CHAPTER 454. MUNICIPAL MASS TRANSPORTATION SYSTEMS

TRANSPORTATION CODE

TITLE 6. ROADWAYS

SUBTITLE K. MASS TRANSPORTATION

CHAPTER 454. MUNICIPAL MASS TRANSPORTATION SYSTEMS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 454.001. AUTHORITY. (a) A municipality may own, purchase,

construct, improve, extend, and operate a mass transportation

system to carry passengers for hire within the municipality, its

suburbs, and adjacent areas.

(b) A municipality, individually or in cooperation with the

United States, may:

(1) undertake research, development, and demonstration projects

for a mass transportation system in the municipality, its

suburbs, and adjacent areas; and

(2) acquire, construct, and improve a facility or equipment for

use, by operation, lease, or otherwise, in mass transportation

service in those areas on, under, over, along, or across a public

street or highway and on real property, an easement, or a

right-of-way acquired for that purpose.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.002. ESSENTIAL GOVERNMENTAL FUNCTIONS. (a) Mass

transportation service provided by a municipality directly or

through another entity by lease, contract, or other manner is an

essential governmental function and not a proprietary function

for all purposes, including the application of Chapter 101, Civil

Practice and Remedies Code, if the service is provided:

(1) on a fixed rail or other designated and dedicated route;

(2) over a distance of less than 20 miles; and

(3) primarily for travel through or to an area of historical,

architectural, recreational, or cultural interest.

(b) An independent contractor that on behalf of a municipality

provides mass transportation service that is an essential

governmental function under Subsection (a) is liable for damages

only to the extent that the municipality would be liable if the

municipality were performing the function.

(c) This section does not apply to taxicab transportation

service.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.003. FEDERAL GRANTS AND LOANS. (a) A municipality may

accept a grant or loan from the United States to finance all or

part of the cost of acquiring, constructing, or improving a

facility or equipment for use, by operation, lease, or otherwise,

in mass transportation service in the municipality, its suburbs,

and adjacent areas and in coordinating mass transportation

service with highway and other transportation in those areas.

(b) Ratification by referendum of a regional authority under

Chapter 451 by less than all municipalities in the metropolitan

area as defined in that chapter does not affect the eligibility

of an excepted municipality to receive federal transit grants

under the National Mass Transportation Assistance Act of 1974 or

subsequent federal statute.

(c) Ratification by referendum of an authority under Chapter 452

by less than all municipalities in the metropolitan area as

defined in that chapter does not affect the eligibility of an

excepted municipality to receive federal transit grants under the

Surface Transportation Assistance Act of 1978 or subsequent

federal statute.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.004. MANAGEMENT. (a) By the terms of an instrument

evidencing an encumbrance of a mass transportation system or the

terms of an ordinance, a municipality may place the management of

a mass transportation system with the governing body of the

municipality or a board of trustees named in the instrument or

ordinance.

(b) A board of trustees of a mass transportation system must

consist of three to nine members, one of whom must be the mayor

of the municipality. The instrument or ordinance must set the

trustees' compensation, which may not exceed two percent of the

gross annual receipts of the system. The instrument or ordinance

may specify:

(1) the term of office of the board of trustees;

(2) the board's powers and duties;

(3) the manner in which the board may exercise its powers and

duties;

(4) the election of the trustees' successors; and

(5) any matter relating to the board's organization.

(c) On any matter not covered by the instrument or ordinance,

the board is governed by the laws and rules controlling the

governing body of the municipality to the extent applicable.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.005. LEASE OF SYSTEM. (a) In lieu of operating a mass

transportation system, the governing body of a municipality or a

board of trustees managing the system, with the approval of the

municipality's governing body by resolution, may enter into a

lease or other contractual arrangement for the operation of the

system by a privately owned and operated corporation.

(b) The guaranteed or contingent payment of rentals, computed on

revenue or gross or net profits or determined by any other method

of compensation the governing body or board of trustees

determines to be reasonable, may be the consideration for a lease

or other contract under this section.

(c) The municipality must give public notice and make a request

for the submission of bids in the manner required by law for the

taking of bids for a public construction contract before entering

into a lease or other contract under this section. The

municipality shall accept the best bid submitted, considering the

rentals to be paid and the experience and financial

responsibility of the corporations submitting the bids.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.006. FARES. (a) Fares charged by a mass

transportation system may be set according to a zone system or

other classification that the municipality determines to be

reasonable.

(b) Unless otherwise considered necessary by the governing body

of the municipality to maintain the level and quality of service

desired, a mass transportation system shall charge and collect

fares that are sufficient to:

(1) pay all operating, maintenance, depreciation, and

replacement charges;

(2) provide for extensions to the extent permitted by this

chapter; and

(3) provide and maintain in the time and manner prescribed by

the applicable ordinances, deeds of trust, and indentures money

sufficient to pay for debt service and reserves for the security

and orderly payment of bonds or notes.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.007. USE OF REVENUE TO PAY OTHER MUNICIPAL DEBTS

PROHIBITED. (a) Except as permitted by the ordinance

authorizing the bonds or notes or the deed of trust or indenture

securing the bonds or notes or as provided by Subsection (b), the

revenue of a mass transportation system may not be used to pay

any other debt, expense, or obligation of the municipality.

(b) An acquired mass transportation system may pay the

municipality that acquired the system for the loss of ad valorem

taxes previously paid by the owners of the system until the

indebtedness secured by the taxes is paid.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.008. RECORDS AND ACCOUNTS. (a) The mayor of a

municipality shall install and maintain a complete system of

records and accounts showing the revenue collected and showing

separately the amount spent or set aside for operation, salaries,

labor, materials, repairs, maintenance, depreciation,

replacements, extensions, and debt service on bonds or notes

issued under this chapter.

(b) A mayor commits an offense if the mayor fails to install and

maintain a system of records and accounts as required by

Subsection (a) on or before the 90th day after the date the mass

transportation system is completed. An offense under this section

is a misdemeanor punishable by a fine of not less than $100 or

more than $1,000.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.009. ANNUAL REPORT. (a) Not later than February 1 of

each year, the superintendent or manager of a mass transportation

system shall file with the mayor of the municipality a detailed

report of the operations for the year ending the preceding

January 1, showing the total sums collected, the balance due, the

total disbursements made, and amounts remaining unpaid as a

result of the operation of the system during the year.

(b) A superintendent or manager commits an offense if the

superintendent or manager fails to file as required by Subsection

(a). An offense under this section is a misdemeanor punishable by

a fine of not less than $100 or more than $1,000.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.010. ENFORCEMENT. A taxpayer or holder of indebtedness

of a mass transportation system residing within the municipality

may enforce this chapter by appropriate civil action in a

district court of the county in which the municipality is

located.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

SUBCHAPTER B. REVENUE BONDS AND NOTES

Sec. 454.021. AUTHORITY TO ISSUE. (a) A municipality may issue

bonds and notes from time to time and in the amounts it considers

necessary or appropriate for acquiring, constructing, improving,

or extending a mass transportation system.

(b) Bonds or notes issued under this chapter are fully

negotiable and may be made redeemable before maturity, at the

option of the issuing municipality, at the price and under the

terms fixed by the issuing municipality in the ordinance

authorizing the bonds or notes.

(c) Bonds or notes issued under this chapter shall be sold for

the price the governing body of the municipality determines to be

in the best interest of the municipality.

(d) Subject to the restrictions in this chapter, the governing

body of a municipality may fix the form, conditions, and details

of bonds and notes issued under this chapter.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.022. NOTICE OF ORDINANCE AUTHORIZING ISSUANCE. Before

adopting an ordinance authorizing the issuance of bonds or notes

under this chapter, the governing body of a municipality shall

give notice of the time when the ordinance is to be adopted. The

notice shall be published in a newspaper of general circulation

in the municipality, in at least two issues, with the first

publication occurring at least 14 days before the date on which

the ordinance is to be adopted.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.023. PETITION FOR ELECTION. (a) The governing body of

a municipality may issue bonds or notes under this chapter

without an election unless a petition requesting an election on

the question is filed with the municipal secretary before the

scheduled time for adopting the ordinance authorizing the

issuance of the bonds or notes.

(b) A petition under this section must be signed by at least 10

percent of the registered voters of the municipality who have

rendered their property for taxation.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.024. ELECTION. (a) If a petition meeting the

requirements of Section 454.023 is filed:

(1) the governing body of the municipality shall hold an

election on the question as provided by Chapter 1251, Government

Code; and

(2) the bonds or notes may not be issued unless a majority of

the votes received at the election favor the question.

(b) The governing body of a municipality may call an election

for the issuance of bonds or notes under this chapter without a

petition under Section 454.023.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Amended by Acts 2001, 77th Leg., ch. 1420, Sec. 8.398, eff. Sept.

1, 2001.

Sec. 454.025. ENCUMBRANCE OF TRANSPORTATION SYSTEM. (a) To

secure the payment of bonds or notes issued under this chapter, a

municipality may encumber:

(1) all or any part of the mass transportation system;

(2) the property of the system, including a bus or other

vehicle, machinery, and equipment of any kind used in the

operation of the system;

(3) the revenue of the system;

(4) the franchise of the system; or

(5) any other thing relating to the system that is acquired or

is to be acquired.

(b) A municipality may:

(1) encumber separately any property, including a bus or other

vehicle, machinery, or equipment of any kind; or

(2) acquire, hold, use, or contract for any property, including

a bus or other vehicle, machinery, or equipment of any kind,

under a lease arrangement, chattel mortgage, or conditional sale,

including an equipment trust transaction.

(c) This chapter does not prohibit a municipality from

encumbering a transportation system for the purposes of

purchasing, building, mortgaging, extending, or repairing, or

reconstructing another system and purchasing necessary property

in connection with the system.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.026. TRANSPORTATION SYSTEM FRANCHISE. In addition to

encumbering the property of a mass transportation system under

Section 454.025, a municipality, by the terms of an instrument

evidencing that encumbrance, may grant to the purchaser under the

power of sale in the instrument a franchise to operate the system

and the system's property. A franchise under this section may not

exceed 25 years.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.027. OPERATING EXPENSES AS LIEN ON REVENUE. If the

revenue of a mass transportation system is encumbered under this

chapter, the expenses of operation and maintenance, including all

salaries, labor, materials, interest, repairs, and extensions

necessary to render efficient service and each proper item of

expense, are a first lien against the revenues. The expense of an

extension may be a lien prior to an existing lien only if:

(1) the governing body of the municipality considers the

extension necessary to keep the system in operation and render

adequate service to the municipality and its inhabitants; or

(2) the extension is necessary to meet a condition that would

otherwise impair the original securities.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.028. OBLIGATION OF TRANSPORTATION SYSTEM NOT MUNICIPAL

DEBT. (a) An obligation of a mass transportation system:

(1) is not a debt of the municipality;

(2) is solely a charge on the property, including the pledged

revenue, of the encumbered system; and

(3) may not be included in determining the power of the

municipality to issue any bonds or notes for any purpose

authorized by law.

(b) A municipality may make payments on bonds or notes issued

under this chapter out of any other funds that lawfully may be

used for that purpose.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.029. ADDITIONAL BONDS OR NOTES. (a) While bonds or

notes that are payable from and secured by a pledge of the

revenue of a mass transportation system are outstanding, the

municipality that issued the bonds or notes may from time to time

issue other bonds or notes for the purpose of:

(1) extending, improving, or both extending and improving the

system; or

(2) acquiring another mass transportation system.

(b) Bonds or notes issued under Subsection (a) constitute a lien

on the revenue, in the order of their issuance, inferior to the

liens securing all issues and series of bonds or notes previously

issued.

(c) Notwithstanding Subsection (b), a municipality may:

(1) adopt an ordinance or execute and issue a deed of trust,

trust indenture, or similar instrument that provides for the

subsequent issuance of additional bonds or notes on a parity with

the previously issued bonds or notes; and

(2) authorize, issue, and sell additional bonds or notes, from

time to time and in different series, payable from the revenue of

the mass transportation system and the revenue of any additional

sources, on a parity with the bonds or notes previously issued

and secured by liens on the transportation system that are on a

parity with the lien securing the previously issued bonds or

notes, subject to the conditions of the ordinance or instrument

described by Subdivision (1).

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.

Sec. 454.030. REFUNDING BONDS OR NOTES. (a) A municipality may

issue refunding bonds or notes to refund one or more series or

issues of bonds or notes.

(b) Refunding bonds or notes have the same priority of lien on

the revenue pledged to their payment that the bonds or notes

being refunded have, except that if all the outstanding bonds or

notes of two or more series or issues of bonds or notes are

refunded in a single issue of refunding bonds or notes, the lien

of all refunding bonds or notes is equal. A refunding bond or

note may not have a priority of lien greater than the highest

priority of lien of the bonds or notes being refunded.

(c) Refunding bonds or notes must bear interest at the same or

lower rate than that borne by the bonds or notes being refunded

unless it is shown mathematically that:

(1) a saving will result in the total amount of interest to be

paid; and

(2) the annual principal and interest burden will not be

increased so as to impair the rights of the holders of any bonds

or notes, if any, having a prior or inferior lien.

(d) Bonds or notes may be refunded by issuing refunding bonds or

notes to be:

(1) exchanged for the bonds or notes being refunded or

cancelled; or

(2) sold, with the proceeds of the sale being used to redeem and

cancel the bonds or notes being refunded.

(e) A municipality may provide in a refunding bond or note issue

money necessary for paying:

(1) any call premium; and

(2) interest to the date set for calling for redemption the

outstanding bonds or notes.

Acts 1995, 74th Leg., ch. 165, Sec. 1, eff. Sept. 1, 1995.