SLC C.S.H.B. 2582 75(R)BILL ANALYSIS LAND & RESOURCE MANAGEMENT C.S.H.B. 2582 By: Hilderbran 4-22-97 Committee Report (Substituted) BACKGROUND Under Section 43.071, Local Government Code, a municipality generally may not annex land within a municipal utility district (MUD) unless it annexes the entire district. In addition, under Section 43.075, Local Government Code, when a municipality annexes a MUD, it must dissolve the district and assume the district's bonded indebtedness. Any taxes levied by the MUD are abolished upon its dissolution. The requirement, under Section 43.071, that a municipality annex a district in its entirety, does not apply to a MUD whose boundaries overlap the extraterritorial jurisdictions (ETJ) of two or more municipalities. Therefore, a district that contains land within multiple ETJs can be partially annexed by a neighboring municipality without dissolving the district. Consequently, property owners in the district would be subject to double taxation--first, by the municipality (at the same tax rate applied elsewhere in the municipality), and second, by the district (to pay the district's bonded indebtedness and operating costs). The result would be high overlapping tax rates for MUD residents and significant reductions in the value of property in the district. For the municipality, the MUD annexation would be a tax windfall, since the MUD would continue funding utilities and related services. The 74th Legislature added Section 54.0162 to the Water Code. This section allows certain districts located in multiple areas of ETJ to elect to be contained within the extraterritorial jurisdiction of a single municipality. However, at least one municipality has taken the position that action on the part of the municipality that is not selected is required to make the district's election effective. This position creates uncertainty as to the ability of a district to choose one ETJ pursuant to Section 54.0162. PURPOSE HB 2582 will allow a district that is located in multiple extraterritorial jurisdictions to choose to be wholly located within the ETJ of one municipality. This would eliminate the possibility of partial annexation and double taxation. In addition, the bill would clarify Section 54.0162, Water Code, by providing that no action is required of the municipality not selected, and would validate any elections made by a district under Section 54.0162 prior to the date of passage of the bill. 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 Subchapter B, Chapter 54, Water Code, by adding Section 54.0163 as follows: Sec. 54.0163. OPTION OF SELECTION OF EXTRATERRITORIAL JURISDICTION FOR CERTAIN DISTRICTS. (a) Provides that the board of a district that is located partly or wholly in the extraterritorial jurisdiction of more than one municipality by resolution may select the municipality that may exercise authority within the district as a whole. The resolution must state the effective date. (b) Provides that as soon as practicable, the board shall file with each affected municipality and in the real property records of each county in which the district is located a certified copy of the resolution. (c) Provides that upon the effective date of the resolution, the district contained wholly within the extraterritorial jurisdiction of the municipality selected by the resolution for all purposes. No action or approval by a municipality not selected is required. (d) Provides a board that has made a selection of extraterritorial jurisdiction under Sec. 54.0162 may confirm the selection by the adoption of a resolution under this section. If the selection under Sec. 54.0162 is confirmed under this subsection, the selection is effective from the date of the original selection. SECTION 2. The legislature validates and confirms in all respects ass resolutions, orders, and other acts or attempted acts of a board of directors of a municipal utility district adopted or taken under Sec. 54.0162, Water Code, before the effective date of this Act. SECTION 3. Emergency Clause. COMPARISON OF ORIGINAL TO SUBSTITUTE CSHB 2582 deletes the words the "partly or wholly" in Sec. 54.0163(a) of the original legislation. CSHB 2582 adds a sentence in Sec. 54.0163(c) that states "No action or approval by a municipality not selected is required." The original bill did not contain this provision. CSHB 2582 deletes the sentence in SECTION 2 of the original bill, that stated this section does not apply to a matter that is the subject of litigation on the effective date of this Act.