AUSTIN, Texas – During the interim, the Texas House Committee on Natural Resources was asked by the Speaker to monitor the implementation of Senate Bill 2185.
The bill, authored by state Sen. Juan Hinojosa of McAllen, aimed to dissolve Hidalgo County Water Improvement District No. 3. However, the legislation was amended drastically. HCWID No. 3 was not dissolved but was asked to carry out various best practices.
The natural resources committee is chaired by state Rep. Tracy King, D-Batesville. During the interim, King’s committee held a hearing in Weslaco on SB 2185.
Here is the committee’s interim report:
ISSUES REGARDING THE HIDALGO COUNTY WATER IMPROVEMENT DISTRICT #3
The Committee was assigned the task of monitoring the implementation of SB 2185, which as introduced, dissolved a particular water control and improvement district, and as passed, mandated certain best practices to the same in lieu of dissolution. Despite this and given the lengthy, fraught history of this subject, we felt it necessary to consider the history of water districts and the Legislature’s role in disputes of this kind. From there the 88th legislature may be better positioned to consider holistic approaches to ensuring all districts are operating at their very best.
Arising from allegations of mismanagement, price gouging, and political ill-will, SB 2185 was the latest iteration in a series of bills filed over the last decade that sought to dissolve the Hidalgo County Water Improvement District #3 (District). Like its predecessors, as part of the dissolution process, the bill provided that the District’s assets, including infrastructure and water rights, were to be transferred to the City of McAllen. The District maintains that because they still provide a necessary and statutorily authorized service the bill is unnecessary and simply an attempt by the City to take its assets.
The House companion to SB 2185 was referred to the House Natural Resources Committee, but due to a longstanding familiarity with the issue, it was not brought up for a hearing. After passing the Texas Senate, SB 2185 was received by the House and referred to the Urban Affairs Committee (instead of the Natural Resources Committee) where it was summarily reported favorably in a formal meeting without a public hearing. While not a requirement under the House rules, it is custom that a committee hold a public hearing on a bill for which the subject of has not previously been considered. Even more so on matters of consequence or controversy, which SB 2185 qualifies as both.
While under consideration by the full House, the Chairman of this Committee raised a point of order on further consideration of SB 2185 on the grounds that the bill was drafted contrary to the Texas Constitution’s prohibition on most local bills, a provision very much designed to prevent the legislature from enacting legislation meddling in local affairs. In an agreement to withdraw the point of order, the dissolution procedures were replaced with best practice language and other agreed to terms. It was further promised that this Committee would consider the subject at an interim hearing in the McAllen, Texas area.
The Committee met in Weslaco on November 14th, 2022. Both the author and House sponsor of SB 2185 were present and joined the committee in questioning witnesses, which primarily consisted of District or City representatives and their allies. Though very informative, the hearing was often tense, accusatory, and argumentative. To supplement, we thoroughly reviewed documents on file with the Public Utility Commission relating to the rate case the City has filed against the District. That included petitions, petition responses, certificates of adjudication, water supply and delivery contracts, and a decade-old state audit report. Lengthy questioning during the hearing was unable to definitively determine if the District’s rate structure is comparable to other similar districts. However, it is neither the charge of this Committee nor its duty to audit the District or otherwise engage in the rate dispute between the parties.
In order to better understand the function and purpose of Hidalgo County Water Improvement District #3, we will provide a brief history of water districts. The following summary owes a great deal to Glenn Jarvis’ essay the Evolution of Water Resources Management in Texas.
In the early 1850s, the state realized the need to develop and manage surface water resources. Back then the legislature enacted special laws granting charters to create private irrigation companies. The concept was that these companies would then raise private capital for irrigation projects to provide water to farms and the burgeoning towns they surrounded.
Over the next 50 years, this system proved limited and largely ineffective. For successful growth, there was a clear need for publicly financed and organized water development.
Accordingly, the citizens of Texas voted to approve a 1904 amendment to Art. III, Sec. 52 of the Texas Constitution. This amendment authorized the legislature to establish political subdivisions and districts with bonding authority for certain water improvement projects. Works specifically authorized by the 1904 amendment included the improvement of watercourses to prevent flooding, permit navigation, and use for irrigation. It also allowed for the construction and maintenance of pools, lakes, reservoirs, dams, canals, and waterways for irrigation, drainage, or navigation purposes.
During the following Session the legislature passed a series of laws aimed at promoting water development in light of this newly granted constitutional authority. Notably, this is when irrigation districts were first authorized.
Despite these efforts, development still languished. As noted in the Evolution of Water Resource Management in Texas, the 1904 amendment was enacted during a period of widespread public concern about higher taxes. Consequently, the amendment was drafted in a manner that impeded its effectiveness. Limitations such as a two-thirds majority vote of resident property owners to issue bonds, a conservative debt ceiling, and barring taxation where cities were included within a district’s boundaries all contributed to the amendment’s failure.
Nearly a decade later in 1913, the legislature took another swing by implementing what was entitled the Irrigation Act (sometimes referred to as the Glasscock Act). Not only was this a major advancement in codifying surface water law, it again authorized the creation of irrigation districts, but this time with expanded water development authority.
Since the days of private irrigation companies leading up to the Irrigation Act of 1913, irrigation and economic development were in many regards synonymous. Without irrigation, there were no farms. Without farming, there was no economic activity. In many regions, irrigation was essential to the state’s growth and development. Understanding that relationship, The Chairman of the Irrigation Committee, Rep. D.W. Glasscock from McAllen, Texas, and one of the major sponsors of the 1913 Irrigation Act addressed the House in support of the bill, stating:
“[W]hile known as the ‘Irrigation Bill’ , it is in fact much more extensive in scope than this term would indicate, and is an effort to form a comprehensive system of statutory ‘Water Law’ for this state. It deals, not only with the important question of irrigation, in which millions of capital is now invested in this state, and upon which many thousands of people are dependent; but also with every right to use the water; from the Primary use for drinking and domestic purposes, the supply of cities and towns, the natural use for stock raising, the use for mining, the development power, and other purposes; up to the problem of conservation of this great natural resources, and its control application and use, to the benefit of all people of this state.”
So while irrigation may have been a force in the modernization of Texas water law, the statutes enacted in those early days granted districts broad authority necessary to develop water resources for reasons beyond irrigation, as articulated by Rep. D.W. Glasscock.
Following a series of destructive floods and recognizing that districts organized under the 1904 amendment were integral to the state’s development but were effectively limited, public sentiment began to shift. The need to develop and control water now outweighed fiscal restraint. The Legislature responded by further refining and expanding upon the 1913 Irrigation Act to include “water improvement districts.” But more significantly, they passed a Joint Resolution to amend the Texas Constitution. On August 21st, 1917, the citizens of the state of Texas fully endorsed the district-based concept of water management by approving what is known as the “Conservation Amendment.”
By authorizing the legislature to create conservation and reclamation districts with broad operational authority and no financial restrictions, the Conservation Amendment essentially replaced the 1904 amendment. In fact, the Legislature reiterated its clear preference for these new districts the following year in a 1918 special session called to implement the Conservation Amendment. The Canales Act of 1918 both reaffirmed large provisions of the 1913 and 1917 Acts and created conservation and reclamation districts with the powers of water improvement districts but none of the limitations imposed by the 1904 Amendment. Though the process was cumbersome, it also authorized existing districts to convert to conservation and reclamation districts authorized by the Conservation Amendment.
Following some confusion in the courts and the onerous conversion requirements of the 1918 Act, the 1925 Legislature again enacted legislation creating a new type of district, the water control and improvement district. Following the same trend, these new districts had expanded powers and duties but lost the limitations that hampered the success of their predecessors. This Act allowed any existing water improvement district or irrigation district to convert into a water control and improvement district by a simple action of its board of directors. This authority was extended to any other conservation or reclamation district a few years later. It has been noted that many districts created prior to this Act eventually converted as HCWID #3 did in 1926.
It is here that today’s Water Code dealing with districts begins to take shape. After 1925, amendments to this area of Texas water law came slower and were more particular and specific, and much of what was enacted up until this point became the foundation for what Water Code chapters 51 and 55 are today. It is also within this context that we must look at Hidalgo County Water Improvement District #3.
The Hidalgo County Water Improvement District #3 was created in 1921 as a constitutionally authorized conservation and reclamation district to furnish raw water for irrigation and to deliver water to the City of McAllen for municipal purposes. It was formed through the county petition process as set forth in general law as opposed to by the Legislature through the enactment of a special law. Following the 1925 Act, the District’s board voted affirmatively in 1926 to convert the district into a water control and improvement district. WCIDs, of course, were specifically designed to accomplish more than just irrigation.
During the hearing, the District was repeatedly referred to as an irrigation district that has outlived its original purpose. This characterization disregards the historic intent of water control and improvement districts. As previously illustrated, the Water Code was purposefully crafted to include WCIDs among the preferred entities given the express responsibility of providing raw water for municipal and irrigation users. Because WCIDs still fulfill this statutory obligation they are by no means a vestige of the past. Rather, they are successfully operating across the state and their governing statute is consistently updated and tweaked to respond to contemporary issues. By design, districts have been able to heavily invest in water rights acquisition and delivery infrastructure in ways that municipalities may not have always been able to.
Unhappy with the rates, dissatisfied with management, and unable to successfully negotiate a mutually agreeable solution the City desires to dissolve the District and take over its assets and operations by legislative action.
After an exhaustive search of the legislative archives, it is apparent that legislation like SB 2185 is largely without precedent. The Committee found only one other instance where a general law water district was dissolved by the legislature. Under current statutory dissolution procedures, a district’s water rights revert back to the state. However, in the example found, the district was voluntarily dissolving and desired legislation to transfer its assets. While untraditional, in light of such an agreement, legislation of this sort is understandable. However, that is not the case between the City of McAllen and the HCWID 3.
While we believe the District has shown in good faith that it is working towards implementing the requirements of SB 2185, we remain confused about the District board elections. We are unimpressed with any explanation thus far in regard to how and when lists of qualified voters are produced or how qualified voters are made aware that an election is even taking place. If the District wishes to continue operating as a WCID, there are issues here that need to be resolved. The Committee is cautiously open to exploring legislative possibilities, but we want to stress that any changes made in statute will potentially impact thousands of other districts for which we’ve heard no complaints.
The Committee has ultimately determined that WCIDs still very much serve their intended purpose. While there may be issues at Hidalgo County Water Improvement District #3, they are not ones for which the Legislature is suited to specifically address. It is situations like this that Art. III, Sec. 56 of the Texas Constitution is designed to protect against: “the purpose of Section 56 is to stop the legislature from meddling in local matters” (The Constitution of The State of Texas: An annotated and Comparative Analysis, George Braden). It is contrary to the Constitution and would set a dangerous precedent to act in such a fashion simply because we may favor one political subdivision over another. It is our job to regulate districts as a whole and not on the individual level. Accordingly, there are statutory options to pursue grievances available in addition to judicial remedies. If those options are insufficient, it is the Legislature’s prerogative to enact a statutory framework that keeps districts honest, transparent, and efficient. As always we welcome suggestions on improvements to the law to keep all districts functioning at their very best.
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