Using the Water and Sewer Fund as a Piggy Bank

Constitutional? Or not Constitutional?

Getting to the bottom of the story about has been informative. Recently there was a public notice in the paper that indicated a lien was going to be placed on the water and sewer system and revenues were pledged to repay a portion of the CO. The limited pledge of revenues from the water and sewer fund amounted to $1000.

Allowing the city administrators to use the water and sewer fund revenue for this purpose to be contrary to what the city charter allows. Section 11.07 of the charter (  http://www.cor.net/modules/showdocument.aspx?documentid=10520 )speaks of transfers of appropriations and states “The Council may at any time transfer an unencumbered balance of an appropriation made for the use of one department, division, or purpose; but no such transfer shall be made of revenues or earnings of any nontax supported public utility for any other purpose.”

Because what is being done, and what the charter seems to not allow, I contacted city hall to find out where the authority lays for what seems improper use of water and sewer fund revenue. David Morgan was the person I was handed off to.

After several email back and forth, his response was that the city administrators are given the authority to use water and sewer fund revenue because of Government Code Section 1502.059 which reads:

Sec. 1502.059.  TRANSFER OF REVENUE TO GENERAL FUND.  Notwithstanding Section 1502.058(a) or a similar law or municipal charter provision, a municipality and its officers and utility trustees may transfer to the municipality's general fund and may use for general or special purposes revenue of any municipally owned utility system in the amount and to the extent authorized in the indenture, deed of trust, or ordinance providing for and securing payment of public securities issued under this chapter or similar law.

He also provided with the text from the Texas Constitution that governs home rule cities.

Texas Constitution - Article 11 Sec. 5.  CITIES OF MORE THAN 5,000 POPULATION; ADOPTION OR AMENDMENT OF CHARTERS; TAXES; DEBT RESTRICTIONS.  (a)  Cities having more than five thousand (5000) inhabitants may, by a majority vote of the qualified voters of said city, at an election held for that purpose, adopt or amend their charters.  If the number of inhabitants of cities that have adopted or amended their charters under this section is reduced to five thousand (5000) or fewer, the cities still may amend their charters by a majority vote of the qualified voters of said city at an election held for that purpose.  The adoption or amendment of charters is subject to such limitations as may be prescribed by the Legislature, and no charter or any ordinance passed under said charter shall contain any provision inconsistent with the Constitution of the State, or of the general laws enacted by the Legislature of this State.  Said cities may levy, assess and collect such taxes as may be authorized by law or by their charters; but no tax for any purpose shall ever be lawful for any one year, which shall exceed two and one-half per cent. of the taxable property of such city, and no debt shall ever be created by any city, unless at the same time provision be made to assess and collect annually a sufficient sum to pay the interest thereon and creating a sinking fund of at least two per cent. thereon, except as provided by Subsection (b).  Furthermore, no city charter shall be altered, amended or repealed oftener than every two years.

(b)  To increase efficiency and effectiveness to the greatest extent possible, the legislature may by general law authorize cities to enter into interlocal contracts with other cities or counties without meeting the assessment and sinking fund requirements under Subsection (a).

An interesting sentence in the language of the constitution is this one:

“The adoption or amendment of charters is subject to such limitations as may be prescribed by the Legislature, and no charter or any ordinance passed under said charter shall contain any provision inconsistent with the Constitution of the State, or of the general laws enacted by the Legislature of this State.”

While researching, I did come across what the TML says about home rule cities:

  https://www.tml.org/pdftexts/HRHChapter1.pdf

“As mentioned earlier, home rule cities look to the state to tell them what they are prohibited from doing, rather than for specific grants of authority to undertake particular functions. In Forwood v. City of Taylor, the Texas Supreme Court summarized Texas’ home rule doctrine as follows:

It was the purpose of the Home-Rule Amendment ... to bestow upon accepting cities and towns of more than 5,000 population full power of self-government, that is, full authority to do anything the legislature could theretofore have authorized them to do. The result is that now it is necessary to look to the acts of the legislature not for grants of power to such cities but only for limitations on their powers.”

It is unmistakable that the primary difference between general law cities and home rule cities is where a city’s power originates.

General Law cities look to the legislature for what they are allowed to do, or what they are given permission to do.

Home rule cities are quite the opposite. A home rule city looks to the legislature only for what they cannot do. A home rule city has the power to do anything the legislature could have allowed them to do.

It would seem to me that Section 1502.059 would be an unconstitutional law. Why? Because it is a law that gives permission to the city administrators by an act of a legislative law,  rather than a limitation of power affecting a city administration’s actions.

The voters of Richardson made clear they did not want the water and sewer fund revenues to be used as a piggy bank by the city administrators or the city council. The legislature, by giving a right to city administrators to raid the water and sewer fund revenues, is taking away a right from the citizens of a home rule city, given to the by the Texas Constitution, that allows for choices on how they want to self-governing

In the proposed CO, the dollar amount is small, $1000. That is not the case with the sweep of funds from the water and sewer department for General and Administrative transfers or for the Franchise Fees. Over the past several year more than $100 million dollars has been taken from the water and sewer fund revenues and applied to purposes against the wishes of the citizens.