BILL ANALYSIS C.S.H.B. 1001 By: Cuellar, Henry April 13, 1995 Committee Report (Substituted) BACKGROUND A large number of subdivisions have been developed in economically distressed areas throughout South Texas along the international border with Mexico that lack an adequate potable water supply and waste water or sewer services. The lack of such services creates a serious and unacceptable health hazard from third world illnesses for the residents of the distressed areas in the affected counties, and it also erodes the economic stability of the affected counties. The health risk along the border in the affected counties, coupled with the mobile nature of the residents of these affected areas and the fact that the trade, transportation, and commerce along the border is the most intense in the United States, creates the very substantial risk of epidemics of third world diseases spreading to the residents of this state and beyond. PURPOSE This legislation is designed to remedy the public health and safety crisis caused by the proliferation of residential subdivisions in economically distressed areas lacking minimally acceptable potable water and waste water or sewer services. The bill confers enforcement authority on the attorney general in affected counties to regulate subdivisions in economically distressed areas, imposes platting requirements and service requirements on persons selling property in economically distressed subdivisions, and imposes civil and criminal penalties for failure to comply. The bill brings within the regulatory ambit of the Texas Natural Resource Conservation Commission those counties offering utility services and affords remedies to affected ratepayers. RULEMAKING AUTHORITY It is the committee's opinion that this bill delegates rulemaking authority to the Texas Natural Resource Conservation Commission in SECTION 13 and to the Texas Water Development Board in consultation with the attorney general in SECTION 16. SECTION BY SECTION ANALYSIS SECTION 1 Legislative findings relating to conditions in the Colonias. SECTION 2 Renumbers several sections of Chapter 232, Local Government Code, which govern the regulation of subdivisions and creates Subchapter A, Subdivision Platting Requirements in General, which pulls together those sections in that chapter dealing with subdivisions generally. Those sections of Chapter 232 that were intended to deal with subdivisions in economically distressed areas (i.e., "colonias") are deleted from the new Subchapter A and placed in a new Subchapter B, Subdivision Platting Requirements in Economically Distressed Counties. SECTION 3 Amends Section 232.0015 of the Local Government Code to clarify that the requirements that pertain to "affected counties" under Subchapter B do not apply to counties under Subchapter A. SECTION 4 Amends Chapter 232, Local Government Code, by the addition of a new Subchapter B, which applies only to real property within the jurisdiction of an affected county that is subdivided into four or more lots that are intended primarily for residential use. Under this section a lot is presumed to be intended for residential use if the lot is five acres or less. This section limits the applicability of Subchapter B if the subdivision is incident to the conveyance of the land as a gift. Subchapter B sets forth subdivision platting requirements in those counties that fall within the Water Code definition of counties eligible for assistance from the Economically Distressed Areas Program ("EDAP"). All counties eligible for EDAP assistance must now adopt the Model Subdivision Rules. In affected counties, subdivision plats containing the information specified in the section must be filed with the county clerk and the plat must be approved by the commissioners court. In order that a subdivision be approved, the subdivision must have adequate drainage, adequate roadways, adequate potable water, waste water or sewer services, and electrical and gas service. The plat must specify the date by which such adequate services must be provided; the commissioners court may extend the date. If the installation of such facilities is not completed by the date specified, the owner of the tract must execute a bond in an amount adequate to ensure the proper construction or installation of such facilities. After the commissioners court approves the plat, it shall issue a certificate so stating to the owner. No entity providing utilities may provide utility services unless the plat approval certificate is first presented. Commissioners courts are required to adopt the necessary rules to provide certification of compliance with the plat requirements of new Subchapter B of the Local Government Code. Further, commissioners courts are required to adopt regulations setting forth requirements for: potable water sufficient in quality and quantity to meet minimum state standards; and solid waste disposal, sufficient and adequate roads, sewer facilities, electrical and gas service and standards for flood management that meet minimum state and federal standards. If a county commissioner has an interest in a subdivided tract, as defined in the bill, the commissioner must file an affidavit with the county clerk so stating and shall abstain from participation in any discussion or vote on any matter involving the tract. Participation in a vote is a removable offense. No sale of a subdivision may occur unless a plat has been prepared and Subchapter B imposes a criminal penalty for any misrepresentations contained in brochures, publications, and advertising related to subdivided land. Subchapter B provides for civil and criminal penalties for violating the section and confers enforcement jurisdiction on the attorney general for violation of any provision of that subchapter and of the model subdivision rules, as well as conferring such enforcement authority on local prosecuting attorneys who are requested to do so by the attorney general. A subdivider may not cause the creation of a public health nuisance. Generally, venue for actions under this new Subchapter is in Travis County District Court, the county in which the defendant resides, or in the county in which the violation or threat of violation occurs. Subchapter B waives governmental immunity of affected counties and county officials and creates a private cause of action on the part of any person against any subdivider or county commissioner who is alleged to be in violation of the subchapter. Subchapter B permits the cancellation and revision of pre-existing plats as well as replatting of existing subdivisions. The new Subchapter B replatting requirements do not apply to subdivisions in which there are pre-existing conforming water and waste water systems that are fully compliant with current minimum state standards and at the time of approval, conformed with the applicable state and county statutes, rules, and regulations. Existing utility services to a subdivision that must be platted or replatted may not be terminated. Finally, new Subchapter B also allows a variance to be granted from the replatting requirements. A variance for utility service may be renewed once (for a total of four years) and a variance from complying with other requirements (not utilities) may be granted by a commissioners court if it is shown that compliance would be impractical. SECTION 5 This section Amends the Local Government Code by creating Section 412.015, County Water And Sewer Utility, which allows affected counties to operate water or sewer utilities, as defined by Section 16.341 of the Water Code, in the same manner as a municipality under Chapter 402. SECTION 6 This section amends Section 13.002, Water Code, by amending the definition of utility to include a "water or sewer utility operated by an affected county" and adds a definition of "affected county," which tracks the definition set forth in Chapter 17, Water Code, governing EDAP assistance. The amendments have the effect of including residents of economically distressed subdivisions within the ambit of Chapter 13, which governs water rates and services. SECTION 7 This section amends Section 13.043, Water Code, by the amendment of Subsections (b), (c), (f), (g), and by adding Subsection (k) to provide that residents of economically distressed subdivisions may appeal rate decisions that actually adversely affected them to the Texas Natural Resources Conservation Commission ("TNRCC"). Additionally, commissioners courts of affected counties are required to provide individual written notice to ratepayers who are eligible to appeal their decisions to the TNRCC. SECTION 8 This section amends the heading of Subchapter D, Chapter 13 of the Water Code to read "Subchapter D. Municipalities And Counties." SECTION 9 This section amends Section 13.084, Water Code, which confers authority on commissioners courts of affected counties to hire rate consultants, accountants, attorneys, engineers, and auditors to assist in ratemaking proceedings and authorizes the TNRCC to assist those commissioners courts in such proceedings. SECTION 10 This section amends Section 13.085, Water Code, authorizing the TNRCC to provide assistance to affected counties in connection with the provision of water and sewer service. SECTION 11 This section amends Section 13.139(a), Water Code, to include affected counties within the requirement of providing services and facilities that are safe, adequate, and efficient. SECTION 12 This section amends Section 13.141, Water Code, to include affected counties operating utilities within the prohibition forbidding billing of state agencies for services before the service is rendered. SECTION 13 This section amends Section 13.181, Water Code, to include counties within the lists of entities to which that subchapter does not apply, except as provided by Section 13.192. Section 13.181 authorizes the TNRCC to adopt rules relating to the operation of certain utilities in specific circumstances. SECTION 14 This section amends Section 13.242, Water Code, to include a utility operated by an affected county within the list of entities, unless otherwise specified, that may not render retail services to the public unless it is granted a certificate of convenience and necessity from the TNRCC. SECTION 15 This section amends Section 15.407(g), Water Code, to provide that if, after an application, a county is no longer an affected county, the political subdivision that submitted the application continues to be eligible for funds and the board shall process the application, and if the application is approved shall provide the funds requested. SECTION 16 This section amends Subsection (a), Section 16.342, Water Code, to require the board to prepare rules in consultation with the attorney general. SECTION 17 This section amends Subsection (g), Section 16.343, Water Code, to prohibit the disbursement of state or federal moneys in eligible counties that do not adopt and enforce the model subdivision rules. SECTION 18 This section amends Section 16.344, Water Code, to require the board to prepare and file quarterly with the governor, the presiding officer of each house of the legislature, the attorney general, and the state auditor a complete and detailed written report describing its monitoring activities under this section. SECTION 19 This section amends Subsection (b), Section 16.349, Water Code, by providing that a holder of a certificate of convenience and necessity that provides service to an economically distressed area located outside the boundaries of the political subdivision may not charge residents of economically distressed area rates that exceed: the cost of providing service to the area; or the rates charged other residents of the political subdivision plus 15 percent. SECTION 20 This section amends Section 16.352, Water Code, by increasing the civil penalties for violations of the code and removes the Class B misdemeanor punishment which requires that the violation be knowingly and intentionally committed. Venue is in a county in which any element of the offense is alleged to have occurred or in Travis County. SECTION 21 This section amends Section 16.353, Water Code, by limiting the county officials who can seek relief before a district court to enjoin a violation of the rules to the county or district attorney. It thus removes the phrase "or other local officials" from the list of officers who are authorized to apply to district court for an injunction or restraining orders to enjoin violations of the rules. SECTION 22 This section amends Section 16.354, Water Code, to allow the attorney general to assess as well as recover the penalties provided under Section 16.352 of the code. SECTION 23 This section amends Subchapter J, Chapter 16, Water Code, by adding Section 16.356 which allows a suit for injunctive relief or for recovery of a civil penalty to be brought in a district court: (1) in the county in which the defendant resides; (2) in the county in which the violation or threat of violation occurs; or (3) in Travis County. SECTION 24 This section amends Section 26.001, Water Code, by adding Subsection (26) which is the definition of an "affected county"; Chapter 26, Water Code, governs water quality control. SECTION 25 This section amends Section 26.123, Water Code, by the addition of Subsection (j), which confers authority on the attorney general, whenever it appears that there has been a violation or threatens to be a violation any provision of that chapter or rule promulgated by the commission, to request the executive director of the Texas Natural Resource Conservation Commission to initiate an investigation. SECTION 26 This section amends Section 26.124, Water Code, by the addition of Subsection (c), which confers authority on the attorney general to institute a civil suit in district court for injunctive relief or civil penalties or both against any person who commits or is threatening to commit a violation of Section 26.121 of the code, which prohibits the unauthorized discharge of polluted water or sewage, or of any rule promulgated by the board. SECTION 27 This section repeals various sections of Subchapter A of the Local Government Code to enable the creation of Subchapter B. SECTION 28 CRIMINAL OFFENSES OR VIOLATIONS AND CIVIL CAUSES OF ACTION. This section defines the applicability of changes in civil and criminal penalties of the Act. SECTION 29 EFFECTIVE DATE. This act takes effect on September 1, 1995. SECTION 30 EMERGENCY. Declares an emergency suspending the constitutional rule that bills be read on three days in each house. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute restructures and reorganizes the original bill, which was structured in articles as opposed to sections. Many sections of the original bill are renumbered or incorporated into other sections in the substitute. Any substantive changes that were made are listed below. The substitute divides Chapter 232 of the Local Government Code into Subchapter A, Subdivision Platting Requirements in General, and Subchapter B, Subdivision Platting Requirements in Economically Distressed Counties. The sections of the original bill that addressed "colonias" are placed in the new Subchapter B, with the exception of certain sections that were deleted. SECTION 4 of the substitute contains new Subchapter B. The substitute renumbers and reorders numerous sections of the original bill in addition to making the following substantive changes. The subchapter applies only to land in the jurisdiction of an affected county that is subdivided into four or more lots that are intended primarily for residential use. A lot is presumed to be intended for residential use if the lot is five acres or less. The subchapter does not apply to the subdivision of land incident to conveyance as a gift. The definition of "affected county" is changed to require a county to meet the 25/25 rule and to be located within 50 miles of an international border. The definition of "minimum state standards" is altered to clarify and distinguish between sewer facilities and treatment of solid waste. The definition of "subdivider" is altered to include an owner. The definition of floodplain has been modified. The originally floodplain was defined as "any are susceptible to being inundated by water from any source and which is identified" by FEMA. The definition has been changed to include "any area in the 100-year floodplain that is susceptible to being inundated by water from any source which is identified" by FEMA. The definition of subdivide has been modified to limit the definition to divisions of land into lots intended for residential use. The following definitions have been added: board, common promotional plan, executive administrator, and utility. The following definitions have been removed: division, economically distressed subdivision, eligible county, land, parcel, and person. Section 232.023 in the substitute now specifically requires that plats affirmatively state that a subdivision meets the requirements of Sections 232.028 and 232.029 of the subchapter. Section 232.024 allows approval of a plat in a floodplain if: (1) the plat contains a restrictive covenant prohibiting construction of housing in the floodplain; or (2) the housing qualifies for insurance from FEMA. In Section 232.026, only the attorney general, instead of the attorney general and the Texas Water Development Board, will receive notice of the granting of an extension by a commissioners court, and the attorney general is required to notify all other state agencies that have enforcement responsibilities under state law of the granting of an extension. Section 232.034 provides that a conviction under this section constitutes official misconduct and is grounds for removal from office. In Section 232.035, the term "person" is changed to "subdivider" in order to protect colonias residents. Subsection (a) is altered to prohibit the sale of a lot in a subdivision if the subdivision has not been platted or if the lot is without water, sewer, gas or electrical services. Subsection (b) has been changed to state that a subdivider may not cause, suffer, allow, or permit a subdivision or any part of a subdivision in an affected county to become a public health nuisance. In addition to the penalties provided in the original version of this bill a person who violates this section must also pay court costs, investigative costs, and attorney s fees to the governmental entity bringing the suit. Throughout Section 232.036, the term "person" is replaced by the term "subdivider"; and the felony in the third degree is dropped to a state jail felony. Subsection (a) is changed to make the failure to file a plat a Class A misdemeanor. Subsection (d) is added which provides that a subdivider commits an offense if the subdivider allows the conveyance of a lot in the subdivision without the appropriate water, sewer, electric and gas utilities. Section 232.037 has been redrafted to foster cooperation between local prosecuting attorneys and the attorney general in both criminal and civil cases. In Section 232.038, three new subsections are added that state when an action may or may not be commenced, when attorneys fees and costs will be awarded, and when the attorney general may intervene. The substitute adds a new Section 232.039, which authorizes a suit by a private person who owns property in an affected county to recover damages related to conditions in the colonias. Recovery may include attorney fees. Section 232.040 is substantially simplified in the substitute. It allows a subdivider to apply for cancellation of a subdivision in the manner provided by Section 232.008 of the Local Government Code. It also allows a resident of the subdivision to object to the cancellation. Section 232.041 of the original bill, which allowed a person with subdivided land to apply for revision of a subdivision plat, is deleted in the substitute and replaced with new Section 232.041, which is titled "Replatting in Economically Distressed Areas." The substitute also limits the application of replatting by stating that it does not apply to subdivisions that already have conforming water and wastewater systems." Section 232.042 is also added by the substitute and includes provisions relating to variances from the replatting requirements. The majority of the sections in Subchapter C of the original bill are deleted in the substitute. The following sections, listed by title, are deleted: "Short Title", "Applicability of Subchapter", "Definitions", "Fraud", "Disclosure Prior to Sale", "Waiver of Governmental Immunity; Permission to Sue", and "Venue." The remaining sections of the subchapter were incorporated into Subchapter B with no substantive changes. Article II of the original bill, which made certain amendments to the Tax Code, is deleted in the substitute. SECTION 5, which is added by the substitute, permits an affected county to operate a water or sewer utility. SECTIONS 9 and 10 of the substitute accomplish the same results as SECTION 8 of the original bill, but they amend different sections of the Texas Water Code. A new SECTION 15 has been inserted that makes changes to Texas Water Code § 15.407(g). The changes amend the statute that defines construction funding eligibility under the Economically Distressed Areas Program so loan applicants will not lose this eligibility after receiving facility planning funds. SECTION 16 of the substitute accomplishes the same result as SECTION 16 of the original bill by making changes to existing Section 16.342, Texas Water Code, instead of adding a new subsection. A new SECTION 17 has been added that requires that an affected county adopt the model rules prior to the receipt of funds under Section 15.407 or Subchapter K, Chapter 17. A new SECTION 18 is inserted amending Section 16.344, Texas Water Code, that requires the TWDB to prepare and file quarterly reports with the governor, the presiding officer of each house of the legislature, the attorney general, and the state auditor a complete and detailed written report describing its monitoring activities under this section A new SECTION 19 was inserted that allows any holder of a certificate of convenience and necessity that extends service to an economically distressed area located outside the boundaries of the political subdivision to charge the residents of such economically distressed area rates that are just, fair, and reasonable or rates that recover the cost of services, whichever is lower, to provide such service to the economically distressed area. Article IV of the original bill, which made changes to Subchapter D of the Property Code relating to executory contracts and contracts for deed, has been deleted in the substitute. Article V of the original bill, which made changes to the Texas Deceptive Trade Practices Act, has been deleted in the substitute. Article VI of the original bill, which set forth mandatory "boiler-plate" language, has been deleted in the substitute. SECTION 32 of the original bill, which contained a severability clause, has been deleted. SUMMARY OF COMMITTEE ACTION H.B. 1001 was considered by the committee in a public hearing on February 28, 1995. The following persons testified in favor of the bill: Representative Henry Cuellar; and Ronald B. Rodenhaven, representing himself. The following person testified neutrally on the bill: Javier Guajardo, representing the Office of the Attorney General. The bill was referred to a subcommittee to be named later by the Chair. On February 28, 1995, the Chair named the following subcommittee members: Representatives Turner, Hamric, and Alexander. H.B. 1001 was considered by the subcommittee in a formal meeting on March 29, 1995. The subcommittee considered a complete substitute for the bill. The substitute was adopted without objection. The bill was reported favorably as substituted to the full committee by a record vote of 3 ayes, 0 nays, 0 pnv, and 0 absent. H.B. 1001 was considered by the committee in a formal meeting on April 6, 1995. The committee considered a complete substitute for the bill. The substitute was adopted without objection. The bill was reported favorably as substituted, with the recommendation that it do pass and be printed, by a record vote of 6 ayes, 0 nays, 0 pnv, and 3 absent.