Sec. 552.022. CONTRACTS WITH CERTAIN SPECIAL DISTRICTS. (a) In this section, "special district" means a district that derives its powers from Article XVI, Section 59, of the Texas Constitution and that has statutory authority to contract with municipalities for the transportation and disposal of sewage.

(b) A municipality located in whole or in part in a county containing a special district, and acting under an ordinance enacted by its governing body, may enter into a contract with the district that may provide:

(1) that the district will make available to the municipality and provide sewage transportation, sewage treatment and disposal services, or any one or more of those services;

(2) for the provision of standby service; or

(3) for use by the district of sewage transportation, treatment, and disposal facilities owned by the municipality.

(c) The contract may be on terms and for a duration agreeable to the parties and may provide that it continue in effect until payment of:

(1) bonds issued by the district and specified in the contract; and

(2) any bonds issued to refund bonds described by Subdivision (1).

(d) The municipality is entitled to continued performance of services covered by the contract after the amortization of the district's investment in the facilities during the useful life of the facilities on payment of charges reduced to take into account the amortization.

(e) Except as provided by Subsection (f), revenue received by a special district from a municipality under a contract made under this section may be used only for:

(1) payment of principal of and interest on, and providing reserve for, bonds issued by the district to finance the facilities covered by the contract; and

(2) operating and maintenance expenses related to the contract, including legal, administrative, and management supervision fees and expenses.

(f) The contract may provide that a designated part of any surplus accumulated for the benefit of the municipality may be spent by the district to enlarge or improve facilities of the district used to serve the municipality.

(g) Payments by a municipality to a district shall be made from revenues of the municipality's water system, sanitary sewer system, or both of those systems, or of the municipality's combined water and sanitary sewer system, as specified in the contract. Those payments are an operating expense of the system whose revenues are to be so applied. Except as provided by Subsection (h), neither the district nor a holder of the bonds of the district may demand payment of the municipality's obligations out of funds raised or to be raised by taxation.

(h) A municipality may pledge its taxing power in a contract made under this section if a majority of the qualified voters of the municipality who vote on the question at an election vote in favor of the proposed contract and the levy of property taxes to pay the municipality's obligations to the authority under the contract. The election shall be conducted in substantially the same manner as a municipal bond election held under Chapter 1251, Government Code. If the voters approve the contract and tax levy:

(1) the municipal governing body shall enact an ordinance prescribing the form and substance of the contract and directing the proper officers of the municipality to sign it; and

(2) once the contract has been executed, the municipality's obligations to the authority under the contract are an obligation of the municipality's taxing power, but may be paid, as provided by the contract, from taxes and revenues from which payments are required by Subsection (g).

(i) A municipality that has executed a contract under this section that is payable in whole or in part from revenue of the municipality's water or sanitary sewer system, or both of those systems, or the municipality's combined water and sewer system shall set and periodically adjust rates charged to users so that at all times that revenue is sufficient to pay:

(1) the expenses of operating and maintaining each system in accordance with current standards and requirements for preventing stream pollution;

(2) obligations of the municipality under the contract; and

(3) all obligations of the municipality relating to revenue bonds issued from the system before or after execution of the contract under this section.

(j) The contract may require the use of consulting engineers and financial experts to advise the municipality as to when service rates are to be adjusted.

(k) A district may render services concurrently to more than one municipality through construction and operation of a plant serving multiple municipalities, with the cost for the services to be allocated among the participating municipalities as provided by one or more contracts made under this section. All the compensation to be received by and all the security pledged to the district by all municipalities is available to the authority to secure bonds issued to provide necessary construction funds.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 2001, 77th Leg., ch. 1420, Sec. 8.348, eff. Sept. 1, 2001.

Renumbered from Local Government Code, Section 402.022 by Acts 2007, 80th Leg., R.S., Ch. 885 (H.B. 2278), Sec. 3.76(a)(2), eff. April 1, 2009.