                                             KEN PAXTON
                                        ATTORNEY GENERAL OF TEXAS




                                            February 13, 2018



The Honorable Lyle Larson                               Opinion No. KP-0178
Chair, Committee on Natural Resources
Texas House of Representatives                          Re: Authority of the West Travis County
Post Office Box 2910                                    Public Utility Agency to impose impervious
Austin, Texas 78768-2910                                cover requirements (RQ-0171-KP)

Dear Representative Larson:

        Local Government Code, chapter 572, authorizes certain public entities to jointly create a
"public utility agency" to own and operate facilities providing water and wastewater services for
each participating public entity. TEX. Loe. Gov'T CODE § 572.051(3) (defining "public utility
agency"); see generally id. §§ 572.001-.064. Pursuant to this authority, the City of Bee Cave,
Hays County, and West Travis County Municipal Utility District No. 5 created the West Travis
County Public Utility Agency ("Agency") and entered into a contract with the Agency to provide
water and wastewater services to customers in northern Hays and western Travis counties. 1 Your
question sterns from a policy adopted by the Agency's board of directors that you say requires
certain new customers to agree to limit development to 20% impervious cover "as a condition to
obtaining water service:"2 Impervious cover requirements generally prescribe the percentage of
land on which a developer may make man-made improvements that impede the infiltration of
water into the soil. See, e.g., El Paso Apartment Ass 'n v. City of El Paso, 415 F. App'x 574, 576
(5th Cir. 2011) (per curiarn). The Agency tells us it began contractually imposing impervious
cover requirements on certain new customers seeking water services as "service level and capacity
planning tools," in response to concerns that the demand for water services from these customers
would exceed its existing capacity. Agency Brief at 2-3. You question whether requiring new
developments to limit impervious cover, as a condition to receiving water service, exceeds the
Agency's statutory authority. See Request Letter at 1-7.

      We note at the outset that you state the impervious cover policy applies only to new
customers seeking water service outside the service area boundaries of the Agency's certificate of




        1
        See Brief from Stefanie Albright, on behalf of the West Travis Cty. Pub. Util. Agency (Aug. 23, 2017)
("Agency Brief') (on file with the Op. Comm.) .
          2
        . Letter from Honorable Lyle Larson, Chair, House Comm. on Nat. Res., to Honorable Ken Paxton, Tex.
Att'y Gen. at 3 (July 21, 2017), http://www.texasattomeygeneral.gov/opinion/requests-for-opinion-rqs ("Request
Letter").
The Honorable Lyle Larson - Page 2                  (KP-0178)



convenience and necessity. 3 Id at 2. While the Agency owes certain duties to customers living
within the certificate's boundaries, including a duty to provide adequate water, we understand your
question to pertain to those customers seeking discretionary water services from the Agency
outside of its certificate. Additionally, we note that the Agency's contract with its creating entities
may create legal obligations pertaining to your question; however, this office does not construe
contracts in an attorney general opinion. See Tex. Att'y Gen. Op. No. GA-0810 (2010) at 1. Thus,
we cannot fully advise you as to the Agency's legal obligations, particularly with respect to
customers seeking water services within the City of Bee Cave, Hays County, and West Travis
County Municipal Utility District No. 5. We can, however, provide general guidance regarding
whether the Agency's enabling statute, chapter 572, vests it with the authority to require customers
to comply with impervious cover limits as a contractual condition to receiving water service.

        We begin with an overview of a public utility agency's authority under chapter 572.
Chapter 572 provides that different types of public entities may join to create a public utility agency
to "plan, finance, construct, own, operate, or maintain" water and wastewater facilities. TEX. Loe.
Gov'T CODE§ 572.051(3). While created by other public entities, a public utility agency is itself
"a separate agency[,] political subdivision of this state[,] and political entity and corporate body."
Id § 572.052(c ). As a statutorily-authorized body, a public utility agency has no inherent authority
and may exercise only those powers conferred by the Legislature and by implication those powers
"reasonably necessary to carry out the express responsibilities given to it by the Legislature." See
Tex. Coast Utils. Coal. v. R.R. Comm 'n of Tex., 423 S.W.3d 355,359 (Tex. 2014).

         While several public entities with varying authority join in its creation, a public utility
agency does not inherit the authority of its creating entities. Rather, chapter 572 expressly limits
the scope of a public utility agency's authority by providing that the entity "may not engage in any
utility business other than the collection, transportation, treatment, or disposal of sewage or the
conservation, storage, transportation, treatment, or distribution of water for a participating public
entity that owns jointly with the agency a facility in this state." TEX. Loe. Gov'T CODE
§ 572.058(a). To implement this authority, chapter 572 provides, in part, that a public utility
agency may "adopt rules to govern the operation of the agency and its employees, facilities, and
service" and "perform any act necessary to the full exercise of the agency's powers." Id
§ 572.058(b)(l), (4). Additionally, chapter 572 confers on a public utility agency, except for
taxation authority, all other powers "that are related to [water and wastewater] facilities and that
are provided by law to a municipality that owns a facility." Id § 572.052(d). Governing
municipal-owned utilities, Local Government Code, chapter 552 confers several powers upon a
municipal-owned water utility system, including the authority to "regulate the system in a manner
that protects the interests of the municipality." Id § 552.00l(b). Likewise, a public utility agency
therefore also has the authority to regulate its water utility system in a manner that protects its
interests. See id §§ 552.00l(b), 572.052(d).

       With respect to your question regarding whether a public utility agency may contractually
require impervious cover limits, two statutory provisions delineate the entity's contracting

        3A certificate of convenience and necessity gives the holder the exclusive right and obligation to provide

adequate retail water and/or sewer utility services within an identified geographic area. See TEX. WATER CODE
§ 13.242; 30 TEX. ADMIN. CODE§ 291.114(a).
The Honorable Lyle Larson - Page 3                    (KP-0178)



authority with respect to private entities seeking water services. First, chapter 572 expressly
provides that the Agency may contract with private entities for water services "under terms the
agency's board ofdirectors considers appropriate." Id. § 572.060(2) (emphases added). Second,
Local Government Code chapter 552 confers similar authority on municipal-owned utilities to
"contract with persons outside its boundaries to permit them to connect with [the municipality's
water utility system] on terms the municipality considers to be in its best interest." Id. § 552.001 (c)
(emphases added). 4 Thus, for private entities seeking water service, the Agency's board of
directors has discretion in determining the contractual conditions upon which it will extend service.
See id §§ 552.00l(c), 572.052(d), 572.060(2). Subsection 572.058(a), however, limits the scope
of that discretion by providing that a public utility agency "may not engage in any utility business
other than the collection, transportation, treatment, or disposal of sewage or the conservation,
storage, transportation, treatment, or distribution of water for a participating public entity." Id.
§ 572.058(a).

         Turning to whether impervious cover requirements fall within this authority, the Agency
tells us it uses these requirements as "planning tools to determine levels of needed capacity" and
that the "purpose of applying these limitations to new service requests is to ensure that the demands
of new development are not allowed to exceed the capacity of the [Agency's system], or in any
way effect the [Agency's] current commitments for service and existing customers." Agency Brief
at 3. While the Agency does have authority to "regulate [its] system in a matter that protects [its]
interests," a dispute appears to exist as to whether the impervious cover requirements in fact further
the Agency's stated goals. See TEX. Loe. Gov'T CODE §§ 552.00l(a), 572.052(d); see also
Request Letter at 7 ("[T]here is nothing about imposing impervious cover requirements to
accomplish the 'conservation, storage, transportation, treatment, or distribution of water."'). To
the extent that the impervious cover requirements do, in fact, further the Agency's "conservation,
storage, transportation, treatment, or distribution of water," a court would likely conclude that the
Agency is within its discretion to impose the contractual restrictions. See TEX. Loe. Gov'T CODE
§ 572.058(a). Factors establishing a nexus could include where the public utility agency obtains
its water and whether the proposed developments are within an aquifer recharge zone. However,
a resolution of these issues necessarily requires a fact and evidence-based query. See, e.g., Quick
v. City ofAustin, 7 S.W.3d 109, 119 (Tex. 1998) (reviewing parties' evidence, including scientific
testimony and nationally-recognized methods, in determining whether impervious cover ordinance
was rationally related to its goal of protecting water quality). As this office does not resolve
questions of fact in the opinion process and no Texas court has yet addressed this issue, we cannot
therefore definitively advise you as to whether chapter 572 permits the Agency to require certain
private entities to comply with impervious cover limits as a contractual condition to receiving
water services. See Tex. Att'y Gen. Op. No. GA-0751 (2009) at 1 ("This office does not resolve
questions of fact in the opinion process.").




         4
          This grant of authority is consistent with Texas case law and attorney general opinions that have similarly
concluded that a municipal-owned utility has reasonable discretion in determining the circumstances in which it will
extend utility lines to a requesting developer. See Crownhill Homes, Inc. v. City of San Antonio, 433 S. W.2d 448,
457-58 (Tex. Civ. App.-Corpus Christi 1968, writ refd n.r.e.); Tex. Att'y Gen. Op. No. JC-0368 (2001) at 3.
The Honorable Lyle Larson - Page 4           (KP-0178)



                                      SUMMARY

                      A public utility agency has statutory authority to contract
              with private entities seeking water services under terms its board of
              directors deems appropriate and that are within the agency's
              permissible scope of authority.

                      Determining whether the West Travis County Public Utility
              Agency has authority to impose impervious cover limits on private
              entities as a contractual condition to extending its water services
              raises questions of fact and contract interpretation beyond the scope
              of an attorney general opinion.

                                            Very truly yours,




                                            KEN PAXTON.
                                            Attorney General of Texas



JEFFREY C. MATEER
First Assistant Attorney General

BRANTLEY STARR
Deputy First Assistant Attorney General

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

ASHLEY FRANKLIN
Assistant Attorney General, Opinion Committee
