When a Texas water control district dissolves, can the county take over its dams and keep the leftover tax money?

Texas AG Opinion JM-1039: Who Gets a Dissolved Water District's Leftover Tax Money?

Plain-English summary

Texas has thousands of special-purpose local districts, and some of them eventually wind down. This opinion dealt with one of them: Brazos County Water Control and Improvement District No. 1, known as Big Creek, created in 1959 to build flood-control works. Thirty years on, Big Creek was stuck. A federal court had enjoined it from finishing its projects until it completed an environmental study under the National Environmental Policy Act, the study and remaining work looked prohibitively expensive, and the district had never completed its flood-control structures within the ten years the Water Code contemplates. It was time to dissolve. The problem was practical: someone still had to maintain the dams Big Creek had already built, and after the district paid its debts it would have roughly $30,000 in tax money left over. The county attorney asked whether Brazos County could agree to take over the dam maintenance and, in exchange, receive that surplus.

The Attorney General walked through the Water Code's several ways to dissolve a water control and improvement district. One track (chapter 50, subchapter G) covers dormant districts and sends their assets escheating to the state. Another (section 51.781) covers dissolution after voters reject construction bonds or when the board or voters move to dissolve, and it has a clear rule, section 51.791, that leftover taxes go to the county treasurer. A third track (section 51.793) fits a district that, like Big Creek, failed to complete its works within ten years, but the sections filling in that procedure do not say what happens to leftover taxes. A fourth, small-county procedure was off the table because Brazos County is far too populous.

So the surplus-tax question had a clear answer under one dissolution track and a gap under the one that fit Big Creek. The Attorney General bridged the gap by reading the statutes together. The 1943 law that created the section 51.793 procedure said it was "cumulative" of the other dissolution laws, which signals that the different provisions are meant to coexist and cooperate rather than displace one another. The policy that leftover taxes go to the county, already in the law when the 1943 act passed, therefore informs a section 51.793 dissolution too.

From there the answer followed. Section 51.802 lets a dissolving district's board contract with others to wind up its affairs. The Attorney General concluded the board could contract with the county to accept and maintain the district's facilities in exchange for the surplus tax money, which tracks the Water Code's own policy. And on the county's side, Local Government Code section 411.002 authorizes a county to contract with another governmental unit to maintain flood-control and drainage improvements. So, as long as the county commissioners court reasonably decided the deal was backed by adequate consideration flowing to the county, Brazos County could legally contract with Big Creek to carry out district functions after dissolution and take the surplus tax funds as payment.

Currency note

This opinion was issued in 1989. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Title 4 of the Water Code and the dissolution provisions cited here, along with the Local Government Code and the Interlocal Cooperation Act, have been amended and renumbered since 1989. The former Texas Water Commission's functions have since moved to successor agencies. Anyone dealing with a present-day dissolution of a water district should consult the current Water Code and interlocal-contracting statutes rather than rely on this 1989 analysis.

Who this opinion affected (as of 1989)

Water control and improvement districts winding down: The opinion told a district dissolving for failure to complete its works that it could contract to hand off its facilities and its surplus tax funds rather than leave the money's fate uncertain.

County commissioners courts: The opinion confirmed a county could take on a dissolving district's flood-control maintenance and receive the surplus, provided the commissioners court reasonably found adequate consideration.

Taxpayers in the district: The opinion meant leftover taxes they had paid would go toward maintaining the local flood-control works through the county, consistent with the Water Code's policy, rather than escheating or sitting idle.

Common questions

Can a county take over a dissolving water district's dams and keep its leftover taxes?
Yes, by contract. The AG concluded Brazos County could contract with the district to carry out its functions after dissolution and receive the surplus tax funds as consideration.

What lets the district make that deal?
Water Code section 51.802 authorizes a dissolving district's board to contract with others to properly liquidate and wind up its affairs, which the AG read to include contracting with the county to take the facilities in exchange for the surplus.

Does the county need anything to justify the contract?
Yes, adequate consideration. The AG concluded the county may enter the contract if the commissioners court reasonably finds the deal is supported by adequate consideration flowing to the county, consistent with Local Government Code section 411.002.

Background and statutory framework

The request concerned Brazos County Water Control and Improvement District No. 1 (Big Creek), validated in 1959 under the authority of article XVI, section 59, of the Texas Constitution and located wholly within Brazos County. A federal court had enjoined the district from further construction until it completed a NEPA study with the Soil Conservation Service, the district found the study and remaining work prohibitively expensive, and it had failed to complete its flood-control and drainage structures within the ten-year period referenced in Water Code section 51.793. After roughly 30 years, with its bonds and obligations retired or provided for, about $30,000 would remain, and the only continuing district function would be maintaining dams, which the county was willing to assume. The AG noted the opinion process resolves legal questions on stated facts, not fact disputes (citing the district's history in Rotello v. Brazos County Water Control & Improvement Dist. No. 1, 511 S.W.2d 392 (Tex. Civ. App.—Houston [1st Dist.] 1974, writ ref'd n.r.e.)).

Title 4 of the Water Code governs districts created under article XVI, section 59 (Water Code section 50.001(1)), with chapter 50 generally applicable and chapter 51 concerning water control and improvement districts. Under chapter 50, subchapter G, the Texas Water Commission may, after notice and hearing, dissolve a district inactive for five consecutive years with no outstanding bonded indebtedness (section 50.251), whereupon the district's assets escheat to the state (section 50.257). Chapter 51, subchapter P, provides for voluntary dissolution in several situations. Section 51.781 requires dissolution after voters reject construction bonds and authorizes dissolution on the board's initiative (when the undertaking is impracticable) or on a voters' petition; the mechanics run through sections 51.782 through 51.792, and section 51.791 directs that excess taxes be paid to the county treasurer, with the commissioners court crediting the money to the county's interest and sinking fund or, if there are no outstanding county bonds, applying it as lawfully directed. The AG found Big Creek did not strictly meet any of the three section 51.781 circumstances.

Subchapter P also authorizes dissolution under section 51.793 where a district has not, within 10 years of creation, completed the construction to carry out its purposes; the mechanics (sections 51.794 through 51.828) are more elaborate and appear to assume outstanding obligations will require an election to approve additional "dissolution bonds" (see section 51.828). Big Creek met the section 51.793 condition, but those sections do not specify what becomes of excess taxes, unlike section 51.791. A third, small-county procedure (available only to districts in a county under 11,000 population; sections 51.829, 51.836) was unavailable to Brazos County, which had a 1980 population over 90,000 (cf. Aikin v. Franklin County Water Dist., 432 S.W.2d 520 (Tex. 1968)). Section 51.836, of interest, has the commissioners court levy taxes to pay a dissolved district's bonds maturing beyond the current year.

The AG traced the history: until 1929 there was no provision for dissolving such a district; the substance of section 51.781 and the small-county alternative were enacted that year (Acts 1929, 41st Leg., ch. 87, at 204; ch. 280, at 578), and the source of section 51.793 was enacted in 1943 (Acts 1943, 48th Leg., ch. 328, at 550), which declared itself cumulative of all other dissolution provisions. The AG reasoned that although a cumulative provision does not consolidate laws in pari materia, it indicates an intent that they be considered in harmonious coexistence (State v. Laredo Ice Co., 73 S.W. 951, 952 (Tex. 1903)), and that the substance of both section 51.791 (excess taxes to the county) and section 51.836 (county may retire a dissolved district's obligations) was already law when the 1943 act passed. Section 51.802 specifically allows a dissolving district's board to contract with trustees, engineers, attorneys, and others it considers necessary to properly liquidate and wind up the district's affairs, and the AG concluded the board may contract with the county to accept and maintain the district's facilities in exchange for its excess tax monies, conforming to the Water Code's policy exemplified by section 51.791 (see also sections 52.501, 66.403, 58.781-58.836; cf. Trimmer v. Carlton, 296 S.W. 1070 (Tex. 1927)).

On the county's authority, the AG relied on Local Government Code section 411.002, which allows a commissioners court to contract with a governmental unit to jointly acquire, construct, or maintain a canal, drain, levee, or other flood-control or drainage improvement, and to allocate maintenance responsibilities by contract. See also V.T.C.S. art. 4413(32c) (Interlocal Cooperation Act); Willacy County Water Control & Improvement Dist. No. 1 v. Abendroth, 177 S.W.2d 936 (Tex. 1944); cf. Attorney General Opinion MW-257 (1980). Aside from any statutory duty of the county upon dissolution of a district within its boundaries, the AG concluded that if the commissioners court reasonably finds the proposed contract is supported by adequate consideration flowing to the county, Brazos County may legally contract with the district to continue district functions after dissolution and receive the surplus tax funds in return.

Citations

Cases:

• Rotello v. Brazos County Water Control & Improvement Dist. No. 1, 511 S.W.2d 392 (Tex. Civ. App.—Houston [1st Dist.] 1974, writ ref'd n.r.e.) (history of the district)
• Aikin v. Franklin County Water Dist., 432 S.W.2d 520 (Tex. 1968) (small-county eligibility)
• State v. Laredo Ice Co., 73 S.W. 951 (Tex. 1903) (cumulative statutes read in harmony)
• Trimmer v. Carlton, 296 S.W. 1070 (Tex. 1927) (statutes in pari materia, same purpose)
• Willacy County Water Control & Improvement Dist. No. 1 v. Abendroth, 177 S.W.2d 936 (Tex. 1944) (classification of districts)

Statutory authority:

• Water Code Title 4, § 50.001(1); §§ 50.251, 50.257 (inactive-district dissolution; escheat)
• Water Code §§ 51.781, 51.782-51.792, 51.791 (voluntary dissolution; excess taxes to county)
• Water Code §§ 51.793, 51.794-51.828, 51.802, 51.828 (dissolution for non-completion; board contracts to wind up)
• Water Code §§ 51.829, 51.836 (small-county procedure); §§ 52.501, 66.403, 58.781-58.836
• Local Gov't Code § 411.002 (county flood-control and drainage contracts)
• V.T.C.S. art. 4413(32c) (Interlocal Cooperation Act); Tex. Const. art. XVI, § 59, § 59-a

Prior Attorney General opinion:

• Attorney General Opinion MW-257 (1980) (related duties of a county)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1039
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1989/jm1039.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; garbled case names have been corrected against the cited reporters; the linked PDF is authoritative.

April 11, 1989

Honorable James M. Kuboviak
Brazos County Attorney
300 East 26th Street, Suite 325
Bryan, Texas 77803

Opinion No. JM-1039

Re: Distribution of tax funds remaining after dissolution of water control and improvement district, and related questions (RQ-1520)

Dear Mr. Kuboviak:

You have asked about the right of Brazos County to contract with a water control and improvement district to receive and use the surplus tax funds of the district remaining at the time of its dissolution if the county agrees to carry out certain of the district's functions after the dissolution. The water control and improvement district is located wholly within Brazos County.

You explain:

Brazos County Water Control and Improvement District No. 1, Big Creek, (hereinafter "Big Creek") was validated for organization and creation by Act on June 27, 1959, Chapter 10, 1st C.S., §§ 1-12, 1959 Tex. Gen. Laws 30, and under the legislative duties conferred thereby at Tex. Const., Art. XVI, § 59. Several events now warrant dissolution of Big Creek. A federal district court order has enjoined Big Creek from completing any further construction of flood control improvements or of carrying out its statutory purposes until it has complied with the applicable provisions of the National Environmental Policy Act and the Environmental Quality Improvement Act by completing, in association with the Soil Conservation Service, a NEPA study of the water sheds within its boundaries. The district has found that the study and cost of the completion of improvements as necessitated by that study would be prohibitive. Prior to this date, Big Creek, because of continuous court proceedings and litigation, has failed to complete the flood control and drainage structures within the ten (10) year time period from its date of creation as set forth in § 51.793 of the Texas Water Code.

The district must now contract with some government entity to maintain and repair the structures it has completed, it must contract to pay for such services and then it must dispose of its surplus tax funds upon its dissolution.

. . . .

It has been determined by Big Creek, that, even after contracting with the County, if the district's debts and obligations were satisfied upon its dissolution, including allowances for the maintenance of existing improvements until their retirement, a cash surplus would exist.

We are advised that the Big Creek district has existed for approximately 30 years; that it issued bonds many years ago; that the issued bonds and other obligations have been retired or else previously collected tax money is available to retire all outstanding district obligations and anticipated expenses; and that approximately $30,000 will remain after such payments. It is also our understanding that the only "district functions" to be discharged following the dissolution of the district will be the maintenance of dams, for which Brazos County is willing to assume responsibility.[1]

Title 4 of the Texas Water Code governs districts, including the Big Creek District, created by the authority of article XVI, section 59, of the Texas Constitution. Water Code § 50.001(1). The provisions of the title generally applicable to all such districts are found in chapter 50 of the Water Code; those particularly concerning water control and improvement districts are contained in chapter 51 thereof.

Subchapter G of chapter 50 (applicable to all districts) deals generally with the dissolution of inactive districts. It provides that, after notice and hearing, the Texas Water Commission may dissolve any district which is inactive for a period of five consecutive years and has no outstanding bonded indebtedness. Water Code § 50.251. Upon the dissolution of a district by the commission, the assets of the district escheat to the state. Id. § 50.257.

Water control and improvement districts may also be voluntarily dissolved pursuant to subchapter P of chapter 51 of the Code (dealing particularly with water control and improvement districts). Different methods of doing so are authorized by subchapter P for several statutorily described situations. Section 51.781 of the Code provides:

(a) If the electors of a district reject the proposal to issue construction bonds by a constitutional or statutory majority vote, the board must dissolve the district and liquidate the affairs of the district as provided in Sections 51.781-51.792 of this code.

(b) Subject to the provisions of Subchapter G of Chapter 50 of this code, if a district finds at any time before the authorization of construction bonds or the final lending of its credit in another form that the proposed undertaking for any reason is impracticable or apparently cannot be successfully and beneficially accomplished, the board may issue notice of a hearing on proposal to dissolve the district.

(c) Subject to the provisions of Subchapter G of Chapter 50 of this code, if 20 percent of the qualified voters of a district petition the board for a hearing on a proposal to dissolve the district and deposit with the board an amount estimated to cover the actual cost of giving notice and holding the hearing, the board shall publish notice of the hearing within 10 days and shall hold the hearing within 40 days after the filing of the petition, as provided in Sections 51.782-51.785 of this code. If the finding is against the petition, the deposit shall be applied to pay the cost of giving notice and holding the hearing.

The mechanics of a dissolution effected pursuant to section 51.781 of the Water Code are controlled by sections 51.782 through 51.792. Section 51.791 speaks to the disposition of excess taxes and reads:

(a) If taxes have been collected by the dissolved district in excess of the amount required to liquidate the obligations of the district, the excess shall be paid ratably to the county treasurer or treasurers of the county or counties in which the district was located.

(b) The commissioners courts shall credit the money received from the dissolved district to the interest and sinking fund for any outstanding county bonds. If the county has no outstanding bonds, the money may be applied as the commissioners court lawfully directs.

However, the situation of the Big Creek district, as we understand it, does not meet strictly any of the three circumstances described in section 51.781 because bonds have not been rejected by voters, construction bonds have been authorized, and no voters have petitioned the board for a hearing on a proposal to dissolve the district or deposited funds to cover the costs of such a hearing.

Subchapter P also authorizes dissolution in another circumstance. Section 51.793 reads:

Subject to the provisions of Subchapter G of Chapter 50 of this code if a district has not within 10 years from the date of its creation commenced and completed the construction of a plant and improvements to carry out the purposes of its creation in accordance with the plans adopted by the district, the board may enter a resolution in its minutes to dissolve the district under the provisions of Sections 51.794-51.828 of this code. After compliance with these provisions, a vote of the electors of the district, and the payment of its valid, enforceable indebtedness, the district may be dissolved.

The mechanics of dissolution under section 51.793 provisions are much more elaborate, time consuming, and costly than are those required when dissolution is effected pursuant to section 51.781, but the Big Creek district apparently does meet the section 51.793 condition: it has not within 10 years from the date of its creation been able to carry out the purposes of its creation. The difficulty is that the subsequent sections governing the dissolution of districts under section 51.793 do not specify what is to become of excess taxes after the district is dissolved -- unlike the provision of section 51.791 applicable to section 51.781 dissolutions. Furthermore, the provisions governing dissolutions under section 51.793 appear to assume that outstanding obligations will remain unpaid and unprovided for, and that an election approving additional tax bonds ("dissolution bonds") will be necessary to effect a dissolution.[2]

There is a third avenue for dissolution or abolition of water control and improvement districts provided by subchapter P, but it is available only to districts located entirely in a county having a population of less than 11,000 according to the last preceding federal census. See Water Code § 51.829. Brazos County, according to the 1980 census, has a population of more than 90,000, so the third alternative procedure is not available to it. Cf. Aikin v. Franklin County Water Dist., 432 S.W.2d 520 (Tex. 1968) (eligibility). Of interest, nevertheless, in the sections describing its mechanism, is section 51.836, which reads:

If a district has outstanding bonds or other indebtedness maturing beyond the current year in which the dissolution occurs, the commissioners court of the county in which the district is located shall levy and have assessed and collected, in the manner prescribed in the Property Tax Code sufficient taxes on all taxable property in the district to pay the principal of and interest on the bonds and other indebtedness when due.

Until 1929, there was no provision in Texas law for the dissolution of a water control and improvement district. In that year, the substance of section 51.781 and its related provisions was enacted, and also the alternative procedure available under section 51.829. See Acts 1929, 41st Leg., ch. 87, at 204; ch. 280, at 578. The source law for section 51.793 and the procedure it authorizes was enacted in 1943. See Acts 1943, 48th Leg., ch. 328, at 550. That act provided, inter alia:

Sec. 18. This Act shall be cumulative of all other provisions of law providing for the dissolution of water control and improvement districts organized under the provisions of Sections 59-a of Article XVI of the Constitution of Texas, and shall be applicable only to such districts as may adopt the provisions hereof as provided . . . .

We are of the opinion that the intent of the 1943 act regarding a method for disposing of excess taxes is implied by its proclamation that its provisions are cumulative of all other provisions of law providing for the dissolution of water control and improvement districts. While such a statutory provision does not consolidate laws in pari materia, it does indicate an intent that they be considered to be in harmonious co-existence and cooperation. State v. Laredo Ice Co., 73 S.W. 951, 952 (Tex. 1903). The substance of both the provision now found in section 51.791 that excess taxes be paid to the county treasurer and the provision of section 51.836 that authorizes the county to retire the obligations of a dissolved district were already part of the law providing for the dissolution of such districts at the time of the 1943 enactment.

Section 51.802 of the Water Code (one of the sections supplementing the section 51.793 authorization for dissolution) specifically allows the board of the district to "contract with trustees, engineers, attorneys, and others it considers necessary or desirable to properly liquidate and wind up the affairs of the district," and we believe it may contract with the county to accept and maintain the district facilities in exchange for the district's excess tax monies remaining after its dissolution. In doing so, it will be conforming to the policy of the Water Code as exemplified by section 51.791. See also Water Code § 52.501 (dissolution of underground water conservation districts); id. § 66.403 (dissolution of storm control districts). See generally Water Code §§ 58.781-58.836 (irrigation districts). Cf. Trimmer v. Carlton, 296 S.W. 1070 (Tex. 1927) (in pari materia, same purpose).

Aside from whatever the statutory duty of the county may be upon the dissolution of a water district located within its boundaries, if, in the reasonable opinion of the county commissioners court, the proposed contract is supported by adequate consideration flowing to the county, we believe that Brazos County may legally contract with Brazos County Water Control and Improvement District No. 1 to continue and carry out district functions after the dissolution of the district and, as consideration therefor, to receive the surplus tax funds of the district upon dissolution of the district. Section 411.002 of the Local Government Code reads:

(a) The commissioners court of a county may contract with a governmental unit, including a county, municipality, or other political subdivision, to jointly acquire a right-of-way or to jointly construct or maintain a canal, drain, levee, or other improvement for the purpose of providing flood control or drainage as it relates to flood control or for the purpose of providing and maintaining necessary outlets.

(b) The contract may contain any provisions that the governing bodies of the contracting entities consider necessary.

(c) The contracting entities may provide by contract, on mutually agreeable terms, that they shall jointly maintain the project or that one of them shall maintain the project under its exclusive direction and control while the other entity contributes to the expense of maintenance.

See also V.T.C.S. art. 4413(32c) (Interlocal Cooperation Act); Willacy County Water Control & Improvement Dist. No. 1 v. Abendroth, 177 S.W.2d 936 (Tex. 1944) (classification of districts). Cf. Attorney General Opinion MW-257 (1980) (related duties of county).

SUMMARY

Brazos County may contract with Brazos County Water Control Improvement District No. 1 to continue and carry out district functions after the dissolution of the district and to receive the surplus tax funds of the district upon dissolution of the district.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Bruce Youngblood
Assistant Attorney General

Footnotes

1. The opinion process of this office is designed to furnish legal opinions based upon a stated fact situation, and not to resolve fact disputes. A recitation of facts in an opinion is not an affirmation of their accuracy, but merely a recital of the basis upon which the legal opinion is offered. See generally Rotello v. Brazos County Water Control & Improvement Dist. No. 1, 511 S.W.2d 392 (Tex. Civ. App.—Houston [1st Dist.] 1974, writ ref'd n.r.e.) (historical background regarding the district).

2. It is after the issuance, sale or delivery of needed dissolution bonds that a dissolution under section 51.793 is deemed to have been effected. Section 51.828 states: "(a) On the issuance and sale or delivery of the dissolution bonds and the appointment and qualification of the trustee, the secretary shall deposit all available existing records of the district in the office of the county clerk of the county or one of the counties in which the district is located. (b) The district immediately is considered dissolved for all purposes, except that the taxes levied against the taxable property may be enforced in the name of the district on behalf of the bondholders by the trustee or his successors. The surviving board may meet from time to time until the dissolution bonds are paid and discharged and may delegate its powers and give instructions to the trustee or his successors as the board sees fit and circumstances warrant. After the payment of all dissolution bonds, interest, and costs of collection, the board shall be dissolved."