83R5566 SLB-D
 
  By: Fraser S.B. No. 235
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the creation of regional authorities for water
  infrastructure projects.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  The Water Code is amended by adding Title 6 to
  read as follows:
  TITLE 6. WATER INFRASTRUCTURE
  SUBTITLE A. GENERAL PROVISIONS
  CHAPTER 201.  GENERAL PROVISIONS
         Sec. 201.001.  DEFINITIONS. In this title:
               (1)  "Commission" means the Texas Commission on
  Environmental Quality.
               (2)  "Development board" means the Texas Water
  Development Board.
  SUBTITLE B. WATER INFRASTRUCTURE PROJECTS
  CHAPTER 251.  REGIONAL WATER AUTHORITIES
  SUBCHAPTER A. GENERAL PROVISIONS
         Sec. 251.001.  DEFINITIONS. In this chapter:
               (1)  "Authority" means a regional water authority
  organized under this chapter.
               (2)  "Board" means the board of directors of an
  authority.
               (3)  "Bond" includes a bond, certificate, note, or
  other obligation of an authority authorized by this chapter,
  another statute, or the Texas Constitution.
               (4)  "Bond proceeding" includes a bond resolution and a
  bond indenture authorized by the bond resolution, a credit
  agreement, loan agreement, or other agreement entered into in
  connection with the bond or the payments to be made under the
  agreement, and any other agreement between an authority and another
  person providing security for the payment of a bond.
               (5)  "Bond resolution" means an order or resolution of
  a board authorizing the issuance of a bond.
               (6)  "Bondholder" means the owner of a bond and
  includes a trustee acting on behalf of an owner of a bond under the
  terms of a bond indenture.
               (7)  "Director" means a member of a board.
               (8)  "Governmental entity" means a political
  subdivision of the state, including a municipality or a county, a
  district organized or operating under Section 52, Article III, or
  Section 59, Article XVI, Texas Constitution, a nonprofit
  corporation, including a water supply or sewer service corporation
  operating under Chapter 67, or any other public entity or
  instrumentality.
               (9)  "Member entity" means a governmental entity that
  is approved for inclusion in an authority.
               (10)  "Public utility facility" means:
                     (A)  a water, wastewater, natural gas, or
  petroleum pipeline or facility;
                     (B)  an electric transmission or distribution
  facility; or
                     (C)  telecommunications infrastructure,
  including fiber optic cable, conduit, and wireless communications
  facilities.
               (11)  "Revenue" means fees, rents, and other money
  received by an authority from the ownership or operation of a water
  project.
               (12)  "Surplus revenue" means revenue that exceeds the
  sum of:
                     (A)  an authority's debt service requirements for
  a water project;
                     (B)  an authority's payment obligations under a
  contract or agreement authorized by this chapter;
                     (C)  coverage requirements of a bond indenture for
  a water project;
                     (D)  costs of operation and maintenance for a
  water project;
                     (E)  cost of repair, expansion, or improvement of
  a water project;
                     (F)  funds allocated for feasibility studies; and
                     (G)  necessary reserves as determined by the
  authority.
               (13)  "Water project" means a project approved for
  inclusion in the state water plan, including:
                     (A)  a conveyance facility for conveying water or
  wastewater, including a canal or pipeline;
                     (B)  a dam;
                     (C)  a desalination facility;
                     (D)  a drainage system;
                     (E)  a dredging operation;
                     (F)  a flood control system;
                     (G)  an injection well;
                     (H)  an irrigation system;
                     (I)  a public utility facility;
                     (J)  a surface water reservoir;
                     (K)  an underground reservoir;
                     (L)  a wastewater or water treatment facility,
  including any:
                           (i)  building or structure;
                           (ii)  pumping equipment;
                           (iii)  pipes; or
                           (iv)  other operating equipment;
                     (M)  other real or personal property associated
  with a water project described by this subdivision; and
                     (N)  any other project approved in the state water
  plan for the area covered by the authority.
               (14)  "Water system" means a combination of water
  projects.
         Sec. 251.002.  CONSTRUCTION COSTS DEFINED. (a)  The cost of
  the acquisition, construction, improvement, extension, or
  expansion of a water project under this chapter includes the cost
  of:
               (1)  the actual acquisition, construction,
  improvement, extension, or expansion of the water project;
               (2)  the acquisition of real property, rights-of-way,
  property rights, easements, and other interests in real property;
               (3)  machinery and equipment;
               (4)  interest payable before, during, and for not more
  than three years after acquisition, construction, improvement,
  extension, or expansion as provided in the bond proceedings;
               (5)  revenue estimates, engineering and legal
  services, plans, specifications, surveys, appraisals, construction
  cost estimates, and other expenses necessary or incidental to
  determining the feasibility of the acquisition, construction,
  improvement, extension, or expansion;
               (6)  necessary or incidental administrative, legal,
  and other expenses;
               (7)  compliance with laws, regulations, and
  administrative rulings, including any costs associated with
  necessary environmental mitigation measures;
               (8)  financing; and
               (9)  expenses related to the initial operation of the
  water project.
         (b)  Costs attributable to a water project and incurred
  before the issuance of bonds to finance the water project may be
  reimbursed from the proceeds of sale of the bonds.
         Sec. 251.003.  NATURE OF AUTHORITY. An authority is a
  conservation and reclamation district created under and essential
  to accomplish the purposes of Section 59, Article XVI, Texas
  Constitution.
  SUBCHAPTER B. CREATION OF AUTHORITY
         Sec. 251.051.  METHOD OF CREATING AUTHORITY. Two or more
  governmental entities may submit a petition to the commission
  requesting the creation of an authority. The petition must
  include:
               (1)  the name of the proposed authority;
               (2)  the area and the boundaries of the proposed
  authority, including a map generally outlining those boundaries;
               (3)  the purpose or purposes of the authority;
               (4)  a statement of the general nature of any water
  projects proposed to be undertaken by the proposed authority, the
  necessity and feasibility of the work, and the estimated costs of
  those projects if those projects are to be funded by the sale of
  bonds or notes;
               (5)  the names of at least five individuals qualified
  to serve as temporary directors; and
               (6)  financial information, including a budget based on
  projected expenses and revenue.
         Sec. 251.052.  NOTICE AND PUBLIC MEETING ON AUTHORITY
  CREATION. If a petition is filed under Section 251.051, the
  commission shall give notice of the application and shall conduct a
  public meeting in a central location within the area of the proposed
  authority on the application not later than the 60th day after the
  date the commission issues notice. The notice must contain the
  date, time, and location of the public meeting and must be published
  in one or more newspapers of general circulation in the area of the
  proposed authority.
         Sec. 251.053.  COMMISSION ORDER.  (a)  After a meeting
  described by Section 251.052, if the commission determines that
  creation of the authority satisfies the criteria adopted by the
  commission under Section 251.054, the commission shall issue an
  order creating the authority and notify the petitioners.
         (b)  An order issued under this section must include:
               (1)  the territory of the authority; and
               (2)  the names of the temporary directors.
         Sec. 251.054.  CRITERIA FOR CREATION OF AUTHORITY.  The
  commission shall adopt rules establishing the criteria to be used
  to determine whether the creation of an authority would protect and
  promote the health and safety of the public.
         Sec. 251.055.  ADDITION AND WITHDRAWAL OF GOVERNMENTAL
  ENTITIES. (a)  A governmental entity may petition the commission
  for approval to become part of an existing authority.  The
  commission may approve the petition only if:
               (1)  the board has agreed to the petition; and
               (2)  the commission finds that the affected
  governmental entities will be adequately represented on the board.
         (b)  A member entity may petition the commission for approval
  to withdraw from an authority. The commission may approve the
  petition only if:
               (1)  the authority has no bonded indebtedness; or
               (2)  the authority has debt other than bonded
  indebtedness, but the board has agreed to the withdrawal.
         (c)  A governmental entity may not become part of an
  authority or withdraw from an authority without the approval of the
  commission.
         Sec. 251.056.  TERRITORY. An authority's territory is the
  combined territory of its member entities.
  SUBCHAPTER C.  ADMINISTRATION
         Sec. 251.101.  BOARD OF DIRECTORS; TERMS.  (a)  The governing
  body of an authority is the board, which shall consist of not fewer
  than 5 and not more than 13 directors appointed by the member
  entities that compose the authority.
         (b)  Directors serve staggered terms of four years.
         Sec. 251.102.  ELIGIBILITY. (a)  To be eligible to serve as
  a director, an individual:
               (1)  must reside in the territory of the authority; and
               (2)  may be a representative of the appointing member
  entity.
         (b)  Notwithstanding any statutory or common law provision
  that prohibits dual office holding, an individual may serve as a
  director who is also an elected or appointed officer of a member
  entity without forfeiting either office.
         Sec. 251.103.  APPOINTMENT OF DIRECTORS. The temporary
  directors shall establish a method of appointing directors that
  ensures equitable treatment of each member entity.
         Sec. 251.104.  MEETINGS. The board shall hold regular
  meetings at a location inside the authority as agreed upon by the
  board.
  SUBCHAPTER D. POWERS AND DUTIES
         Sec. 251.151.  GENERAL POWERS. (a)  An authority, through
  its board, may:
               (1)  adopt rules for the regulation of its affairs and
  the conduct of its business;
               (2)  adopt an official seal;
               (3)  study, evaluate, design, finance, acquire,
  construct, maintain, repair, and operate water projects,
  individually or as one or more water systems;
               (4)  acquire, hold, and dispose of property in the
  exercise of its powers and the performance of its duties under this
  chapter;
               (5)  enter into contracts or operating agreements with
  a similar authority, another governmental entity, or an agency of
  the United States, a state of the United States, the United Mexican
  States, or a state of the United Mexican States;
               (6)  enter into contracts or agreements necessary or
  incidental to its powers and duties under this chapter;
               (7)  employ and set the compensation and benefits of
  administrators, consulting engineers, attorneys, accountants,
  construction and financial experts, superintendents, managers,
  full-time and part-time employees, agents, consultants, and other
  persons as the authority considers necessary or useful;
               (8)  apply for, directly or indirectly receive, and
  spend loans, gifts, grants, and other contributions for any purpose
  of this chapter, including the construction of a water project, and
  receive and spend contributions of money, property, labor, or other
  things of value from any source, including the United States, a
  state of the United States, the United Mexican States, a state of
  the United Mexican States, the commission, a political subdivision
  of this state, or a governmental entity or private entity, to be
  used for the purposes for which the grants, loans, or contributions
  are made, and enter into any agreement necessary for the grants,
  loans, or contributions;
               (9)  relocate or remove or request the relocation or
  removal of a public utility facility in, on, along, over, or under a
  water project;
               (10)  enter into leases, operating agreements, service
  agreements, licenses, franchises, and similar agreements with a
  public or private party governing the party's use of all or any
  portion of a water project and the rights and obligations of the
  authority with respect to a water project;
               (11)  borrow money from or enter into a loan agreement
  or other arrangement with the development board; and
               (12)  do all things necessary or appropriate to carry
  out the powers and duties expressly granted or imposed by this
  chapter.
         (b)  An authority may, if requested by the commission,
  perform any function not specified by this chapter to promote or
  develop a water project in this state.
         (c)  An authority may sue and be sued and plead and be
  impleaded in its own name.
         Sec. 251.152.  PROJECTS ON BEHALF OF GOVERNMENTAL ENTITIES.
  (a)  An authority and a governmental entity may enter into a
  contract, agreement, interlocal agreement, or other similar
  arrangement under which the authority may plan, design, construct,
  or operate a water project on behalf of the governmental entity.  An
  authority may enter into a contract with the commission under which
  the authority will plan, develop, operate, or maintain a water
  project on behalf of the commission.
         (b)  Payments to be made to an authority under a contract
  described by this section constitute operating expenses of the
  water project or system that is to be operated under the contract.  
  The contract may extend for the number of years as agreed to by the
  parties.
         Sec. 251.153.  PROCUREMENT. An authority shall adopt rules
  governing its procurement of goods and services that are consistent
  with general laws applicable to the authority.
         Sec. 251.154.  PROVISION OF RETAIL PUBLIC UTILITY SERVICES
  PROHIBITED.  An authority may not operate a public utility facility
  that provides retail public utility service.
         Sec. 251.155.  EMINENT DOMAIN.  An authority may exercise
  the power of eminent domain in accordance with Section 49.222.
  SUBCHAPTER E.  OPERATION OF WATER PROJECTS
         Sec. 251.201.  OPERATION OF WATER PROJECT.  (a)  An authority
  shall operate a water project with employees of the authority or by
  using services contracted under Subsection (b).
         (b)  An authority may enter into an agreement with one or
  more persons to provide, on terms and conditions approved by the
  authority, personnel and services to design, construct, operate,
  maintain, expand, enlarge, or extend the water project of the
  authority.
         Sec. 251.202.  AUDIT. (a) An authority shall have a
  certified public accountant audit the authority's books and
  accounts at least annually. The cost of the audit may be treated as
  part of the cost of construction or operation of a water project.
         (b)  The commission may initiate an independent audit of the
  authority or any of its activities at any time the commission
  considers appropriate. An audit under this subsection shall be
  conducted at the expense of the commission.
         Sec. 251.203.  TRANSFER OF WATER PROJECTS OR SYSTEMS. An
  authority, acting through its board, may agree with another entity
  to acquire a water project or system from that entity and to assume
  any debts, obligations, and liabilities of the entity relating to a
  water project or system transferred to the authority.
         Sec. 251.204.  AD VALOREM TAX. (a) If authorized at an
  election held for that purpose, an authority may impose an
  operation and maintenance tax on taxable property in the authority
  in accordance with Section 49.107.
         (b)  The board shall determine the tax rate.  The rate may not
  exceed the rate approved at the election.
         (c)  An authority may not impose an ad valorem tax for the
  payment of bonds or other obligations.
  SUBCHAPTER F.  WATER PROJECT FINANCING
         Sec. 251.251.  REVENUE BONDS. (a)  An authority, by bond
  resolution, may authorize the issuance of bonds to pay all or part
  of the cost of a water project, to refund any bonds previously
  issued for the water project, or to pay for all or part of the cost
  of a water project that will become a part of another water system.
         (b)  As determined in the bond resolution, the bonds of each
  issue shall:
               (1)  be dated;
               (2)  bear interest at the rate or rates provided by the
  bond resolution and beginning on the dates provided by the bond
  resolution and as authorized by law, or bear no interest;
               (3)  mature at the time or times provided by the bond
  resolution, not exceeding 40 years from their date or dates; and
               (4)  be made redeemable before maturity at the price or
  prices and under the terms provided by the bond resolution.
         (c)  An authority may sell the bonds at public or private
  sale in the manner and for the price it determines to be in the best
  interest of the authority.
         (d)  The proceeds of each bond issue shall be disbursed in
  the manner and under any restrictions provided in the bond
  resolution.
         (e)  Additional bonds may be issued in the same manner to pay
  the costs of a water project.  Unless otherwise provided in the bond
  resolution, the additional bonds shall be on a parity, without
  preference or priority, with bonds previously issued and payable
  from the revenue of the water project.  In addition, an authority
  may issue bonds for a water project secured by a lien on the revenue
  of the water project subordinate to the lien on the revenue securing
  other bonds issued for the water project.
         (f)  If the proceeds of a bond issue exceed the cost of the
  water project for which the bonds were issued, the surplus shall be
  segregated from the other money of the authority and used only for
  the purposes specified in the bond resolution.
         (g)  Bonds issued and delivered under this chapter and
  interest coupons on the bonds are a security under Chapter 8,
  Business & Commerce Code.
         (h)  Bonds issued under this chapter and income from the
  bonds, including any profit made on the sale or transfer of the
  bonds, are exempt from taxation in this state.
         (i)  Bonds issued under this chapter shall be considered
  authorized investments under Chapter 2256, Government Code, for
  this state, any governmental entity, and any other public entity
  proposing to invest in the bonds.
         Sec. 251.252.  INTERIM BONDS. (a)  An authority may, before
  issuing definitive bonds, issue interim bonds, with or without
  coupons, exchangeable for definitive bonds.
         (b)  The interim bonds may be authorized and issued in
  accordance with this chapter, without regard to a requirement,
  restriction, or procedural provision in any other law.
         (c)  A bond resolution authorizing interim bonds may provide
  that the interim bonds recite that the bonds are issued under this
  chapter.  The recital is conclusive evidence of the validity and the
  regularity of the bonds' issuance.
         Sec. 251.253.  PAYMENT OF BONDS; STATE AND COUNTY CREDIT.
  (a)  The principal of, interest on, and any redemption premium on
  bonds issued by an authority are payable solely from:
               (1)  the revenue of the water project for which the
  bonds are issued;
               (2)  payments made under an agreement with the
  commission or another governmental entity;
               (3)  money derived from any other source available to
  the authority, other than money derived from a water project that is
  not part of the same water system or money derived from a different
  system, except to the extent that the surplus revenue of a water
  project or system has been pledged for that purpose; and
               (4)  amounts received under a credit agreement relating
  to the water project for which the bonds are issued.
         (b)  Bonds issued under this chapter do not constitute a debt
  of this state or of a governmental entity, or a pledge of the faith
  and credit of this state or of a governmental entity.  Each bond
  must contain on its face a statement to the effect that:
               (1)  the state, the authority, or any governmental
  entity is not obligated to pay the bond or the interest on the bond
  from a source other than the amount pledged to pay the bond and the
  interest on the bond; and
               (2)  the faith and credit and taxing power of this state
  or of any governmental entity are not pledged to the payment of the
  principal of or interest on the bond.
         (c)  An authority may not incur a financial obligation that
  cannot be paid from revenue derived from owning or operating the
  authority's water projects or from other revenue provided by law.
         Sec. 251.254.  EFFECT OF LIEN. (a)  A lien on or a pledge of
  revenue from a water project or a reserve, replacement, or other
  fund established in connection with a bond issued under this
  chapter:
               (1)  is enforceable at the time of payment for and
  delivery of the bond;
               (2)  applies to each item on hand or subsequently
  received;
               (3)  applies without physical delivery of an item or
  other act; and
               (4)  is enforceable against any person having a claim,
  in tort, contract, or other remedy, against the applicable
  authority without regard to whether the person has notice of the
  lien or pledge.
         (b)  A bond resolution is not required to be recorded except
  in the regular records of the authority.
         Sec. 251.255.  BOND INDENTURE. (a)  Bonds issued by an
  authority under this chapter may be secured by a bond indenture
  between the authority and a corporate trustee that is a trust
  company or a bank that has the powers of a trust company.
         (b)  A bond indenture may pledge or assign the revenues to be
  received but may not convey or mortgage any part of a water project.
         (c)  A bond indenture may:
               (1)  set forth the rights and remedies of the
  bondholders and the trustee;
               (2)  restrict the individual right of action by
  bondholders as is customary in trust agreements or indentures of
  trust securing corporate bonds and debentures; and
               (3)  contain provisions the authority determines
  reasonable and proper for the security of the bondholders,
  including covenants:
                     (A)  establishing the authority's duties relating
  to:
                           (i)  the acquisition of property;
                           (ii)  the construction, maintenance,
  operation, and repair of and insurance for a water project; and
                           (iii)  custody, safeguarding, and
  application of money;
                     (B)  prescribing events that constitute default;
                     (C)  prescribing terms on which any or all of the
  bonds become or may be declared due before maturity; and
                     (D)  relating to the rights, powers, liabilities,
  or duties that arise on the breach of a duty of the authority.
         (d)  An expense incurred in carrying out a trust agreement
  may be treated as part of the cost of operating the water project.
         (e)  In addition to all other rights by mandamus or other
  court proceeding, an owner or trustee of a bond issued under this
  chapter may enforce the owner's rights against an issuing
  authority, the authority's employees, the authority's board, or an
  agent or employee of the authority's board and is entitled to:
               (1)  require the authority or the board to impose and
  collect fees, charges, and other revenue sufficient to carry out
  any agreement contained in the bond proceedings; and
               (2)  apply for and obtain the appointment of a receiver
  for the water project or system.
         Sec. 251.256.  APPROVAL OF BONDS BY ATTORNEY GENERAL. (a)  
  An authority shall submit to the attorney general for examination
  the record of proceedings relating to bonds authorized under this
  chapter.  The record shall include the bond proceedings and any
  contract securing or providing revenue for the payment of the
  bonds.
         (b)  If the attorney general determines that the bonds, the
  bond proceedings, and any supporting contract are authorized by
  law, the attorney general shall approve the bonds and deliver to the
  comptroller:
               (1)  a copy of the legal opinion of the attorney general
  stating the approval; and
               (2)  the record of proceedings relating to the
  authorization of the bonds.
         (c)  On receipt of the legal opinion of the attorney general
  and the record of proceedings relating to the authorization of the
  bonds, the comptroller shall register the record of proceedings.
         (d)  After approval by the attorney general, the bonds, the
  bond proceedings, and any supporting contract are valid,
  enforceable, and incontestable in any court or other forum for any
  reason and are binding obligations according to their terms for all
  purposes.
         Sec. 251.257.  FURNISHING OF INDEMNIFYING BONDS OR PLEDGES
  OF SECURITIES. (a)  A bank or trust company incorporated under the
  laws of this state that acts as depository of the proceeds of bonds
  or of revenue may furnish indemnifying bonds or pledge securities
  that an authority requires.
         (b)  Bonds of an authority may secure the deposit of public
  money of this state or a political subdivision of this state to the
  extent of the lesser of the face value of the bonds or their market
  value.
         Sec. 251.258.  APPLICABILITY OF OTHER LAW; CONFLICTS. All
  laws affecting the issuance of bonds by local governmental
  entities, including Chapters 1201, 1202, 1204, and 1371, Government
  Code, apply to bonds issued under this chapter.  To the extent of a
  conflict between those laws and this chapter, the provisions of
  this chapter prevail.
         Sec. 251.259.  REVENUE; SINKING FUND. (a)  An authority may
  impose fees or other charges related to each of its water projects.
         (b)  Revenue derived from a water project for which bonds are
  issued, other than any part necessary to pay the cost of
  maintenance, repair, and operation and to provide reserves for
  those costs as provided in the bond proceedings, shall be set aside
  at regular intervals as provided in the bond resolution or trust
  agreement in a sinking fund that is pledged to and charged with the
  payment of:
               (1)  interest on the bonds as it becomes due;
               (2)  principal of the bonds as it becomes due;
               (3)  necessary charges of paying agents for paying
  principal and interest;
               (4)  the redemption price or the purchase price of
  bonds retired by call or purchase as provided in the bond
  proceedings; and
               (5)  any amounts due under credit agreements.
         (c)  Use and disposition of money deposited to the credit of
  the sinking fund is subject to the bond proceedings.
         (d)  To the extent permitted under the applicable bond
  proceedings, revenue from one water project of an authority may be
  used to pay the cost of another water project of the authority.
         (e)  An authority may not use revenue from a water project in
  a manner not authorized by this chapter. Except as provided by this
  chapter, revenue derived from a water project may not be applied for
  a purpose or to pay a cost other than a purpose or cost that is
  reasonably related to or anticipated to be for the benefit of a
  water project.
         Sec. 251.260.  AUTHORITY REVOLVING FUND. (a)  An authority
  may maintain a revolving fund to be held in trust by a banking
  institution chosen by the authority separate from any other funds
  and administered by the authority's board.
         (b)  An authority may transfer into its revolving fund money
  from any permissible source, including:
               (1)  money from a water project if the transfer does not
  diminish the money available for the project to less than any amount
  required to be retained by the bond proceedings pertaining to the
  project;
               (2)  money received by the authority from any source
  and not otherwise committed, including money from the transfer of a
  water project or system or sale of authority assets; and
               (3)  contributions, loans, grants, or assistance from
  the United States, another state, another political subdivision of
  this state, a foreign governmental entity, including the United
  Mexican States or a state of the United Mexican States, a local
  government, any private enterprise, or any person.
         (c)  The authority may use money in the revolving fund to:
               (1)  finance the acquisition, construction,
  maintenance, or operation of a water project, including the
  extension, expansion, or improvement of a water project;
               (2)  provide matching money required in connection with
  any federal, state, local, or private aid, grant, or other funding,
  including aid or funding by or with public-private partnerships;
               (3)  provide credit enhancement either directly or
  indirectly for bonds issued to acquire, construct, extend, expand,
  or improve a water project;
               (4)  provide security for or payment of future or
  existing debt for the design, acquisition, construction,
  operation, maintenance, extension, expansion, or improvement of a
  water project or system;
               (5)  borrow money and issue promissory notes or other
  indebtedness payable out of the revolving fund for any purpose
  authorized by this chapter; and
               (6)  provide for any other reasonable purpose that
  assists in the financing of an authority as authorized by this
  chapter.
         (d)  Money spent or advanced from the revolving fund for a
  water project must be reimbursed from the money of that water
  project.  There must be a reasonable expectation of repayment at the
  time the expenditure or advancement is authorized.
         Sec. 251.261.  EXEMPTION FROM TAXATION OR ASSESSMENT. (a)  
  An authority is exempt from taxation of or assessments on:
               (1)  a water project or system;
               (2)  property the authority acquires or uses under this
  chapter for a water project or system; or
               (3)  income from property described by Subdivision (1)
  or (2).
         (b)  An authority is exempt from payment of development fees,
  utility connection fees, assessments, and service fees imposed or
  assessed by any governmental entity or any property owners' or
  homeowners' association.  This subsection does not apply to fees or
  assessments charged under approved rate schedules or line extension
  policies of a municipally owned electric or gas utility.
         Sec. 251.262.  PERFORMANCE AND PAYMENT BONDS AND SECURITY.
  Notwithstanding Chapter 2253, Government Code, an authority shall
  require any party to an agreement to operate or maintain a water
  project to provide performance and payment bonds or other forms of
  security, including a corporate guarantee, in amounts considered by
  the authority to be adequate to protect the authority and to assure
  performance of all obligations to the authority and to
  subcontractors providing materials or labor for a water project.
  SUBCHAPTER G.  DISSOLUTION OF AUTHORITY
         Sec. 251.301.  VOLUNTARY DISSOLUTION. (a)  An authority may
  not be dissolved unless the dissolution is approved by the
  commission.
         (b)  A board may submit a request to the commission for
  approval to dissolve.
         (c)  The commission may approve a request to dissolve only
  if:
               (1)  all debts, obligations, and liabilities of the
  authority have been paid and discharged or adequate provision has
  been made for the payment of all debts, obligations, and
  liabilities; and
               (2)  there are no suits pending against the authority,
  or adequate provision has been made for the satisfaction of any
  judgment, order, or decree that may be entered against it in any
  pending suit.
         Sec. 251.302.  INVOLUNTARY DISSOLUTION. (a)  The commission
  by order may require an authority to dissolve if the commission
  determines that the authority has not substantially complied with
  the requirements of a commission rule.
         (b)  The commission may not require dissolution unless:
               (1)  the conditions described in Section 251.301(c)
  have been met; and
               (2)  the holders of any indebtedness have evidenced
  their agreement to the dissolution.
         SECTION 2.  The Texas Commission on Environmental Quality
  shall adopt rules necessary to implement Chapter 251, Water Code,
  as added by this Act, not later than March 1, 2014.
         SECTION 3.  This Act takes effect September 1, 2013.