Lawmakers pass bill that would allow Agua SUD to be placed in receivership

The Texas Legislature passed a bill last week that would allow the troubled Agua Special Utility District to be placed in receivership.

State Sen. Juan “Chuy” Hinojosa authored Senate Bill 1188 after becoming concerned about corruption at Agua SUD, which serves more than 17,000 customers in western Hidalgo County.

“I think the present board is working very hard to correct the mismanagement and clean up the mess that was left by the previous board,” Hinojosa said.

In February, when he filed the bill, Hinojosa explained why the state needed a way to place Agua SUD in receivership if the problems re-emerged.

“Corrupt public officials and businessmen saddled Agua SUD with crippling non-voter approved debt in exchange for kickbacks facilitated through an energy savings performance contract (ESPC),” according to a statement of intent filed with the bill. “Agua SUD’s financial report for fiscal year 2021 revealed the district was facing major financial problems as a result of decisions made by former board members between 2016 and 2020. Those decisions racked up debt, ran six-figure deficits, and depleted a multi-million cash and balance down to less than $232,000.”

Lawmakers sent the bill to Gov. Greg Abbott on Memorial Day. The bill would allow the Texas Commission on Environmental Quality to start the receivership process if Agua SUD:

> Received three consecutive audit reports with anything other than an unqualified or clean opinion

> Completed five consecutive fiscal years at a net loss

> Defaulted on more than one financial debt obligation

> Violated a final judgment issued by a district court in certain circumstances

The state could also start the receivership process if a member of the board or an “agent” of Agua SUD is convicted of an offense related to the management or governance of the utility district. A final conviction isn’t required; a plea of guilty or no contest is enough to trigger receivership.

Along with creating a process for Agua SUD to be placed in receivership, the bill requires candidates and elected officials to file campaign finance reports with the Texas Ethics Commission.

They currently file campaign finance reports with Agua SUD. To view the documents, members of the public must submit a request or visit Agua SUD during regular business hours.

State Sen. Juan “Chuy” Hinojosa, D-McAllen. (Photo courtesy of state Sen. Juan “Chuy” Hinojosa.)

The Texas Ethics Commission would make the documents available to anyone with an internet connection — no public information request or appointment required.

Utility board Director Jose Luis Ochoa Jr., who represents the Peñitas area, said he supports the bill.

“I see the point,” Ochoa said. “I see why they’re doing it. The board before, they kind of got away with some stuff.”

Utility board Director Adriana Flores-Villarreal, who represents Sullivan City and part of La Joya, remained skeptical.

“I understand what’s going on,” Flores-Villarreal said. “And what they’re trying to do.”

Flores-Villarreal, however, said the bill wouldn’t prevent corruption. The new requirements, which are designed to improve accountability and transparency, may actually cause problems for the current board instead.

“I hate to say it like this, but corruption’s always going to exist. You can try and make all these changes, but people that are corrupt will always be corrupt,” Flores-Villarreal said. “So why punish the innocent ones that are not corrupt?”