JBM C.S.H.B. 2300 75(R)BILL ANALYSIS NATURAL RESOURCES C.S.H.B. 2300 By: Serna 4-9-97 Committee Report (Substituted) BACKGROUND This bill relates to the creation and operation of a municipal utility district (MUD) in an unincorporated portion of eastern El Paso County. The proposed MUD contains approximately 3000 acres and abuts the city limits of El Paso on the west. The Permanent School Fund owns all of the property within the proposed MUD. The Texas General Land Office (GLO), under the direction of the Texas Land Commissioner and the School Land Board, manages the real estate holdings of the Permanent School Fund. The proposed MUD is a part of a near contiguous land assemblage that comprises approximately 4200 acres. The property is located adjacent to the corporate limits of the City of El Paso and is in the path of sustained and steady growth east of the city. In anticipation of annexation by the City of El Paso, the School Land Board, in 1993, removed property from the Lower Valley Water Authority. Despite efforts by the GLO and the City of El Paso, they have not been able to agree on an annexation and/or utility service plan. The Permanent School Fund property, therefore, is currently underdeveloped and has no access to utilities. As a result of current market factors, the School Land Board would like to market the property for sale in the immediate future. PURPOSE To allow the creation of a MUD to provide the Permanent School Fund land with a vehicle for providing utility in a timely, affordable manner. The bill is consistent with existing law and requirements for MUDs, except that it: (1) addresses issues unique to land ownership by the Permanent School Fund; (2) requires that at least 5 percent of the residential property in the district be developed as affordable housing; and, (3) encourages land owners and developers to develop property within the district in accordance with El Paso standards. 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 1.01. This section states that the Paseo del Este Municipal Utility District (district) is created under Section 59, Article XVI, Texas Constitution, in El Paso, Texas. This section also states that the district has the powers of a municipal utility district as provided by Chapter 49 and 54, Water Code, unless otherwise provided by this Act. SECTION 1.02. Definitions. SECTION 1.03. This section identifies the area included within the district. This section also clarifies that it is not the intention of this Act to include any land in the district that is already included within the territory of another district. SECTION 2.01. This section provides that the district shall be governed by a five-member board of directors. SECTION 2.02. This section addresses the requirements for director eligibility. This section states that, except for initial directors, elected directors must meet the requirements of Section 54.102, Texas Water Code. However, each initial director must either be at least 18 years of age and a resident of El Paso or Travis County. Further, a director can be an employee, notwithstanding Section 49.052, of the State unless they are members of the School Land Board or employees of the General Land Office. SECTION 2.03. Section 2.03 provides for terms of office and appointment of initial directors. Except for initial directors, directors serve 4-year staggered terms, with the terms of two or three directors expiring September 1 of each even-numbered year. Further, the School Land Board shall appoint five initial directors as soon as practicable after the effective date of this Act. Also, two of the initial directors serve until September 1, 2000, and three of the initial directors serve until September 1, 2002. Section 2.04 governs election of permanent directors. SECTION 2.04. This Section states that a director serves until the director's successor has qualified, and an election shall be held for permanent directors the first Saturday in May of each even-numbered year. SECTION 2.05. This Section concerns qualification of board directors. Each director must take the constitutional oath of office and, except for initial directors, provide a faithful performance bond. SECTION 2.06. This section addresses meetings of the board. Meetings must be held within the district unless the board votes publicly to hold the meeting outside the district. This section further holds that a majority of the directors shall constitute a quorum of the board, which is necessary to pass on any question before the board. The board may adopt bylaws and an official seal, and may provide in the bylaws that each director receives a fee of $20 for attending a meeting. No director is to be paid more than $40 per month for meetings held in a calendar month. SECTION 2.07. This section addresses election of board officers by board members. This sections states that the board must elect a president and vice-president. The treasurer must give bond in the amount determined by the board not less than $100,000. However, until the district authorizes the issuance of bonds, the amount of the treasurer's official bond may be fixed in an amount not less than $5,000. SECTION 2.08. This section addresses conflicts of interest. In the event a director is interested in contracting with the district for the purchase of property, services, the construction of facilities or other authorized actions, he shall disclose his interests to the board and refrain from the vote regarding his contract. SECTION 2.09. This section authorizes the board to employ district employees, and the section outlines the general manager's responsibilities. SECTION 2.10. This section requires all employees of the district charged with the collection, custody or payment of any money of the district to execute a fidelity bond in an amount to be determined by the board. SECTION 2.11. This section establishes the principal office of the district in either Travis or El Paso County. If the office is in Travis County, duplicate records must be maintained and available in El Paso County. After the district issues bonds, the district office must be in El Paso County. SECTION 2.12. This section requires the district to keep complete and accurate accounts of its business transactions, minutes of its meetings, contracts, documents and other records for reasonable public inspection. SECTION 2.13. This section authorizes suit by and against the district in its corporate name. SECTION 3.01. This section sets forth the powers and duties of the district. These include the power and duty to administer and enforce this Act; use district facilities and powers to accomplish its stated purposes; coordinate the provision of water, wastewater, and drainage services; and control and abate water pollution within the district. This section also contains a provision which requires the district to submit all design plans and specifications for utility infrastructure and related systems to the appropriate municipal corporation for review. Such review shall be conducted by the municipality within 60 days after the date on which the plans and specifications are delivered to the municipality. A fee may be charged by the municipality for conducting the review. In addition, this section states that subject to Texas Natural Resource Conservation Commission (TNRCC) authority, the district has the authority to control and abate water pollution within the district. Also, except as provided by this Act, the district has the powers, rights, and privileges necessary and convenient for accomplishing this Act as provided by Section 59, Article XVI, Texas Constitution. Finally, the powers granted to the district by this Act are cumulative of powers granted by other law. SECTION 3.02. This section authorizes the district to adopt and enforce rules. Also, the district must keep a record of its rules and provide copies of such rules upon written request. SECTION 3.03. This section authorizes the district to enter property in the district to inspect and investigate conditions relating to its authorized purposes in the same manner and under the same provisions and restrictions applicable to the TNRCC. SECTION 3.04. This section authorizes the board to hold hearings, accept testimony and evidence, compel the attendance of a witness, and make findings of fact and determinations relating to the administration of this Act or an order or rule of the board. The board may delegate its authority to take testimony and administer oath in a hearing to one or more of its members or employees. An order of the board must be in the name of the district and attested in accordance with district rules. SECTION 3.05. This section provides that a person who violates a rule, permit, or order of the district is subject to civil penalties to be paid to the district. Venue is established in the county in which the violation occurred. SECTION 3.06. This section authorizes the district to obtain all permits necessary to carry out the purposes of this Act, as well as to contract for water or a water supply. The district is authorized to contract for and collect, transport, process, dispose of and control all wastes. At the request of the city of El Paso, the bill requires the district to encourage owners and developers to use and develop their land in a manner consistent with all codes and regulations of each adjacent municipal corporation with a population in excess of 300,000. Further, this section states that the district is not authorized to unilaterally require any entity to fund or construct a utility infrastructure for the purpose of extending utilities to the district. SECTION 3.07. Under this section, the district is authorized to enter into any contract, and to acquire, operate and maintain land, and all improvements and facilities inside or outside of the district to carry out the purposes of this Act. This section does not authorize the district to unilaterally require any entity to fund or construct a utility infrastructure to extend utilities to the district. SECTION 3.08. This section requires the district to obtain the written consent from a municipality for the particular use of any public roadway, street, alley or easement in El Paso county to accomplish the purposes of the district. SECTION 3.09. This section provides that all relocation, raising, rerouting, changing of grade or alteration of construction within the district, unless otherwise agreed to in writing by the interested parties, shall be at the sole expense of the district. SECTION 4.01. For the disbursement of money by the district, this section requires an instrument to be signed by the person or persons authorized to do so in the board's bylaws or by board resolution. SECTION 4.02. This section allows the district to establish fees and charges in an amount necessary to fulfill its obligations under this Act. SECTION 4.03. This section allows the district to apply, enter into any agreement in connection with, and receive loans to carry out one or more of its powers, provided it acts in accordance with federal or state law. SECTION 4.04. This section requires the board to establish the district's fiscal year. SECTION 4.05. This section requires the board to comply with the provisions of Section 49.156, Texas Water Code, with regard to depository banks. Before designating a depository bank, the district must provide notice to solicit interested banks followed by a public hearing to review the submitted applications. Membership of an officer or director of a bank on the board does not disqualify the bank from being considered and chosen as the depository bank. In addition, serving as an officer or director of a bank does not disqualify that person from board membership. If no application is received after board notice, the board may designate a bank. SECTION 5.01. This section sets forth the three classes in which the district may issue bonds: (1) secured by ad valorem taxes; (2) secured by a pledge of all or part of revenues accruing to the district; and (3) secured by a combination of (1) and (2). This section goes further to describe the manner and form in which the obligations may be issued. Obligations may be issued in more than one series and the district is the "issuer.". The obligations may be further secured by an indenture or trust with a corporate trustee and the resolution authorizing these obligations may specify additional provisions which shall constitute a contract between the district and the owners of the obligations. This section also provides that the district shall not issue bonds secured by or otherwise encumbering PSF land. This provision will insure that there are no liens on PSF land. SECTION 5.02. This section authorizes the district to issue bond anticipation notes, which may or may not be secured by a pledge of revenues of the district. The district may issue bonds to provide proceeds to pay the principal of and interest on bond anticipation notes. However, these bonds shall be secured by revenues of the district. If the agreement authorizing the issuance of bond anticipation notes contains a covenant concluding that such notes shall be payable from the proceeds of the subsequently issued bonds, it is not necessary to obtain approval by the attorney general or register with the comptroller. SECTION 5.03. This section authorizes the district to issue refunding bonds under this Act that may be issued to: (1) refund one or more series of outstanding bonds; (2) combine the pledges for the outstanding bonds for the security of the refunding bonds; or (3) secure by other or additional revenues. This section also addresses bond security, required attorney general approval, and applicable remedies. SECTION 5.04. This section requires bond review and approval by the district to be governed by the provisions of Subchapter F, Chapter 49, and Chapter 54, Texas Water Code. SECTION 5.05. This section declares all bonds and notes of the district to be legal and authorized investments. Such bonds and notes are eligible to secure the deposit of all public funds of the State, cities, towns, villages, counties, school districts or other political subdivisions of the State. Such bonds are lawful security for the deposits to the extent of their value. SECTION 5.06. This section allows the board to levy and collect ad valorem taxes for maintenance, improvements, and administrative expenses of the district. This section states existing law; that is, PSF land is not subject to taxation. SECTION 5.07. This section requires the assessment and collection of property taxes to be governed by the law applicable to counties. The tax assessor-collector of each county is to act as the tax assessor-collector for the district. He shall be responsible for placing the district on the county tax rolls and his fee shall be one percent of taxes collected. All available legal means for enforcement of State and county taxes shall be available to the district. The fee for collecting delinquent taxes through prosecution is set at 15 percent of the taxes collected by suit. SECTION 6.01. Notwithstanding any other provision of law, this section authorizes the district to include other land within the district by annexation. SECTION 6.02. This section authorizes owners of land contiguous to the territory of the district to file a petition requesting annexation into the district. Upon receipt of the petition, the board shall hear and consider the petition and may add the property to the district if the board determines it to be to advantageous to the district and the district's improvements are or will be sufficient, without injuring land in the district, to provide service to the land to be added. SECTION 6.03. This section requires that an annexation petition be filed with the secretary of the board and signed by either a majority in value of the owners of land in the area, or signed by 50 landowners, if the number of landowners in the area is more than 50. After reviewing the petition, the board must hold a hearing to consider the petition. If the petition is thereafter approved, the board shall enter an order in its minutes declaring the area annexed. SECTION 6.04. If annexation is approved, this section requires a properly executed copy of the annexation order to be filed and recorded in the deed records of the county or counties in which the district in located. SECTION 7.01. Notwithstanding any other provision of law, this section authorizes the board to hold a hearing on exclusion of land from the district by either a petition of a landowner or on motion of the board. The exclusion petition must include a metes and bounds description of the land to be excluded and the grounds for exclusion, and must be signed by at least ten percent of the owners of land to be excluded, or by five or more of the owners of land to be excluded if the number of owners is more than 50. SECTION 7.02. This section requires the board to hold a hearing on any exclusion petition and provide proper notice in accordance with this Act. In order to exclude land, the board must find that the district has no obligation that will be impaired and no obligations will be incurred by the exclusion of the land, and that the exclusion is in the best interests of the district. SECTION 7.03. This section sets forth the effective dates of exclusion orders. This section also provides that before an exclusion order becomes effective, all taxes levied and assessed by the district on the land to be excluded must be paid in full. SECTION 7.04. If the board issues an exclusion order pursuant to a petition signed by less than all of the owners of the land to be excluded, this section requires the board to publish a notice of the order. If the district does not receive a ratification petition within 25 days of the board's order, the order will be deemed in effect. The ratification petition must request an election and must be signed by at least ten percent of the qualified voters that reside in the area to be excluded. SECTION 8.01. This section authorizes a district to be divided into two or more districts, provided there is no outstanding indebtedness secured by taxes or net revenues of the district. SECTION 8.02. This section requires the board, prior to dividing the territory of the district, to prepare a metes and bounds description of the proposed division and determine the terms of the division, including a plan to pay and perform outstanding district obligations. This section requires the resulting districts to be designated appropriately, and requires the resulting district to obtain authorization for the issuance of bonds by majority vote of qualified voters. SECTION 8.03. This section provides that each district shall be considered a separate district after division. The original board is authorized to continue to act for 90 days following approval of the division to wind up its affairs and appoint a new board of directors for the resulting districts. A board member of the original district may be appointed to the board of a resulting district. SECTION 8.04. This section provides that the current obligations of the original district are protected and are not impaired after division. It authorizes debts to be paid by taxes, revenues, or assessments levied on the land included in the original district or by contributions from each of the resulting districts as set forth in the division order. SECTION 8.05. This section authorizes each resulting district to incur and pay debts created by such district and to possess all other powers and authorities prescribed for districts under this Act. SECTION 8.06. This section requires that each resulting district assume the obligations of the original district under any existing agreements or resolutions. All other obligations of the original district shall be divided pro rata among the resulting districts in a manner determined by the districts. SECTION 8.07. This section requires the original district to provide written notice of a division plan to the TNRCC. SECTION 9.01. Notwithstanding any other provision of law, this section provides that, in the event of division of a district, an annexing municipality must assume all outstanding debts of the district; dissolve the district within six months of annexation; assume all district assets; refrain from imposing city taxes on property located within the district at any time prior to dissolution; provide all municipal utility and emergency medical services, fire, police, garbage collection, and other standard municipal services to residents of the district; and comply with regional land use planning within the district. Except for property that received a utility service allocation by the district or districts or property in which site development has been authorized or commenced, this section also authorizes the annexing municipality to impose proper fees and assessments allowed by State law after annexation and dissolution. SECTION 10.01. This section addresses the requirements for affordable housing within the district. The Act requires that a minimum of five percent of the residential housing units in the district be used to provide affordable housing. This section requires, to the extent territory of the district can be used for affordable housing in a manner consistent with the constitutional and statutory provisions relating to management of lands dedicated to the Permanent School Fund, fifteen percent of all residential development be affordable housing. This section also provides that affordable housing is to be located in different areas within the district, and that, on the sale of Permanent School Fund land in the district, the School Land Board shall impose use restrictions requiring construction of affordable housing in a percentage sufficient to satisfy the above requirement. SECTION 11.01. This section provides that the district is not required to pay taxes and holds the bonds issued under this Act free of taxation. SECTION 11.02. This section affirmatively states that the first election for permanent board directors will be on the first Saturday in May 2000. SECTION 11.03. This section acknowledges that all rules, laws, notices and procedures required for the notice, introduction, and passage of this Act are fulfilled and accomplished. The amendment renumbered this and succeeding sections, and revised the heading to this section. Further, the amendment affirmatively states that the governor has submitted notice and the Act to the TNRCC and that TNRCC has filed its recommendations with the governor, lieutenant governor, and speaker of the house of representatives within the required time limit. SECTION 11.04. Severability. SECTION 11.05. Emergency. COMPARISON OF ORIGINAL TO SUBSTITUTE Section 1.01. The original references Chapter 50 of the Texas Water Code, and the substitute changes that reference to Chapter 49 of the Texas Water Code. Section 1.02 of the substitute. This section was added in the substitute to define "district" and "board." Section 2.02. In the original, employment with a state agency does not disqualify a person from serving as director. However, in the substitute, a new provision was added that does disqualify a state employee if they are employed by the General Land Office or the School Land Board. Further, in the substitute, an employee of the district may not serve as a director. Section 2.03. As filed, the Act provided for director elections in even-numbered years and for directors to serve staggered terms which expired in odd-numbered years. The substitute changes "odd-numbered year" to "even-numbered year" to make Sections 2.03 and 2.04 compatible with the Election Code. The substitute also changes the dates for appointment of directors and expiration of their terms from 1997 to 2000 and from 1999 to 2002, respectively. The substitute also adds initial directors serve until permanent directors are elected under Section 2.04 of this Act and qualify for office. Further, the substitute provides that, if a vacancy occurs, the School Land Board shall appoint a successor to fill the vacancy and to serve the remainder of the unexpired term. Section 2.05. In the original, this section stated that any owner of over 500 acres of land within the district was a constitutional fund to the state, then the members of the state board who were responsible for administering the land holdings of the fund would each be qualified voters within the district. This section was deleted in the substitute. The substitute also changes Section 54.116 of the Water Code to Section 49.055 of the Water Code, in relation to the bond required from directors. Section 3.03. The substitute changes the reference to the Water Code from Section 54.216 to Section 49.221 of the Water Code. Section 3.06. The substitute adds a provision that states that the district may not unilaterally require a person, firm, corporation, municipal corporation, public agency or other entity to fund or construct utility infrastructure for purposes of extending utilities to the district. Section 3.07. The original refers to Sections 54.201 and 54.211 of the Water Code, and the substitute changes this reference to Sections 49.218 and 54.201 of the Water Code. Section 4.05. The original refers to Sections 54.307 of the Water Code, and the substitute changes this reference to Section 49.156 of the Water Code. Section 5.04. The original refers to Subchapter F, Chapter 54, of the Water Code, and the substitute changes the reference to Subchapter F, Chapter 49, of the Water Code. Section 7.04. The original refers to Subchapter E, Chapter 51, of the Water Code, and the substitute changes the reference to Subchapter J, Chapter 49, of the Water Code. Section 8.02. The original listed several requirements the board must follow after the board of the original district agreed on the terms and conditions of division. However, the substitute requires the board to complete specific requirements before the division is made, not after. Further, the substitute adds several new provisions which state that, except as provided by Section 8.03 of this Act, if the board divides territory under this article, the board shall be divided in an appropriate manner consistent with the division of the district, and a district resulting from a division under this article shall be designated in an appropriate manner. Section 8.03. In the original, the original district board appointed two initial directors to serve terms expiring on September 1 of the second year after the creation of each new district and three initial directors to serve terms expiring on September 1 of the fourth year after the creation of each new district. However, in the substitute, the expiration date for the appointment of the two initial directors is changed to September 1 of the first even-numbered year and September 1 of the second even-numbered year for the three initial directors. Section 10.01. The substitute requires, to the extent territory of the district can be used for affordable housing in a manner consistent with the constitutional and statutory provisions relating to management of lands dedicated to the Permanent School Fund, fifteen percent of all residential development be affordable housing. The substitute also provides that affordable housing is to be located in different areas within the district, and that, on the sale of Permanent School Fund land in the district, the School Land Board shall impose use restrictions requiring construction of affordable housing in a percentage sufficient to satisfy the above requirement. These provisions were not included in the original. Section 11.02. This is a new Section in the substitute that states that, notwithstanding Section 2.04 of this Act, the district shall hold its first election for permanent directors on the first Saturday in May 2000. Section 11.03. The substitute adds a provision that requires the TNRCC to file its recommendations relating to this Act with the governor, lieutenant governor, and speaker of the house of representatives within the required time.