HBA-EVB C.S.H.B. 3165 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 3165 By: Keel Land & Resource Management 5/8/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Upon the annexation of land within a water or sewer district by a municipality, such a district is dissolved with respect to the annexed land. Current law makes no provision for the resumption of a water or sewer district's original functions if such an annexation is determined by the courts to be invalid. The purpose of C.S.H.B. 3165 is to provide that such districts resume their functions as before the annexation and purported dissolution to avoid disruption of services for area residents. This bill also contains conditions, reporting requirements, and time frames concerning the provision of services to residents of the affected area. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter D, Chapter 43, Local Government Code, by adding Section 43.0716 as follows: Sec. 43.0716. INVALID ANNEXATION OF WATER OR SEWER DISTRICT. (a) Requires a water or sewer district, as defined by Section 43.071 (Authority to Annex Water or Sewer District), that was purportedly dissolved by a municipal annexation that is later invalidated, to resume its functions and duties as they existed immediately before the invalidated annexation on the 30th day after the date a final court judgement invalidates the annexation of the land contained in the district; or upholds the constitutionality of a statute that effectively prohibits the annexation of the land by the municipality. (b) Requires the municipality, not later than the date described by Subsection (a) or, if that date occurs before the effective date of this section, on the effective date of this section, to: (1) transfer all of the district's assets in the possession of the municipality back to the district, including revenue from taxes levied by the district; (2) provide written notice of the resumption of the district's functions and duties to each financial institution that held assets of the district at the time of the invalidated annexation; all holders of district bonds; and all persons who will receive water or sewer service from the district; (3) provide a written accounting to the board of directors of the district of all assets of the district held by the municipality and of all assets or obligations disposed of by the municipality, including the proceeds of the sale of a district asset; and (4) provide to the board of directors of the district a written accounting of all revenues received from and expenses incurred for the municipality's operation of the district's water and sewer systems and provide the district with an amount equal to the excess of the revenues over the expenses. (c) Authorizes the board of directors of the district to provide for an independent appraisal of an asset of the district that was sold by the municipality. Requires the municipality, not later than the time required for an action under Subsection (b), if the independent appraisal of the asset is for more than the amount of the proceeds the municipality received for the asset, to transfer to the district an amount equal to: (1) the difference between the amount of the independent appraisal and the amount the municipality received; and (2) interest on the difference under Subdivision (1) computed at the rate of six percent a year from the date the municipality received the proceeds from the sale of the asset. (d) Provides that a person who was serving as a director of the district immediately before the invalidated annexation resumes service as a director on the date described by Subsection (a). Requires the vacancy to be filled by appointment of the board, if a person is no longer qualified under law to serve as director. Requires the Texas Natural Resource Conservation Commission to fill the vacancies by appointment not later than the 20th day after the day the commission receives a written request from a director or a resident of the district, if less than a majority of the members of the board are qualified to serve. (e) Provides that a contract or other outstanding obligation of the district at the time of the invalidated annexation is not affected by the annexation and its subsequent invalidation except that a condition imposed by the municipality under Section 54.016 (Consent of City), Water Code, is no longer valid. (f) Authorizes the district, at the discretion of the board of directors, to assume an obligation incurred by the municipality for the direct benefit of the land in the district or water or sewer customers of the district during the period of invalid annexation. Provides that an obligation that is not assumed by the district under this subsection remains an obligation of the municipality. (g) Prohibits the municipality from seeking reimbursement from the district for money spent or an asset of the municipality consumed by the municipality for the benefit of the district, a landowner in the district, or a water or sewer customer of the district during the period of invalid annexation by the municipality. (h) Provides that a person is a water or sewer customer of the district on the date described by Subsection (a), if the person is located in the district or in the area the district served before the invalid annexation by the municipality; and is connected to the water or sewer facilities of the district either before or after the invalidated annexation by the municipality. (i) Prohibits the municipality from terminating water or sewer service to a customer of the district until the district is able to resume the operation of its water or sewer facilities. (j) Provides that all authority of the district that was approved at an election held before the invalidated annexation, including the authority to tax and the authority to issue bonded indebtedness secured by taxes or revenues or a combination of taxes and revenues, is effective as of the date described by Subsection (a). SECTION 2.Emergency clause. Effective date: upon passage. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute differs from the original by reorganizing text to conform to Legislative Council format. The substitute differs from the original in the caption, which relates to the invalid annexation of a water or sewer district, rather than annexations and water conservation and reclamation districts, including municipal utility districts. The substitute differs from the original in SECTION 1 (proposed Section 43.0716, Local Government Code) by changing the title from "Invalid Annexations and Resumption of Special District Functions" to "Invalid Annexation of a Water or Sewer District." The substitute differs from the original in proposed Section 43.0716(a), Government Code, by requiring a water or sewer district to resume its functions and duties as they existed before the invalidated annexation on the 30th day after the date a final court judgement, rather than final non-appealable decision of a Texas court of competent jurisdiction, invalidates the annexation of land contained in the district, or upholds the constitutionality of a statute that effectively prohibits the annexation of the land by the municipality. Makes conforming and nonsubstantive changes. The substitute differs from the original by redesignating text in proposed Section 43.0716(b)(3) of the original to Subsection (c) of the substitute, which authorizes the board of directors of the district to provide for, rather than require at their discretion and require the municipality to pay for, an independent appraisal of an asset of the district that was sold by the municipality, rather than an independent appraisal of the reasonableness of the sales price of any such asset together with interest thereon at the rate of six percent per annum from the date the municipality received the sales proceeds and requiring that to be paid for by the municipality. The substitute also differs from the original by redesignating text relating to transfer by the municipality to the district of the difference between the amount of the independent appraisal and the amount the municipality received, plus interest, from Subdivision (b)(3) of the original to Subsection (c) of the substitute. Makes conforming and nonsubstantive changes. The substitute removes proposed Subdivision (b)(4) of the original, which required the municipality to pay to the owners of taxable property in the district from whom the municipality collected ad valorem taxes, the amount of such taxes collected together with interest at a rate of six percent per annum. The substitute differs from the original by redesignating Subdivision (b)(5) of the original as Subdivision (b)(4) of the substitute. Makes conforming and nonsubstantive changes. The substitute differs from the original by redesignating Subsection (c) of the original as Subsection (d) of the substitute. The substitute differs from the original in Subsection (d) by providing that a person who was serving as a director of the district immediately before the invalidated annexation resumes service as a director on the date described by Subsection (a), rather than requiring the person to resume service. The substitute further differs from the original in Subsection (d) by requiring the Texas Natural Resource Conservation Commission to fill the vacancies by appointment not later than the 20th day after the day the commission receives a written request from a director or a resident of the district, rather than by any remaining director of the board or by any landowner within the district, if less than a majority of the members of the board are qualified to serve. The substitute differs from the original by not requiring the oaths of the board of directors of the district and bonds to be reinstated. The substitute also differs from the original by not requiring a director appointed to fill a vacancy to serve until the next regular election date for the district. Makes conforming and nonsubstantive changes. The substitute differs from the original by redesignating text from Subsection (d) of the original relating to contracts or, rather than and, other outstanding obligations of the district, as Subsection (e) of the substitute. Makes conforming and nonsubstantive changes. The substitute differs from the original by redesignating text from Subsection (d) of the original relating to obligations incurred by the municipality related to the invalid annexation as Subsection (f) of the substitute. Makes conforming and nonsubstantive changes. The substitute differs from the original by redesignating text from Subsection (d) of the original prohibiting a municipality from seeking reimbursement from the district for certain monies or assets consumed by the municipality for the benefit of the district, as Subsection (g) of the substitute. Makes conforming and nonsubstantive changes. The substitute differs from the original by redesignating text from Subsection (e) of the original relating to conditions for a person being considered a water or sewer customer of the district, as Subsection (h) of the substitute. Makes conforming and nonsubstantive changes. The substitute differs from the original by redesignating text from Subsection (e) of the original prohibiting a municipality from discontinuing service to customers until certain conditions are met, as Subsection (i) of the substitute. Makes conforming and nonsubstantive changes. The substitute differs from the original by redesignating Subsection (f) of the original as Subsection (j) of the substitute. Makes conforming and nonsubstantive changes.