ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

December 17, 2013

The HonorableJohnJ. Carona Chair, Committee on Business and OpinionNo. GA-1031

Commerce Texas State Senate Post Office Box 12068 Austin, Texas 78711 Re: Whether the Austin City Council may transfer governance of Austin Energy to a boardofdirectors (RQ-1132-GA)

Dear Senator Carona:

You ask three questions about the Austin City Council's authority to adopt an ordinance regarding the governance ofits municipally owned electric utility. 1 You tell us that the City of Austin's ("City") electric utility, Austin Energy ("Utility"), is governed by the Austin City Council. See Request Letter at 1. You indicate that questions exist regarding the City's authority to transition the Utility's governance to an independent board of directors, the fundamental question being whether the City has authority to changethe governance structure of the Utility absent a city charter amendment election. See id. at 2--4. You express concern that a charter amendment election would exclude those Utility customers who are not City residents from having input in the matter. See id. at 3 (stating that "approximately 15 percent ofAustin Energy's customers

... are located outside ofthe municipal boundaries and, therefore, cannot vote in city elections" and noting the Utility's provision ofutility service to the numerous State ofTexas facilities locatedwithin the City). Inthese circumstances, you ask:
1) Does Local Government Code, Section 552.122 allow the Austin City Council, by ordinance, to transition to a board of director governance, distinct from the Austin City Council, and to allowout-of-city customerrepresentation ontheboard?
2) Do any provisions ofthe Austin City Charter, including but not limited to those related to purchasing, personnel matters, or finance, pose a limitation on the powers or responsibilities that

1See Letter from Honorable John J. Carona, Chair, Comm. on Bus. & Commerce, to Honorable Greg Abbott, Tex. Att'y Gen. at4 (June 24, 2013), http://www.texasattomeygeneral.gov/opin ("Request Letter").TheHonorableJohnJ.Carona- Page 2 (GA-1031)

ld at4. may be delegated to a board ofdirectors that includes out-of-city customer representation established by an ordinance adopted by the AustinCityCouncil?
3) Ifthe city charter does present limitations to the powers that might be delegated to a board ofdirectors, does state law provide
an option for amending the city charter with respect to the oversight or operation of Austin Energy that would allow all customersto have avoice inthe election?

In connection with your first question, you raise section 552.122 of the Local Government Code. See id at 3. Section 552.122 is contained in subchapter G ofchapter 552, which applies to municipal electric utility systems thathave certain outstanding debt obligations. See TEX. Loc. Gov'TCoDEANN. §§ 552.121 (West Supp. 2012) (setting forth requirements for applicability ofsubchapter G), 552.121-.124 (subchapter G). Section 552.122 provides that "[a] municipality by ordinance may transfer management and control ofthe municipality's electric utility system to a board of trustees appointed by the municipality's governing body." ld §552.122(a) (emphasis added). By itsplainlanguage, section 552.122 authorizes amunicipality to transfermanagement and control ofits electric utilityto aboard oftrustees. See Tex

. W Oaks Hasp., L.P. v. Williams, 371 S.W.3d 171, 177 (Tex. 2012) (stating that the aim of statutory construction is to determine legislative intent, which is best ascertained by the "plain and
common meaning of the statute's words"). Section 552.122 does not require a charter amendment for a city to change its utility's governance structure and instead expressly permits the municipality to do so by ordinance. TEX. Loc. Gov'TCODEANN.§ 552.122(a) (West Supp. 2012); cf id § 552.121 (recognizing governance change can be made by ordinance or charter election). The only express requirement section 552.122 imposes is that the ordinance shall prescribe "(1) the number ofmembers; and (2) the qualifications for appointment to the board." Id § 552.122(b); cfid § 552.142(b)-(c) (imposing numerous other requirements regarding the transfer of management and control of a municipally owned water utility). Section 552.122 contains no additional requirements regarding the composition ofthe board. Further, it contains
no language prohibiting a municipality from establishingboard member qualifications that allow for representation by out-of-city utility customers. Thus, assuming the City satisfies the applicability provisions in section 552,121, section 552.122 authorizes the City to adopt an ordinanceproviding for a board oftrustees to manage and control the Utility and to establishthe board memberqualifications, which couldinclude out-of-cityrepresentation.

You next ask whether any provision of the City's charter limits the powers and responsibilities that may be delegated by ordinance to a board that includes out-of-city customer representatives. See Request Letter at 4. You do not suggest a particular charter provision or specific limitation for us to examine in relation to your question. We decline the invitation to exhaustively examine every provision ofthe city charter, but we find no immediately apparent provision that prohibits the City from delegating management and control ofits Utility to an appointed board that includes out-of-city representatives. Whether any particular charter provisionimpacts the City's authorityto "transfermanagement and control ofthe municipality'sTheHonorableJohnJ.Carona- Page 3 (GA-1031)

electric utility system to a board oftrustees" that is independent will ultimately depend on an analysis ofthe charterprovisions at issue. TEX. Loc. Gov'TCoDEANN.§ 552.122 (West Supp. 2012). Questions regarding construction ofa city charter are outside the purview ofan attorney general opinion. See Tex. Att'y Gen. Op. No. GA-0356 (2005) at 2 (stating that this office does not construe city charters).

Of course, a home-rule city may not adopt an ordinance or charter provision that is "inconsistent with the Constitution of this State, or [with] the general laws enacted by the Legislature ofthis State." TEX. CONST. art. XI, § 5. A charter provision that conflicts with a state statute is unenforceable. See In re Sanchez, 81 S.W.3d 794, 796 (Tex. 2002). A court will nothold a general lawand amunicipal ordinance orcharterprovision "repugnantto each otherif any other reasonable construction leaving both in effect can be reached." Dallas Merch 's & Concessionaire's Ass'n v. City of Dallas, 852 S.W.2d 489, 491 (Tex. 1993). Section 552.122 authorizes a transfer to a board oftrustees ofthe "management and control" ofthe utility. TEX. Loc. Gov'TCODE ANN. § 552.122(a) (West Supp. 2012). In considering a predecessor statute, this office defined "management and control" to mean "governing, supervising, directing and conducting the affairs ofthe utility system." Tex. Att'y Gen. Op. No. DM-444 (1997) at 3. To the extent a charter provision is construed by the City to serve as a limitation on a board of trustees' ability to govern, supervise, direct and conduct the affairs ofthe Utility, a court could conclude that the charter provision is unenforceable as inconsistent with section 552.122. Whether any particular provision in the City's charter impermissibly conflicts with section 552.122 is notaquestionwe addresshere. Finally, you ask whether state law provides an option for amending the City charter to allow all Utility customers to vote in the charter-amendment election. See Request Letter at 4. Article XI, section 5ofthe Texas Constitutionprovidesthathome-rule cities "may, by amajority vote ofthe qualifiedvoters of saidcity, at an electionheld for thatpurpose, adopt or amendtheir charters." TEX. CONST. art. XI,§ 5 (emphasis added). Section 9.005 ofthe Local Government Code provides that "a proposed amendment to a municipality's charter is adopted if it is approved by a majority ofthe qualifiedvoters of the municipality who vote at an election held for that purpose." TEX. Loc. Gov'TCoDEANN. § 9.005(a) (West 2008) (emphasis added); City of Socorro v. US. Fireworks of Am., Inc., 842 S.W.2d 779, 781 (Tex. App.-ElPaso 1992, writ denied) (recognizing Legislature's adoption of chapter 9 of the Local Government Code in implementing article XI, section 5). Under this authority, only qualified voters ofthe City may vote in an electionto amendthe City'scharter.The HonorableJohnJ. Carona

- Page 4 (GA-1031)

SUMMARY

A city to which chapter 552 oftheLocal Government Code applies has express authority under section 552.122 to adopt an ordinance providing for a board oftrustees to manage and control its municipally owned electric utility and to establish the b ard member qualifications which can include out-of-city representation.

Whether any particular city charter provision limits such a board's independent exercise of its delegated powers and responsibilities is not aquestionthat canbe resolved inan attorney general opinion.

Under article XI, section 5 ofthe Texas Constitution, only qualified voters ofthe City ofAustin may vote in an election to amendthe Austincity charter.

DANIEL T. HODGE FirstAssistantAttorney General

JAMES D. BLACKLOCK DeputyAttorneyGeneral for Legal Counsel

VIRGINIAK. HOELSCHER Chair, OpinionCommittee

CharlotteM. Harper Verytrulyyours,

Attorney General ofTexas

AssistantAttorney General, OpinionCommittee