It’s astonishing how much a water supply corporation can get away with—lack of transparency, failure to hold recorded meetings, missing IRS Form 990 reports, and even neglecting annual elections. These corporations often evade accountability for infrastructure improvements, despite receiving millions in developer agreements meant for water distribution enhancements. Instead, they channel funds into local political campaigns to keep city councils to state officials lenient toward their practices, suppress competition, or obstruct land negotiations for public-use projects.
In some cases, water supply corporations take advantage of wastewater line excavations, illegally crossing water boundaries without permits or oversight. Meanwhile, municipalities are left hoping that these entities are conducting proper testing and employing licensed operators. The system is rife with opportunities for misconduct, including cases where individuals with inside knowledge can be swayed by financial incentives, leading to even more questionable practices.
Why Should Municipalities Act?
Residents demand transparency and local government control—but what does that actually look like? One critical tool available to municipalities is the franchise agreement or ordinance, which establishes oversight and financial responsibility for utilities using public infrastructure. Here’s why this approach is essential:
1. Municipal Oversight and Accountability
A franchise agreement ensures that the city receives a reasonable fee for the use of its streets, alleys, and public spaces. This revenue offsets costs associated with infrastructure maintenance and public resource management. By formalizing the rights and responsibilities of a water supply corporation, the ordinance helps ensure that the non-exclusive franchise allows the city to regulate utility operations within public rights-of-way, ensuring compliance with safety, environmental, and service quality standards. Additionally, all books and records related to the water supply corporation’s operations must be made available for inspection and copying within thirty (30) days of a formal request, ensuring transparency and accountability.
2. Infrastructure Improvements Without City Cost
The agreement permits the utility to construct, install, and maintain facilities, fostering necessary infrastructure improvements without direct expenses to the city.
3. Controlled Expansion to Support Growth
As the city expands, the ordinance allows for the extension of water services, promoting responsible development.
4. Flexibility and Non-Exclusivity
A non-exclusive franchise means that additional utility providers can be introduced in the future, fostering competition and potentially improving services for residents.
5. Legal Clarity and Protection
Clear terms and conditions reduce disputes between the city and the utility, ensuring structured public utility management.
6. Enhanced Public Safety and Coordination
Proper management of water infrastructure within public rights-of-way allows for better coordination with city planning, road maintenance, and emergency services.
7. Preventing Negligence and Public Hazards
To make matters worse, some water supply corporations outsource work to third-party contractors who cut corners to save costs. Poorly executed excavations have left hazards like open pits, misaligned pipelines, and incomplete repairs, creating both safety and aesthetic concerns for residents. Franchise agreements should include provisions requiring proper oversight, accountability, and timely remediation of excavation projects.
8. Traffic Control During Utility Work
Utility work can significantly disrupt traffic flow, particularly during peak hours. A franchise agreement should require water supply corporations to implement proper traffic control measures to minimize disruptions and enhance public safety.
Legal Authority Under Texas Tax Code Section 182.025
Texas Tax Code Section 182.025 applies to both general-law and home-rule municipalities, granting incorporated cities the authority to charge reasonable fees for public utility use of municipal streets, alleys, or public ways.
How This Applies to General-Law Municipalities:
- Right to Charge for Right-of-Way Use: General-law cities can impose fees on water utilities using municipal rights-of-way. While this does not grant full regulatory control, it allows cities to collect revenue for public land use.
- Limit on Charges: The law caps fees at 2% of the utility’s gross receipts from water sales within city limits, preventing excessive fees.
- Franchise Agreement Considerations: Cities can negotiate franchise agreements as a condition for utilities accessing public rights-of-way.
- Ordinance Authority: A general-law city may adopt an ordinance establishing right-of-way fees and setting conditions for utility access to public infrastructure.
Conclusion
Yes, Section 182.025 of the Texas Tax Code applies to general-law municipalities in the context of charging right-of-way fees for water utilities. While it does not provide broad regulatory control, it does offer a legal foundation for requiring franchise agreements or ordinances to ensure utilities pay for the use of municipal streets and alleys.
For a general-law city considering such an ordinance, it is essential to:
- Ensure fees do not exceed the 2% cap on gross receipts.
- Leverage the statute to require franchise agreements before allowing access to public rights-of-way.
- Consult legal counsel to ensure enforceability under state law.
By implementing these measures, municipalities can enhance oversight, improve infrastructure accountability, and ensure fair compensation for the use of public resources.
Let me know your thoughts in the comments below or send me an email—I’d love to hear from you!
