81R35246 SLB-D

By: Uresti S.B. No. 2440

Substitute the following for S.B. No. 2440:

By: Callegari C.S.S.B. No. 2440

A BILL TO BE ENTITLED

AN ACT

relating to the Bexar Metropolitan Water District.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. (a) In this section:

(1) "Board" means the district's board of directors.

(2) "District" means the Bexar Metropolitan Water District.

(b) Following 18 months of review and audits by agencies of this state and by the Bexar Metropolitan Water District Oversight Committee, the legislature finds that:

(1) certain officials of the district have engaged in unethical conduct and unprofessional management practices;

(2) disagreements regarding the district's jurisdiction and the jurisdiction of other entities inside the district and distrust between management personnel and the board have prevented the district from improving services for existing customers and meeting the water supply needs of the growing population within the district's service area;

(3) the district has a history of noncompliance with regulations;

(4) the board has engaged in mismanagement of the district, allowing for financial improprieties;

(5) the district has provided unreliable service to the degree that the quality of life of the district's customers is impaired and the prospects for economic growth within the district are diminished; and

(6) to ensure the reliability, sustainability, quality, and affordability of water supply services to the district's customers, legislative action is necessary, including the appointment of a conservator to serve as an advisor to the board until the district has achieved sufficient rehabilitation to serve its customers in a professional, ethical, and reliable manner.

SECTION 2. Section 8, Chapter 306, Acts of the 49th Legislature, Regular Session, 1945, is amended to read as follows:

Sec. 8. (a) [.] The seven [five (5)] members of the Board of Directors are [shall hereafter be] elected to staggered two-year terms in an election held on the uniform election date in November. Directors shall be elected from numbered single-member districts established by the Board [for a term of six (6) years each, provided that an election for two (2) Directors for a term of six (6) years shall be held on the first Tuesday in April, 1954; the terms of three (3) members of the present Board shall be, and are, hereby, extended to the first Tuesday in April, 1957; and the present Directors shall determine such three (3) by lot. Three (3) Directors shall be elected on the first Tuesday in April, 1957, and two (2) Directors and three (3) Directors, alternately, shall be elected each three (3) years thereafter on the first Tuesday in April as the six-year terms expire]. At an election of Directors, the candidate from each single-member district who receives [The two (2) or three (3) persons, respectively, receiving] the greatest number of votes shall be declared elected to represent that single-member district. Each Director shall hold office until his successor shall have been elected or appointed and shall have qualified. A Director may not serve more than three terms.[;]

(b) Such [such] elections shall be called, conducted and canvassed in the manner provided by the Election Code. [Chapter 25, General Laws of the Thirty-ninth Legislature, Regular Session, 1925, and any amendments thereto;]

(c) The [the] Board of Directors shall fill all vacancies on the Board by appointment and such appointees shall hold office for the unexpired term for which they were appointed.[;]

(d) Any four [any three] members of the Board shall constitute a quorum for the adoption of passage of any resolution or order or the transaction of any business of the District.[;]

(e) A Director must [Directors succeeding the first Board, whether now or hereafter elected, shall] be a qualified voter of the single-member district from which the Director is elected [resident electors of Bexar County, Texas, and owners of taxable property within the area comprising said District, and shall organize in like manner].

SECTION 3. Chapter 306, Acts of the 49th Legislature, Regular Session, 1945, is amended by adding Sections 1A, 8A, 8B, 8C, 9A, 9B, 12A, 12B, 23A, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, and 44 to read as follows:

Sec. 1A. In this Act:

(1) "Board" means the District's Board of Directors.

(2) "Commission" means the Texas Commission on Environmental Quality.

(3) "Director" means a Board member.

(4) "District" means the Bexar Metropolitan Water District.

Sec. 8A. (a) To be eligible to be a candidate for or elected as a Director, a person must have:

(1) resided continuously in the single-member district that the person seeks to represent for 12 months immediately preceding the date of the regular filing deadline for the candidate's application for a place on the ballot; and

(2) viewed the open government training video provided by the attorney general and provided to the Board a signed affidavit stating that the candidate viewed the video.

(b) In this subsection, "political contribution" and "specific-purpose committee" have the meanings assigned by Section 251.001, Election Code. A Director or a candidate for the office of Director may not knowingly accept political contributions from a person that in the aggregate exceed $500 in connection with each election in which the person is involved. For purposes of this subsection, a contribution to a specific-purpose committee for the purpose of supporting a candidate for the office of Director, opposing the candidate's opponent, or assisting the candidate as an officeholder is considered to be a contribution to the candidate.

Sec. 8B. (a) A person who is elected or appointed to and qualifies for office as a Director on or after the effective date of this section may not vote, deliberate, or be counted as a member in attendance at a meeting of the Board until the person completes a training program on District management issues. The training program must provide information to the person regarding:

(1) the enabling legislation that created the District;

(2) the operation of the District;

(3) the role and functions of the Board;

(4) the rules of the Board;

(5) the current budget for the Board;

(6) the results of the most recent formal audit of the Board;

(7) the requirements of the:

(A) open meetings law, Chapter 551, Government Code;

(B) open records law, Chapter 552, Government Code; and

(C) administrative procedure law, Chapter 2001, Government Code;

(8) the requirements of the conflict of interest laws and other laws relating to public officials; and

(9) any applicable ethics policies adopted by the Board or the Texas Ethics Commission.

(b) The Commission may create an advanced training program designed for a person who has previously completed a training program described by Subsection (a) of this section. If the Commission creates an advanced training program under this subsection, a person who completes that advanced training program is considered to have met the person's obligation under Subsection (a) of this section.

(c) Each Director who is elected or appointed on or after the effective date of this section shall complete a training program described by Subsection (a) or (b) of this section at least once in each term the Director serves.

(d) The Board shall adopt rules regarding the completion of the training program described by Subsection (a) or (b) of this section by a person who is elected or appointed to and qualifies for office as a Director before the effective date of this section. A Director described by this subsection who does not comply with Board rules shall be considered incompetent as to the performance of the duties of a Director in any action to remove the Director from office.

(e) A Director may not:

(1) accept or solicit a gift, favor, or service that:

(A) might reasonably influence the Director in the discharge of an official duty; or

(B) the Director knows or should know is being offered with the intent to influence the Director's official conduct;

(2) accept other employment or engage in a business or professional activity that the Director might reasonably expect would require or induce the Director to disclose confidential information acquired by reason of the official position;

(3) accept other employment or compensation that could reasonably be expected to impair the Director's independence of judgment in the performance of the Director's official duties;

(4) make personal investments that could reasonably be expected to create a substantial conflict between the Director's private interest and the interest of the District;

(5) intentionally or knowingly solicit, accept, or agree to accept any benefit for having exercised the Director's official powers or performed the Director's official duties in favor of another; or

(6) have a personal interest in an agreement executed by the District.

(f) Not later than April 30 each year, a Director shall file with the Bexar County clerk a verified financial statement complying with Sections 572.022, 572.023, 572.024, and 572.0252, Government Code. A copy of a financial statement filed under this section shall be kept in the main office of the District.

Sec. 8C. (a) A Director may be recalled for:

(1) incompetency or official misconduct as described by Section 21.022, Local Government Code;

(2) conviction of a felony;

(3) incapacity;

(4) failure to file a financial statement as required by Section 8B(f) of this Act;

(5) failure to complete a training program described by Section 8B(a) or (b) of this Act; or

(6) failure to maintain residency in the District.

(b) If at least 10 percent of the voters in the District submit a petition to the Board requesting the recall of a Director, the Board, not later than the 10th day after the date the petition is submitted, shall mail a written notice of the petition and the date of its submission to each registered voter in the District.

(c) Not later than the 30th day after the date a petition requesting the recall of a Director is submitted, the Board shall order an election on the question of recalling the Director.

(d) A recall election under this section may be held on any uniform election date.

(e) If a majority of the District voters voting at an election held under this section favor the recall of the Director, the Director is recalled and ceases to be a member of the Board.

(f) If a vacancy occurs on the Board after the recall of a Director under this section, the remaining members of the Board shall appoint a replacement. A Director appointed to fill a vacancy under this subsection serves until the next regularly scheduled Directors' election.

Sec. 9A. (a) The Board shall employ a general manager of the District or contract with a person to perform the duties of a general manager. The Board shall delegate to the general manager or contractor full authority to manage and operate the affairs of the District subject only to orders of the Board.

(b) The Board shall delegate to the general manager or contractor the authority to employ persons necessary for the proper handling of the business and operation of the District and to determine the compensation to be paid to employees, other than the general manager or contractor.

(c) The general manager or contractor annually shall complete a training program on state and federal laws related to the administration of the District. The training program must provide information regarding:

(1) nepotism;

(2) conflicts of interest;

(3) criminal penalties related to the conduct of elected officials;

(4) financial disclosure requirements;

(5) equal employment;

(6) disability accommodation;

(7) labor relations; and

(8) the acquisition and sale of property.

Sec. 9B. (a) The Board shall employ a chief financial officer of the District or contract with a person to perform the duties of a chief financial officer. The Board shall delegate to the chief financial officer or contractor the authority necessary to administer all financial affairs of the District, including:

(1) maintaining the general accounting system for the District;

(2) certifying the availability of funds for all proposed expenditures;

(3) submitting to the Board a monthly statement of all receipts and disbursements in sufficient detail to show the financial condition of the District; and

(4) preparing at the end of each fiscal year a complete financial statement and report.

(b) The Board shall require the chief financial officer of the District to furnish good and sufficient bond, payable to the District, in an amount determined by the Board to be sufficient to safeguard the District. The bond shall be conditioned on the faithful performance of that person's duties and on accounting for all funds and property of the District. The bond shall be signed or endorsed by a surety company authorized to do business in the state.

Sec. 12A. (a) All Board reimbursements and expenditures must be approved by the Board in a regularly scheduled meeting.

(b) At each regularly scheduled meeting of the Board, the Board shall review all expenditures made by the general manager.

Sec. 12B. (a) The Board shall adopt an annual budget.

(b) The budget must contain:

(1) a message explaining the budget;

(2) an outline of the proposed financial policies of the District for the next fiscal year, including any major changes from the current fiscal year;

(3) a comparison of the actual and estimated revenue and expenditures for the current fiscal year and actual and estimated revenue for the two preceding fiscal years;

(4) a statement of the water rates and collections for the preceding five years; and

(5) a complete financial statement, including a statement of:

(A) the outstanding obligations of the District, with a schedule of payments and maturities;

(B) the amount of cash on hand to the credit of each fund of the District;

(C) the amount of money received by the District from all sources during the preceding fiscal year, with notations regarding each department, division, or office of the District;

(D) the amount of money available to the District from all sources during the following fiscal year;

(E) the amount of the balances expected at the end of the fiscal year for which the budget is being prepared;

(F) the estimated amount of revenue and balances available to cover the proposed budget; and

(G) the estimated revenue from fees that will be required.

(c) The Board shall conduct two public hearings not later than the 30th day before the date of the public hearing at which the Board will adopt the budget. At least one of the public hearings must be held at a location other than the District office. Notice of the hearings must be included in a water or sewer service bill of each ratepayer mailed at least 30 days before the date of the first hearing.

Sec. 23A. (a) The Board may not increase residential water or sewer service rates by more than 10 percent unless the Board holds a public hearing on the matter of the rate increase. The hearing must be attended by the Board and, if the District employs a general manager or chief financial officer, by the general manager and the chief financial officer.

(b) The Board may increase residential rates by more than 10 percent only if approved by a unanimous vote of the Board after the hearing held under Subsection (a).

(c) A motion by a Director to increase residential water or sewer service rates by more than 10 percent must read as follows:

"I move that we increase residential (water or sewer, as appropriate) rates by ___ percent. An average water bill in the District is $ ___ for ___ gallons. With this increase, the average residential water bill will be $ ___ for ___ gallons. We need to increase the rates because of the following: (insert justification for rate increase)."

Sec. 34. (a) After September 1, 2014, the Board annually shall have an audit conducted of the District's books and records that covers all matters relating to the fiscal affairs of the District. The audit must be conducted by an independent auditor who does not:

(1) otherwise maintain any District accounts;

(2) act as a financial advisor to the District; or

(3) have any financial interest in the District.

(b) The Board may not select the same auditor for more than three consecutive annual audits.

Sec. 35. (a) The Commission shall appoint as conservator for the District an individual who, at the time of the individual's appointment:

(1) may be, but is not required to be, a Commission employee;

(2) has demonstrated a high level of expertise in water utility management;

(3) is not a Director; and

(4) has no financial interest in the District or any entity that has a contract with the District or that is likely to develop a contractual relationship with the District.

(b) The conservator's term expires on the earlier of:

(1) the fifth anniversary of the date the conservator is appointed;

(2) the date the Commission issues an order dissolving the conservatorship under Section 40; or

(3) the date the Commission enters an order dissolving the District under Section 42.

(c) If the Commission, after a reasonable period, determines that the conservator has not made satisfactory progress in performing the conservator's duties, the Commission shall appoint a new conservator to serve for the remainder of the conservator's term.

Sec. 36. A conservator appointed under Section 35 shall appoint an agency review team to assist the conservator in carrying out the duties described by Section 39. A person appointed under this section to the team must meet the same qualifications as those required for the conservator appointed under Section 35(a).

Sec. 37. (a) A conservator appointed under Section 35 and any person appointed by the conservator is entitled to receive a salary for performing those duties.

(b) The District shall pay the compensation of the conservator and any person appointed by the conservator.

Sec. 38. (a) A conservator appointed under Section 35 and any person appointed by the conservator is entitled to reimbursement of the reasonable and necessary expenses incurred by the conservator or appointee in the course of performing duties under Section 39.

(b) The District shall pay any reasonable and necessary expenses incurred by the conservator or appointee.

Sec. 39. (a) The conservator and the agency review team shall advise the Board on matters relating to the District's rehabilitation. The Board shall work cooperatively with the conservator and the agency review team to improve the Board's ability to manage and operate the District in a professional manner.

(b) In addition to the duties under Subsection (a), not later than June 1, 2010, the agency review team shall prepare a report evaluating the distinct water systems that make up the District and determine the following:

(1) the District's basis in or the intrinsic value of the infrastructure associated with each water system;

(2) the District's bonded debt and commercial paper reasonably associated with or allocable to the infrastructure in each water system;

(3) the adequacy of the source of the water supply located in each water system's service area to supply the current and projected demands generated in that service area;

(4) the adequacy of the water storage facilities located in each water system's service area to supply the current and projected demands generated in that service area;

(5) the adequacy of the distribution system located in each water system's service area to supply the current and projected demands generated in that service area; and

(6) the ability of the District to serve its customers in a particular service area or a specific part of the service area based on the infrastructure and capacity of the District in that area.

(c) The conservator shall submit the report to the governor, the lieutenant governor, the speaker of the house of representatives, the chair of each committee of the legislature having primary jurisdiction over water districts, and the Commission.

(d) The conservator and the agency review team shall develop bylaws for the District that separate the administrative and technical functions of the District. The Board shall consider and adopt rules and bylaws consistent with the bylaws developed by the conservator and the agency review team.

(e) The agency review team shall examine the service delivery in the several service areas of the District to determine whether the District is financially and practically able to provide continuous quality service in each area at reasonable rates. For any area the agency review team determines the District's ability to serve is inadequate or impractical, the agency review team shall recommend that the District divest the utility assets in that area.

(f) If the agency review team makes a recommendation under Subsection (e), the conservator shall appoint an agent to carry out the sale of the utility assets in that area. The agent shall bring an action in a district court in Bexar County for a determination of the fair market value of the assets to be sold. The fair market value shall be determined by a judge who was elected to that court from competent evidence of the value introduced by the parties. Competent evidence of value may include:

(1) expert opinion testimony;

(2) comparable sales;

(3) anticipated marketing time and holding costs;

(4) cost of sale; and

(5) the necessity and amount of any discount to be applied to the future sales price or the cash flow generated by the property to arrive at a fair market value as of the date of the sale.

(g) After the fair market value is determined under Subsection (f), the agent shall sell the assets to an appropriate entity in the best interest of the ratepayers. The agent shall conduct the sale in a manner consistent with the best interest of the ratepayers. Proceeds from the sale of the assets shall be applied to outstanding debt of the District, and if any proceeds remain after the retirement of all the District's debt, the remaining proceeds shall be distributed to the ratepayers as a rebate.

(h) This section expires September 1, 2014.

Sec. 40. (a) When the conservator reports to the Commission that the District has been sufficiently rehabilitated to provide reliable, cost-effective, quality service to its customers, the Commission shall evaluate the condition of the District and determine whether:

(1) the District has been sufficiently rehabilitated to enable the District to provide reliable, cost-effective, quality service to its customers; and

(2) the conservatorship is no longer necessary.

(b) The Commission may issue an order dissolving the conservatorship if the Commission determines the conservatorship is no longer necessary.

Sec. 41. (a) The Commission may hold an election in the District on the question of dissolving the District and disposing of the District's assets and obligations if:

(1) the conservator determines after an initial evaluation to be performed before the 60th day after the date of the effective date of the Act creating this section that the District cannot be rehabilitated and the dissolution of the District would be in the best interest of the ratepayers; or

(2) the conservator reports to the Commission at any time that the Board is unable or unwilling to comply with a request or recommendation of the conservator or agency review team.

(b) The Commission may hold an election under this section on a uniform election date following the 60th day after the date of preclearance under Section 5 of the federal Voting Rights Act of 1965 (42 U.S.C. Section 1973c) of all provisions of the Act enacting this section that are subject to that preclearance. If the Commission determines that preclearance under Section 5 of the federal Voting Rights Act of 1965 is not required, the Commission may hold the election on a uniform election date that falls at least 60 days after the date the Commission makes that determination.

(c) The order calling the election must state:

(1) the nature of the election, including the proposition to appear on the ballot;

(2) the date of the election;

(3) the hours during which the polls will be open; and

(4) the location of the polling places.

(d) The Commission shall give notice of an election under this section by publishing once a week for two consecutive weeks a substantial copy of the election order in a newspaper with general circulation in the District. The first publication of the notice must appear not later than the 35th day before the date of the election.

(e) The ballot for an election under this section must be printed to permit voting for or against the proposition: "The dissolution of the Bexar Metropolitan Water District."

(f) If a majority of the votes in an election under this section favor dissolution, the conservator shall report the result to the Commission and the Commission shall find that the District is dissolved.

Sec. 42. (a) If a majority of the votes in an election held under Section 41 favor dissolution, the term of each person who is serving as a Director of the District on the date of the canvass of the election expires on that date. Not later than the 60th day after the date of the canvass of the election, the conservator shall assume all powers necessary for the purposes described by this section.

(b) The conservator shall transfer or assign the rights and duties of the District associated with the provision of water services, including existing contracts, assets, and liabilities of the District, to one or more appropriate entities in such a manner that service to the existing customers of the District is not interrupted.

(c) After the District has paid all its debts and has disposed of all its money and other assets as prescribed by this section, the conservator shall file a written report with the Commission summarizing the conservator's actions in dissolving the District.

(d) Not later than the 10th day after the date the Commission receives the report and determines that the requirements of this section have been fulfilled, the Commission shall enter an order dissolving the District and releasing the conservator from any further duty or obligation.

Sec. 43. If a majority of votes favor dissolution in an election held under Section 41, this Act expires on the date the Commission enters an order dissolving the District.

Sec. 44. If a majority of the votes in an election held under Section 41 do not favor dissolution, the conservator appointed under Section 35 continues to serve until the conservatorship expires under Section 35.

SECTION 4. (a) Subject to approval by the Legislative Audit Committee for inclusion in the annual audit plan, the state auditor shall conduct an annual audit of the Bexar Metropolitan Water District for the five years following the effective date of this Act. The scope of the audit shall be determined by the state auditor based on a risk assessment.

(b) The district shall reimburse the state auditor for the cost of the audit.

SECTION 5. (a) Section 8, Chapter 306, Acts of the 49th Legislature, Regular Session, 1945, as amended by this Act, applies only to a member of the board of directors of the Bexar Metropolitan Water District who is elected to the board on or after the effective date of this Act.

(b) Section 8A, Chapter 306, Acts of the 49th Legislature, Regular Session, 1945, as added by this Act, applies only to a member of the board of directors of the Bexar Metropolitan Water District who is elected to the board on or after the effective date of this Act. A director who is elected before the effective date of this Act is governed by the law in effect when the director was elected, and the former law is continued in effect for that purpose. A director elected to a six-year term before the effective date of this Act shall serve out the term to which the director was elected.

(c) For a numbered single-member district director's position that expires in 2010 or 2011, the district shall call and hold an election on a uniform election date in that year to elect the director for that position for a term that expires on the uniform election date in November 2013.

SECTION 6. (a) The legal notice of the intention to introduce this Act, setting forth the general substance of this Act, has been published as provided by law, and the notice and a copy of this Act have been furnished to all persons, agencies, officials, or entities to which they are required to be furnished under Section 59, Article XVI, Texas Constitution, and Chapter 313, Government Code.

(b) The governor, one of the required recipients, has submitted the notice and Act to the Texas Commission on Environmental Quality.

(c) The Texas Commission on Environmental Quality has filed its recommendations relating to this Act with the governor, the lieutenant governor, and the speaker of the house of representatives within the required time.

(d) All requirements of the constitution and laws of this state and the rules and procedures of the legislature with respect to the notice, introduction, and passage of this Act are fulfilled and accomplished.

SECTION 7. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2009.