HBA-MPA, NLM C.S.S.B. 89 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 89 By: Madla Land & Resource Management 4/29/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE During the 75th Legislative Session, the Legislature reviewed more than 70 bills directed at changing current statutes regarding municipal annexation. These bills included measures to: increase the unannexed area's negotiating leverage with the municipality; give citizens of areas proposed for annexation the ability to veto annexation; redefine boundaries and powers within the ETJ; change the time within which a municipality must provide services to an annexed area and the level of services to be provided; and to disannex one or more areas. Also many home buyers do not realize the extent to which they are subject to annexation. C.S.S.B. 89 seeks to address the wide range of issues surrounding annexation, balancing the interests of landowners and residents within a city's ETJ and the needs of cities to manage growth in unincorporated areas within the ETJ. The Act attempts to accomplish this balancing of interests by including provisions related to the creation of three-year annexation plans by municipalities, the level of services to be provided in annexed areas, alternatives to annexation, arbitration procedures and disannexation. 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 B, Chapter 42, Local Government Code, by adding Section 42.0225, as follows: Sec. 42.0225. EXTRATERRITORIAL JURISDICTION AROUND CERTAIN MUNICIPALLY OWNED PROPERTY. Provides that, for an area owned by a municipality that is not contiguous to other territory of the municipality, the extraterritorial jurisdiction (ETJ) of the municipality is expanded to include only the area located within one mile of the boundaries of the annexed area, notwithstanding the limits on ETJ enumerated in Sections 42.021(2)-(5) (Extent of Extraterritorial Jurisdiction), Local Government Code. Provides that a municipality's ETJ is not expanded if the area annexed under this section lies within the municipality's existing ETJ. SECTION 2. Amends Subchapter A, Chapter 43, Local Government Code, by adding Section 43.002, as follows: Sec. 43.002. CONTINUATION OF LAND USE. Prohibits a municipality, after annexing an area, from prohibiting a person from continuing a legal land use in effect on the date annexation proceedings were instituted; or beginning a land use for which one or more licenses, certificates, permits, approvals, or other forms of authorization were required, and for which a completed application for initial authorization, which includes all documents and information required, was filed with the governmental entity 90 days before the date annexation was effective. Provides that this section does not prohibit a municipality from imposing a regulation relating to: _the location of sexually oriented businesses as that term is defined by Section 243.002 (Definition); _a municipal ordinance, regulation, or other requirement affecting colonias as that term is defined by Section 2306.581 (Definition), Government Code; _preventing imminent destruction of property or injury to persons; _public nuisances; _flood control; _the storage and use of hazardous substances; _the sale and use of fireworks; or _the discharge of firearms. SECTION 3. Amends the heading to Subchapter C, Chapter 43, Local Government Code, as follows: SUBCHAPTER C. New title: ANNEXATION PROCEDURE FOR AREAS ANNEXED UNDER MUNICIPAL ANNEXATION PLAN SECTION 4. Amends Sections 43.052 and 43.053, Local Government Code, as follows: Sec. 43.052. MUNICIPAL ANNEXATION PLAN REQUIRED. (a) Defines "special district." (b) Authorizes a municipality to annex an area identified in the annexation plan only as provided in this section. (c) Requires a municipality to prepare a plan that specifically identifies annexation that may occur beginning on the third anniversary of the plan's adoption. Authorizes the municipality to amend the plan to specifically identify areas that may be annexed beginning on the third anniversary of the amendment. (d) Prohibits a municipal utility district or other special district that will be abolished as a result of the annexation, excluding an emergency services district, in which the area is located, from: reducing the tax rate applicable to the area below the effective tax rate or the rollback tax rate calculated under Chapter 26 (Assessment), Tax Code; voluntarily transferring an asset without consideration; or entering into a contract for services that extends beyond the three-year annexation plan period, other than a contract with another political subdivision for the operation of water, wastewater, and drainage facilities, without the consent of the municipality at any time during which an area is included in a municipality's annexation plan. (e) Authorizes a municipality to amend its annexation plan at any time to remove an area proposed for annexation. Prohibits a municipality from including an area in its annexation plan, if the plan has been amended to remove the area from the plan within the 18 months after the month the area is included, until the first anniversary of the date of such an amendment. Prohibits a municipality, if it has amended its annexation plan to remove an area from the plan within 18 months after the month the area is included in the three year annexation plan, from including the area in its annexation plan until the second anniversary of the date of the amendment. (f) Requires the municipality to give written notice, before the 90th day after the date a municipality adopts or amends an annexation plan under this section, to each property owner in the affected area that the area has been included in or removed from the annexation plan; to each public entity, as defined by Section 43.053 (Period for Completion of Annexation; Effective Date); and each railroad company that serves the municipality. (g) Provides that if an area is not removed from the municipality's annexation plan, the annexation of the area under the plan must be completed before the 31st day after the third anniversary of the date the area was included in the annexation plan. Prohibits the municipality, if the annexation is not completed within the period prescribed by this subsection, from annexing the area proposed for annexation before the fifth anniversary of the last day for completing an annexation under this subsection. (h) Provides that this section does not apply to an area proposed for annexation if: (1) the area contains fewer than 100 separate tracts of land on which residential dwellings are located; (2) the area will be annexed by vote or petition of the qualified voters or property owners as provided by Subchapter B (General Authority to Annex); (3) the area is included within the boundaries of a special district and the area is annexed at the request of the district; (4) the area is the subject of an industrial district contract under Section 42.044; (5) the area is located in a colonia, as that term is defined by Section 2306.581, Government Code; (6) the area is annexed under Section 43.026 (Authority of Type A General-Law Municipality to Annex Area it Owns), 43.027 (Authority of General-Law Municipality to Annex Navigable Stream), 43.029 (Authority of Certain Small Municipalities to Annex Unoccupied Area on Petition of School Board), or 43.031(Authority of Adjacent Municipalities to Change Boundaries by Agreement); or (7) the municipality determines that the annexation of the area is necessary to protect the area proposed for annexation or the municipality from imminent destruction of property, or a condition that constitutes a public or private nuisance. Deletes existing Section 43.052 (Annexation Hearing Requirements). Deletes existing text as follows: deletes provision that the governing body of a municipality must conduct two public hearings conducted after the 40th day but before the 20th days before it may institute annexation; deletes provision that, if 20 adult residents file a protest, the municipality must hold at least one of the public hearings in the area; deletes provision that the municipality must publish notice of the hearings in a general circulation newspaper in the municipality and the area to be annexed between the 20th and the 10th day before the hearing, and provide written notice to each railroad in the proposed annexation area. Sec. 43.053. New title: INVENTORY OF SERVICES AND FACILITIES REQUIRED. (a) Defines "public entity" for the purposes of this section. (b) Requires a municipality to compile a comprehensive inventory of services and facilities provided by public and private entities, directly or by contract, in each area proposed for annexation, after adopting an annexation plan or amending an annexation plan to include additional areas under Section 43.052. Provides that the inventory of services and facilities must include all services and facilities the municipality is required to provide or maintain following the annexation. (c) Requires the municipality to request, in the notice provided under Section 43.052(f), the information necessary to compile the inventory from each public or private entity that provides services or facilities in each area proposed for annexation. Requires the public or private entity to provide to the municipality the information held by the entity that is necessary to compile the inventory not later than the 90th day after the date the municipality requests the information, unless the entity and the municipality agree to extend the period. Sets forth the required content for the information provided under this subsection. Provides that a municipality is not required to include the information in an inventory prepared under this section if a service provider fails to provide the information required within the 90-day period. (d) Requires that the information required in the inventory be based on services and facilities provided in the year prior to the adoption of the annexation plan or its amendment to include additional areas. (e) Provides that the inventory for utilities, roads, drainage, structures, and other infrastructure provided by public or private entities, must include an engineer's report describing the condition of all infrastructure elements, and a summary of expenditures on that infrastructure. (f) Provides that for police, fire, and emergency medical services, the inventory must include for each service the average dispatch and delivery time, a schedule of equipment, including vehicles, a staffing schedule that discloses the certification and training levels of personnel, and a summary of operating and capital expenditures. (g) Requires the municipality to complete the inventory and make it available for public inspection before the 60th day after it receives the required information from the service provider under Subsection (c). (h) Authorizes the municipality to monitor the services provided in the area proposed for annexation and verify the information provided. Deletes existing Section 43.053. (Period for Completion of Annexation; Effective Date). Deletes existing text as follows: deletes provision that annexation must be completed within 90 days after the governing body institutes annexation proceedings, excluding any period during which a court enjoins or restrains the municipality, or the annexation proceedings are void; deletes provision that the governing body of a municipality with a population over 1.5 million may make the annexation effective within 90 days after the date of the adoption of the ordinance providing for annexation. SECTION 5. Amends Subchapter C, Chapter 43, Local Government Code, by adding Section 43.0545, as follows: Sec. 43.0545. ANNEXATION OF CERTAIN ADJACENT AREAS. (a) Prohibits a municipality from annexing an area within its ETJ only because it is contiguous to municipal territory that is less than 1,000 feet wide at its narrowest point. (b) Prohibits a municipality from annexing an area in its ETJ only because the area is contiguous to municipal territory annexed before September 1, 1999, which was in the ETJ at the time of annexation only because it was contiguous to municipal territory that was less than 1,000 feet in width at its narrowest point. (c) Provides that Subsections (a) and (b) do not apply to an area completely surrounded by incorporated territory of one or more municipalities, where the owners of the area have requested annexation, that is owned by the municipality, or that is the subject of an industrial district contract under Section 42.044 (Creation of Industrial District in Extraterritorial Jurisdiction). (d) Provides that an area, which is in a municipality's ETJ only because it is contiguous to municipal territory annexed only because it was contiguous to municipal territory less than 1,000 feet in width at its narrowest point, may be annexed, if the area which was less than 1,000 feet in width at its narrowest point at the time of the previous annexation is more than 1,000 feet in width at its narrowest point as a result of the previous annexation. (e) Provides that for purposes of this section, roads, highways, rivers, lakes, or other bodies of water are not included in computing the 1,000 foot distance. SECTION 6. Amends Section 43.056, Local Government Code, as follows: Sec. 43.056. PROVISION OF SERVICES TO ANNEXED AREA. (a) Requires the municipality, rather than its governing body, proposing the annexation to complete, rather than direct its planning department or other appropriate municipal department to prepare, a service plan that provides for the extension of full municipal services to the area to be annexed, before the first day of the 10th month after the month in which the inventory is prepared as provided by Section 43.053, rather than before the publication of the notice of the first hearing. (b) Provides that a municipality's service plan must include a program to provide full municipal services in annexed areas no later than two and one-half years after the effective date of annexation, rather than four and one-half years, unless that period is extended by an arbitration decision issued under this chapter (Municipal Annexation) or by agreement between specified parties. Provides that on, rather than within 60 days after, the effective date of the annexation of the area under the program the municipality must provide certain services in the area, including emergency medical services, and the operation and maintenance of water and wastewater facilities in the annexed area that are not within the service area of another water or wastewater utility, roads, streets, and their lighting, parks, playgrounds, swimming pools, and any other publicly owned facility, building, or service. Deletes Subsection (b-1) which provides that a municipality with a population over 1.5 million must provide: full municipal services within four and one-half years after the effective date of annexation; police protection and solid waste collection on and after the effective date of the annexation; emergency medical service and fire protection within 30 days if contracted; within 60 days, maintenance of water and wastewater facilities not within the service area of another water or wastewater utility; roads and streets, including road and street lighting; parks, playgrounds, and swimming pools; and any other publicly owned facility, building or service, and if service is provided by municipal personnel and equipment, emergency medical service and fire protection. (c) Redefines "full municipal services." (d) Created from existing text. (e) Requires that the service plan include a program to initiate after the effective date of the annexation, the acquisition or construction of capital improvements necessary for service to the area. Requires construction to be substantially completed within two and one-half years after the effective date of the annexation unless extended as provided by Subsection (b), rather than beginning within two years of the effective date and being substantially completed four and one-half years after that. Redesignated from existing Subsection (d). Makes conforming change. (f) Prohibits a service plan from providing services in the area in a manner that would have the effect of reducing by more than a negligible amount the level of fire and police protection and emergency medical services provided within the corporate boundaries of the municipality before annexation. Redesignated from existing Subsection (e). Makes nonsubstantive changes. (g) Provides that if the annexed area had a lower level of services, infrastructure, and infrastructure maintenance than those within the corporate boundaries of the municipality before annexation, a service plan must provide a level of services, infrastructure, and infrastructure maintenance comparable to other areas of the municipality similar in topography, land use, and population to what is reasonably projected for the annexed area. If the level of services, infrastructure, and infrastructure maintenance is equal it must be maintained. If the level of services, infrastructure, and infrastructure maintenance in the annexed area is superior to the service level within the municipality, the service plan must provide a service level comparable to other areas of the municipality with topography, land use, and population density similar to those reasonably contemplated or projected for the annexed area. If the annexed area had a higher level of service for maintaining the infrastructure in the area, including the facilities described in Subsections (b)(5)-(8), than in the municipality, the service plan must operate and maintain infrastructure at an equal or higher level of services, infrastructure, and infrastructure maintenance in that area. Provides that in a municipality with a population of 1.6 million or more, if the annexed area has a level of services superior to those provided within the corporate boundaries before annexation, a service plan must provide the area with a level of services comparable to the level that existed in that area previous to annexation. Makes nonsubstantive changes. (h) Prohibits a municipality with a population of 1.6 million or more from imposing an additional fee, over and above the ad valorem taxes and fees within the municipality before annexation, in order to maintain the level of services that existed before annexation. Provides that this subsection does not prohibit the municipality from imposing a fee for a service in the annexed area if the same fee is imposed within the corporate boundaries before annexation. (i)-(k) Redesignated from existing Subsections (f)-(h). Makes conforming changes. (l) Redesignated from existing Subsection (i). Authorizes a person residing or owning land in an annexed area to enforce a service plan by petitioning the municipality for a change in policy or procedures to ensure compliance with the service plan. Authorizes the petitioner, if the municipality fails to take action with regard to the petition, to request arbitration of the dispute. Deletes text authorizing a resident or landowner in an annexed area to enforce a service plan by applying for a writ of mandamus. (m) Redesignated from existing Subsection (k). Provides that this section does not require that a uniform level of full municipal services be provided to each area of the municipality if the governing body of the municipality determines that different characteristics of topography, land use, and population density are considered a sufficient basis for providing different levels of service. Authorizes a person aggrieved by a determination made by a municipality under this subsection to request arbitration. Specifies that nothing in this subsection modifies the requirement under Subsection (g) for a service plan to provide a level of services in an annexed area that is equal or superior to the level of services provided within the corporate boundaries of the municipality before annexation. Provides that Subsection (g) prevails to the extent of any conflict between this subsection and Subsection (g). Deletes existing Subsection (j) requiring a municipality that annexes an area to provide the area or cause the area to be provided with services in accordance with the service plan for that area. SECTION 7. Amends Subchapter C, Chapter 43, Local Government Code, by renumbering Section 43.0561 as Section 43.0566 and Section 43.0565 as Section 43.0567 and by adding Sections 43.0561, 43.0562, 43.0563, 43.0564, and 43.0565 as follows: Sec. 43.0561. ANNEXATION HEARING REQUIREMENTS. (a) Provides that, before annexation proceedings may be instituted, the governing body of a municipality must conduct two public hearings at which persons with an interest in the annexation are given an opportunity to be heard. Provides that the hearing must be held not later than 90 days after the inventory is available for inspection. (b) Provides that, if a suitable site is reasonably available and more than 20 adults who are permanent residents file a written protest with the secretary of the municipality within 10 days after the date of the publication of the notice, containing the name, address, and age of each signatory, the municipality must hold at least one of the public hearings in the area to be annexed. Authorizes the hearing to be held outside the area proposed for annexation at the nearest suitable public facility if no such facility is available within the area. (c) Provides that the municipality must publish notice of the hearings in a general circulation newspaper in the municipality and the area to be annexed between the 20th and the 10th day before the hearing. Provides that notice by certified mail must be provided to each public entity and utility providing service in the area proposed for annexation, and each railroad company serving the municipality and paying taxes in the municipality and with right-of-way in the proposed annexation area. Sec. 43.0562. NEGOTIATIONS REQUIRED. (a) Requires a municipality and the property owners of the area proposed for annexation, if the municipality has a population of less than 1.6 million, to negotiate for the provision of services to the area after annexation or for the provision of services to the area in lieu of annexation under Section 43.0563, after holding the hearings as provided by Section 43.0561. Requires a municipality and the governing body of the district, if a municipality proposes to annex a special district as that term is defined by Section 43.052, to negotiate for the provision of services to the area in lieu of annexation under Section 43.0751, after holding the hearings under Section 43.0561. (b) Requires the commissioners court of the county in which the area proposed for annexation is located to select five representatives to negotiate with the municipality for the provision of services to the area after annexation, for purposes of negotiations under Subsection (a)(1). Requires the commissioners court of the county in which the greatest number of residents reside to select three representatives to negotiate with the municipality, and the commissioners courts of the remaining counties jointly to select two representatives to negotiate with the municipality, if the area proposed for annexation is located in more than one county. (c) Authorizes the governing boards of the special districts to jointly select five representatives to negotiate with the municipality on behalf of all the affected districts, if more than one district is located in the area proposed for annexation. Sec. 43.0563. CONTRACTS FOR PROVISION OF SERVICES IN LIEU OF ANNEXATION. Authorizes the governing body of a municipality with a population of less than 1.6 million, to negotiate and enter into a written agreement with representatives designated under Section 43.0562(a)(1) for the provision of services and the funding of the services in the area. Authorizes the agreement to also include an agreement related to permissible land uses and compliance with municipal ordinances. Provides that an agreement under this section is in lieu of annexation by the municipality of the area. Sets forth the terms the parties are authorized to agree to in negotiating an agreement under this section. Sec. 43.0564. ARBITRATION REGARDING NEGOTIATIONS FOR SERVICES. (a) Authorizes either party, by majority decision of the party's representatives, to request the appointment of an arbitrator to resolve the service plan issues in dispute, if the municipality and the representatives of the area proposed for annexation cannot reach an agreement for the provision of services under Section 43.0562 or if the municipality and the property owner representatives cannot reach an agreement for the provision of services in lieu of annexation. Provides that the request must be made in writing to the other party before the 60th day after the date the service plan is completed under Section 43.056. Prohibits the municipality from annexing the area under another section of this chapter during the pendency of the arbitration proceeding or an appeal from the arbitrator's decision. (b) Authorizes the parties to the dispute to agree on the appointment of an arbitrator. Requires the mayor of the municipality to immediately request a list of seven neutral arbitrators from the American Arbitration Association or the Federal Mediation and Conciliation Service, or their successors in function, if the parties cannot agree on the appointment of an arbitrator before the 11th day after the date arbitration is requested. Sets forth residency requirements for the arbitrator. Authorizes the parties to agree on the appointment of an arbitrator included in the list. Sets forth the method of striking potential arbitrator appointees if the parties cannot agree on the appointment of an arbitrator before a specified date. Defines "business day." (c) Requires the arbitrator to set a hearing to be held not later than the 10th day after the date the arbitrator is appointed, and to notify the parties to the arbitration in writing of the time and place of the hearing not later than the eighth day before the date of the hearing. (d) Provides that the authority of the arbitrator is limited to issuing a decision relating only to the service plan issues in dispute. (e) Authorizes the arbitrator to receive in evidence any documentary evidence or other information the arbitrator considers relevant, administer oaths, and issue certain subpoenas. (f) Requires the arbitrator to complete the hearing within two consecutive days unless the parties agree otherwise. Requires the arbitrator to permit each party one day to present evidence and other information. Authorizes the arbitrator, for good cause shown, to schedule an additional hearing to be held not later than the seventh day after the date of the first hearing. Provides that the arbitrator must issue a written decision and deliver a copy to the parties by a specified date. (g) Authorizes either party to appeal any provision of an arbitrator's decision that exceeds the authority granted under Subsection (d) to a district court in a county in which the area proposed for annexation is located. (h) Prohibits the municipality from annexing the area proposed for annexation before the fifth anniversary of the date of the arbitrator's decision, if the municipality does not agree with the terms of the arbitrator's decision. (i) Requires the municipality to pay the cost of arbitration except as provided by this subsection. Authorizes the arbitrator to require the area proposed for annexation to pay all or part of the arbitration costs if the arbitrator finds that the request for arbitration submitted by the area was groundless, in bad faith, or for purposes of harassment. Sec. 43.0565. ARBITRATION REGARDING ENFORCEMENT OF SERVICE PLAN. (a) Provides that a person requesting arbitration must request the appointment of an arbitrator in writing to the municipality. (b) Provides that Sections 43.0564(b), (c), and (e) apply to appointment of an arbitrator and the conducting of an arbitration proceeding. (c) Provides that in an arbitration proceeding, the municipality has the burden of proof. (d) Authorizes the municipality to disannex the area before the 31st day after receiving a copy of the arbitrators decision, and authorizes the arbitrator to require the municipality to comply with the service plan before a reasonable date; require the municipality to refund the collected for services to the landowners of the area to be annexed; and require the municipality to pay the cost of arbitration, including reasonable attorney's fees, if the arbitrator finds the municipality has not complied with the service plan requirements. (e) Authorizes the arbitrator, if the arbitrator finds that the municipality has complied with the service plan, to require the person requesting arbitration to pay the cost of arbitration to the municipality, including reasonable attorney's fees Sec. 43.0566. Redesignated from existing Section 43.0561. Sec. 43.0567. Redesignated from existing Section 43.0565. Increases the minimum population of a municipality required to develop a service plan for the provision of water and sewer service to 1.6 million from 1.5 million. SECTION 8. Amends Chapter 43, Local Government Code, by adding Subchapter C-1, as follows: SUBCHAPTER C-1. ANNEXATION PROCEDURE FOR AREAS EXEMPTED FROM MUNICIPAL ANNEXATION PLAN Sec. 43.061. APPLICABILITY. Applies this subchapter to an area proposed for annexation that is not required to be included in a municipal annexation plan under Section 43.052. Sec. 43.062. PROCEDURES APPLICABLE. Applies Sections 43.051 (Authority to Annex Limited to Extraterritorial Jurisdiction), 43.054 (Width Requirements), 43.0545 (Annexation of Certain Adjacent Areas), 43.055 (Maximum Amount of Annexation Each Year), 43.0567 (Provision of Water or Sewer Service in Populous Municipality), and 43.057 (Annexation That Surrounds Area: Findings Required) to the annexation of an area to which this subchapter applies. Sec. 43.063. ANNEXATION HEARING REQUIREMENTS. (a) Provides that the governing body of the municipality must conduct two public hearings at which persons interested in the annexation are given the opportunity to be heard, before a municipality may institute annexation proceedings. Provides that the hearings must be conducted on or after the 40th day but before the 20th day before the date of the institution of the proceedings. (b) Specifies that at least one of the hearings must be held in the area proposed for annexation if a suitable site is reasonably available and more than 10 percent of the adults who are permanent residents of the area file a written protest of the annexation with the secretary of the municipality within 10 days after the date of the publication of the notice required by this section. Specifies that the protest must state the name, address, and age of each protester who signs. (c) Provides that the municipality must publish notice of the hearings in the manner specified by this subsection, and must give notice by certified mail to each railroad company with right-of-way property in the area to be annexed Sec. 43.064. PERIOD FOR COMPLETION OF ANNEXATION; EFFECTIVE DATE. Provides that the annexation of an area must be completed within 90 days after the date the governing body institutes the annexation proceedings or those proceedings are void. Provides that any period during which the municipality is restrained or enjoined by a court from annexing the area is not included in computing the 90-day period. Authorizes the governing body of a municipality with a population of 1.6 million or more to provide that an annexation take effect on any date within 90 days after the date of the adoption of the ordinance providing for the annexation, notwithstanding any provision of a municipal charter to the contrary. Sec. 43.065. PROVISION OF SERVICES TO ANNEXED AREA. Requires the governing body of the municipality proposing the annexation to direct its planning department or other appropriate municipal department to prepare a service plan that provides for the extension of full municipal services to the area to be annexed, before the publication of the notice of the first hearing required under Section 43.063. Requires the municipality to provide the services by any of the methods by which it extends the services to any other area of the municipality. Provides that Sections 43.056(b)-(m) apply to the annexation of an area to which this subchapter applies. SECTION 9. Amends Section 43.0751, Local Government Code, by amending Subsections (b) and (k) and by adding Subsections (o) and (p), as follows: (b) Authorizes, rather than requires, the governing bodies of a municipality and a district to negotiate and enter into a written strategic partnership agreement for the district by mutual consent. Requires the governing body of a municipality, on written request from a district included in the municipality's annexation plan under Section 43.052, to negotiate and enter into a written strategic partnership agreement with the district. Deletes existing text relating to the requirement for the bodies of a municipality and the district to evidence intentions to negotiate. (k) Authorizes a municipality that has annexed all or part of a district, rather than a district, to impose a retail sales tax within the boundaries of the part of the district that is annexed for limited purposes. (o) Authorizes the municipality and the district to seek binding arbitration of the issues relating to the agreement in dispute under Section 43.0752, if a municipality required to negotiate with a district under this section and the requesting district fail to agree on the terms of a strategic partnership agreement. (p) Prohibits an agreement under this section from requiring the district to provide revenue to the municipality solely for the purpose of obtaining an agreement with the municipality to forgo annexation of the district. Provides that an agreement under this section must provide reasonable and equitable benefits to each party, including revenue, services, and regulatory benefits. SECTION 10. Amends Subchapter D, Chapter 43, Local Government Code, by adding Section 43.0752, as follows: Sec. 43.0752. ARBITRATION OF STRATEGIC PARTNERSHIP AGREEMENT. (a) Authorizes either party, if the municipality and the district cannot reach an agreement on terms of a strategic partnership agreement, to request the appointment of an arbitrator to resolve the issues in dispute. Sets forth the requirements of such a request. Prohibits the municipality from annexing the district under another section of this chapter during the pendency of the arbitration proceeding or an appeal of the decision. (b) Sets forth the sections that apply to the appointment of an arbitrator and the conduct of an arbitration proceeding. (c) Provides that the authority of the arbitrator is limited to determining whether the offer of a party complies with Section 43.0751(p). (d) Authorizes the arbitrator to issue a decision that incorporates the offer as part of the strategic partnership agreement if the arbitrator finds that the offer complies with Section 43.0751(p). (e) Requires the municipality and the district to equally pay the costs of arbitration. SECTION 11. Amends Subsection (a), Section 43.121, Local Government Code, to delete the provision relating to municipal authorization under a home-rule charter. SECTION 12. Amends Subsection (c), Section 43.141, Local Government Code, to prohibit a disannexed area from being annexed again within 10, rather than five, years. Deletes existing text relating to a service plan for an area that has been reannexed within seven years of disannexation. SECTION 13. Amends Subchapter G, Chapter 43, Local Government Code, by adding Section 43.148, as follows: Sec. 43.148. REFUND OF TAXES AND FEES. Requires a municipality that disannexes an area to refund to the landowners of the area the amount of money collected in property taxes and fees during the period the area was part of the municipality less what the municipality spent for the direct benefit of the area during that period. Requires the municipality to proportionately refund the amount to the landowners by a method to be developed by the municipality, that identifies each landowner's pro rata payment of taxes and fees being refunded. Requires a municipality to refund money to current landowners in the area by a specified date. SECTION 14. Amends Subchapter Z, Chapter 43, Local Government Code, by adding Section 43.905, as follows: Sec. 43.905. EFFECT OF ANNEXATION ON OPERATION OF SCHOOL DISTRICT. Requires a municipality that proposes to annex an area to provide written notice of the proposed annexation to each public school district in the manner provided. Sets forth the required content for a notice to a public school district. Prohibits the municipality from proceeding with the annexation unless the municipality provides the required notice. Requires municipalities that annexed an area between December 1, 1996, and September 1, 1999, to grant a variance from the municipality's building code for that facility if the facility does not comply with the code. Authorizes a municipality that, as a result of annexation, provides utility services to a school district to charge the district for utility services at rates that are the same or lower than the district was paying before annexation. Provides that such a rate is effective until the first day of the school district's fiscal year that begins after the 90th day after the effective date of annexation. SECTION 15. Amends Subchapter A, Chapter 5, Property Code, by adding Section 5.012, as follows: Sec. 5.012. SELLER'S DISCLOSURE REGARDING POTENTIAL ANNEXATION. Requires a person who sells an interest in real property in this state to give to the purchaser of the property a written notice regarding possible annexation and sets forth the content of such notice. Requires the seller to deliver the notice to the purchaser before the date the executory contract binds the purchaser to purchase the property. Authorizes the notice to be given separately, as part of the contract during negotiations, or as part of any other notice the seller delivers to the purchaser. Provides that this section does not apply to certain transfers described by this section. Provides that the seller has no duty to provide additional information regarding the possible annexation of the property by a municipality, if the notice is delivered as provided by this section. Authorizes the purchaser to terminate the contract for any reason within the earlier of seven days after the date the purchaser receives the notice, or the date the transfer occurs, if an executory contract is entered into without the seller providing the notice required by this section. SECTION 16. (a) Provides that this Act takes effect September 1, 1999, except that Section 15 of this Act takes effect January 1, 2000. (b) Requires each municipality to adopt an annexation plan as required by Section 43.052, Local Government Code, as amended by this Act, on or before December 31, 1999, that becomes effective December 31, 1999. (c) Provides that the changes in law made by Sections 2 through 7 and 9 through 13 of this Act apply only to an annexation included in a municipality's annexation plan prepared under Section 43.052, Local Government Code, as amended by this Act, except as provided by Subsection (d) of this section. Authorizes a municipality, except as provided by Subsection (d) of this section, to continue to annex any area during the period beginning December 31, 1999, and ending December 31, 2002, under Chapter 43, Local Government Code, as it existed immediately before September 1, 1999, if the area is not included in the annexation plan, and the former law is continued in effect for that purpose. (d) Makes application of Sections 43.002, 43.0545, 43.056(b), (c), (e), (f), (g), (l), and (m), 43.121(a), 43.141(c), 43.148, and 43.905, Local Government Code, as added or amended by this Act, prospective. (e) Makes application of Sections 43.002, 43.0545, 43.056(b), (c), (e), (f), (g), (l), and (m), 43.121(a), 43.141(c), 43.148, and 43.905, Local Government Code, as amended by this Act, apply only to the annexation of an area that is not included in a municipal annexation plan under Section 43.052, Local Government Code, as added by this Act, if the first hearing notice required by Section 43.063, Local Government Code, as added by this Act, is published on or after September 1, 1999. (f) Provides that the change in law made by Section 1 of this Act applies only to: _an annexation plan prepared under Section 43.052, Local Government Code, as amended by this Act; and _an annexation of an area that is not included in the municipality's annexation plan during the period beginning December 31, 1999, and ending December 31, 2002, if the first hearing notice required by Section 43.052, Local Government Code, as it existed immediately before September 1, 1999, is published on or after that date. (g) Provides that the change in law made by Section 15 of this Act applies only to a transfer of property that occurs on or after January 1, 2000. Provides that a transfer of property occurs before January 1, 2000, for purposes of this section, if the executory contract binding the purchaser to purchase the property is executed before that date. Provides that application of this Act to property transferred before January 1, 2000, is prospective. SECTION 17. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original in SECTION 2 (proposed Section 43.002, Local Government Code) in proposed Subsection (c) to provide that this section does not prohibit a municipality from imposing a regulation relating to flood control, in addition to other specified regulations and ordinances. Redesignates proposed Subdivisions (5)-(7) as (6)-(8). The substitute modifies the original in SECTION 4 (Section 43.052, Local Government Code), as follows: The substitute redesignates Subsections (a)-(e) of the original to Subsections (b)-(f) and Subsection (f) of the original to Subsection (h). Adds new Subsection (a), to define "special district." The substitute modifies the original in Subsection (d) to exclude an emergency services district in which the area to be annexed is located, from the list of districts prohibited from taking certain actions without the consent of the municipality. The original bill would have also excluded a county and an independent school district, and did not refer to the consent of the municipality. The substitute adds the provisions that these entities are prohibited from reducing the tax rate applicable to the area below the effective tax rate or the rollback tax rate calculated under Chapter 26, Tax Code; or entering into a contract for services that extends beyond the three-year annexation plan period other than a contract with another political subdivision for the operation of water, wastewater, and drainage facilities. The substitute modifies the original by adding new Subsection (g) to provide that if an area is not removed from the municipality's annexation plan, the annexation of the area under the plan must be completed before the 31st day after the third anniversary of the date the area was included in the annexation plan. Prohibits the municipality, if the annexation is not completed within the period prescribed by this subsection, from annexing the area proposed for annexation before the fifth anniversary of the last day for completing an annexation under this subsection. The substitute modifies the original in proposed Subsection (h) with respect to the following provisions setting out areas proposed for annexation to which this section does not apply, as follows: _in proposed Subdivision (1) by replacing the condition if the area has fewer than 250 residents with, if the area contains fewer than 100 separate tracts of land on which one or more residential dwellings are located; _by adding a new Subdivision (3), if the area is included within the boundaries of a special district and the area is annexed at the request of the district; _and adding a condition in proposed Subdivision (7), regarding the municipality's determination that the annexation of the area is necessary to protect the area proposed for annexation or the municipality from imminent destruction of property, or a condition that constitutes a public or private nuisance. The substitute modifies the original in SECTION 4 (proposed Section 43.053, Local Government Code) in Subsection (c) by providing an exception to the requirement to compile the inventory of services and facilities not later than the 90th day after the date the municipality requests the information, if the entity and the municipality agree to extend the period. The substitute replaces a provision authorizing the municipality to impose an administrative penalty of $200 for each day the service provider is in violation, and requiring the municipality to prescribe procedures to provide for due process in the imposition of an administrative penalty under this subsection, with language stating that, if a service provider fails to provide the information required by this subsection within the 90-day period, a municipality is not required to include the information in an inventory prepared under this section. The substitute adds proposed Subsection (h) to authorize a municipality to monitor the service provided in an area proposed for annexation and verify the inventory information. The substitute modifies the original in SECTION 5 (proposed Section 43.0545, Local Government Code) to delete language from proposed Subsection (e) providing an exception to the provision that roads, highways, rivers, lakes, or other bodies of water are not included in computing the 1,000 foot measuring distance for annexation. The substitute modifies the original in SECTION 6 (Section 43.056, Local Government Code), in the following ways: The substitute modifies the original in Subsection (a) by deleting reference to the governing body of the municipality and its planning department or other appropriate municipal department in the original bill, so that the substitute requires the municipality to complete a service plan that provides for the extension of full municipal services to the area to be annexed by a specified date. In Subsection (b), the substitute replaces a provision in the original bill creating an exception to the requirement that full municipal services be provided in a specified time unless such services cannot reasonably be provided and the municipality proposes a schedule for the extension of services within four and one half years, with the provision unless the period is extended by an arbitration decision or an agreement between the parties under this subchapter. The substitute modifies the original in Subsection (c) by redefining "full municipal service" to include water and central wastewater services and to exclude gas or electrical service funded in whole or in part by municipal taxation. The substitute modifies the original in Subsection (e) by replacing the provision in the original bill requiring construction to be completed within the period provided in the service plan, or alternatively, authorizing the service plan to be amended to extend the period for construction if the construction is proceeding with all deliberate speed, with the requirement that the construction be substantially completed within 2-1/2 years after the effective date of annexation unless that period is extended as provided by Subsection (b). Makes conforming changes. The substitute modifies the original in Subsection (f) by providing that a service plan may not reduce the level of fire and police protection and emergency medical services provided within the corporate boundaries of the municipality before annexation by more than a negligible amount The substitute modifies the original in Subsection (g) by adding reference to infrastructure and infrastructure maintenance and topography in considerations that must be taken into account in assessing the level of service provided by a municipality to an area after annexation. Adds new language providing that in a municipality with a population of 1.6 million or more, if the annexed area has a level of services superior to those provided within the corporate boundaries before annexation, a service plan must provide the area with a level of services comparable to the level that existed in that area previous to annexation. The substitute modifies the original by adding new Subsection (h) to prohibit a municipality with a population of 1.6 million or more from imposing an additional fee in order to maintain the level of services that existed before annexation. Provides that this subsection does not prohibit the municipality from imposing a fee for a service in the annexed area if the same fee is imposed within the corporate boundaries before annexation. The substitute modifies the original by redesignating Subsections (h)-(k) of the original to Subsections (i)-(l) of the substitute. The substitute modifies the original Subsection (k), redesignated as Subsection (l) of the substitute (Subsection (i) of existing law), by replacing a provision authorizing a person residing or owning land in an annexed area to apply for a writ of mandamus not later than the second anniversary of the date the person knew or should have known that the municipality was not complying with the service plan and placing the burden of proof on the municipality, with text authorizing such a person to enforce a service plan by petitioning the municipality for a change in policy or procedures to ensure compliance with the service plan and seek arbitration under Section 43.0565. The substitute modifies the original by removing Subsection (l) of the original, concerning a writ issued by the court. Language deleted from this subsection concerning remedies imposed by the court if the municipality does not meet the conditions of the service plan is incorporated into proposed Section 43.0565 of the substitute, with the authority to impose these remedies vested in the arbitrator. Adds language to proposed Subsection (m) authorizing a person aggrieved by a determination made by a municipality under this subsection to request arbitration. The substitute modifies the original in SECTION 7 (proposed Section 43.0561, Local Government Code) in Subsection (c) to provide that the municipality must give notice by certified mail to each public entity and utility service provider that provides services in the area proposed for annexation, in addition to each railroad company that serves the municipality and is on the municipality's tax roll if the company's right-of-way is in the area proposed for annexation. The substitute modifies the original in SECTION 7 (proposed Section 43.0562, Local Government Code) as follows: The substitute modifies the original in proposed Subsection (a) to require a municipality with a population of less than 1.6 million and the property owners of the area proposed for annexation, after holding the hearings as provided by Section 43.0561, if the municipality has to follow the procedure set forth in proposed Subsection (a) of the original bill. The substitute adds a new Subsection (a)(2), requiring a municipality and the governing body of the district, if a municipality proposes to annex a special district as that term is defined by Section 43.052, to negotiate for the provision of services to the area in lieu of annexation under Section 43.0751. The substitute makes conforming changes to proposed Subsections (b) and (c). The substitute modifies the original in proposed Section 43.0563, Local Government Code, to make conforming and nonsubstantive changes. The substitute modifies the original in proposed Section 43.0564, Local Government Code, by changing the title to "Arbitration Regarding Negotiations for Services" from "Arbitration Required." The substitute modifies the original in Subsection (a) to authorize either party, by majority decision of the party's representatives, to request the appointment of an arbitrator to resolve the service plan issues in dispute, if the municipality and the representatives of the area proposed for annexation cannot reach an agreement for the provision of services under Section 43.0562 (Strategic Partnerships for Continuation of Certain Districts) or if the municipality and the property owner representatives cannot reach an agreement for the provision of services in lieu of annexation, under Section 43.0563. The substitute removes the reference to Section 43.0751. The substitute modifies the original in proposed Section 43.0564, Local Government Code, in Subsection (b) to provide that if the parties cannot agree on the appointment of an arbitrator before the 11th business day after the date arbitration is requested the mayor of the municipality is required to immediately request a list of seven neutral arbitrators from the American Arbitration Association or the Federal Mediation and Conciliation Service, or their successors in function, and appoint a person who is not a resident or property owner of the municipality or the area proposed for annexation to serve as arbitrator. The substitute sets forth residency requirements of the arbitrator; authorizes the parties to agree on the appointment of an arbitrator from the list provided; sets forth the method of striking potential arbitrator appointees if the parties cannot agree on the appointment of an arbitrator before a specified date; and defines "business day." In the original bill the chief administrative district judge in a county with jurisdiction over either party was required to appoint a qualified person as arbitrator if the parties cannot agree on the appointment before a specified date. The substitute modifies the original in proposed Section 43.0564, Local Government Code, in proposed Subsection (f), by replacing a provision in the original bill, requiring the arbitrator to complete the hearing within one day; authorizing the arbitrator, for good cause shown, to schedule an additional hearing to be held not later than the seventh day after the date of the first hearing, and providing that unless otherwise agreed to by the parties, the arbitrator must issue a decision in writing and deliver a copy of the decision to the parties not later than the 14th day after the date of the final hearing. In the substitute the arbitrator is required to complete the hearing within two consecutive days unless the parties agree otherwise. Authorizes the arbitrator to schedule an additional hearing to be held by a specified date. Provides that the arbitrator must issue a written decision and deliver a copy to the parties by a specified date. The substitute modifies the original proposed Section 43.0564, Local Government Code, of the original in Subsection (i), to add language authorizing the arbitrator to require the area proposed for annexation to pay all or part of the arbitration costs if the arbitrator finds that the request for arbitration submitted by the area was groundless, in bad faith, or for purposes of harassment. The substitute amends Subsection 43.0565, Local Government Code, (not addressed by the original bill) by redesignating existing text to 43.0567, Local Government Code. Adds a new Section 43.0565, as follows: Sec. 43.0565. ARBITRATION REGARDING ENFORCEMENT OF SERVICE PLAN. (a) Provides that a person requesting arbitration must request the appointment of an arbitrator in writing to the municipality. (b) Provides that Sections 43.0564(b), (c), and (e) apply to appointment of an arbitrator and the conduct of an arbitration proceeding. (c) Provides that in an arbitration proceeding, the municipality has the burden of proof. (d) Specifies the actions that may be taken by a municipality or the arbitrator if the arbitrator finds that the municipality has not complied with the service plan. This is similar to authority granted to a court issuing a writ of mandamus under Section 43.056(l) of the original bill. (e) Authorizes the arbitrator, if the arbitrator finds that the municipality has complied with the service plan, to require the person requesting arbitration to pay the cost of arbitration to the municipality. The substitute modifies the original in SECTION 8 (proposed Section 43.064, Local Government Code) to provide that any period during which the municipality is restrained or enjoined by a court, rather than a court of competent jurisdiction, from annexing the area is not included in computing the 90-day period in which the municipality is required to complete annexation. The substitute modifies the original in SECTION 9 (Section 43.0751, Local Government Code) by amending Subsection (k) to authorize a municipality that has annexed all or part of a district, rather than a district, to impose a retail sales tax within the boundaries of the part of the district that is annexed for limited purposes, rather than within the district. Subsection (k) was not addressed in the original bill. Adds proposed Subsection (p) to prohibit an agreement under this section from requiring the district to provide revenue to the municipality solely for the purpose of obtaining an agreement with the municipality to forgo annexation of the district and to provide that an agreement under this section must provide reasonable and equitable benefits to each party, including revenue, services, and regulatory benefits. The substitute modifies the original by redesignating SECTIONS 10-16 to SECTIONS 11-17. The substitute modifies the original by adding a new SECTION 10 to amend Subchapter D, Chapter 43, Local Government Code, by adding Section 43.0752, as follows: Sec. 43.0752. ARBITRATION OF STRATEGIC PARTNERSHIP AGREEMENT. (a) Authorizes either party, if the municipality and the district cannot reach an agreement on terms of a strategic partnership agreement, to request the appointment of an arbitrator to resolve the issues. Sets forth the requirements of such a request. Prohibits the municipality from annexing the district under another section of this chapter during the pendency of the arbitration proceeding or an appeal of the decision. (b) Sets forth the sections that apply to the appointment of an arbitrator and the conduct of an arbitration proceeding. (c) Provides that the authority of the arbitrator is limited to determining whether the offer of a party complies with Section 43.0751. (d) Authorizes the arbitrator to issue a decision that incorporates the offer as part of the strategic partnership agreement if the arbitrator finds that the offer complies with Section 43.0751. (e) Requires the municipality and the district to equally pay the costs of arbitration. The substitute modifies the original in SECTION 13 (proposed Section 43.148, Local Government Code) by adding Subsection (c) to require a municipality to refund money to current landowners in the area by a specified date. The substitute modifies the original in SECTION 14 (proposed Section 43.905, Local Government Code) to delete proposed Subsection (d) and adds proposed Subsection (e) to authorize a municipality that, as a result of annexation, provides utility services to a school district to charge the district for utility services at specified rates. Adds proposed Subsection (f) to provide that a set rate is effective until the first day of the school district's fiscal year that begins after the 90th day after the effective date of annexation. Makes a nonsubstantive change. The substitute modifies the original in SECTION 16 to make conforming changes.