Court Opinion

ID: 9653211
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:41:19.95162+00
Date Added: 2024-06-11T18:12:57.095525
License: Public Domain

OPINION
NYE, Justice.
Crownhill Homes, Inc., a subdivider and developer, filed suit against the City of San Antonio, the Water Works Board of Trustees, and the Board members individually (including the Mayor of the City of San Antonio), seeking a declaratory judgment as to the validity of certain regulations of the Water Works Board of Trustees and praying for a writ of mandamus requiring the Board to make certain requested on-site water main extensions in developer’s subdivision without imposing the costs of the same on the developer. The trial was before the court sitting without a jury. The court entered judgment declaring the Board’s regulations valid, denying the developer’s application for mandamus, and denying all other additional relief requested. The developer has perfected its appeal.
For a number of years prior to 1960 the municipally owned Water Works of the City of San Antonio, through its Board of Trustees, required developers as a prerequisite to the approval of their plat for subdivisions, to pay the cost of water mains within the proposed development. Included in this cost to the developer were approach main extensions from the City’s transmission water mains, and local benefit on-site mains that serve directly the lots within the subdivision. A policy of the Board provided for at least a partial refund to the developers of these expenditures, based on the amount of water used by the ultimate customers over a fixed period of time. Although the present Board’s regulations *450continue to permit the developer to recoup his costs for the approach main extensions (which lead from the City’s main transmission lines into the subdivision) the Board determined in the early part of 1960 that it could no longer reimburse the developer for the local benefit on-site water main costs. It is the refusal of the Board to make at least some of this reimbursement to the developers, that caused the initiation of this suit.
The basic issues of law presented by this appeal are: (1) Does the San Antonio Water Works Board of Trustees have the statutory authority to determine the Board’s policy of governing the extensions of on-site water mains in the implementation of the City Council’s approved master water plan, and if so, does the Board exercise a governmental discretion in setting forth this regulation ? (2) Is the San Antonio Water Works Board’s regulation valid which requires the developers to pay the entire cost of local benefit on-site water main extensions into a new area without reimbursement, when tested by the constitutional guarantees of due process of law and equal protection under the law?
The Water Works Board of Trustees of the City of San Antonio requires sub-dividers and developers without exception to install at their own expense, and in effect donate to the City, local on-site water mains and the necessary appurtenances designed to provide water service to the lots within their proposed subdivision. In the absence of contract performance bond, or other assurances deemed satisfactory by the Water Board, the Board will not certify to the Planning Commission of the City of San Antonio that water service is available to the subdivision. This certification is a prerequisite to plat approval by that body. So, unless the developer follows essentially this procedure by complying with the Board’s regulations and policy, he is for all practical purposes denied the right to erect improvements within the subdivision. The questioned regulation reads as follows:
“Item 3. Extension of developer-customer/on-site mains. The construction of water distribution and pertinent facilities for domestic, commercial and fire protection uses conforming to board-approved plans and specifications may be installed by a contractor of the developer’s choice, provided a performance bond for 100% of the total contract construction cost is furnished by the contractor in favor of the board and owner * * *.
“The board shall not be obligated to permit connection of any extension to existing system facilities prior to the full completion and acceptance of the entire construction by the board. * * * ”
It is this regulation that forms the basis of appellant’s complaint.
The San Antonio Water Supply Company, a private corporation, was purchased by the City of San Antonio in 1925 by authority of the Legislature of the State of Texas. The Legislature directed that the management and control of the system was to be placed in the hands of the City Council of the City, or if the Council and the citizens of the City deemed advisable, in the hands of a Board of Trustees consisting of not more than five members, one of whom shall always be the Mayor of such City. Art. 1109a, Vernon’s Ann.Civ.St., Acts of 39th Legislature 1925.1 The City of San Antonio decided that its water system would be governed under the alternate authority authorized by the Legislature. Therefore, the City entered into a trust agreement and placed into the hands of its Board of Trustees, the operation of the system. This was approved by the citizens of the City in an election held for that purpose.
In the early days of the Water Works Board, and especially during the years *451just prior to 1955, the water system was in poor financial condition. The Board was required to borrow cash from banks to meet operating expenses. During the later years the governing Board was forced to use and finally deleted customer deposit refunds in order to carry on its operation. At that time the Water Board’s regulations specified that land developers would install approach and on-site (local benefit water mains) to serve lots within their subdivision at their expense (subject to 100% refund) from the transmission water mains made available to the subdivider by the Water Board. The regulations continued, that thereafter, if revenues from water sales within the subdivision reached a certain level, the developer could receive a refund from the Board of 100% of his approach and on-site local benefit main costs.2 The Water Board’s liability to developers for these 100% main extension refunds soon amounted to $2,000,000.00. The Board determined that it was financially unable to continue this 100% refund policy. As a result thereof, the Board in 1956 amended its regulations to restrict the potential refund to developers on on-site mains to 50%. At the same time the City Council passed a 19% increase in water rates.
Two years later the City Council of San Antonio passed an ordinance authorizing the issuance of water revenue refunding bonds. This ordinance specified in detail the Board’s powers, duties, functions, organization, and specifically how its revenues would be expended. The significance here is that the priority of fund requirements from water revenue under the bond ordinance called for “the maintenance and operation fund” to have first call on all water system fund revenues; next, in priority of fund requirements was (2) “interest and the sinking fund”; following this came (3) “the bond reserve fund”; next, (4) “the improvement and contingent fund” and finally, (5) “the surplus fund.” It was undisputed that the definition of a water main extension is the “addition of capacity, the addition of mains or other facilities which add to the system’s size or to its amount of service units, such as customers, meters, mains, pumps, wells or other items.” It is appellees’ contention that under the express terms of this ordinance, costs for extensions may be made only from the “improvement and contingency fund” and the “surplus fund”. The improvements and contingency fund consists, to the extent money is available from the higher priority requirements of other funds of a sum equal to 15% of the gross revenue of the system. The record shows that since the passage of the ordinance, there has never been sufficient water revenue to satisfy the priority requirements of the first four funds. The “surplus fund” has never been established.
The bond ordinance passed in conformity with Articles 1109a, 1111 to 1118w, V.A. C.S., requires the City of San Antonio to maintain sufficient rates to pay all “maintenance, depreciation, replacement, betterment and interest [and principal] charges.” It was undisputed that the term “betterment” is an improvement to the plant in service, and that this definition did not include extensions or additions to the system. The bond ordinance pledged all the revenues of the system to the bond holders’ first lien, after deducting operating, maintenance, replacement and betterment charges. Appellee contends that neither the ordinance nor the statutes permit the deduction of extension charges from this pledge of revenue, and that neither the statutes nor the bond ordinance require the raising of rates sufficient to pay for on-site local benefit extensions, and that this Court *452should not require the appellee City to do so.
The financial condition of the Water Board continued to be poor. By 1960 the Board’s obligations accumulated a deficit of $3,703,396.00. During the period from 1956 to 1960 and after the Board had liquidated its 100% obligation to the developers, the Board’s obligation to developers of 50% refund for on-site improvements rose to $794,000.00. The system revenues were insufficient to meet this continued liability. The Board then determined that it was not in a position to meet the financial requirements of refunding 50% of the cost of local on-site mains. The Board employed consulting engineers and made comprehensive studies of the financial picture and the future of the entire water works system. The final reports were incorporated into a general master plan for the extension of water mains in conformity with Art. 974a, V.A.C.S. The City Council of San Antonio adopted the master plan for water system improvements by ordinance after favorable recommendation by the City’s Planning Commission. The master plan provided for extensions of water service to all unserved areas of the city, hut did not provide for extension of local on-site mains. As a result San Antonio has a thorough, detailed and complete water service extension program. It has laid transmission mains into every area and section of the city and has adopted a master plan for the extension of mains in the future through the year 1990. It pays all of the general benefit costs of extensions, including wells, pumps, pump-houses, booster stations, valves and transmission mains. Appellees’ say that in the exercise of its judgment and discretion, the City has determined that the installation of on-site local benefit mains at its whole cost is not necessary to render adequate service, and it has determined further that it shall not expend its revenues otherwise pledged to bondholders for such purpose.
The present Water Board’s regulations for water system extension and service line installation were approved by the Board in November, 1959 and officially adopted on February 23, 1960. The City Council approved the regulations after a public hearing as required by Art. 974a, V.A.C.S. It is the Board’s regulation of water system extensions and line service installations that are under attack by the appellant. The trial court found that the regulations were adopted pursuant to and in accordance with the City’s master plan for water system improvement.
The Water Board’s regulations had among its terms classification of customers in two categories (1) single customer and (2) developer-customer. The appellant falls in the latter category and the court found that developers constituted a separate and distinct class for utility regulatory purposes. The appellant admits that the regulations of the Board treated all developers alike. The entire regulation covers three and one-half pages and sets forth conditions applicable to extensions of on-site mains within a subdivision. Nowhere in the regulations do they make provisions for a refund to the developer-customer for installation of the cost of on-site mains that are purely of local benefit within the subdivision, although the developer-customer may recover 100% of his cost of installation of the approach main to the subdivision. The trial court found that the foregoing regulations established clearly defined standards which apprised the appellants of their rights, duties and obligations thereunder.
Following the adoption of the regulations by the City Council, the City in 1961 raised the water rates 18%. The City Council specially conditioned approval of the increase on the premise that no water revenues would be used to refund developers the cost of on-site local benefit mains within their subdivisions. The 100% refund of the approach mains were not affected. The financial picture of the Board improved. Beginning in 1962 the Board was able to meet its 100% refund obligation to the developer-customer on the approach mains to the subdivision.
*453During the next few years the Board concluded that it did not have sufficient funds to carry out its master plan for extensions, its capital improvement program covered by the bond issues, the 100% refund policy on approach mains, and at the same time pay the cost for the on-site local benefit extensions (the type demanded by the appellant). The Board had committed its total revenue available for extensions pursuant to the master plan and even so the present revenues were insufficient to support the Board’s five-year extension and capital improvement program which was a part of the City’s master plan adopted by the City Council. The record shows that the financial condition of the Water Board indicates that there are $20,000,000.00 in revenue bonds outstanding. All revenues are pledged to the payment of these bonds except revenues exempt by statute from the bondholder’s first lien. The $6,000,000.00 extension in capital improvement program, adopted in accordance with the master plan and present regulations, were designed to carry out the Water Board’s whole cost, the provision of the master plan for extensions of the system to all areas of the city, including all new subdivisions. It does not include on-site local benefit mains within the new subdivision. The evidence is undisputed that had the Board pursued the policy of 100% refund of on-site main extensions during the period from 1958 through 1964 the Board would have accumulated a deficit of $4,896,643.00 by the end of 1964.
Appellee points out that the evidence overwhelmingly supports the reasonableness of the present regulations which the appel-lees say were adopted only after and in pursuit of an exact and exhaustive professional study of the various factors considered in a test of reasonableness. The city argues that the justification, for the approach adopted by the present Water Works Board through its regulations is that the new customer, being a purchaser of a lot from the developer, pays his own way without discriminating against existing customers. The evidence shows that revenues obtained from new customers will not amortize the cost of on-site extensions to these customers. In this connection the appellees state that the City of San Antonio’s medium income of families is low; that over 25% of the families have less than $3,000.00 per year income; that the overall water rates have increased 70% between 1950 and 1961; that to pay for the cost of these on-site water mains would primarily benefit the developers who admit that they pass the cost of such development on to the lot purchaser, but do not pass on to such customer any refund received by them under any refund policy such as the City Water Board has had in prior years. Appellees further argue that their approach through present regulations provides full and equal treatment to persons similarly situated and that reasonable water rates are the legitimate and commendable concern of the Water Board. Under these regulations over 7900 subdivision lots have been developed by the developer-customer and water furnished by the Board.
The appellant, as a subdivider and developer, affected by these regulations commenced what he categorizes as this “test case”. The litigation began after the appellant had obtained a preliminary plat approval for Crownhill Park Unit No. 8. The appellant then demanded that the Board pay and install the on-site mains and appurtenances to three particular lots in his subdivision. The Board refused, whereupon, this suit was commenced, seeking a declaratory judgment as to the validity of the regulations in question, and praying for a writ of mandamus requiring the Water Works Board to furnish the three main extensions at the Board’s cost.
The City argues that it has no obligation to extend one single main for the benefit of one single individual, a group of individuals or developers. It admits that it does have a duty to make water service reasonably available to its citizens, but the performance of this duty must be tested *454in the light of its statutory powers for planning, financing and regulating.
The City of San Antonio furnishes all the backup facilities, the transmission mains and refunds 100% of the cost of the approach main. Therefore, the appellant’s only complaint goes to that part of the regulations that pertains to on-site mains. The appellant has developed at least eight units of Crownhill Park comprising approximately 200 lots, some of which were developed under the old regulations permitting a 50% refund, on on-site mains and the balance under present regulations. The only exception is the three lots in question, comprising the “test case” here involved. The appellant plead that the City was obliged to make on-site water main extensions where the same were reasonable, and that its definition for the test of reasonableness is “whether the economic rate to be anticipated by the utility in extending its service to reach new customers will be sufficient to recoup over a period of time the investment of the capital improvements necessary to reach these new customers.” The majority of the evidence contained in the statement of facts goes to the proof of "reasonableness” in regard to the request for the extension of on-site or local benefit mains and appurtenances under present circumstances. The trial court found as a fact that neither the anticipated revenue from all 39 lots in Unit No. 8 of Crownhill Park, nor the anticipated revenue from the three lots in question without an adjacent on-site main furnished by developer in Unit 8, would ever be sufficient to amortize the cost of extending water service to either of the lots in Unit 8 or to the three lots in the unit. The undisputed evidence shows that the anticipated revenue from all lots in the new subdivisions developed under the present regulations will not amortize the whole cost of extending water service to these lots, where the city utility furnishes the on-site local benefit mains, even during double the life of the facilities. The court in effect held that the subdividers’ request was not reasonable. In this respect the court found that: (1) the cost of on-site or local benefit mains is only a part of the whole cost of extending water service to any lot and that (2) the total cost of extension of water service to any lot to the Water Board includes also the cost of what is referred to as “back-up facilities” which is defined as “wells, pumps, pump houses, chlorinating equipment, reservoirs, tanks, transmission mains, telemetering and control equipment and appurtenances.”
The evidence is that over one half of the cost of getting water to a new subdivision is in the “back-up facilities.” Therefore the city contends that the regulations requiring the developer to pay the cost of empty on-site mains in his subdivision is a reasonable regulation as a matter of law. The subdivider pays only the on-site main that benefits the new subdivision.
The appellant in its original brief presents 24 points of error, none of which challenge the sufficiency of the evidence to support the findings of the trial court, and almost all of which complain of the trial court’s conclusions of law. The appellees answer these points in seven counterpoints. Three of these are briefed and argued together and one concerns the results of the trial court’s judgment. In general, appellant contends that the regulations in question are invalid; that the City of San Antonio has the obligation to make all extensions of on-site mains at its expense, that are proved to be reasonable extensions. In this connection appellant argues that the regulations should contain criteria of reasonableness to which all developers could turn for guidance in the presentation of their extension requests to the City for consideration, a criteria which could and would afford a basis for judicial review of the City’s decision in the event such request was denied. In support of these contentions the appellant argues that the city-owned water utility is governed by the same legal duties as that of a privately owned utility, although some procedures might be different; that the purpose and *455the effect of the City’s regulations are to shift the capital costs of the extensions from the city-owned utility to the developer; that this policy is invalid as requiring the developer to make a gift of its water mains to the city-owned utility without reimbursement; that the classification of the developers, deprives them of due process and equal protection of the law; and finally, that a city utility acting through its agents (Water Works Board of Trustees) does not prescribe rules and regulations for the operation of the water system in a governmental or legislative capacity, but prescribes them as a proprietary function.
The City of San Antonio is a home rule city. It purchased the water works system under the authority given it by the Legislature, Art. 1109a, V.A.C.S. The statute provides in part that this law shall be cumulative of all legislative acts granting the power to all cities including home rule cities, and it is not intended to limit or impair any power given by any other of such acts. (Sec. 7.). Appellees contend in addition to this Art. 1109a, other articles give it its governmental power and authority in enacting the questioned regulations. They are: Articles 974a, 1108, 1110c, 1111, 1113, 1113a, 1115, 1116, 1118, 1118a, and 1175, V.A.C.S.
In 1957 an ordinance was passed by the City of San Antonio which made important changes in the operation of the water works system. The Water Works Board of Trustees under this ordinance for instance, were to be named by the City Council and vacancies were to be filled by it. The Board was given absolute and complete control and power with reference to the control, management and operation of the system. The Board was charged with the duty of making recommendations to the Council concerning the fixing of rates and charges, but that the power of fixing rates and charges for services rendered by the system was left in the City Council.
The trial court ruled among other things that the Water Works Board of Trustees of the City of San Antonio, had full power and authority in the making of rules and regulations governing the furnishing of water service; and that in reference to the making of extensions, the regulations in question were reasonable, lawful and were a legal exercise of the Board’s legislative discretion and governmental powers. The Court further ruled that the Board prescribed these regulations in a governmental capacity although it owns and operates the municipal water system in a proprietary capacity.
The power of the City of San Antonio which operates under the home rule amendment, is limited only by the provisions of the Federal and State Constitutions and the general state laws. Denman v. Quin, 116 S.W.2d 783 (Tex.Civ.App.—San Antonio, 1938, err. ref.); Constitution of the State of Texas, Vernon’s Ann.St. Constitution, Art. 11, Sec. 5. The city is vested with two kinds of powers and functions, governmental and proprietary.
“ * * * Governmental functions are exercised in the administration of the affairs which affect the public generally, and are performed by virtue of powers conferred upon the city as an agency of the state. Proprietary functions pertain to business affairs administered for the special benefit of the urban community embraced within the corporate boundaries. * * * ”
San Antonio Independent School District v. Water Works Board of Trustees, 120 S.W.2d 861 (Tex.Civ.App.—Beaumont, 1938, wr. ref.), see cases cited therein; 39 Tex. Jur.2d, Sec. 307, pp. 636-637.
Generally, a private water utility is required to make the extensions directed by its franchise, the granting and terms of which are an exercise of governmental discretion by the governing body of the municipality, or by any applicable common law duty which has not been abrogated by the franchise or statute. The appellant admits that a city such as San Antonio *456has governmental power to regulate and prescribe extension policies where it concerns a privately-owned public utility, but here argues that a municipality cannot, in its governmental capacity, set its own extension regulations, because such policy making operation by the city of its municipally-owned utility, is proprietary in nature. Appellees on the other hand reason, and we agree, that the statutes that make municipalities, regulatory bodies over privately owned public utilities with governmental power and discretion, cannot be deemed to deny the municipality the exercise of that same power in its own behalf. Citing Art. 1175, V.A.C.S. which says in part: (Para. 11 to the effect) that cities adopting the home rule amendment may:
“ * * * have the exclusive right to own, erect, maintain and operate water works and water works system for the use of any city, and its inhabitants, to regulate the same and have power to prescribe rates for water furnished * * * and to do and perform whatsoever may be necessary to operate and maintain the said water works or water works system * *
In Art. 974a, Sec. 4, the Legislature provided in part:
“If such plan or plat * * * shall conform to the general plan of said city and its * * * public utility facilities * * and to the general plan for the extension of such city * * * regard being had for access to and extension of sewer and water mains * * * and if same shall conform to such general rules and regulations, * * * governing * * * subdivisions of land * * * as the governing body of such city may adopt and promulgate to promote the health, safety, morals or general welfare of the community, and the safe, orderly and healthful development of said community (which general rules and regulations for said purposes such cities are hereby authorized to adopt and promulgate after public hearing thereon), * * (Emphasis supplied).
To the same effect is the utility and bond statutes which bear out the governmental nature of the power to prescribe regulations for extensions. See Arts. 1108; 1109a; 1115; 1116; 1118a, sec. 5, V.A.C.S.
Art. 1109a, Sec. 4, provides that the city shall have the power to own, extend and enlarge its water systems and to manage and control the system through the city governing body or its agent by designation in a contract for such purpose.
“ * * * in all matters where such contract is silent, the laws and rules governing the council of such city shall govern said board of trustees so far as applicable. Said city council or board of trustees having such management and control shall have power to make rules and regulations governing the furnishing of service to patrons and for the payment for same, * * *” (emphasis supplied).
The Supreme Court of Texas has said that where a city which was statutorily empowered to provide a city with water, the exercise of such express power granted to a city, is within its discretion and partakes of a legislative nature. “The courts will not regulate the exercise of such a power unless it is exercised in a manner clearly abuse thereof. * * * ” citing authority. The Court went on to say in effect that this policy making function of a city is governmental in nature. In agreeing with the holding of the Court of Civil Appeals concerning the matter in which the City of Haskell exercised this express power to provide a suitable water supply, the Supreme Court said (this express power) * * *
“ * * * rests largely in the discretion of its governing body, and that the City possesses the implied power to oppose the implementation of a project which its governing body, in the exercise of reasonable discretion, considers to be detrimental to the present or future water supply which the City is required by statute to provide for its inhabitants. * * * f*
*457Kimbrough v. Walling, 371 S.W.2d 691, Sup.Ct.1963.
Concerning the power of a municipality in exercising and prescribing rules and regulations the court in City of Wink, et al v. Wink Gas Co., 115 S.W.2d 973, wr. ref. (Tex.Civ.App.—El Paso, 1938) stated that the city has the power to regulate by ordinance the rates to be charged by gas companies and other public utilities. Citing Art. 1119, V.A.C.S. which the Court says describes the governmental power in part:
“ ‘and also to prescribe rules and regulations under which such commodity shall be furnished, and service rendered, and to fix penalties to enforce such charges, rules and regulations.’ The power of the city to regulate rates to be charged by public utilities and to prescribe rules and regulations under which such commodities shall be furnished is governmental. * * * ” (emphasis supplied)
The language of statutes that delegate regulatory powers to home rule cities and operating boards, are also consistent in their grant of governmental power. Arts. 1108 and 1175, V.A.C.S. See City of Beaumont v. Calder Place Corporation, 143 Tex. 244, 183 S.W.2d 713 (1944) which recognizes the power of home rule cities to maintain and operate the water works system.
The trial court ruled that the right of the governing board to determine the area to be served and extensions to be made by the water utility was a matter within its sound discretion. Citing Art. 1116, V.A.C.S. In this connection the trial court ruled that the determination of how much revenues of the water system should be applied to the extensions of the system was also within the sound discretion of the governing body. Citing Arts. 1113 and 1113a, V.A.C.S. The trial court further ruled that the bondholders have an irrevocable first lien on all revenues of the system except the revenues used for certain expenditures that are exempt by statute. Expenditures for extensions are not exempt, except those which in the Board’s judgment, are necessary to keep the plant in operation and to render adequate service. The appellant argues that the Legislature evisioned that the municipally owned water system should make all extensions at its expense and provide the means to finance such extensions. In this connection the appellant would have this Court, in effect, order the City to raise its water rates or provide bond money to pay for the costs of all such extensions. The undisputed evidence shows that there is insufficient revenue to pay for all on-site local benefit extensions without the sale of revenue bonds or a rate increase.
Appellant does not cite any Texas authority for the proposition that the determination by a city-owned water utility as to what extensions shall be made is not a matter for the sound discretion of the governing body. Even appellant’s out of state authority which it relies on so heavily, is distinguishable by the facts in each case. The majority rule, however, which we believe governs this case is set forth in the text of American Jurisprudence and American Law Reports wherein it is said that:
“ * * * a municipality which engages in furnishing water to its inhabitants is generally regarded as having a governmental discretion as to the limits to which it is advisable to extend its mains, and an extension will not be compelled by the courts at the instance of an inhabitant. ‡ ⅜ ⅝
56 Am.Jur., Sec. 61, p. 966. Again the majority rule is stated in the American Law Reports as:
“Although there exists, of course, a basic underlying obligation of a city owning a general domestic water system to supply impartially all applicants in substantially like position to those being served, it has quite generally been held or recognized that a municipality exercises a discretionary function in deciding whether or not to extend its system to an entirely new section within its territorial limits, and cannot be compelled to do so at the *458instance of a prospective consumer, at least if its basis for refusing is in any way reasonable and does not, therefore, involve any abuse of discretion, or arbitrary or fraudulent action * * *.”
Citing various jurisdictions which uphold this general rule. 47 A.L.R.2d 1222 at 1225. See also 94 C.J.S., Waters § 278 at page 139; 63 C.J.S., Mun.Corp. § 1051, pp. 698-672.
To hold that the regulations complained of by the appellant are invalid and to grant the mandamus requested by the appellant subdivider, would in our opinion be, a substitution of this Court’s judgment for the legislative discretion given to the municipal governing body. The Texas courts have uniformly refrained from so doing. Justice Steakley in a unanimous opinion by the Supreme Court, speaking of this expressed statutory power of a city to provide its inhabitants with water, said that a city was acting within its discretion and such power partakes of a legislative nature and that “ * * * The courts will not regulate the exercise of such a power unless it is exercised in a manner clearly abusive thereof.” Kimbrough v. Walling, supra. See also Chemical Bank & Trust Co. v. Falkner, 369 S.W.2d 427 (Tex.Sup.1963); Lombardo v. City of Dallas, 124 Tex. 1, 73 S.W.2d 475 (Tex.Sup.1934).
There is no Texas case on all fours on the question of the discretionary authority of the municipality to extend on-site water mains under similar facts. However, there is very persuasive Texas authority which indicates to us that the promulgation of policies concerning water main extensions by the governing body of the municipality, is an exercise of a governmental function. In the case of Crouch v. City of McKinney, 47 Tex.Civ.App. 54, 104 S.W. 518 (1907, wr. ref.) the Court in upholding the action of the trial court in refusing a mandatory injunction said that:
“The government of the city has been intrusted to a mayor and board of aider-men, and, so long as the affairs of the city are conducted in a reasonably judicial manner, their acts will not be interfered with. * * * ”
The Court went on to say that the duty of the city to extend water lines is a matter which should be left to the sound discretion of the City Council.
Again, in a very recent case where a developer of a subdivision sought a mandatory injunction to require the city to extend certain water lines within the subdivision and to have the court hold void an ordinance of the city, the Court, in refusing the injunctive relief, said:
“The court properly refused to require the City to extend the water line now existing in the Bassridge Addition, although the city has the responsibility to furnish water to the inhabitants of the City. This service is subject to reasonable regulations promulgated by the City. The Charter does not require the City to furnish all extensions of water mains desired by a property owner, but only to furnish such facilities with reasonable diligence.” Citing Crouch v. City of McKinney, (emphasis supplied)
City of Snyder v. Bass, 360 S.W.2d 426 (Tex.Civ.App.—Eastland 1962, wr. ref. n. r. e.). The Court in City of Snyder case went on to say that in reference to the Crouch case, that the duty of a city to extend water lines was a matter that should be left to the sound discretion of the City Council. The Court cited with approval the annotation contained in 48 A.L.R.2d 1224 that:
“ * * * the majority rule is that a city in such cases has the right to exercise its discretion in a reasonable manner.
The appellant relies most heavily on three New Jersey cases. However, a close reading of these cases shows that the New Jersey courts also recognize the general rule that “a municipality that engages in furnishing water to its inhabitants has a governmental discretion as to the limits that *459are advisable to extend its mains.” The New Jersey courts, however, likened the municipally owned utilities to that of a privately owned utility. These cases are persuasive in a way, to appellant’s contentions, however, they all can be distinguished and the results obtained do not follow the majority rule or the trend in the Texas courts. For instance, there is no showing whatsoever that the New Jersey statutes on the subject of extension, contain in any way, the discretionary language contained in the Texas statutes.3
In 38 Am.Jur., Section 560, p. 248, the general rule is again said to be that:
“ * * * the furnishing of public services, rests in the discretion of the governing municipal authorities, * * * and the courts will not undertake to control or interfere with the exercise of such discretion in the absence of bad faith or abuse. * * * ”
See Browne v. City of Bentonville, 94 Ark. 80, 126 S.W. 93 (1910) ; Middletown Water District v. Tucker, 284 S.W.2d 666 (Ky.1955); City of Greenwood v. Provine, 143 Miss. 42, 108 So. 284, 45 A.L.R. 824 (1926) ; Commonwealth ex rel Green v. Alexandria Water Co., 192 Va. 512, 65 S.E.2d 521 (1951); City of Bellaire v. Lamkin, 159 Tex. 141, 317 S.W.2d 43, 66 A.L.R.2d 1289 (1958); Forbes v. City of Houston, 356 S.W.2d 709 (Tex.Civ.App.—Houston 1962, wr. ref. n. r. e.). Here the Texas Court said in order for an action of the City Council to be subject to mandamus the act must be a ministerial act or, if discretionary, there must be a clear case of abuse of discretion. See also Jarrett v. City of Boston, 209 Ga. 530, 74 S.E.2d 549, 40 A.L.R.2d 1327 (1953); Reed et al v. City of Langdon, 78 N.D. 991, 54 N.W.2d 148 (1952). In a very recent opinion by the Supreme Court of Texas, Texas Power & Light Co. v. City of Garland, Tex., 431 S.W.2d 511, our High Court recognizes the governmental power of the city in enacting regulations. Although it concerns the police power of the city the Supreme Court recognizes the governmental function of the municipality where rules and regulations are concerned.
The trial court ruled that the appellant failed to meet its burden of proof to show that the regulations or order reaffirming the regulations were arbitrary, capricious or unreasonable. Sifford v. Waterworks Board of Trustees, 70 S.W.2d 476 (Tex.Civ.App.—San Antonio 1934, wr. ref.). We hold that the order and regulations of the Water Works Board of Trustees was reasonable when tested by substantial evidence. We further hold, therefore, that the Board in promulgating its water main extension regulations, exercised its legislative or governmental power, and did not act in a proprietary capacity. Crouch et al v. City of McKinney; City of Snyder v. Bass, supra; Rounds v. Board of Water and Sewer Commissioners, 347 Mass. 40, 196 N.E.2d 209 (1964) and cases cited therein. See Filger v. Public Water Supply Dist. No. 1 of Clay Co., 346 S.W.2d 567 (Mo.App.1961) where the Court approved an instruction as a fair and proper declaration of the law to-wit :
“ * * * that the Board of Directors (water supply district) does not have an absolute duty to serve all inhabitants of the District with the amount of water such applicant may request, but, in the exercise of their discretion as such Directors, may refuse to furnish water to an applicant in the quantity requested provided, however, such decision is not arbitrarily arrived at as a result of fraud or caprice or in an effort to discriminate against any particular applicant.” (emphasis supplied).
See also Town of Wickenburg v. Sabin, 68 Ariz. 75, 200 P.2d 342 (1948); Johnson v. *460Reasor, 392 S.W.2d 54 (Ky.1965); Wolff v. Louisville Water Co., Inc., 302 S.W.2d 104 (Ky.1957).
The questions of whether appellees’ regulations are constitutional, whether appel-lees exercise a governmental discretion in making water main extensions and the other issues presented by this appeal, cannot be resolved by comparing the number of cities that make refunds of water main extension costs to developers with the number of cities which do not make such refunds. The trial court did not rule that there was only one reasonable method that the Board could have adopted.
The policy of determining who will pay the cost of water extensions in subdivisions is closely related to the rate making policy of the city. Appellant would in effect have our courts require the municipality either to raise the water rates, or issue revenue bonds as an alternative to the present regulations. If appellant is correct, the right to determine water rates would then be divested out of the governing body of the City and ultimately determined instead by the developers’ judgment, or the City’s judgment as to how many water customers can be generated by the sale of houses and what rates would have to be charged to pay for the new subdivision’s on-site extensions. But it is not a municipal function to speculate in concert with developers in the subdivision business. The Legislative expressly excluded extensions in establishing the factors for rate charges necessary to retire revenue bonds. If we agreed with appellant, and if extensions were now included as a factor in rate making, the court’s mandate would in effect be a substitution of its judgment for the judgment of the Legislature and local governing' body. This would be an incorrect court function.
Appellant complains of the constitutionality of the regulations which require the developer to donate the on-site water mains to the city, and the refusal of the Water Works Board to reimburse the developer for this expenditure. The authorities hold that the municipality has the right to impose conditions on subdivision development, including the “donation” of streets, alleys, drains, water mains, sewer mains and the like. See Lombardo v. City of Dallas, 124 Tex. 1, 73 S.W.2d 475 (1934) and the many cases cited in Shepard Texas Citations following this authority. The overwhelming weight of authority is that such donation is not a taking of appellant’s property for public use without reimbursement. The exercise of governmental discretion to impose reasonable regulations as a condition for the use of property, or as a condition precedent to the subdivision of land, does not amount to a taking of private property for public use without just compensation.
Article 974a, V.A.C.S., for instance, requires an owner to dedicate land for streets, alleys, parks, playgrounds and public utility facilities as a condition of plat approval. A number of cases from other states recognize the rule that requires the subdivider to agree in advance to vest title to water mains in the city without compensation as a condition to receiving water. See Zastrow v. Village of Brown Deer, 9 Wis.2d 100, 100 N.W.2d 359 (1960); Rounds v. Board of Water and Sewer Commissioners, 347 Mass. 40, 196 N.E.2d 209; Blevens v. City of Manchester, 103 N.H. 284, 170 A.2d 121; Spaugh v. City of Winston-Salem, 234 N.C. 708, 68 S.E.2d 838 (1952). The Board’s regulations in question require that the developers’ water main facilities for domestic, commercial and fire protection use, must conform to the Board’s specifications. This is not a taking of private property for public use without compensation. The fire protection aspect of the regulations certainly is an exercise of the police power of the City, and to permit the subdivider in effect to dictate to the municipality its demand for extensions, we believe, would seriously take from the City its full control and supervision of the water system, and would interfere with the exercise of this part of its police power. City *461of Beaumont v. Calder Place Corp., 143 Tex. 244, 183 S.W.2d 713 (Tex.Sup.1944); Moser et al v. Greenland Hills Realty Co., 300 S.W. 177 (Tex.Civ.App.—Dallas 1927, err. ref.); see also Texas Power & Light Co. v. City of Garland, Sup.Ct., supra.
The water mains in question are constructed for the benefit ultimately of the potential lot owner, not the subdivider who bought the raw land and transformed it into a residential lot. It has been held that there is an implied dedication of such water main to the lot owners, the water consumer, and the public generally for this purpose. By virtue of such implied dedication the municipality may use the mains to supply water to the lot owners and to connect with its fire protection facilities without compensation to the subdivider. City of Danville v. Forest Hills Development Corporation, 165 Va. 425, 182 S.E. 548 (1935); Hightower v. City of Tyler, 134 S.W.2d 404 (Tex.Civ.App.—El Paso 1939); City of Houston v. Lakewood Estates, Inc., 381 S.W.2d 697 (Tex.Civ.App.—Houston 1964). The United States Court of Appeals in upholding a trial court’s refusal of a recovery by the developer stated:
“The water systems were installed for the purpose of making the lots within the subdivision salable and usable for residential purposes. Their intended purpose from the outset was to serve the purchasers of lots, the consumers of water, and the public. * * * [t]he action of the city and county in taking charge and control of such systems for use in furthering the public purpose to which they were dedicated did not constitute the wrongful taking or appropriation of property of plaintiffs which rendered the city and county liable in damages for conversion. * * * ”
Trentman v. City and County of Denver, Colorado, 129 F.Supp. 624; 10 Cir., 236 F.2d 951.
Finally, appellant argues that it has been denied substantive due process and equal protection of the law in violation of the state and federal constitutions. In the case of Johnson v. Benbrook Water and Sewer Authority, 410 S.W.2d 644 (Tex.Civ.App.—Ft. Worth 1966, n. r. e.), cert. den. 393 U.S. 836, 89 S.Ct. 111, 21 L.Ed.2d 106, the defendant Water & Sewer Authority adopted a policy of requiring all builders, subdividers and developers to pay the entire cost of extending the water and sewer system to and through any new area being developed for which the developer had requested water and sewer service. The Ben-brook Authority required that the planned extensions must be approved by their engineer prior to commencement of construction. In addition to this, the Benbrook Authority required that all developers pay the entire cost of the improvements necessary to provide adequate water and sewer service to the persons residing within its boundaries. The evidence was that even with the policy of requiring that such extensions be paid by the developer without reimbursement, the Benbrook Water and Sewer Authority had steadily increased its indebtness since its creation. On appeal the plaintiff raised one question and that was whether or not the Benbrook Water and Sewer Authority has the constitutional and statutory authority to require the developer to extend the water and sewer extensions at its own expense and without reimbursement? The legal question presented was whether or not such policy of the Authority constituted an appropriation or a taking of the developers’ property without due process of law and did the implementation of that policy to the developer deny to him equal protection of the law? The Court held that it did not. Citing authority. Virtually the same contention is made by appellant here.
We hold that the Board’s regulation was valid which required the developers to pay the entire cost of local on-site water main extensions into a new area without reimbursement when tested by the constitution guarantees or due process of law and equal protection under the law. Appellant’s points are overruled.
*462The judgment of the trial court is affirmed.

. For historical background see San Antonio Independent School District v. Water Works Board of Trustees, 120 S.W.2d 861 (Tex.Civ.App.—Beaumont 1938, wr. ref.).

. Off-site or approach mains were defined in the regulations as “a main which brings water service and/or circulation of water to the perimeter of a property or the projection thereof across roadways abutting said property.” On-site or local benefit mains are defined in the regulations as “a main to provide service within the perimeters of a property or along abutting roadways, alleys and/or utility easements.”

. See Reid Development Corp. v. Parsippany-Troy Hills Township, 10 N.J. 229, 89 A.2d 667 (1952); Reid Development Corp. v. Parsippany-Troy Hills Township, 31 N.J.Super. 459, 107 A.2d 20 (1954) ; Hake Intervale Homes, Inc. v. Parsippany-Troy Hills, 28 N.J. 423, 147 A.2d 28 (1958).