-0045-KP)

Dear Senator Nelson:

        You ask whether a water supply district may assign to another district certain duties and
rights under an operating agreement, including approval of aspects of the annual budget and
contracting for certain services. 1 Your questions concern an agreement between Denton County
Fresh Water Supply District No. 1-A ("District 1-A") and Denton County Fresh Water Supply
District No. 1-B ("District 1.,.B''). Request Letter at 1.

        You inform us that the original district that became District 1-A and District I-B was
approved by the voters as a fresh water supply district in I 983 and subsequently converted into a
water control and improvement district subject to chapters 49 and 5 I of the Water Code. Id. You
state that the original district was divided by election in I 995 into the present District I-A and
District 1-B. Id. You further state that the districts provide water and sewer services pursuant to
agreements with the Upper Trinity River Authority and the City of Lewisville (the "City"). Id. Iri
connection with these services, you inform us, the districts entered into an operating agreement
"to provide for the orderly operation and maintenance of the water and sewer facilities within the
Districts" and which assigns District I-A operational responsibility. Id. at I-2. You state that the
operating agreement "and this operation!l-1 responsibility has led to continuing disputes between
the Districts." Id. at 2.

        Your overriding concern is whether certain terms in the operating agreement impermissibly
contract away certain of District I-B's legislative functions. Id. First, you state that the operating
agreement authorizes District 1-A to prepare' a facilities budget for District I-:B' s review, but that
District 1-A need not obtain District 1-B's approval unless actual expenses incurred on behalf of
District I-B exceed estimated expenses by I2 percent. Id. Second, you state that the operating
agreement authorizes District I-A to issue building permits in District I-B's territory. See id. at
3. Third, you state that the operating agreement requires District I-A to contract with the City for

         1
           See Letter from Honorable Jane Nelson, Chair, Senate Fin. Comm., to Honorable Ken Paxton, Tex. Att'y
Gen. at 1 (Aug. 12, 2015), https://www.texasattomeygeneral.gov/opfoion/requests-for-opinion-rqs ("Request Letter").
The Honorable Jane Nelson - Page 2            (KP-0063)



police and emergency services and makes District 1-B responsible for its share of these costs. Id.
Finally, you state that the operating agreement provides that District 1-B will not transfer, assign,
or convey any of the unutilized capacity that has been financed by District 1-B to any party other
than District 1-A or an entity approved by it. Id. You ask whether these specific terms in the
operating agreement constitute an impermissible abdication of governmental powers as
exemplified by the holding in Clear Lake City Water Authority v. Clear Lake Utilities Co., 549
S.W.2d 385 (Tex. 1977). Because "reviewing or construing specific contracts is outside the scope
of an attorney general opinion," we cannot definitively answer your question with respect to these
specific terms. Tex. Att'y Gen. Op. No. GA-0883 (2011) at 4. We- therefore address legal
principles applicable to your question in general terms.

         In Clear Lake City Water Authority, the Texas Supreme Court stated that, pursuant to
principles applicable to political subdivisions, a water "[a]uthority could not, by contract or
otherwise, bind itself in such a way as to restrict [the] free exercise of [its] governmental powers,
nor could it abdicate its governmental functions, even for a 'reasonable time."' Clear Lake City
Water Auth., 549 S.W.2d at 391 (concluding that a water supply contract for an indefinite term
violated this principle); see also Banker v. Jefferson Cty. Water Control & Improvement Dist. No.
1, 277 S.W.2d 130, 134 (Tex. Civ. App.-Beaumont 1955, writ refd n.r.e.) (holding that the
district could not bargain away its governmental power to sell its surplus water). Although the
Clear Lake principle has often been applied to preclude a political subdivision from delegating
governmental powers to a private entity, it has also been used to invalidate a delegation of power
by one political subdivision to another. See City ofArlington v. City of Fort Worth, 844 S.W.2d
875, 878 (Tex. App.-Fort Worth 1992, writ denied) (holding that a city's "agreement to provide
sewer service for an indefinite period of time bargains away a city's governmental responsibilities
and abdicates its police power"); City of Farmers Branch v. City of Addison, 694 S.W.2d 94, 96
(Tex. App.-Dallas 1985, writ refd n.r.e) (deciding that a contract whereby one city had unlimited
right to discharge sewage into another city's sewer system constituted an impermissible surrender
of municipal authority).

       In an early opinion concerning a municipal water contract, the Texas Supreme Court
explained that the principle is based on what specific action the Legislature has authorized:

               It is now universally conceded that powers are conferred on
               municipal corporations for public purposes; and, as their powers
               cannot be delegated, so they cannot be bargained or bartered away.
               Such corporations may make authorized contracts, but they have no
               power, as a party, to make contracts or pass by-laws which shall
               cede away, control, or embarrass their legislative or governmental
               powers, or which shall disable them from performing their public
               duties. . . . If the legislature had expressly authorized the making of
               the contract under consideration, it would doubtless be binding,
               unless there be some constitutional objection to such a law, [and the
               contract] could not be held to operate ... as a surrender of any power
               the legislature intended the city government to exercise at all times.
               The question would then have been determined by a power superior
The Honorable Jane Nelson - Page 3             (KP-0063)



                to that of the municipality,-a power from which it derives all the
                power it has ....

City of Brenham v. Brenham Water Co., 4 S.W. 143, 149 (Tex. 1887) (quotation marks and
citations omitted). Thus, while a political subdivision may not contract away a governmental
power granted by statute in most instances, whether a political subdivision is authorized to enter
into a particular contract involving the exercise of its governmental powers is ultimately a question
of what the Legislature has authorized. See Tex. Att'y Gen. Op. No. JC-0377 (2001) at 5 ("Unless
expressly authorized by the legislature, a governmental entity may not delegate its legislatively
entrusted authority to another entity." (emphasis added)).

         As a corollary to the general public policy against delegating authority, the Legislature has
expressed public policy in the Interlocal Cooperation Act (the "Act") "to increase the efficiency
and effectiveness of local governments by authorizing them to contract, to the greatest possible
extent, with one another." TEX. Gov'T CODE § 791.001. The Act authorizes local governments
to contract or agree to "provide a governmental function or service that each party to the contract
is authorized to perform individually." Id. § 791.01 l(a), (c)(2). The Legislature has specifically
authorized one political subdivision to contract with another "to obtain or provide part or all of:
 (1) water supply or wastewater treatment facilities; or (2) a lease or operation of water supply
facilities or wastewater treatment facilities." Id. § 791.026(a) (emphasis added). "The powers
 granted by [section 791.026] prevail over a limitation contained in another law." Id.§ 791.026(g).

       Additionally, article XVI, section 59 of the Texas Constitution specifically requires the
Legislature to define the powers of districts organized under that constitutional provision. TEX.
CONST. art. XVI, § 59 (providing that these districts have "such powers of government ... as may
be conferred by law"); see also id. art. III, § 52(b). Section 49.213 of the Water Code, which
provides that a "district may enter into contracts with any person or any public or private entity in
the performance of any purpose or function permitted by a district." TEX. WATER CODE
§ 49.213(b). Subsection (c) provides further:

                A district may enter into contracts, which may be of unlimited
                duration, with persons or any public or private entities on the terms
                and conditions the board may consider desirable, fair, and
                advantageous for:



                   (5) the maintenance and operation of any works,
                       improvements, facilities, plants, equipment, and appliances
                       of the district or of another person or public or private
                       entity;

                        and

                    (7) the exercise of any other rights, powers, and duties granted
                        to a district.                                       ·
The Honorable Jane Nelson - Page 4                      (KP-0063)



Id. § 49.213(c). Specifically, a district board is authorized to enter into "a contract for technical,
scientific, legal, fiscal, or other professional services." Id. § 49.067(b). But "[t]he board through
such action cannot abrogate its fiscal responsibility." Id.

         Thus, both section 49 .213 of the Water Code and the Interlocal Cooperation Act expressly
authorize a district to contract with another district for the operation of water and sewage facilities
"on the terms and conditions the [district] may consider desirable, fair, and advantageous." Id.
§ 49.213(c)(5); TEX. Gov'T CODE § 791.026(a). Under section 49.213 of the Water Code, the
agreement may govern "the performance of any purpose or function permitted by a district" and
"the exercise of any other rights, powers, and duties granted to a district." TEX. WATER CODE
§ 49 .213(b), (c )(7). But no judicial opinion of which we are aware has determined the extent to
which one water district may delegate its "rights, powers, and duties" in an operating agreement
under section 49.213, or determined the fiscal responsibilities that a water district board may not
abrogate under section 49.067. 2 Accordingly, we may only advise that a court would likely
conclude that one water district may contract for another water district to perfom1 the rights,
powers and duties of the first only to the extent the contract is authorized by the Interlocal
Cooperation Act, section 49.213 of the Water Code, or other state law and does not abrogate the
first district's fiscal responsibilities under section 49.067 of the Water Code.




         2Cf   Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 843 & n.10 (Tex. 2010)
(construing contract as not violating the "reserved powers doctrine" and noting that subsection 49 .213(c)(4) of the
Water Code now expressly allows water districts to enter into contracts of unlimited duration); Clear Lake City Water
Auth. v. Kirby Lake Dev., Ltd., 123 S.W.3d 735, 751 (Tex. App.-Houston [14th Dist.] 2003, pet. denied) (rejecting
a water authority's argument that it cannot contractually surrender its legislative discretion to decide whether and how
to allocate public funds, holding that section 49.213(c)(4) and other statutes authorized the particular agreement and
"[n]othing in the statutes governing the Authority limits its ability to pay its contractual obligations, and Texas courts
have routinely enforced contracts requiring water districts to pay in the future").
The Honorable Jane Nelson - Page 5            (KP-0063)



                                      SUMMARY

                      A governmental .entity may not delegate its legislatively
              entrusted authority to another entity except as authorized by the
              Legislature. A court would likely conclude that one water district
              may contract for another water district to perform. the rights, powers,
              and duties of the first only to the extent the contract is authorized by
              the Interlocal Cooperation Act, section 49 .213 of the Water Code,
              or other state law and does not abrogate the first district's fiscal
              responsibilities under section 49.067 of the Water Code.

                                             Very truly yours,



                                            ~?~
                                             KEN PAXTON
                                             Attorney General of Texas



CHARLES E. ROY
First Assistant Attorney General

BRANTLEY STARR
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOEifSCHER
Chair, Opinion Committee

WILLIAM A. HILL
Assistant Attorney General, Opinion Committee
