Can Hot Springs Village or its nonprofit Property Owners’ Association become an Arkansas water authority under Act 736 of 2025?

Plain-English summary

Representative McGrew asked whether Hot Springs Village could qualify under Act 736 of 2025 and receive loan funds. The Attorney General answered that the unincorporated community itself lacks legal status and cannot become a water authority. Its nonprofit Property Owners' Association might qualify to form or convert to one. The Director of the Natural Resources Division must decide whether the POA provides water to or for the benefit of members of the general public. The Attorney General did not make that factual finding. Formation also requires a second person or entity; conversion does not have that two-person formation condition.

The PDF says a water authority may borrow tax-exempt funds for water projects. Footnote 7 cites the Construction Assistance Revolving Loans and names other state water funding programs that a water authority can obtain. The opinion does not award the POA funding or determine its eligibility for a particular loan program.

What this means for you

If you are on the POA board

Confirm the POA's corporate and water-service facts for the Natural Resources Division. The director's finding about service to members of the general public controls whether the POA meets the qualified-corporation definition. If forming a new authority, identify the second participating person or entity and file the required paperwork; if considering conversion, the POA itself must qualify and file the conversion paperwork. A separate funding inquiry is needed before treating a loan as available to the POA.

If you live in Hot Springs Village

The village as a community cannot apply to become an authority. The POA may have a route, but its status is unresolved because the opinion leaves the general-public service question to the director. This opinion does not say the POA has received or will receive state loan funds.

If you administer a water funding program

The opinion identifies possible water-authority powers and funding sources in general. Evaluate any application under the specific program's requirements; the opinion does not decide loan eligibility for this POA.

Common questions

Why can't Hot Springs Village itself become a water authority?
It is an unincorporated community without legal status, so it is neither a qualified corporation nor a person able to form an authority under the Water Authority Act.

Can the POA form an authority by itself?
No. Formation under A.C.A. § 4-35-201 requires two or more persons. The opinion says the POA could participate if the director finds it is a qualified corporation and a second person or entity joins.

Can the POA convert into an authority?
Possibly. Conversion depends on the director finding the POA qualifies under A.C.A. § 4-35-103(7), followed by the required filing and fee.

Which funding programs does the PDF mention?
Footnote 7 names Construction Assistance Revolving Loans, the Clean Water and Drinking Water State Revolving Funds, the Water Development Fund, the Water, Sewer, and Solid Waste Fund, and the General Obligation Bond Program. The opinion describes these as sources a water authority can obtain; it does not approve a POA application to any of them.

Background and statutory framework

Act 736 amended the Water Authority Act's qualified-corporation definition in A.C.A. § 4-35-103(7). The opinion identifies the director as the factfinder for whether this POA serves members of the general public. A.C.A. § 4-35-201 governs formation and § 4-35-202 governs conversion. The PDF footnotes identify A.C.A. §§ 15-5-901 through -910 as the Construction Assistance Revolving Loans provisions.

Source

• Official opinion search: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/ (Opinion No. 2025-052; PDF consulted for funding footnote).

Original opinion text

Opinion No. 2025-052

December 4, 2025

The Honorable Richard McGrew
State Representative
324 Ouachita Avenue
Hot Springs, Arkansas 71901

Dear Representative McGrew:

You have requested my opinion regarding Act 736 of 2025, which “expands the eligibility for water development state programs, amends the Water Authority Act, and amends the uses of the Construction Assistance Revolving Loan Fund.” You report that Hot Springs Village (HSV) is a gated community located in Garland and Saline Counties. The population of HSV is governed by the HSV Property Owners’ Association (POA), which is a nonprofit corporation. You have asked whether HSV “would qualify, be eligible to participate in, and receive loan funds pursuant to and as outlined in Act 736.” 1

RESPONSES

As an unincorporated community, HSV lacks legal status, so it cannot become a water authority. But its POA, as a nonprofit corporation, could become eligible to form or convert to a water authority under the conditions discussed below.

DISCUSSION

Under the Water Authority Act, 2 as amended by Act 736 of 2025, “a qualified corporation involved in the sale, transmission, and distribution of potable water … may form or convert its entity status to be a water authority.” 3 As a “public body politic and governmental entity organized” under the

1
Although your question only mentions HSV, I have also addressed whether the POA itself could qualify to participate in and receive loan funds under Act 736. 2 A.C.A. §§ 4-35-101 through -306.
3
Id. § 4-35-101.

BOB R. BROOKS JR. JUSTICE BUILDING
101 WEST CAPITOL AVENUE
LITTLE ROCK, ARKANSAS 72201

The Honorable Richard McGrew
State Representative
Opinion No. 2025-052
Page 2

Water Authority Act, 4 a water authority may exercise the power of eminent domain, 5 issue interest- bearing bonds for water projects, 6 and borrow tax-exempt funds for water projects. 7 The General Assembly has further provided that a water authority’s projects and project income are public property to be used for a public purpose and are exempt from ad valorem taxation. 8

1. Qualified corporation. Under A.C.A. § 4-35-103(7), as amended by Act 736, a “qualified
   corporation” is either:

   • “A nonprofit corporation … that provides, distributes, transmits, treats, pumps, or stores
   raw or potable water to or for the benefit of members of the general public and … other
   users or that proposes to accomplish, develop, or construct any of the foregoing”; or

   • “Any governmental entity … [or] investor-owned water or wastewater utility … that
   provides, distributes, transmits, treats, pumps, or stores raw or potable water to or for the
   benefit of members of the general public and … other users that proposes to accomplish,
   develop, or construct any of the foregoing.”

As an “unincorporated community,” 9 HSV has no legal status. 10 Without legal status, HSV cannot be a nonprofit corporation, a government entity, or an investor-owned water or wastewater utility. Thus, HSV is not a qualified corporation under A.C.A. § 4-35-103(7).

4
A.C.A. § 4-35-103(12) (“‘Water authority’ means the public body politic and governmental entity organized pursuant to the provisions of this chapter”). 5 Id. § 4-35-210(16).
6
Id. § 4-35-301(a).
7
Id. §§ 15-5-901 through -910 (“Construction Assistance Revolving Loans”). A water authority can also obtain tax- exempt funding through the Clean Water State Revolving Fund; the Drinking Water State Revolving Fund; the Water Development Fund; the Water, Sewer, and Solid Waste Fund; and the General Obligation Bond Program. Arkansas Department of Agriculture, Water and Wastewater Funding (Nov. 12, 2025), https://agriculture.arkansas.gov/natural- resources/water-development/water-and-wastewater-funding/. 8 A.C.A. § 4-35-108.
9
Id. § 14-270-102(5) (“‘Unincorporated community’ means an unincorporated community in a rural area of the state”); 15 C.A.R. § 189-102(19)(A) (“Unincorporated community” means a population center with historic boundaries that are understood in local custom and amenable to mapping, but which is not legally incorporated as a municipality”); 15 C.A.R. § 189-102(19)(B) (“Census designated places recognized by the United States Bureau of the Census are automatically recognized as unincorporated communities, while other unincorporated communities’ status and boundaries must be established by maps and narratives…”). 10 See Bunch v. Launius, 222 Ark. 760, 762, 262 S.W.2d 461, 462 (1953) (holding that “an unincorporated labor union cannot be sued in its society name”); Dist. No. 21, United Mine Workers of Am. v. Bourland, 169 Ark. 796, 277 S.W. 546, 549 (1925) (holding that “an unincorporated or voluntary association of persons has no legal entity”).

The Honorable Richard McGrew
State Representative
Opinion No. 2025-052
Page 3

Although the POA is not a governmental entity 11 or an investor-owned water or wastewater utility, 12 it could qualify under A.C.A. § 4-35-103(7) because it is a nonprofit corporation. 13 While the POA provides water services for HSV residents, 14 it does not offer water services to the surrounding communities. Thus, it is unclear whether the POA provides water services “to or for the benefit of members of the general public.” The ordinary and usually accepted meaning of “general public” is “any and everyone.” 15 But I am not a factfinder when issuing opinions, and whether the POA provides water services “to or for the benefit of members of the general public” is a question of fact to be determined by the Director of the Natural Resources Division of the Department of Agriculture. 16

2. Formation. To create a water authority, two or more persons must pay a fee and file the
   appropriate paperwork with the Natural Resources Division. 17 Under A.C.A. § 4-35-201, “persons
   … include cities, counties, or other public bodies.” But the Rules Governing Water Authorities state that “persons” also includes nonprofit corporations. 18 And the ordinary and usually accepted meaning of “person” includes “artificial persons such as corporations, partnerships, associations, and both public and private organizations.” 19 Thus, the Director of the Natural Resources Division would likely find that the POA is a “person” under A.C.A. § 4-35-201.

Because HSV has no legal status, it is not a person under A.C.A. § 4-35-201 and therefore cannot participate in the formation of a water authority. But as a nonprofit corporation, the POA could participate in the formation of a water authority if (1) the Director of the Natural Resources Division determines that the POA is a qualified corporation under A.C.A. § 4-35-103(7) and (2) a second person or entity is involved in the formation process.

11
See Coombs v. Hot Springs Vill. Prop. Owners Ass’n, 98 Ark. App. 226, 229 fn1, 254 S.W.3d 5, 8 (2007) (“The Village [POA] is not a municipality”). 12 See Articles of Amendment to the Amended and Restated Articles of Incorporation of Hot Springs Village Property Owners Association, https://www.explorethevillage.com/governing-documents/articles-of-incorporation (“The Association shall have members. The Association shall not have or issue shares of stock, no dividends shall be paid, and no part of the income of the Association shall be distributed to its directors, officers, or members …”). 13 Articles of Amendment to the Amended and Restated Articles of Incorporation of Hot Springs Village Property Owners Association, https://www.explorethevillage.com/governing-documents/articles-of-incorporation. 14 Hot Springs Village Property Owners Association Policy Guide, Chapter 4 – Public Services, https://www.explorethevillage.com/governing-documents/policy-guide.
15
Harvey v. Bell, 292 Ark. 657, 661, 732 S.W.2d 138, 140 (1987) (quoting C.J.S. Dedication § 54 (1956)); see also Ark. Att’y Gen. Ops. 1999-365, 1991-387, 1991-338. 16 4 C.A.R. § 1-203 (formation); 4 C.A.R. § 1-304 (conversion).
17
A.C.A. § 4-35-201; 4 C.A.R. § 1-201.
18
Id.
19
Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 273 (2012).

The Honorable Richard McGrew
State Representative
Opinion No. 2025-052
Page 4

3. Conversion. To convert to a water authority, a qualified corporation must pay a fee and file the
   appropriate paperwork with the Natural Resources Division.20 As explained above, HSV cannot use A.C.A. § 4-35-202 to convert to a water authority because it has no legal status. But the POA could convert to a water authority if the Director of the Natural Resources Division determines that the POA is a qualified corporation under A.C.A. § 4-35-103(7).

Assistant Attorney General Jodie Keener prepared this opinion, which I hereby approve.

Sincerely,

TIM GRIFFIN
Attorney General

20
4 C.A.R. § 1-301.