n ” 

JIM MAnOX 

Attorney General 

Supreme Court Bullding 

P. 0. BOX 1254S 

Austin. TX. 78711. 2545 

512/4752501 

Telex 01015711387 

Telecopier 512I475-0255 

714 Jackson. Suite 700 

Dallas. TX. 75202.4508 

2141742-5944 

4S24 Albert. Ave.. Suite 180 

El Pea, TX. 799052793 

91563334S4 

1 Texas, Suite 790 

,~urton. TX. 77002-3111 

71312235888 

SC6 Broadway. Suite 312 

Lubbock. TX. 79401-2479 

SC6/747-5235 

4309 N. Tenth. Suite B 

McAlkn. TX. 7SYWlSS5 

5121(x)24547 

200 Main Plaza. suits 100 

tin Antonio. TX. 7B2M.2797 

5121225.4191 

The Attorney General of Texas 

January 10. 1985 

Mr. Charles E. Nemir 

Executive Director 

Opinion No. JM-296 

Texas Department of Water Resources 

P. 0. Box 13087, Capitol Station 

Austin, Texas 787 11 

Re: Whether a developer of 

property within a water 

control and improvement district may serve as director 

of that district 

Dear Mr. Nemir: 

You have ask,cd our opinion as to whether two developers of 

property within t’he territorial boundaries of Brushy Creek Water 

Control and Improvement District No. 1 [hereinafter “District”] are 

disqualified by tt,e Texas Water Code from serving on the board of 

directors of the D!.r;trict. Your letter states: 

Either: section 50.026 or section 51.0721 of the 

Texas Wllt:er Code, or possibly both of these 

sections,, is applicable to Brushy Creek Water 

Control ,uld Improvement District Flo. 1, depending 

on whether It is a special law district or a 

general Law district. Both sections provide that 

a develcper of property in a district is disqualified from serving as a member of the 

governing board thereof if the District is 

proposln~~ to provide or actually providing water 

and sewer services or either of these services to 

househoLi users as the principal functions of the 

District, 

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 munlcipalities 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 contracts 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. 

Very truly your J k k 

JIM MATTOX 

Attorney General of Texas 

TOM GREER 

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