BILL ANALYSIS C.S.H.B. 2038 By: Brady 4-3-95 Committee Report (Substituted) BACKGROUND In December, 1994, the Oak Ridge Municipal Utility District and the City of Oak Ridge North each passed resolutions endorsing legislation to merge the two entities. Such a merger would create a more effective system which would provide savings to common overhead, operating expenses and duplicate services. Under the bill, the Oak Ridge Municipal Utility District's Board of Directors may dissolve the district upon a vote of the majority of the resident electors. To complete the merger, the City of Oak Ridge North must agree to assume the district's debts, take ownership of the district's assets, perform the district's functions, and provide all services previously provided by the district. PURPOSE As proposed, HB 2038 provides for the dissolution of the Oak Ridge Municipal Utility District and allows its assets and obligations to be assumed by the City of Oak Ridge North. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 615, Acts of the 60th Legislature by adding Section 25 to allow the Oak Ridge Municipal Utility District and the City of Oak Ridge North to merge. Section 25. (a) Outlines procedure for the district's board to dissolve the Municipal Utility District. (b) Outlines qualifications for municipality to be able to assume district's debts and assets. (c) Assesses ad valorem tax not to exceed pro rata share of district's debt service on outstanding bonds. (d) Provides that the municipality may not levy an ad valorem tax to pay annual debt service obligations on the district's outstanding bonds on property that, at the time the district is dissolved, is not within the district. (e) Allows municipality to charge for water and sewer services to areas that are within the district but not within the municipality's boundaries at the time of dissolution rates not to exceed 125 percent of the rates charged to residents of the municipality as necessary to provide services to those areas. SECTION 2. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE Subsection (e) of the newly-created Section 25 (Section 1, page 3, lines 10-14, of the Substitute) was added to the substituted version, replacing original subsections (e) and (f) of the newly-created Section 25 in the introduced version of the bill. Those sections of the introduced version of the bill read as follows: (e) Except as provided by Subsection (f), the municipality may charge for water and sewer services to areas that, at the time the district is dissolved, are within the district but not within the municipality's boundaries rates that are higher than rates charged within the municipality's boundaries as necessary to provide services to those areas and may charge those areas their pro rata shares of new debt service obligations incurred by the municipality after dissolution of the district and related to the provision of water and sewer services. (f) Before the second anniversary of the date of the dissolution of the district, the municipality may not charge for water and sewer services to areas that, at the time the district id dissolved, are within the district but not within the municipality's boundaries rates that exceed the total effective cost of services, after applying any available income tax deductions related to the services, in the areas immediately before dissolution. The correlative section of the Substitute, which replaces these two sections, simply provides that, at the time the district is dissolved, the municipality may charge those specified areas rates not to exceed 125 percent of the rates charged to residents of the municipality as necessary to provide services to those specified areas. SUMMARY OF COMMITTEE ACTION H.B.2038 was considered by the committee in a public hearing on April 3, 1995. The following persons testified in favor of the bill: Mr. Gary S. North, representing himself and as President of Oak Ridge M.U.D.; Mr. Gary A. Louie, representing himself and City Council of Oak Ridge North. The following persons testified against the bill: None (0). The following persons testified on the bill: None (0). 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 and be sent to the Committee on Local and Consent Calendars, by a record vote of 7 ayes, 0 nays, 0 pnv, 2 absent.