1. (a) Developer projects. The following provisions shall apply unless the commission, in its discretion, determines that application to a particular situation renders an inequitable result.

   1. (1) A developer project is a district project which provides water, wastewater or drainage service for property owned by a developer of property in the district, as defined by Water Code, §49.052(d).
   2. (2) Except as permitted pursuant to paragraph (8) of this subsection, the costs of joint facilities that benefit the district and others should be shared on the basis of benefits received. Generally, the benefits are the design capacities in the joint facilities for each participant. Proposed cost sharing for conveyance facilities should account for both flow and inflow locations.
   3. (3) The cost of clearing and grubbing of district facilities easements that will also be used for other facilities that are not eligible for district expenditures, such as roads, gas lines, telephone lines, etc., should be shared equally by the district and the developer, except where unusually wide road or street rights-of-way or other unusual circumstances are present, as determined by the commission. The district's share of such costs is further subject to any required developer contribution pursuant to §293.47 of this title (relating to Thirty Percent of District Construction Costs To Be Paid by Developer). The applicability of the competitive bidding statutes and/or regulations shall be determined by the amount of the estimated district share, including any required developer contribution; provided, however, that in instances where such clearing and grubbing construction contracts are let and awarded in the developer's name and the developer's aggregate share of such costs, including any required developer contribution, exceeds 50% of the total construction contract costs, the competitive bidding statutes and/or regulations are not considered to be applicable.
   4. (4) A district may finance the cost of spreading and compacting of fill in areas that require the fill for development purposes, such as in abandoned ditches or floodplain areas, only to the extent necessary to dispose of the spoil material (fill) generated by other projects of the district.
   5. (5) The cost of any clearing and grubbing in areas where fill is to be placed should not be paid by the district unless the district can demonstrate a net savings in the costs of disposal of excavated materials when compared to the estimated costs of disposal off site.
   6. (6) When a developer changes the plan of development requiring the abandonment or relocation of existing facilities, the district may pay the cost of either the abandoned facilities or the cost of replacement facilities, but not both.
   7. (7) When a developer changes the plan of development requiring the redesign of facilities that have been designed, but not constructed, the district may pay the cost of the original design or the cost of the redesign, but not both.

   8. (8) A district shall not finance the pro rata share of oversized water, sewer, or drainage facilities to serve areas outside the district unless:

      1. (A) such oversizing:

         1. (i) is required by or represents the minimum approvable design sizes prescribed by local governments or other regulatory agencies for such applications;
         2. (ii) does not benefit out-of-district land owned by the developer;
         3. (iii) does not benefit out-of-district land currently being developed by others; and
         4. (iv) the district agrees to use its best efforts to recover such costs if a future user outside the district desires to use such capacity; or
      2. (B) the district has entered into an agreement with the party being served by such oversized capacity which provides adequate payment to the district to pay the cost of financing, operating, and maintaining such oversized capacity; or

      3. (C) the district has entered into an agreement with the party to be served or benefited in the future by such oversized capacity, which provides for contemporaneous payment by such future user of the incremental increase in construction and engineering costs attributable to such oversizing and which, until the costs of financing, construction, operation, and maintenance of such oversized facilities are prorated according to paragraph (2) of this subsection, provides that:

         1. (i) the capacity or usage rights of such future user shall be restricted to the design flow or capacity of such oversized facilities multiplied by the fractional engineering and construction costs contemporaneously paid by such future user; and
         2. (ii) such future user shall pay directly allocable operation and maintenance costs proportionate to such restricted capacity or usage rights.
   9. (9) Railroad, pipeline, or underground utility relocations that are needed because of road crossings should not be financed by the district; however, if such relocations result from a simultaneous district project and road crossing project, then such relocation costs should be shared equally.
   10. (10) Engineering studies, such as topographic surveys, soil studies, fault studies, boundary surveys, etc., that contain information that will be used both for district purposes and for other purposes, such as roadway design, foundation design, land purchases, etc., should be shared equally by the district and the developer, unless unusual circumstances are present as determined by the commission.
   11. (11) Land planning, zoning, and development planning costs should not be paid by the district, except for conceptual land use plans required to be filed with a city as a condition for city consent to creation of the district.
   12. (12) The cost of constructing lakes or other facilities that are part of the developer's amenities package should not be paid by the district. The cost of combined lake and detention facilities should be shared with the developer on the basis of the volume attributable to each use, and land costs should be shared on the same basis, unless the district can demonstrate a net savings in the cost of securing fill and construction materials from such lake or detention facilities, when compared to the costs of securing such fill or construction materials off-site.

   13. (13) Bridge and culvert crossings shall be financed in accordance with the following provisions.

       1. (A) The costs of bridge and culvert crossings needed to accommodate the development's road system shall not be financed by a district unless such crossing consists of one or more culverts with a combined cross-sectional area of not more than nine square feet. The districts share shall be subject to the developer's 30% contribution as may be required by §293.47 of this title (relating to Thirty Percent of District Construction Costs To Be Paid by Developer).

       2. (B) Drainage districts and levee improvement districts which were confirmed and operating pursuant to the Water Code, Chapters 56 and 57, respectively, prior to September 1, 1989, may fund the costs of bridge and culvert crossings larger than those specified in subparagraph (A) of this paragraph which are necessary as a result of required channel improvements subject to the following limitations:

          1. (i) the crossing must be located entirely or partially within the district's boundaries;
          2. (ii) the drainage channel construction or renovation must benefit property within the district's boundaries;
          3. (iii) the costs shall not exceed a pro rata share based on the percent of total drainage area of the channel crossed, measured at the point of crossing, calculated by taking the total cost of such bridge or culvert crossing multiplied by a fraction, the numerator of which is the total drainage area located within the district upstream of the crossing, and the denominator of which is the total drainage area upstream of the crossing;
          4. (iv) the district shall be responsible for not more than 50% of the pro rata share as calculated under this subsection, subject to the developer's 30% contribution as may be required by §293.47 of this title (relating to Thirty Percent of District Construction Costs To Be Paid by Developer).
       3. (C) The cost of replacement of existing bridges and culverts not constructed or installed by the developer, or the cost of new bridges and culverts across existing roads not financed or constructed by the developer, may be financed by the district, except that any costs of increasing the traffic carrying capacity of bridges or culverts shall not be financed by the district.
   14. (14) In evaluating district construction projects, including those described in paragraphs (1)-(12) of this subsection, primary consideration shall be given to engineering feasibility and whether the project has been designed in accordance with good engineering practices, notwithstanding that other acceptable or less costly engineering alternatives may exist.

   15. (15) Bond issue proceeds will not be used to pay or reimburse consultant fees for the following:

       1. (A) special or investigative reports for projects which, for any reason, have not been constructed and, in all probability, will not be constructed;
       2. (B) fees for bond issue reports for bond issues consisting primarily of developer reimbursable and approved by the commission but which are no longer proposed to be issued; or
       3. (C) fees for completed projects which are not and will not be of benefit to the district;
       4. (D) provided, however, that the foregoing limitations shall not apply to regional projects or special or investigative reports necessary to properly evaluate the feasibility of alternative district projects.

   16. (16) Bond funds may be used to finance costs and expenses necessarily incurred in the organization and operation of the district during the creation and construction periods as follows:

       1. (A) Such costs were incurred or projected to incur during creation, and/or construction periods which includes periods during which the district is constructing its facilities or there is construction by third parties of above ground improvements within the district.
       2. (B) Construction periods do not need to be continuous; however, once reimbursement for a specific time period has occurred, expenses for a prior time period are no longer eligible. Payment of expenses during construction periods is limited to five years in any single bond issue.
       3. (C) Any reimbursement to a developer with bond funds is restricted to actual expenses paid by the district during the same five year period for which application is made pursuant to this subsection.
       4. (D) The district may pay interest on the advances under this paragraph. Section 293.50 of this title (relating to Developer Interest Reimbursement) applies to interest payments for a developer and such payments are subject to a developer reimbursement audit.
   17. (17) In instances where creation costs to be paid from bond proceeds are determined to be excessive, the executive director may request that the developer submit invoices and cancelled checks to determine whether such creation costs were reasonable and customary and necessary for district creation purposes. Such creation costs shall not include planning, platting, zoning, other costs prohibited by paragraphs (10) and (14) of this subsection, and other matters not directly related to the district's water, sewage, and drainage system, even if required for city consent.
   18. (18) The district shall not purchase, pay for, or reimburse the cost of facilities, either completed or incomplete, from which it has not and will not receive benefit, even though such facilities may have been at one time required by a city or other entity having jurisdiction.
   19. (19) The district shall not enter into any binding contracts with a developer which compel the district to become liable for costs above those approved by the commission.

   20. (20) A district shall not purchase more water supply or wastewater treatment capacity than is needed to meet the foreseeable capacity demands of the district, except in circumstances where:

       1. (A) lease payments or capital contributions are required to be made to entities owning or constructing regional water supply or wastewater treatment facilities to serve the district and others;
       2. (B) such purchases or leases are necessary to meet minimum regulatory standards; or
       3. (C) such purchases or leases are justified by considerations of economic or engineering feasibility.

2. (b) All projects.

   1. (1) The purchase price for existing facilities not covered by a preconstruction agreement or otherwise not constructed by a developer in contemplation of resale to the district should be established by an independent appraisal by a registered professional engineer hired by the district. The appraised value should reflect the current condition of the facilities and estimated cost of repair, as evidenced by an on-site inspection.
   2. (2) In order for a proposed project to be considered feasible, the aggregate wastewater treatment capacity authorized under permits held by the applicant and/or developer should be adequate to serve the projected buildout used in the projection of revenues and expenses.
   3. (3) Contract revenue bonds proposed to be issued by districts for facilities providing water, sewer, or drainage, pursuant to contracts authorized under Local Government Code, §402.014, or other similar statutory authorization, will be approved by the commission only when the city's pro rata share of debt service on such bonds is sufficient to pay for the cost of the water, sewer, or drainage facilities proposed to serve areas located outside the boundaries of the service area of the issuing district.

   4. (4) When a district proposes to obtain water or sewer service from a municipality, district, or other political subdivision and proposes to use bond proceeds to compensate the providing political subdivision for the water or sewer services on the basis of a capitalized unit cost, e.g., per connection, per lot, or per acre, the commission will approve the use of bond proceeds for such compensation under the following conditions:

      1. (A) the unit cost is reasonable;
      2. (B) the unit cost approximates the cost to the entity providing the necessary facilities, or providing entity has adopted a uniform service plan for such water and sewer services based on engineering studies of the facilities required; and

      3. (C) the district and the providing entity have entered into a contract which will:

         1. (i) specifically convey either an ownership interest in or a specified contractual capacity or volume of flow into or from the system of the providing entity;
         2. (ii) provide a method to quantify the interest or contractual capacity rights;
         3. (iii) provide that the term for such interest or contractual capacity right is not less than the duration of the maturity schedule of the bonds; and
         4. (iv) contain no provisions which could have the effect of subordinating the conveyed interest or contractual capacity right to a preferential use or right of any other entity.

Source Note:The provisions of this §293.44 adopted to be effective September 5, 1986, 11 TexReg 3736; amended to be effective June 30, 1993, 18 TexReg 3758; amended to be effective April 15, 1994, 19 TexReg 2301; amended to be effective October 22, 1996, 21 TexReg 9905.