Can Hot Springs Village or its Property Owners Association qualify as a 'water authority' under Arkansas's expanded Water Authority Act and access the state's water-infrastructure loan programs?

Plain-English summary

Hot Springs Village (HSV) is a gated community in Garland and Saline Counties, governed by a Property Owners Association (POA) that is a nonprofit corporation. Act 736 of 2025 expanded who could form or convert to a water authority under Arkansas's Water Authority Act and broadened use of the state Construction Assistance Revolving Loan Fund. State Representative Richard McGrew asked the AG whether HSV could participate.

Attorney General Tim Griffin's analysis splits HSV from its POA:

HSV itself cannot. It's an "unincorporated community" under A.C.A. § 14-270-102(5) and 15 C.A.R. § 189-102(19). Arkansas case law (Bunch v. Launius, District No. 21 v. Bourland) confirms that unincorporated associations and communities have no legal entity status. Without legal status, HSV cannot:

• Be a "qualified corporation" under § 4-35-103(7).
• Be a "person" under § 4-35-201 (water authority formation).
• Form or convert to a water authority.

The POA might be able to. As a nonprofit corporation, the POA could qualify if:

1. The Director of the Natural Resources Division finds it serves the general public. The qualified-corporation definition requires the entity to provide water "to or for the benefit of members of the general public and other users." HSV's POA serves only HSV residents (a closed gated community), and the AG flagged that whether residents-only service constitutes "general public" is a factual question for the Director. The plain meaning of "general public" is "any and everyone."

2. A second qualifying entity participates in formation. § 4-35-201 requires "two or more persons" to form a water authority. The POA can't do it alone.

Conversion (transforming the POA itself into a water authority) is also potentially available under § 4-35-202, again contingent on the Director's qualified-corporation determination.

If the POA does qualify, it would gain access to powers like eminent domain (§ 4-35-210(16)), tax-exempt bond issuance (§ 4-35-301(a)), and the Construction Assistance Revolving Loan Fund (§§ 15-5-901 to -910), plus other state water-funding programs.

What this means for you

If you live in Hot Springs Village

Your POA controls the analysis. Two practical questions for the POA board:

1. Does the POA want water-authority status? Benefits include access to state loan programs and tax-exempt bonds. Tradeoffs include exposure to eminent domain rules and being treated as a public entity for some purposes.
2. If yes, who's the second "person" for formation? Could be a partner POA, a related water cooperative, or a state agency. The POA needs to identify a partner.

If you're a Property Owners Association board member elsewhere in Arkansas

This opinion is useful precedent. Other gated/private communities (Bella Vista, Cherokee Village, etc.) face the same structural question. The path:

• Confirm the POA is a nonprofit corporation. Unincorporated owner associations don't qualify; but most large planned communities are organized as nonprofits.
• Confirm the POA serves the "general public." If service is limited to members, the qualified-corporation analysis is contested. The Director's view will be fact-specific.
• Find a partner for formation. § 4-35-201 requires two persons.

If you're a Natural Resources Division staffer evaluating an application

Two thresholds:

1. Qualified corporation. Is the applicant a nonprofit corporation, governmental entity, or investor-owned utility? Does it provide, distribute, or store potable water "to or for the benefit of members of the general public and other users"?
2. Persons for formation. Are there two or more "persons" forming the authority? Under 4 C.A.R. § 1-201, "persons" includes nonprofit corporations.

For HSV's POA specifically, the "general public" question is the key fact issue. Reasonable arguments both ways: yes (because "general public" can include any HSV resident with no membership restriction; access is essentially open to anyone within the community) versus no (because HSV is gated and excludes non-residents).

If you're a water infrastructure attorney

Act 736 of 2025 is the recent-amendment hook. Earlier opinions on the Water Authority Act may not capture the expanded definitions. Read the current § 4-35-103(7) carefully; the inclusion of nonprofit corporations is the substantive change.

If you're a state legislator

If the policy intent of Act 736 was to let nonprofit residential communities like HSV access water-authority status, the "general public" language may need clarification. As written, the AG's analysis leaves the residents-only question to the Director's case-by-case judgment, which creates uncertainty.

If you're an investor-owned water utility

You qualify directly under § 4-35-103(7) if you "provide, distribute, transmit, treat, pump, or store raw or potable water to or for the benefit of members of the general public and other users." For investor-owned utilities, the general-public service is usually clearer than for residents-only POAs.

Common questions

Q: What's a "water authority"?
A: A public body politic and governmental entity organized under the Water Authority Act (A.C.A. § 4-35-103(12)). It can issue tax-exempt bonds, exercise eminent domain, and access state water-infrastructure loan programs.

Q: What changed with Act 736 of 2025?
A: The qualified-corporation definition was expanded to include nonprofit corporations that provide water to the general public. Before the amendment, only governmental entities and investor-owned utilities clearly qualified.

Q: Could HSV become a city to qualify?
A: Theoretically. Under Arkansas municipal-incorporation statutes, an unincorporated community can incorporate. That's a substantial process and would change HSV's governance structure. Most HSV residents would likely prefer the POA-conversion path if it's available.

Q: What does "general public" mean for water-service purposes?
A: The Arkansas Supreme Court in Harvey v. Bell used "any and everyone." The AG flagged this as a fact issue for the Natural Resources Division Director. A POA serving only HSV residents may or may not meet this test.

Q: What state funding becomes available if the POA qualifies?
A: Access to:
- Construction Assistance Revolving Loans (§§ 15-5-901 to -910)
- Clean Water State Revolving Fund
- Drinking Water State Revolving Fund
- Water Development Fund
- Water, Sewer, and Solid Waste Fund
- General Obligation Bond Program

Q: Do Article 14, Section 2 considerations (like in school district IP) apply here?
A: No. That provision applies to school property. Water authority property has its own statutory framework under § 4-35-108.

Background and statutory framework

Arkansas's Water Authority Act (§§ 4-35-101 et seq.) creates a hybrid public-private entity that can deliver water services and access tax-exempt financing. The Act has been amended multiple times to expand who can form or operate as a water authority.

Act 736 of 2025 is the most recent expansion. Three key provisions:

1. Expanded qualified-corporation definition. § 4-35-103(7) now reaches nonprofit corporations (in addition to governmental entities and investor-owned utilities) that "provide, distribute, transmit, treat, pump, or store raw or potable water to or for the benefit of members of the general public and other users."

2. Expanded eligibility for the Construction Assistance Revolving Loan Fund. Both formation (creating a new authority) and conversion (transforming an existing entity) pathways are available.

3. Persons-for-formation rule. § 4-35-201 requires two or more persons to form an authority. "Persons" includes nonprofit corporations under 4 C.A.R. § 1-201.

The unincorporated-community / no-legal-entity rule has been settled Arkansas law for over a century. District No. 21 v. Bourland (1925) held that an unincorporated voluntary association has no legal entity. Bunch v. Launius (1953) extended the rule to unincorporated labor unions. Hot Springs Village is structurally similar: an unincorporated community without legal entity status.

The Arkansas Court of Appeals in Coombs v. Hot Springs Village POA (2007) confirmed specifically that the HSV POA "is not a municipality", a non-trivial factor in the AG's analysis here.

Citations and references

Statutes:
- A.C.A. §§ 4-35-101 et seq., Water Authority Act
- A.C.A. §§ 15-5-901 to -910, Construction Assistance Revolving Loans
- A.C.A. § 14-270-102: unincorporated community definition

Code of Arkansas Rules:
- 15 C.A.R. § 189-102(19), unincorporated community definition
- 4 C.A.R. §§ 1-201, 1-203, 1-301, 1-304: water authority formation/conversion

Cases:
- Bunch v. Launius, 222 Ark. 760, 262 S.W.2d 461 (1953)
- Dist. No. 21, United Mine Workers of Am. v. Bourland, 169 Ark. 796, 277 S.W. 546 (1925)
- Coombs v. Hot Springs Vill. Prop. Owners Ass'n, 98 Ark. App. 226, 254 S.W.3d 5 (2007)
- Harvey v. Bell, 292 Ark. 657, 732 S.W.2d 138 (1987)

Reference:
- Arkansas Department of Agriculture, Water and Wastewater Funding
- HSV POA Articles of Incorporation: explorethevillage.com/governing-documents

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

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

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."

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, 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." As a "public body politic and governmental entity organized" under the Water Authority Act, a water authority may exercise the power of eminent domain, issue interest-bearing bonds for water projects, and borrow tax-exempt funds for water projects. 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.

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," HSV has no legal status. 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).

Although the POA is not a governmental entity or an investor-owned water or wastewater utility, it could qualify under A.C.A. § 4-35-103(7) because it is a nonprofit corporation. While the POA provides water services for HSV residents, 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." 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.

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. 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. And the ordinary and usually accepted meaning of "person" includes "artificial persons such as corporations, partnerships, associations, and both public and private organizations." 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.

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. 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