Lower Colorado Riv. Auth. v. City of San Marcos

• Court: Texas Supreme Court
• Writing for the Court: WALKER; McGEE; GREENHILL, C.J., and DANIEL
• Citation: Lower Colorado Riv. Auth. v. City of San Marcos, 523 S.W.2d 641 (Tex. 1975)
• Decision Date: 07 May 1975
• Docket Number: No. B--4663,B--4663
• Parties: LOWER COLORADO RIVER AUTHORITY, Petitioner, v. CITY OF SAN MARCOS, Texas, Respondent.

Page 641

523 S.W.2d 641

LOWER COLORADO RIVER AUTHORITY, Petitioner, v. CITY OF SAN MARCOS, Texas, Respondent.

No. B--4663.

Supreme Court of Texas.

May 7, 1975.

Small, Craig & Werkenthin, C. C. Small, Jr. and Lawrence S. Smith, Austin, for petitioner.

McGinnis, Lochridge & Kilgore, James W. Wilson, Austin, for respondent.

WALKER, Justice.

The opinion delivered in this case on December 11, 1974, is withdrawn, and the following is substituted therefor:

This suit was brought by the City of San Marcos against the Lower Colorado River Authority to obtain: (1) a judgment declaring that San Marcos has power to regulate the rates charged by LCRA for the sale of electricity at retail within the city limits and that resolutions of LCRA's Board of Directors increasing rates were void for noncompliance with the open meeting law, Art. 6252--17, ¹ and (2) for an injunction restraining LCRA from collecting rates in excess of those authorized by San Marcos. LCRA counterclaimed for declaratory relief to the contrary and an adjudication that the City's rate ordinance was void for lack of notice to LCRA.

The trial court entered judgment declaring that San Marcos has no jurisdiction over rates charged by LCRA for the sale of electricity, that the City's rate ordinance is void, and that rate increases ordered by LCRA in 1972 and 1973 are invalid. Both parties perfected appeals, although San Marcos did not complain of the trial court's action in holding its rate ordinance invalid. The Court of Civil Appeals: (1) reversed the trial court's judgment with respect to the regulatory jurisdiction of San Marcos and rendered judgment that San Marcos has exclusive power, after notice and hearing, to regulate by ordinance LCRA's rates for electricity sold within the city limits; and (2) affirmed the trial court's judgment in all other respects. Tex.Civ.App., 508 S.W.2d 403. We modify the judgment of the Court of Civil Appeals to declare that the 1973 rate increase ordered by the LCRA is not invalid, and as so modified the judgment of the Court of Civil Appeals is affirmed.

All of the material facts were stipulated in the trial court. San Marcos is a municipal corporation located in Hays County, and is incorporated as a home rule city under Article XI, Section 5, of the Texas Constitution, Vernon's Ann.St. The city charter expressly authorizes the City Council to regulate by ordinance the rates of every public utility operating in the city. LCRA was created by Article 8280--107 as a conservation and reclamation district under the authority of Article XVI, Section 59, of the Texas Constitution. It is authorized to develop and generate water power and electric energy within its boundaries and to distribute and sell the same within and without its boundaries. San Marcos and Hays County are not within the boundaries of LCRA. In 1939 LCRA acquired from Texas Power & Light Company the electrical distribution system serving the residents of San Marcos, including a 50-year franchise granted by the City in 1925. The system is now operated by LCRA under a 10-year franchise granted by the City in 1967.

Prior to 1972 San Marcos made no attempt to regulate rates charged by LCRA for electric service, but it has from time to time claimed regulatory jurisdiction over rates. LCRA has consistently denied that San Marcos has any power with respect to rates, and there has been a continuing controversy between the parties on that question. On October 19, 1972, the LCRA Board of Directors adopted a resolution substantially increasing its retail electric rates, including those charged in San Marcos, effective with the first monthly billing period after January 1, 1973. On December 15, 1972, the City Council passed on first reading an ordinance regulating electrical rates in the city. The rates prescribed by the ordinance are those that were being charged in San Marcos at that time. The ordinance was finally adopted on December 19, 1972, and LCRA was notified the following day. LCRA made no reply but put its increased rates into effect in January, and this action was brought shortly thereafter.

The brief of LCRA in the Court of Civil Appeals refers to 'the power claimed by San Marcos under § 12 of Article 1175.' It argued that the words 'person, firm or corporation' as used in the statute do not embrace a municipal corporation such as LCRA, and that the statute does not contemplate regulation of rates charged by a governmental agency. This was treated by the Court of Civil Appeals as an 'implied limitation' argument, and with good reason since Article 1175 could have no other bearing on the case. The intermediate court concluded that Subdivision 12 of Article 1175 simply makes clear the constitutional power of home rule cities to regulate the rates of all utilities, including LCRA, rendering service to their inhabitants. We do not attempt to explore that question, because LCRA now recognizes, and properly so, that 'any construction of Article 1175 is immaterial' in the present case.

A home rule city derives its power not from the Legislature but from Article XI, Section 5, of the Texas Constitution. Accepting cities and towns of more than 5,000 population have 'full power of self-government, that is, full authority to do anything the legislature could theretofore have authorized them to do. The result is that now it is necessary to look to the acts of the legislature not for grants of power to such cities but only for limitations on their powers.' Forwood v. City of Taylor, 147 Tex. 161, 214 S.W.2d 282. Where Article 1175 indicates that a power is to be exercised by the 'governing authority' or specifies the procedure to be followed, the statutory provisions may be regarded, in some instances at least, as limitations on the power of the city to delegate the power to other officials or act in any other manner. See Burch v. City of San Antonio, Tex.Sup., 518 S.W.2d 540. In view of the explicit provisions of Article 1176, however, the enumeration of powers in Article 1175 may never be construed as an implied limitation on the exercise by a home rule city of all powers incident to the enjoyment of local self-government.

The powers of home rule cities are subject to and may be limited only by their charters or by the Constitution or by general law. In this instance there is no limitation in either the Constitution or the charter, and the parties agree that the case turns on whether Section 8 of the LCRA Act, Article 8280--107, constitutes a legislative limitation upon the power of San Marcos as a home rule city with respect to LCRA rates. Section 8 of the Act provides as follows:

Sec. 8. The Board shall establish and collect rates and other charges for the sale or use of water, water connections, power, electric energy or other services sold, furnished, or supplied by the District which fees and charges shall be reasonable and nondiscriminatory and sufficient to produce revenues adequate;

(a) to pay all expenses necessary to the operation and maintenance of the properties and facilities of the District;

(b) to pay the interest on and principal of all bonds issued under this Act when and as the same shall become due and payable;

(c) to pay all sinking fund and/or reserve fund payments agreed to be made in respect of any such bonds, and payable out of such revenues, when and as the same shall become due and payable; and

(d) to fulfill the terms of any agreements made with the holders of such bonds and/or with any person in their behalf.

Out of the revenues which may be received in excess of those required for the purposes specified in subparagraphs (a), (b), (c) and (d) above, the Board may in its discretion establish a reasonable depreciation and emergency fund, or retire (by purchase and cancellation or redemption) bonds issued under this Act, or apply the same to any corporate purpose.

It is the intention of this Act that the rates and charges of the District shall not be in excess of what may be necessary to fulfill the obligations imposed upon it by this Act. Nothing herein shall be construed as depriving the State of Texas of its power to regulate and control fees and/or charges to be collected for the use of water, water connections, power, electric energy, or other service, provided that the State of Texas does hereby pledge to and agree with the purchasers and successive holders of the bonds issued hereunder that the State will not limit or alter the power hereby vested in the District to establish and collect such fees and charges as will produce revenues sufficient to pay the items specified in subparagraphs (a), (b), (c) and (d) of this Section 8, or in any way to impair the rights or remedies of the holders of the bonds, or of any person in their behalf, until the bonds, together with the interest thereon, with interest on unpaid installments of interest and all costs and expenses in connection with any action or proceedings by or on behalf of the bondholders and all other obligations of the District in connection with such bonds are fully met and discharged.

LCRA emphasizes: (1) the provision that the Board shall establish and collect rates and other charges for the sale or use of electric energy supplied by the District, and (2) the statutory pledge that the State will not limit or alter the power vested in the District to establish and collect such fees and charges as will produce revenue sufficient to pay the items specified in subparagraphs (a), (b), (c) and (d) of Section 8 or in any way to impair the rights or remedies of bondholders. LCRA then argues that in view of these provisions and under our holding in Lower Colorado River Authority v. McCraw, 125 Tex. 268, 83 S.W.2d 629, it is clear that the Legislature intended to withdraw from home rule cities power to regulate rates charged by LCRA for the sale of electric energy within the city limits. We do not agree.

A limitation on the power of home rule cities by general law or by...