The opinion
n ”
The Attorney General of Texas
January 10. 1985
JIM MAnOX
Attorney General
Supreme Court Bullding Mr. Charles E. Nemir Opinion No. JM-296
P. 0. BOX 1254S Executive Director
Austin. TX. 78711. 2545 Texas Department of Water Resources Re: Whether a developer of
512/4752501 P. 0. Box 13087, Capitol Station property within a water
Telex 01015711387
Telecopier 512I475-0255 Austin, Texas 787 11 control and improvement dis-
trict may serve as director
of that district
714 Jackson. Suite 700
Dallas. TX. 75202.4508
Dear Mr. Nemir:
2141742-5944
You have ask,cd our opinion as to whether two developers of
4S24 Albert. Ave.. Suite 180 property within t’he territorial boundaries of Brushy Creek Water
El Pea, TX. 799052793 Control and Improvement District No. 1 [hereinafter “District”] are
91563334S4
disqualified by tt,e Texas Water Code from serving on the board of
directors of the D!.r;trict. Your letter states:
1 Texas, Suite 790
,~urton. TX. 77002-3111 Either: section 50.026 or section 51.0721 of the
71312235888 Texas Wllt:er Code, or possibly both of these
sections,, is applicable to Brushy Creek Water
Control ,uld Improvement District Flo. 1, depending
SC6 Broadway. Suite 312
Lubbock. TX. 79401-2479 on whether It is a special law district or a
SC6/747-5235 general Law district. Both sections provide that
a develcper of property in a district is dis-
qualified from serving as a member of the
4309 N. Tenth. Suite B
McAlkn. TX. 7SYWlSS5
governing board thereof if the District is
5121(x)24547 proposln~~ to provide or actually providing water
and sewer services or either of these services to
househoLi users as the principal functions of the
200 Main Plaza. suits 100 District,
tin Antonio. TX. 7B2M.2797
5121225.4191
The District has never provided sever services
to household users as a principal function of the
District. Bowever, the District has recently
filed an application with the Texas Department of
Water Resources to have the District designated as
the entity to provide the vastewater collection,
treatment, and/or disposal, system or systems to
serve all or part of a defined area, as authorized
by chapter 26, subchapter C. of the Texas Water
Code. IE the District is so designated and
constructs a regional sewage disposal facility. it
p. 1327
Mr. Charles E. Nemir - Page 2 (JR&296)
proposes to provide capacity in that facility to
various political eubdivisfons, including munlci-
palities and municipal utility districts. but does
not propose at this ,time to provide sewer services
directly to household users. The customer
political subdivisfcons would, however, provide
sewer services to household users within the
territorial confines of the District.
We limit our conclusion ‘to the specific facts presented. There
are no reported cases construing section 50.026 or section 51.0721 of
the Texas Water Code. Therefore, the rules of statutory construction
must be applied in order KO interpret the statutes. Calvert v.
British-American Oil Producing: Co., 397 S.W.2d 839, 842 (Tex. 1966).
The fundamental rule in the caction of statutes is to ascertain
and give effect to the inten: of the legislature. Jessen Associates.
Inc. v. Bullock, 531 S.W.Z!CI 593, 599 (Tex. 1975). Courts will
construe the language of a statute liberally in order to give effect
to the legislative intent. ;ity of San Marco6 v. Lower Colorado River
Authority. 508 S.W.2d 403 (l’ex. Civ. App. - Austin 1974). aff’d 523
S.W.2d 641 (Tex. 1975).
The Code Construction Act:, article 5429b-2. V.T.C.S., sets out in
section 3.01 several presuniptions of legislative intent applicable
here: “(3) s just and reasonable result is intended: (4) a result
feasible of execution is intended; and (5) public interest is favored
over any private interest,” The Code Construction Act further
provides in section 3.03, subsections (1) and (5). that in construing
a statute a court may consider, among other matters, the object sought
to be attained by the statute and the consequences of a particular
cor.str”ction. These principles of construction require that the
legislative purposes be determined from the statute as a whole rather
than from a literal application of particular statutory language.
Brown v. Patterson, 609 S.W,.:!d 287 (Tex. Civ. App. - Dallas 1980. no
writ).
In 1973, the legislature amended the Texas Water Code to add four
statutes (sections 50.024 [mrrent section 50.026). 51.0721, 53.0631.
54.1021) which provide for disqualification, in particular situations,
of the board members of certain types of water districts: special law
districts, general law districts, fresh water supply districts, and
municipal utility districts. Acts 1973, 63rd Leg., ch. 635, at 1748,
amended by Acts 1975, 64th Leg.. ch. 248, at 600. With the exception
of section 53.0631, pertaining to fresh water supply districts, these
disqualification statutes are virtually identical. Therefore. whether
section 50.026 or section ljI.0721 is applicable to the District is
iavaaterial to our result.
p. 1328
Mr. Charles E. Nsmir - Page 3 (JM-296)
Sections 50.026 and 1,1.0721, the statutes applicable to the
District, provide, in pertinent part:
(a) A person is disqualified from serving as a
member of a governing board of a district
proposing to provi’ie or actually providing wster
and sewer servicez; or either of these services to
household users arr the principal functions of the
district and croated by special act of the
legislature if:
. . . .
(3) he III a developer of property in the
district;
. . . .
Water Code $50.026.
(a) A person j.s disqualified from serving as a
member of the board of a district proposing to
provide or actually providing water and sawer
services or either of these services to household
users as the principal functions of the district,
if:
. . . .
(3) he i:r a developer of property in the
district;
. . . .
Water Code 151.0721.
The disqualification atatutes were part of a fourteen-bill
package of remedial legisla,::Lon involving water. df.stricts submitted as
emergency legislation by thscu Governor Dolph Briscoe with these words:
The wst n‘uearous category of special
districts. apart from school districts, ere water
districts. They have been referred to as ‘the
least known, least understood, and least cared
about class of gcvernments in the United States.’
They desperately need increased supervision and
regulation over th#sir formation and the conduct of
their financial alfairs. The abuses to which they
have been subject are designed to be corrected by
p. 1329
Mr. Charles E. Nemir - Page 4 (J%296)
these bills. Enactment of these bills will help
maintain the confidence of our citizens in their
local government.
S.J. of Tex.. 63rd L.eg., Reg. Sess. 421 (1973); R.J. of Tex., 63rd
Leg.. Reg. Sess. 1285 (1973),,
Disqualification statutes are significantly different from
statutes designed to preven’t or punish specific acts of misconduct.
The 1973 statutes are intt,nded to preclude conflicts of interest
between developers and the board of directors of a district providing
water or sewer services to residents by disqualifying the developers
from serving on the board of directors. The disqualification statutes
also serve to maintain the rublic’s trust and confidence In the board
of directors and in their decisions.
The statutory provisiclcs relating to defined regional sewage
systems are contained in chz:pter 26, subchapter C. of the Texas Water
Code. Water Code J§26.081-26.087. The purpose of such regional
systems is
to serve the waste disposal systems needs of the
citizens of the state and to prevent pollution and
maintain and enhance the quality of water in the
state.
Water Code 126.081 (a). After the Ti?xas Water Development Board has
defined the regional area, it then designates “the person to provide
the waste collection, treatment, or disposal system or systems to
serve all or part of the are!a. defined.” Water Code 126.083(c).
The District, a designated regional entity. will construct and
operate or oversee a regionul. waste treatment facility. This facility
~111 treat sewage from houtieholds within the defined area, Including
households within the terr,LI:orial boundaries of the District, after
the sewage is collected by municipalities and other water districts.
Your letter states that Bln.shy Creek Water Control and Improvement
District No. 1 does not propose at this time to provide sewer service
directly to household user:). The implication of ymr statements is
that the sewer service to b’e provided by the District would be made
available to political subdivisions within the regional area and only
indirectly to household users. We conclude that the prohibition from
serving on the governing beard of a district providing water or sewer
service found in sections 50.026 and 50.0721 of the Water Code applies
whether the service to household users is supplied directly by the
district or indirectly through intermediary governmental entities.
The question of wheth~zr sections 50.026 and 51.0721 can validly
be extended to bar membership on a district’s board of directors to
p. 1330
Nr. Charlas E. Nemir - Page 5 (m-296)
persons who supply water and sewer servicer only indirectly to
household users is a novel oue. As we indicated earlier, there ate no
reported cases construing these statutes, and our research has found
no other case which directly addresses this issue. We have turned,
therefore, to case lav const:nting statutes and other provisions of law
prohibiting, as a conflict o:! interest , certain conduct by officers or
employees of municipalities, and used as s basis to invalidate con-
tracts entered into by the city when a conflict of interest was found
t.0 exist.
Thus, in Delta Electrg: Construction Company v. City of San
Antonio, 437 S.W.2d 602 (Tex. Civ. App. - San Antonio 1969. writ ref’d
n.r.c.1, the president and a major shareholder of a contracting firm
was a &aber of the city’s EL~act&al Examining and Supervising Board.
The city, through its VatIs Works Board of Trustees, executed a
contract with the firm. In affirming the trial court’s judgment that
the contract was null and void. the court of civil appeals found it
immaterial that the firm president/electric board member did not in
any manner influence the award of the contract to his firm. Id. at
604. 609. Instead. the court. interpreted the scope of the prohibited
conflict of interest very broadly:
‘It is the general rule that municipal contracts
in which officers or employees of the city have a
personal pecuniary interest are void. . . .
[Citations omittei;]. It has long been the public
policy of this s’tste to prohibit officers of a
city from having ;r personal pecuniary interest in
contracts with the city and this policy is
specifically exprtssed in both the penal and civil
statutes. See article 373, Penal Code, and
article 9887.C.S. 1925. The foregoing rule
rests on sound prblic policy. Its object is to
insure to the city strict fidelity upon the part
of those who reprs?aent it and manage its affairs.
The rule prohibiting public officers from being
interested in public contracts should be
scrupulously enforced.
-- ’ (Emphasis added).
Id. at 609 (quoting from=2 of Edinburg V. Ellis, 59 S.P.Zd 99 (Tex.
?&im’n App. 1933, opinion approved)).
‘[IIt is generalL:y held that vhenever s public
officer enters irto a contract, the execution of
which may make :It possible for his personal
interests to becc%e antagonistic to his faithful
discharge of a public duty such contract will be
held void as aaeznst nub& ~olicv. It is the
existence of suck. interest which is deci,sive and
p. 1331
Yr. Charles E. Nemir - Page ti (JM-296)
not the actual efl’cct or influence, if any[ .I of
the interest: if there is a potential conflict,
the contract is invalid.’ (Citation omitted).
(Emphasis supplied).
g& Accord, International Bank of Commerce of Laredo V. United
National Bank of Laredo. 653 S.W.Zd 539, 547-48 (Tex. App. - San
Antonio 1983. writ ref’d n.r.e.1.
This ruling by the Delta Electric court indicates that it is the
public policy of thins stat; to construe the prohibition against a
conflict of interest broadly enough both to include the indirect use
of official influence to fwther one’s private pecuniary interest and
to incl.ude the mere possib:.l.ity that such influence might be used.
This conclusion follow fro!a the fact that the Del.ta Electric court
found that the firm president/electric board member was involved in a
conflict of interest, even though he did not serve on the city board
through which the contraft was awarded and even though he exercised no
influence on its award. ::his situation is analogous to the facts
which we confront in this opinion, because developers of property
serving on water district boards, though not providing services
directly to household users, would be identified closely with the
political entities formally providing these services and would thus
have the possibility of influencing the provision of these services to
their personal pecuniary benefit. In these circumstances, therefore,
we find that it is proper w apply this broad public policy against
conflicts of interest and to include developers serving on such
district boards within the smbit of sections 50.026 and 51.0721.
If the District is designated as a regional entity, conflicts of
interest, which the 1egislal:ure sought to proscribe by section 50.026
and section 51.0721. could t,hus exist for developers of property in
the District who serve on the board of directors of the District. The
board of directors can potentially affect land values substantially
within the District by mak1r.g decisions which might influence the rate
and direction of grovth within the District and which might be
improperly influenced if the~re were a conflict of interest betveen a
person’s duty as a board mealber and his or her pecuniary interest as a
developer. For instance, the board will determine the number and
location of all treatment and disposal facilities, which ~111 affect
land values and could deternine the order in which portions of the
defined area would be se:3red. The board can oppose or support
applications by others fo:: waste treatment facilities within the
defined area. The board can also request the Texas Water Cotmaission
to issue an order under sec:t,ion 26.084 of the Water Code which would
prohibit or limit other treatment facilities within the defined area.
Section 50.026 and sa:tion 51.0721 also require, however. that
the providing of water or sever services to household users be the
p. 1332
Mr. Charles E. Nemir - Psge 7 (JM-296)
"principal functions" of the district. We find the facts in the
request insufficient to dei:ermine whether the sever services. which
the District will provide a;1 a regional entity, will be the principal
function of the District.
The District was created as a couservation and reclamation
district which was subsequently "validated" by the l.egislature and
given the status and authority of a water control and improvement
district. Acts 1957, 55th Leg., ch. 341. at 807. Your request does
not set out the nature and sN:ope of what other functions, if any, the
District will have beyond its functions as a regional entity that are
pertinent to determining vhother a conflict of interest exists. While
the District's functions as a regional entity concerned with water and
sever services will undoubm!dly involve a substantial comitment of
time and financial resources, it cannot be determined from the facts
given whether these part:lcular functions will be the principal
functions of the District.
In conclusion, the DiHrict, if designated as an entity for the
operation or oversight of a regional waste treatment system. would be
providing or proposing to pcowide sever services to household users
within the meaning of sectilms 50.026 and 51.0721. The two developers
of property within the District would thereby be disqualified from
serving on the District's hoard of directors if those sever services
were the principal function of the District. Under the facts set out
in the opinion request, ve are unable to determine whether such
services would be the principal function of the District.
SUMMARY
Any developer o,f property within the boundaries
of the Brushy Crt:ek Water Control and Improvement
District No. 1 is disqualified from serving on the
District's board of directors if and when the
District is desigmted as the entity to operate or
oversee a regional waste treatment system if the
District's functions as a regional entity are its
principal functions.
J k
Very truly your
k
JIM MATTOX
Attorney General of Texas
TOMGREER
First Assistant Attorney General
p. 1333
Mr. Charles E. Nemir - Page ,3 (Jt+296)
DAVID R. RICHARDS
Executive Assistant Attorney 'General
RlCK GILPIN
Chairman, Opinion Committee
Prepared by Paul Elliott
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Paul Elliott
Susan Garrison
Tony Guillory
Jim Matthews
Nancy Sutton
p. 1334
Mr. Charles E. Nemir - Page 9 (J'M-296)
1. The Delta Electric court relied on two statutes in reaching
its judgment. one of which, article 988. V.T.C.S.. prohibited a city
officer from being "directl!f or indirectly interested" in the business
affairs of the city. Thus :it is arguable that because that statute
contained the words "direc:tly or indirectly," and neither section
50.026 nor section 51.0721 does, the Delta Electric decision is
inappropriate here. Delta Electric, supta. at 608-09 a nn. 3, 4, 5.
We decline to accept this pwition, however. on two grounds:
(1) Article 968 was repealed by the legislature and replaced
with article 988b. V.T.C.S. Acts 1983, 68th Leg., ch. 640, at 4079.
The new conflict-of-interest statute for local officials, article
988b. is far more compreh~msive than its predecessor but does not
contain the words "directly or indirectly." We doubt that by the
omission of these words the legislature meant to restrict the broad
scope of conflict-of-interest prohibitions applied under article 988.
Thus, the Delta Electric amtement of policy should retain viability
and should be applicable to other statutes, such as sections 50.026
and 51.0721, which do not cmtsin these words.
(2) The Delta E1ectri.c court also relied on article 373 of the
Texas Penal Code which has &ce been repealed. Acts 1973, 63rd Leg.,
ch. 399, at 991. That statute did not contain the words "directly or
indirectly" and thus was a basis on which the court could have
bottomed its opinion without relying on express ststutory language
meeping indirect conduct vithin the scope of the prohibition. (A
city charter provision cited by the court also contained the term
"directly or indirectly," but the court appeared not to base its
decision exclusively on this provision.) -Id. at 609.
p. 1335