2009S0496-2 03/13/09
 
  By: Uresti S.B. No. 2440
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to providing an oversight mechanism for the Bexar
  Metropolitan Water District, including enforcement authority, and
  authorizing a dissolution election.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  LEGISLATIVE FINDINGS. The legislature finds
  that:
               (1)  according to audits and evaluations of the Bexar
  Metropolitan Water District performed by state agencies under H.B.
  No. 1565, Acts of the 80th Legislature, Regular Session, 2007:
                     (A)  certain officials of the district have
  engaged in a pattern of unethical conduct and unprofessional
  management practices;
                     (B)  disagreements regarding jurisdiction within
  the district and between the district and other entities and
  distrust among key management personnel and members of the board
  have hampered efforts by the district to improve services for
  existing customers and to meet water supply needs of growing
  populations within its service areas;
                     (C)  there has been a history of noncompliance on
  the part of the district; and
                     (D)  the district has demonstrated weak
  management, engaged in financial improprieties, and provided
  unreliable service, which threatens to impair the quality of life
  of its customers and diminish the prospects for economic growth
  within the district;
               (2)  after 18 months of intense scrutiny by state
  agencies and the Bexar Metropolitan Water District Oversight
  Committee, which is composed of gubernatorial appointees,
  legislators, and a local representative of Bexar County, it is
  evident that further legislative action is necessary; and
               (3)  to ensure the reliability, sustainability,
  quality, and affordability of water supply services to the
  customers of the district, it is necessary to appoint a
  conservator, who shall manage the district until the district has
  achieved sufficient rehabilitation to serve its customers in a
  professional, ethical, and reliable manner.
         SECTION 2.  DISSOLUTION.  Chapter 306, Acts of the 49th
  Legislature, Regular Session, 1945, is amended by adding Sections
  33B, 33C, 33D, 33E, 33F, and 33G to read as follows:
         Sec. 33B.  ELECTION ON DISSOLUTION AND CONSERVATORSHIP.  
  (a)  Not later than October 1, 2009, the Board shall order an
  election on the appointment of a conservator for the purpose of
  dissolving the District.
         (b)  The election shall be held not later than the 60th day
  after the date the election is ordered.
         (c)  The order calling the election must state:
               (1)  the nature of the election, including the
  proposition that is 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)  Section 41.001(a), Election Code, does not apply to an
  election ordered under this Section.
         Sec. 33C.  NOTICE OF ELECTION. The Board shall give notice
  of the election by publishing a substantial copy of the election
  order in a newspaper with general circulation in the District once a
  week for two consecutive weeks. The first publication must appear
  at least 35 days before the date set for election.
         Sec. 33D.  BALLOT. The ballot for the election shall be
  printed to permit voting for or against the proposition: "The
  appointment of a conservator for the Bexar Metropolitan Water
  District for the purpose of dissolving the District."
         Sec. 33E.  APPOINTMENT OF CONSERVATOR; ADMINISTRATION OF
  ASSETS. (a)  If a majority of the votes in the election ordered
  under Section 33B of this Act favor dissolution, a conservator
  shall be appointed by the Texas Commission on Environmental Quality
  not later than the 60th day after the date of the election.
         (b)  The Conservator shall administer the property, assets,
  and debts until all funds have been disposed of and all District
  debts have been paid or settled.
         Sec. 33F.  SALE OR TRANSFER OF ASSETS AND LIABILITIES.
  (a)  Notwithstanding any other provision of this Act, the District
  may not be dissolved unless the Conservator provides for the sale or
  transfer of the District's assets and liabilities to another person
  or entity or until all of the District's outstanding indebtedness
  or contractual obligations have otherwise been repaid or
  discharged.
         (b)  The dissolution of the District and the sale or transfer
  of the District's assets or liabilities may not contravene a trust
  indenture or bond resolution relating to the outstanding bonds of
  the District. The dissolution and sale or transfer does not
  diminish or impair the rights of a holder of an outstanding bond,
  warrant, commercial paper note, or other obligation of the
  District.
         (c)  The sale or transfer of the District's assets and
  liabilities must satisfy the debt, bond obligations, commercial
  paper notes, or any other financial obligation of the District in a
  manner that protects the interests of the residents of the
  District, including the residents' collective property rights in
  the District's assets. The District may not transfer or dispose of
  the District's assets except for due compensation unless the
  transfer is made to another governmental agency that serves the
  District and the transferred assets are to be used for the benefit
  of the residents of the District.
         Sec. 33G.  REPORT; DISSOLUTION ORDER. (a)  After the
  District has paid all its debts and has disposed of all its assets
  and funds as prescribed by this Act, the Conservator shall file a
  written report with the Texas Commission on Environmental Quality
  summarizing the Conservator's actions in dissolving the District.
         (b)  Not later than the 10th day after the date the Texas
  Commission on Environmental Quality receives the report and
  determines that the requirements of this Act as they relate to
  dissolution have been fulfilled, the Commission shall enter an
  order confirming the dissolution of the District and ordering the
  termination of conservatorship established under Section 33E of
  this Act, as applicable.
         SECTION 3.  CREATION OF CONSERVATORSHIP. Chapter 306, Acts
  of the 49th Legislature, Regular Session, 1945, is amended by
  adding Sections 34, 34A, and 34B to read as follows:
         Sec. 34.  CONSERVATOR.  If a majority of the votes in the
  election ordered under Section 33B of this Act do not favor
  dissolution, not later than the 60th day after the date of this
  election, the Texas Commission on Environmental Quality shall
  appoint a conservator for the District.  The individual appointed
  must have demonstrated a high level of expertise in water utility
  management.
         Sec. 34A.  POWERS AND DUTIES OF CONSERVATOR.  (a)  The Board
  shall be subject to the authority of a conservator appointed under
  Section 34 of this Act and shall work cooperatively with the
  Conservator in rehabilitating the Board in its ability to manage
  and operate the District in a professional manner. During the
  period of conservatorship, the Conservator has all of the general
  authority held by the Board immediately before the date
  conservatorship is established.
         (b)  The Conservator shall:
               (1)  take possession and control of the books, records,
  property, assets, and daily management of the District;
               (2)  take immediate action to ensure that the assets of
  the District are protected and that the quality of service provided
  to District customers is improved to the highest level reasonably
  practicable under the circumstances;
               (3)  develop a comprehensive rehabilitation plan for
  the District; and
               (4)  report monthly to the Texas Commission on
  Environmental Quality and to any committee with direct oversight
  authority over the District regarding:
                     (A)  the financial, managerial, technical, and
  operational status of the District under the conservatorship;
                     (B)  the actions the Conservator has taken to
  ensure that the District complies with the plan developed under
  Subdivision (3) of this Subsection; and
                     (C)  the progress the Conservator has made towards
  completion of the plan developed under Subdivision (3) of this
  Subsection.
         (c)  The comprehensive rehabilitation plan must:
               (1)  identify strategies for restoring the District's
  financial integrity and for developing a system of sound financial
  management;
               (2)  describe a standard of ethics, professionalism,
  and openness expected of each member of the Board and employees of
  the District and a mechanism for enforcing compliance with District
  policies, including procurement policies;
               (3)  address ways to enhance the District's operational
  efficiency;
               (4)  as an integral part of rehabilitating the
  District, devise a program for:
                     (A)  educating the Board of Directors and key
  management personnel on improving management practices, on
  complying with Board policy and applicable laws and regulations,
  and on implementing needed reforms for the District; and
                     (B)  developing greater technical expertise on
  the part of District employees;
               (5)  identify District assets that, if sold, would
  likely improve the District's ability to serve its remaining
  customers;
               (6)  ensure that any assets identified in Subdivision
  (5) of this Subsection that are sold are sold at fair market value;
               (7)  ensure that any entity that acquires a District
  asset is responsible for all transaction costs related to the
  acquisition, including the cost of defending the State against
  legal challenges to the disposition of the asset; and
               (8)  inventory and evaluate the discrete water systems
  that the District comprises and determine:
                     (A)  the District's basis in or the intrinsic
  value of the infrastructure associated with each water system;
                     (B)  the District's bonded debt and commercial
  paper reasonably associated with or allocable to the infrastructure
  of each water system;
                     (C)  the adequacy of the source of the water
  supply, such as wells, located in each water system's service area
  to supply the current and projected demands generated in that
  service area;
                     (D)  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; and
                     (E)  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.
         (d)  The term of the Conservator continues until:
               (1)  the Conservator reports that the District has been
  sufficiently rehabilitated to provide reliable, cost-effective,
  quality service to its customers; and
               (2)  the Texas Commission on Environmental Quality,
  after performing a confirmation review, concurs with the
  Conservator's report that the District has been sufficiently
  rehabilitated to ensure that it can serve its customers in a
  professional manner and that conservatorship is no longer
  necessary.
         (e)  When conservatorship is terminated under Subsection (d)
  of this Section, the assets and management of the District return to
  the control of the Board of Directors.
         (f)  Funding for the conservatorship shall be provided by the
  District and approved by the Commission.
         (g)  The Conservator may not take any action that:
               (1)  will impair the District's ability to collect
  revenues, fees, or charges:
                     (A)  for operating District systems; or
                     (B)  necessary for the payment of any bonds,
  commercial paper notes, or any other financial obligation; or
               (2)  would cause an event of default under any
  provision of any indenture, contract, order, or other financial
  instrument creating any such obligation.
         (h)  The appointment of the Conservator is not conditioned on
  or a result of an insolvency or bankruptcy proceeding or an
  inability of the District to pay its debts.
         (i)  Except as provided by Subsection (j) of this Section,
  the Conservator may not be a receiver, trustee, custodian, or
  liquidator of the District's system or other property.
         (j)  If a majority of the voters approve the dissolution of
  the District in an election held under Section 35 of this Act, the
  Conservator may use any authority provided by this Act as necessary
  to accomplish the dissolution.
         Sec. 34B.  ADDITIONAL ENFORCEMENT AUTHORITY.
  (a)  Notwithstanding any other law, if the Texas Commission on
  Environmental Quality determines that, after a reasonable period,
  the District has not made satisfactory progress in rehabilitating
  its management and related operations, the Commission may use the
  auditing and enforcement authority provided to the Commission by
  Chapters 36 and 49, Water Code, to address deficiencies on the part
  of the District or may recommend dissolution as provided by Section
  35 of this Act.
         (b)  If the Texas Commission on Environmental Quality
  determines that, after a reasonable period, the Conservator has not
  made satisfactory progress in implementing the comprehensive
  rehabilitation plan and the Commission has not determined that the
  District must be dissolved, the Commission shall appoint a new
  Conservator.
         (c)  The Texas Commission on Environmental Quality shall
  adopt rules providing for filling a vacancy in the position of
  Conservator.
         SECTION 4.  CREATION OF SUBSEQUENT CONSERVATORSHIP.
  Effective June 1, 2011, Chapter 306, Acts of the 49th Legislature,
  Regular Session, 1945, is amended by adding Section 34C to read as
  follows:
         Sec. 34C.  SUBSEQUENT CONSERVATOR. (a)  The Texas
  Commission on Environmental Quality shall appoint a subsequent
  Conservator for the District if the Commission determines that
  after the termination of an earlier conservatorship under Section
  34A of this Act, the District has:
               (1)  obstructed the Commission's authority to supervise
  the District;
               (2)  violated a final order of the Commission;
               (3)  caused a potential health hazard by failing to
  provide appropriate water or wastewater treatment to District
  customers;
               (4)  caused a potential health hazard, extended
  outages, or repeated service interruptions by failing to adequately
  maintain District facilities;
               (5)  displayed a pattern of hostility towards the
  Commission or repeatedly failed to respond to the Commission or to
  District customers;
               (6)  engaged in a pattern of:
                     (A)  noncompliance with laws or regulations; or
                     (B)  unethical conduct and unprofessional
  management practices;
               (7)  abandoned the operation of its facilities;
               (8)  had a majority of its Board of Directors resign;
               (9)  demonstrated weak management;
               (10)  engaged in financial improprieties; or
               (11)  provided unreliable service that impairs the
  quality of life of its customers or diminishes the prospects for
  economic growth within the District.
         (b)  An individual appointed Conservator under this Section
  must have demonstrated a high level of expertise in water utility
  management and shall have all the powers and duties assigned to a
  Conservator under Section 34A of this Act.
         (c)  For a conservatorship created under this Section, the
  Texas Commission on Environmental Quality has the additional
  enforcement authority assigned to it under Section 34B of this Act.
         SECTION 5.  OVERSIGHT COMMITTEE: COMPOSITION; REPORT.
  Section 33A, Chapter 306, Acts of the 49th Legislature, Regular
  Session, 1945, is amended by amending Subsection (c) and adding
  Subsection (g) to read as follows:
         (c)  The oversight committee is comprised of five [5] members
  appointed as follows [to represent the following members]:
               (1)  a [the] Senator who represents a Senate district
  that includes territory within the District, [sponsor of this Act,
  or, in the event this Senator cannot serve, a Senator] appointed by
  the Lieutenant Governor;
               (2)  a Representative who represents a [the] House
  district that includes territory within the District, [author of
  this Act, or, in the event this Representative cannot serve, a
  Representative] appointed by the Speaker of the Texas House of
  Representatives;
               (3)  one member of the Senate Committee on Natural
  Resources [with special expertise in the operation of public water
  utilities] appointed by the Lieutenant Governor;
               (4)  one member of the House Committee on Natural
  Resources appointed by the Speaker of the Texas House of
  Representatives; and
               (5)  one member appointed by the Governor to represent
  the public[; and
               [(5)     a member of the Bexar County Commissioners Court
  who represents a precinct in which customers of the District
  reside].
         (g)  On or before December 31, 2010, the oversight committee
  shall provide a report under Subsection (e) of this Section to the
  82nd Legislature. The committee is abolished and this Section
  expires on January 1, 2011.
         SECTION 6.  DISSOLUTION BY ELECTION AFTER FAILED
  REHABILITATION. Chapter 306, Acts of the 49th Legislature, Regular
  Session, 1945, is amended by adding Section 35 and Sections 35A
  through 35E to read as follows:
         Sec. 35.  RECOMMENDATION OF DISSOLUTION; ELECTION. (a)  If
  the Texas Commission on Environmental Quality makes an affirmative
  determination under Subsection (a), Section 34B of this Act, the
  Commission may recommend that the District be dissolved, in which
  case the Conservator shall order an election on the proposed
  dissolution.
         (b)  The District may be dissolved only on approval of a
  majority of the voters voting in an election held for that purpose.
         (c)  The election shall be held not later than the 60th day
  after the date the election is ordered.
         (d)  The order calling the election must state:
               (1)  the nature of the election, including the
  proposition that is 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.
         (e)  Section 41.001(a), Election Code, does not apply to an
  election ordered under this Section.
         Sec. 35A.  NOTICE OF ELECTION. The Conservator shall give
  notice of the election by publishing a substantial copy of the
  election order in a newspaper with general circulation in the
  District once a week for two consecutive weeks. The first
  publication must appear at least 35 days before the date set for
  election.
         Sec. 35B.  BALLOT. The ballot for the election shall be
  printed to permit voting for or against the proposition: "The
  dissolution of the Bexar Metropolitan Water District."
         Sec. 35C.  ADMINISTRATION OF ASSETS. If a majority of the
  votes in the election ordered under Section 35 of this Act favor
  dissolution, the Conservator shall administer the property,
  assets, and debts until all funds have been disposed of and all
  District debts have been paid or settled.
         Sec. 35D.  SALE OR TRANSFER OF ASSETS AND LIABILITIES.
  (a)  Notwithstanding any other provision of this Act, the District
  may not be dissolved unless the Conservator provides for the sale or
  transfer of the District's assets and liabilities to another person
  or entity or until all of the District's outstanding indebtedness
  or contractual obligations have otherwise been repaid or
  discharged.
         (b)  The dissolution of the District and the sale or transfer
  of the District's assets or liabilities may not contravene a trust
  indenture or bond resolution relating to the outstanding bonds of
  the District. The dissolution and sale or transfer does not
  diminish or impair the rights of a holder of an outstanding bond,
  warrant, commercial paper note, or other obligation of the
  District.
         (c)  The sale or transfer of the District's assets and
  liabilities must satisfy the debt, bond obligations, commercial
  paper notes, or any other financial obligation of the District in a
  manner that protects the interests of the residents of the
  District, including the residents' collective property rights in
  the District's assets. The District may not transfer or dispose of
  the District's assets except for due compensation unless the
  transfer is made to another governmental agency that serves the
  District and the transferred assets are to be used for the benefit
  of the residents of the District.
         Sec. 35E.  REPORT; DISSOLUTION ORDER. (a)  After the
  District has paid all its debts and has disposed of all its assets
  and funds as prescribed by this Act, the Conservator shall file a
  written report with the Texas Commission on Environmental Quality
  summarizing the Conservator's actions in dissolving the District.
         (b)  Not later than the 10th day after the date the Texas
  Commission on Environmental Quality receives the report and
  determines that the requirements of this Act as they relate to
  dissolution have been fulfilled, the Commission shall enter an
  order confirming the dissolution of the District and ordering the
  termination of conservatorship established under Section 34, 34B,
  or 34C of this Act, as applicable.
         SECTION 7.  NOTICE. (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 8.  EFFECTIVE DATE. Except as otherwise provided by
  this Act, 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, except as otherwise provided by this Act.