LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  March 17, 1997
         
         
      TO: Honorable Fred M. Bosse, Chair            IN RE:  House Bill No. 1394
          Committee on Land and Resource Management                              By: Turner, Bob
          House
          Austin, Texas
         
         
         
         
         FROM:  John Keel, Director    
         
In response to your request for a Fiscal Note on HB1394 ( Relating 
to municipal annexation requirements and the corresponding provision 
of municipal services.) this office has detemined the following:
         
         Biennial Net Impact to General Revenue Funds by HB1394-As Introduced
         

No fiscal implication to the State is anticipated.
         

         
 
FISCAL ANALYSIS
          
This bill would require a city to provide full municipal services, 
including water and wastewater services, to an annexed area 
no later than 2-1/2 years after the effective date of the annexation. 
 Current law requires cities to provide full municipal services 
within 4-1/2 years of the effective date of annexation. 

The 
bill would require a city to begin construction of necessary 
capital improvements within six months after the effective date 
of the annexation, instead of the two years required under current 
law.  

The bill would require a municipality to provide water 
or wastewater service to any property within an annexed area 
upon request of a property owner.

The bill would require 
a municipality with a population over 500,000 to notify the 
owner of a water and wastewater utility in the municipality's 
extraterritorial jurisdiction at least 180 days prior to annexation 
proceedings.  The utility would be required to inform the municipality 
of their decision to remain independent or to require the annexing 
city to assume all assets and liabilities of the utility within 
30 days of receiving the notice.  Currently, such municipalities 
are not required to negotiate with a private utility owner, 
nor are they required to provide 180 days notice to a private 
utility owner prior to annexation proceedings.

FISCAL IMPACT

The 
reduction of time a municipality has to provide full services 
to a newly annexed area from 4-1/2 years to 2-1/2 years could 
increase initial capital outlays for a municipality in the first 
three fiscal years after annexation which could otherwise be 
extended over a period of five years under current law.

The 
reduction of time a municipality has to begin construction of 
capital improvements following an annexation could likewise 
accelerate the capital outlay schedule of a municipality.  In 
cases where a municipality borrows funds necessary for such 
improvements, this could result in the municipality paying more 
interest during debt repayment. 

Upon enactment of this bill, 
a municipality would not be expected to annex areas containing 
properties which can not be supplied with water or wastewater 
services in a cost-effective manner.  As a result, some municipalities' 
ability to expand their tax bases in such areas could be limited.

The 
requirement that a municipality seek approval from a utility 
provider prior to annexation is not expected to result in significant 
fiscal implications to municipalities over 500,000 population, 
since such municipalities would retain their powers of condemnation 
to acquire such entities.
          
   Source:            Agencies:   304   Comptroller of Public Accounts
                                         
                      LBB Staff:   JK ,BB ,TL