SLC C.S.S.B. 727 75(R)BILL ANALYSIS LAND & RESOURCE MANAGEMENT C.S.S.B. 727 By: Gallegos (Woolley) 5-1-97 Committee Report (Substituted) BACKGROUND Currently, the Municipal Annexation Act authorizes in-lieu contracts between cities and industrial districts located in extraterritorial jurisdiction (ETJ) areas. Pursuant to the provision, a city and the owner of a refinery or other industrial use in an ETJ area can enter into a contract under which the owner makes negotiated payments to the city, the city provides stipulated services to the owner, and the district is immunized from annexation. In-lieu contracts may be for a term of up to 15 years, and are subject to renewal. However, the Annexation Act does not contain a corresponding in-lieu provision for residential Municipal Utility Districts (MUDs) located in ETJ areas. Under current law, the only choice for cities and MUD residents is between annexation and no annexation. CSSB 727 would extend the industrial district concept to MUDs. It would create a mechanism by which the mayor of a city with a population over 1.6 million and the board of a MUD located in the city's ETJ can negotiate in-lieu contracts. Negotiations would be initiated by either the mayor or the MUD board, who would then begin good-faith discussions toward execution of a mutually-beneficial contract. Contracts may be for a term of up to 15 years, and are subject to renewal. The goal of CSSB 727 is to encourage agreements under which MUDs make voluntary payments to offset the cost of municipal streets, water systems, and other facilities and services that benefit the region. PURPOSE As proposed, CSSB 727 outlines provisions regarding contracts between municipal utility districts located in extraterritorial areas and municipalities. 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 42C, Local Government Code, by adding Section 42.0441, as follows: Sec. 42.0441. JOINT AGREEMENTS BETWEEN CERTAIN DISTRICTS AND OTHER DEFINED AREAS IN EXTRATERRITORIAL AREA AND MUNICIPALITIES. (a) Provides that it is the intent of the legislature to enable municipal utility districts in extraterritorial areas and municipalities to negotiate mutually-agreeable alternatives to annexation. Provides that in furtherance of that goal, this section authorizes municipal utility districts and municipalities to execute mutually-agreeable contracts providing for the joint funding of services in lieu of annexation. (b) Provides definitions. (c) States that either the mayor of a municipality or the governing body of a district may submit a written request to the other to initiate negotiations under this section. This section states that the recipient must respond affirmatively to the request to negotiate in writing within 30 days of delivery, if negotiations are to proceed. (d) Requires the board of directors to appoint a designee from the board to negotiate with the mayor upon electing to enter into negotiations with the mayor. (e) Requires the mayor and the board's designee to negotiate in good faith upon initiation of negotiations. Sets forth options for which the mayor and the board's designee are authorized to, in their discretion, agree to a written contract. (f) Authorizes the governing body of the municipality and the board of a district to renew or extend a contract for successive periods not to exceed 15 years. (g) Provides that a municipality may not annex the district unless either the municipality or the district delivers notice terminating negotiations, or 12 months, whichever shall last occur. (h) Provides for, on approval of the contract by the governing body of the municipality and the board of the district, there shall be an election in the district if 10% of the registered voters request an election. The contract shall be binding if approved. (i) Provides that if the voters do not approve a contract, it shall not be construed as a request for annexation. (j) Provides for contracts with other local organizations. SECTION 2. Amends Chapter 321.102, Tax Code, by adding Subsection (c-1), as follows: (c-1) Requires the municipal secretary to send by United States registered or certified mail to the controller a certified copy of the ordinance that changes the municipality's boundaries and shows the effective date of the boundary change if the boundaries of a municipality in which the tax imposed under this chapter are changed pursuant to Chapter 42C, Section 42.0441(e)(2), Local Government Code. Requires the ordinance to be accompanied by a map clearly showing the added territory. Provides that the tax takes effect in the added territory on the first day of the first calendar quarter after the comptroller receives the ordinance and map. SECTION 3. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE CSSB 727 amends the caption for Sec. 42.0441, of the Local Government Code, as proposed by this Act, to read as follows, "JOINT AGREEMENTS BETWEEN CERTAIN DISTRICTS AND OTHER DEFINED AREAS IN EXTRATERRITORIAL AREA AND MUNICIPALITIES." CSSB 727 adds provisions for municipalities to negotiate contracts in lieu of annexation with "local organization" in addition to MUDs. "Local organizations" are defined as community, homeowners, or other nonprofit associations representing a clearly defined geographical area. The moratorium provisions that apply to the municipality in the event of negotiations with a MUD will not apply to local organizations because their leadership is not elected by the voters of the district. Further, any proposed contract with a local organization must be approved by the voters of the district. The original legislation did not contain these provisions. CSSB 727 revises elections provisions to be similar to existing law for voter approval of certificates of obligation. The municipality must publish notice of the contract in a newspaper of general circulation summarizing the contract's terms. At least 10% of the voters in a district must submit a petition requesting an election within 30 days of the publication. If a petition is received, the contract shall be submitted to the voters on the next uniform election date. If the contract is not approved, the vote shall not be construed as a request for annexation. The original legislation did not contain these provisions. CSSB 727 revises the method for MUDs and the municipalities to enter into negotiations. Either party may request negotiations and the recipient of the request must respond within 30 days. If both parties agree to negotiate, the municipality may not annex the MUD until 12 months or until either party delivers to the other party a notice terminating negotiations, whichever is later. Both parties must negotiate in good faith. The original legislation did not contain these provisions. CSSB 727 adds franchise fees as an additional revenue option. The original legislation did not contain this provision.