The stakes continue to mount in a legal dispute between the city of Conroe and the San Jacinto River Authority over increases in SJRA water fees as hundreds of thousands of Montgomery County residents are footing the bill.

The SJRA is a state agency that works to conserve the water resources of the San Jacinto River watershed. The water authority sells surface water from Lake Conroe to select entities, including Conroe and The Woodlands as a part of a groundwater reduction plan to comply with groundwater regulations in Montgomery County.

For the second consecutive year, the city has approved a resolution opposing SJRA water-usage fee increases. Conroe has not paid the 18 cent increase per 1,000 gallons that went into effect last September because city officials disagreed with the reasoning behind the increase—that after two years of heavy rainfall, the SJRA needed to raise fees to rebuild its reserve funds, officials said. In response, the SJRA filed a lawsuit in Travis County in August 2016.

This year the SJRA plans to increase water-usage rates another 14 cents in September—12 cents of which it attributes to legal fees associated with the lawsuit. Conroe Mayor Pro Tem Duke Coon said it was the SJRA’s decision to file a lawsuit, and there would be no legal costs if the agency had not filed it.

“They are going to have to come to the table and renegotiate this contract,” Coon said. “We have no intentions of paying the 14 cent increase. Their comments that 12 cents of that increase are because of litigation with Conroe are disingenuous. They sued us.”

The cost to citizens

The SJRA believes it is necessary to protect groundwater resources from further drawdown because of concerns groundwater wells will not be able to produce water fast enough, or reliably enough, to meet demand in the future, SJRA officials said.

Meanwhile, Conroe officials said they believe there is enough groundwater to sustain the county long-term. The city claims the entire SJRA groundwater reduction plan system is unnecessary and a scheme to build the state agency’s business—selling water.

The dispute has led to a legal battle between the two entities. As of July, the city of Conroe has paid $382,707 in attorney’s fees for the SJRA lawsuit. That is in addition to $453,606 spent on attorney’s fees for the city’s separate lawsuit against the Lone Star Groundwater Conservation District—a separate entity that regulates groundwater usage in Montgomery County. The LSGCD has spent $424,951 in that lawsuit with Conroe.

Combined, more than $836,313 of Conroe taxpayer money has been spent on legal fees for water related litigation since 2014 by the city, according to the city. Conroe City Council Member Duane Ham said the cost of litigation is justified when compared to the cost of SJRA surface water that the city is contractually obligated to purchase in the next 70 years.

Under the most recent rates, the city has made monthly payments of up to $835,829 per month to the SJRA under the 2015 SJRA fee rate. Conroe paid $8,657,652 to the SJRA for water in fiscal year 2015-16.

“Right now it costs the taxpayers of the city of Conroe $10 million per year to take water that we don’t need out of Lake Conroe,” Ham said. “I couldn’t give a tax break that would directly affect taxpayers better than this. We are talking about $10 million per year. That would affect every homeowner every day of every month. It would cut their water bills in half.”

The SJRA has also paid substantial legal fees during the lawsuit. The agency has spent $882,000 on attorney’s fees. Those fees are paid for from revenue made from water fees assessed from residents of cities such as Conroe, Magnolia, The Woodlands, Oak Ridge North and the other 145 entities that are members of the SJRA GRP.

Conroe officials blame the lawsuit on the SJRA, since the agency originally filed the lawsuit. However, SJRA General Manager Jace Houston said the SJRA had no choice but to file the lawsuit.

“The purpose of the lawsuit is that we have to defend the validity of the contract because it is the source of the revenue to pay off the bonds [that funded the surface water treatment plant],” Houston said. “We don’t have a choice but to enforce the validity of the contract and make sure everybody pays.”

Conroe and Montgomery County residents have paid for a total of about $2.14 million in legal fees between Conroe, SJRA and LSGCD in the two separate lawsuits. That figure does not include the amount spent by private utility providers in Montgomery County, such as Quadvest and Woodlands Oaks Utility Company, who are also parties to the lawsuit. The city of Magnolia is also involved in the lawsuit against the SJRA, but officials said the city has not spent any money on legal fees.

Frozen Bond Sales

After the SJRA lawsuit was filed, Texas Attorney General Ken Paxton did not approve Conroe’s water and sewer revenue bond sale in late September 2016. The attorney general’s office is a party to the SJRA lawsuit.

Since then the city has pooled its cash from its budget to fund about $8.4 million in capital improvement projects that were supposed to be funded by the bond sale until it can repay itself with a bond sale in the future, Conroe Chief Financial Officer Steve Williams said.

However, Ham said the city has not received written instructions from the attorney general’s office as to what to do to address the bond freeze. At the time of the action, Paxton instructed Conroe to escrow outstanding funds not paid to the SJRA under the security of the court. However, Ham said Paxton has not issued written confirmation that he would accept that action from the city.

“The attorney general is playing politics,” Ham said. “He cuts off our revenue bonds and won’t even return our phone calls. He won’t put in writing what he wants us to do. What kind of state agency tries to mandate something and won’t put it in writing?”

Because of this, Ham said the city is saving the outstanding money in its own funds.

The attorney general’s office declined comment.