Can a Texas river authority charge property owners or create a taxing district to fund dam repairs?

Plain-English summary

The Guadalupe-Blanco River Authority manages a chain of dams that create lakes along the Guadalupe River, including Lakes Placid, McQueeney, Meadow, Dunlap, Gonzales, and Wood. After a spill gate failed and drained Lake Wood in 2016, and the Lake Dunlap dam failed and drained that lake in 2019, the Authority's studies showed several aging dams would need to be reconstructed. A state senator asked the AG what funding tools the Authority has to cover those costs: can it charge lakefront property owners a fee, and can it set up a taxing district by election?

The AG first set a boundary. Property owners had already sued the Authority claiming the lake drawdowns were an unconstitutional taking, and that litigation also raised whether the Authority has a legal duty to rebuild and operate the dams. Following its longstanding practice of not opining on matters in pending litigation, the AG said it would not address any duty to repair, or any liability for the failures or drawdowns. It limited the opinion to the revenue-raising mechanisms, which were not directly at issue in the suits.

On fees, the AG said yes with a caveat. The Authority's enabling legislation expressly lets it set reasonable, nondiscriminatory rates and charges for services it furnishes. Damming the rivers lets the Authority provide services, and maintaining set lake levels is a service that benefits abutting property owners more than the general public. Texas law lets a governmental entity classify customers by the character and benefit of the service, so the Authority could charge a unique fee to lakefront owners. The limit is that a charge whose real purpose is to raise revenue beyond what regulation reasonably needs is a tax, not a fee, no matter what it is called, and the Authority may impose only fees. Whether any particular charge is really a tax is a fact-specific question the AG said it could not resolve in an opinion.

On a taxing district, the AG said the Authority itself cannot create one. The enabling statute says nothing in it or any other law authorizes the District to levy or collect taxes or assessments, so the Authority has no taxing power and cannot establish a taxing district. But the AG pointed to a path that runs through the property owners rather than the Authority. Under article XVI, section 59 of the Texas Constitution and chapter 51 of the Water Code, a majority of property owners in a proposed area can petition to create a water control and improvement district, which the county commissioners court or the Texas Commission on Environmental Quality may then order created. With voter approval, such a district has taxing authority and can contract with the Authority to fund and perform the dam repairs, paying with tax proceeds. The AG cautioned that if a district hands tax revenue to the Authority, its contract must include controls (sufficient oversight of how the money is spent) so the transfer serves a public purpose of the district and does not run afoul of the constitutional ban on lending public credit.

Currency note

This opinion was issued in 2020. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

For the river authority, the opinion described two usable revenue tools and one that was off the table. It could charge lakefront owners a service fee tied to the benefit they receive, provided the charge stayed a fee and did not become a revenue-raising tax; it could not create a taxing district, because its enabling act denies it any taxing power. For the affected lakefront property owners, the opinion's significance was that the taxing route was available to them, not to the Authority: a majority could petition to form a water control and improvement district that, with voter approval, could tax and then contract with the Authority to rebuild the dams. The AG flagged the legal guardrail on that arrangement, the contract needed spending controls to keep a tax-revenue transfer within the constitutional public-purpose and anti-lending-of-credit limits. On the larger and more contested questions, whether the Authority had to repair the dams at all, and whether it was liable for the failures and drawdowns, the AG declined to opine because those issues were in active litigation, so the page cannot answer them and neither did the AG.

Common questions

Q: Can the river authority charge lakefront owners a fee for dam upkeep?
A: Yes, the AG concluded the Authority may charge a fee for unique services lakefront owners receive (like maintained lake levels), as long as the charge is a real fee and not a tax in disguise.

Q: When does a fee become an illegal tax?
A: If its primary purpose is to raise revenue beyond what regulation reasonably needs, a court would likely treat it as a tax. The AG said deciding whether a specific charge crosses that line is a fact question outside the opinion process.

Q: Can the river authority set up a taxing district to pay for the dams?
A: No. The AG said the Authority's enabling legislation forbids it from levying or collecting taxes, so it cannot establish a taxing district.

Q: Is there any way to use tax money for the dams?
A: Yes, but through the property owners. A majority can petition to create a water control and improvement district that, with voter approval, has taxing power and can contract with the Authority to fund and carry out repairs, with contract controls to keep the spending for a public purpose.

Q: Did the AG say whether the Authority must repair the dams?
A: No. The AG declined to address any duty to repair or any liability for the dam failures or lake drawdowns, because those questions were the subject of pending litigation.

Background and statutory framework

The Guadalupe-Blanco River Authority operates under its 1975 enabling act, codified in the Texas Water Auxiliary Laws as article 8280-106 (Act of May 22, 1975, 64th Leg., R.S., ch. 433, 1975 Tex. Gen. Laws 1149). Section 9 directs the board to set reasonable, nondiscriminatory rates and charges for services the District furnishes, sufficient to cover operation, maintenance, replacements, and additions. Section 1 provides that nothing in the act authorizes the District to levy or collect taxes or assessments. Sections 2(a), 2(v), and 2(w) give the Authority power to control, store, and preserve river waters for useful purposes, to contract for the construction, financing, operation, and maintenance of facilities, and to participate with other districts. On the fee-versus-tax line, the AG applied Tex. Boll Weevil Eradication Found., Inc. v. Lewellen, 952 S.W.2d 454 (Tex. 1997), and treated reasonableness as a fact question under Gillam v. City of Fort Worth, 287 S.W.2d 494 (Tex. App.-Fort Worth 1956, writ ref'd n.r.e.), and Black v. City of Killeen, 78 S.W.3d 686 (Tex. App.-Austin 2002, pet. denied). The water-district path rests on Texas Constitution article XVI, section 59(a), (b), and Water Code chapter 51, including the creation petition (section 51.013(a)), the body that orders creation (section 51.016; "Commission" defined at section 51.001(5)), district purposes and powers (sections 51.121(b)(1), 51.125(6), 49.211(b)), contract authority (section 49.213(a)), and payment from taxes or other income subject to a contract election (section 49.108(a), (b), (e)), with taxing authority under section 51.011. The lending-of-credit caution comes from Texas Constitution article III, section 52(a) and the three-part public-purpose test in Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377 (Tex. 2002). The AG declined to reach the litigation-bound questions under Tex. Att'y Gen. Op. Nos. GA-0502 (2007), MW-205 (1980), and V-291 (1947), noting the pending suits Skonnord v. Guadalupe-Blanco River Auth. and Williams v. Guadalupe-Blanco River Auth. (25th Dist. Ct., Guadalupe Cty.). The 2001 renaming of the environmental agency is reflected in the Act of May 28, 2001, 77th Leg., R.S., ch. 965, § 18.01, 2001 Tex. Gen. Laws 1933, 1985.

Citations and references

Statutory provisions:

• Tex. Water Aux. Laws art. 8280-106 (Act of May 22, 1975, 64th Leg., R.S., ch. 433, §§ 1, 2(a), 2(v), 2(w), 9)
• Tex. Const. art. XVI, § 59; art. III, § 52(a)
• Tex. Water Code § 51.011; § 51.013; § 51.016; § 51.121; § 51.125; § 49.108; § 49.211; § 49.213
• Act of May 28, 2001, 77th Leg., R.S., ch. 965, § 18.01, 2001 Tex. Gen. Laws 1933, 1985

Cases:

• Gillam v. City of Fort Worth, 287 S.W.2d 494, 497 (Tex. App.-Fort Worth 1956, writ ref'd n.r.e.)
• Tex. Boll Weevil Eradication Found., Inc. v. Lewellen, 952 S.W.2d 454, 461 (Tex. 1997)
• Black v. City of Killeen, 78 S.W.3d 686, 699 (Tex. App.-Austin 2002, pet. denied)
• Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 384 (Tex. 2002)

Attorney General opinions:

• Tex. Att'y Gen. Op. Nos. GA-0502 (2007), MW-205 (1980), V-291 (1947)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0283
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2020/kp-0283.pdf

Original opinion text

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

January 2, 2020

The Honorable Charles Perry
Chair, Committee on Water & Rural Affairs
Texas State Senate
Post Office Box 12068
Austin, Texas 78711-2068

Opinion No. KP-0283

Re: Authority of the Guadalupe-Blanco River Authority to impose fees or to by election establish a taxing district to fund the replacement, operation, and maintenance of dams (RQ-0310-KP)

Dear Senator Perry:

You ask about the ability of the Guadalupe-Blanco River Authority (the "Authority") to collect fees or establish a taxing district by election to fund the replacement, operation, and maintenance of dams located at Lakes Placid, McQueeney, Meadow, Dunlap, Gonzales, and Wood.[1] As background, you explain that in 2016, "a spill gate at the dam that forms Lake Wood on the Guadalupe River system failed," and the failure caused Lake Wood to drain. Request Letter at 1. In 2019, the dam that forms Lake Dunlap also failed, causing Lake Dunlap to drain. Id. The Authority "completed several engineering studies which indicated that the dams located at Lakes Dunlap, McQueeney, Placid, Meadow, and Gonzales would need to be reconstructed due to aging spill gate parts." Id. Thus, you ask about the mechanisms available to the Authority to "adequately cover the associated costs." Id.

Certain matters involving the failed dams along the Guadalupe River are the subject of pending litigation.[2] Owners of waterfront property located on the lakes have sued the Authority, alleging that the Authority's decision to draw down lake levels constitutes an unconstitutional taking of their property. The pending litigation also questions whether the law imposes a duty on the Authority to replace, rebuild, and operate the dams. The longstanding policy of this office is to generally refrain from responding to legal questions that are the subject of pending litigation. See Tex. Att'y Gen. Op. Nos. GA-0502 (2007) at 3-4, MW-205 (1980) at 1, V-291 (1947) at 5-6. As a result, this opinion does not address any duty that the Authority may or may not possess regarding maintenance or repair of the dams, nor does it address any liability of the Authority for the dam failures or drawing down lake levels. Your specific questions ask about the funding mechanisms available to the Authority to replace, repair, or maintain the dams, issues not directly at issue in the pending litigation. We therefore limit this opinion to the methods by which the Authority may raise revenue.

You first ask whether the Authority may "establish and issue a fee for lakefront property owners in order to fund the replacement, operation, and maintenance of the dams located at Lakes Placid, McQueeney, Meadow, Dunlap, Gonzales, and Wood." Request Letter at 3. The Authority's enabling legislation expressly authorizes it to collect fees for services provided by the Authority:

The Board shall establish and collect rates and other charges for the sale or use of water, water connections, power, electric energy or all other services sold, furnished, or supplied by the District which fees and charges shall be reasonable and nondiscriminatory and sufficient to produce revenues adequate . . . to pay all expenses necessary to the operation and maintenance and replacements and additions to the properties and facilities of the District . . . .

TEX. WATER AUX. LAWS art. 8280-106 [Act of May 22, 1975, 64th Leg., R.S., ch. 433, § 9, 1975 Tex. Gen. Laws 1149, 1153 (emphasis added)]. Thus, the Authority possesses express authority to charge a fee for any services that it elects to offer.

Damming the rivers under the Authority's control allows it to provide benefits and services to multiple consumer groups in different ways. You ask specifically about a fee imposed on property owners whose land touches the water resource. See Request Letter at 3. A dam could potentially provide a service to property owners by maintaining set lake levels. Furthermore, governmental entities charging for services may reasonably classify consumers based on factors such as "the cost of service, the purpose for which the service or product is received, the quantity or amount received, the different character of the service furnished, the time of its use or any other matter which presents a substantial difference as a ground of distinction." Gillam v. City of Fort Worth, 287 S.W.2d 494, 497 (Tex. App.-Fort Worth 1956, writ ref'd n.r.e.). Property owners whose land abuts the water resource may receive a benefit different from and greater than other residents within the Authority's jurisdiction such that it could justify a unique fee on those owners.

However, Texas courts recognize a distinction between fees and taxes, and the Authority may impose only the former. If the primary purpose of a fee is to raise revenue in excess of that reasonably needed for regulation, a court would likely consider the fee a tax, regardless of the name by which it is designated. See Tex. Boll Weevil Eradication Found., Inc. v. Lewellen, 952 S.W.2d 454, 461 (Tex. 1997). The reasonableness of any fee imposed, and whether such fee is in fact a tax, would require a factual inquiry into the basis of the fee and is not an appropriate question for the opinion process. See id.; see also Gillam, 287 S.W.2d at 497 ("Whether differences in rates between classes of customers are to be made, and, if so, the amount of the differences, are legislative rather than judicial questions[.]"); see also Black v. City of Killeen, 78 S.W.3d 686, 699 (Tex. App.-Austin 2002, pet. denied) (stating that whether any specific fee is unreasonably discriminatory "is one of fact and must be decided on a case-by-case basis"). But as a general matter, the Authority may establish and impose a fee on lakefront property owners for unique services those owners receive from the Authority, as long as the fee does not amount to a tax on those property owners.

You next ask whether the Authority may "establish a taxing district by election for those property owners whose land touches the water resource in order to fund the replacement, operation, and maintenance of the dams located at Lakes Placid, McQueeney, Meadow, Dunlap, Gonzales and Wood." Request Letter at 3. The Authority's enabling legislation prohibits it from levying or collecting a tax: "Nothing in this Act or in any other Act or law contained, however, shall be construed as authorizing the District to levy or collect taxes or assessments." TEX. WATER AUX. LAWS art. 8280-106 [Act of May 22, 1975, 64th Leg., R.S., ch. 433, § 1, 1975 Tex. Gen. Laws 1149]. Given this prohibition, the Authority itself may not establish a taxing district to repair and maintain the dams.

However, the property owners with land abutting the drained lakes have considered the creation of water districts for the purpose of funding the needed repairs.[3] Article 16, section 59 of the Texas Constitution permits the creation of water districts for the control, storing, preservation, and distribution of rivers and streams for irrigation, power, and all other useful purposes. TEX. CONST. art. XVI, § 59(a), (b). Pursuant to that authority, the Legislature, through chapter 51 of the Water Code, authorized the creation of water control and improvement districts for many different purposes, including "the control, storage, preservation, and distribution of its water and floodwater and the water of its rivers and streams for irrigation, power, and all other useful purposes . . . ." TEX. WATER CODE § 51.121(b)(1). A majority of property owners within a proposed district may file a petition requesting its creation. Id. § 51.013(a). Depending on whether the proposed district is included within one county or multiple counties, either the county commissioners court or the Commission on Environmental Quality ("the Commission") considers whether to order creation of the district. See id. § 51.016 ("Commissioners Court or Commission to Consider Creation of District"); see also id. § 51.001(5) (defining "Commission").[4]

The Legislature authorized water control and improvement districts to provide for the "control, storage, preservation, and distribution of its water and floodwater and the water of its rivers and streams for irrigation, power, and all other useful purposes." Id. § 51.121(b)(1). Such districts may also "construct all works and improvements necessary . . . to supply water for municipal uses, domestic uses, power and commercial uses, and all other beneficial uses or controls." Id. § 51.125(6). In performing these functions, a district may "purchase, construct, acquire, own, operate, maintain, repair, improve, or extend inside and outside its boundaries any and all land, works, improvements, facilities, plants, equipment, and appliances necessary to accomplish the purposes of its creation." Id. § 49.211(b). And it "may contract with a person or any public or private entity for the joint construction, financing, ownership, and operation of any works, improvements, facilities, plants, equipment, and appliances necessary to accomplish any purpose or function permitted by a district." Id. § 49.213(a). Furthermore, a contract entered into by a district may provide that it "will make payment under the contract from proceeds from the sale of notes or bonds, from taxes, or from any other income of the district." Id. § 49.108(a). Such a contract requires a contract election and voter approval by a majority of the voters at an election held for that purpose and may additionally require approval by the Texas Commission on Environmental Quality. Id. § 49.108(b), (e). Pursuant to this authority, property owners could, with voter approval, establish a water control improvement district with taxing authority to raise revenue to fund repair of the dams. Id. § 51.011.

Furthermore, if approved by the voters, the water control improvement district could contract with the Authority to improve the dams under contract terms agreed to between the Authority and the district. While the Authority does not have the power to tax, it does possess the power to "control, store and preserve, within or adjoining its boundaries . . . , the waters of any rivers and streams . . . , for all useful purposes, and to use, distribute and sell the same, within [its] boundaries . . . , for any such purposes[.]" TEX. WATER AUX. LAWS art. 8280-106 [Act of May 22, 1975, 64th Leg., R.S., ch. 433, § 2(a), 1975 Tex. Gen. Laws 1149, 1150 (emphasis added)]. It may contract "for, or in connection with . . . the construction, acquisition, ownership, financing, operation, maintenance, sale, . . . or other use or disposition of any facilities[.]" Id. § 2(v) at 1152. And it may participate with other districts, like a water control and improvement district, in performing those functions. See id. § 2(w).

If a water control improvement district conveyed tax revenue to the Authority to improve the dams, the district would need to include safeguards in its contract to prevent concerns that the transfer amounts to an impermissible lending of credit under article III, section 52 of the Texas Constitution. See TEX. CONST. art. III, § 52(a). The Texas Supreme Court emphasized that a political subdivision's transfer of funds to another entity must include "sufficient control over the expenditure" to ensure that it accomplishes a public purpose of the political subdivision. See Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 384 (Tex. 2002) (setting out three-part test to evaluate expenditure under article III, section 52(a)).

SUMMARY

The Guadalupe-Blanco River Authority may establish and impose a fee on property owners whose land abuts the water resources controlled by the Authority for the unique services those landowners receive from the Authority, as long as the fee does not amount to a tax on those property owners.

The Authority's enabling legislation prohibits it from levying or collecting a tax. Thus, the Authority itself may not establish a taxing district to repair and maintain the dams. However, property owners may, with the requisite approval, establish a water control improvement district with taxing authority to raise revenue to fund repair of the dams. The district may contract with the Authority to perform repairs, and it may pay for the repairs using tax proceeds, provided the district imposes controls to ensure the funds are used for a public purpose of the district.

Very truly yours,

KEN PAXTON
Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

RYAN L. BANGERT
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

[1] See Letter from Honorable Charles Perry, Chair, Senate Comm. on Water & Rural Affairs, to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (Sept. 26, 2019), https://www2.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").

[2] See Skonnord v. Guadalupe-Blanco River Auth., No. 19-2053-CV (25th Dist. Ct., Guadalupe Cty., Tex. Sept. 5, 2019); Williams v. Guadalupe-Blanco River Auth., No. 19-2054-CV (25th Dist. Ct., Guadalupe Cty., Tex. Sept. 5, 2019).

[3] See Darren Dunn, Lake Dunlap may be saved; GBRA, PLDA reach agreement to repair Lake Dunlap Dam, SEGUIN TODAY, Oct. 11, 2019; Brief from Stacey A. Steinbach, Assistant Gen. Manager, Tex. Water Conservation Ass'n, to Honorable Ken Paxton, Tex. Att'y Gen. at 6 (Oct. 30, 2019) (on file with the Op. Comm.).

[4] See also Act of May 28, 2001, 77th Leg., R.S., ch. 965, § 18.01, 2001 Tex. Gen. Laws 1933, 1985 (renaming the Texas Natural Resources Commission the Texas Commission on Environmental Quality).