By Keel                                               H.B. No. 3165
         Line and page numbers may not match official copy.
         Bill not drafted by TLC or Senate E&E.
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to annexations and water conservation and reclamation
 1-3     districts, including municipal utility districts.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1.  Subchapter D, Chapter 43, Local Government Code,
 1-6     is amended by adding Section 43.0716 to read as follows:
 1-7           Sec. 43.0716.  INVALID ANNEXATIONS AND RESUMPTION OF SPECIAL
 1-8     DISTRICT FUNCTIONS.  (a)  In the event a municipality's annexation
 1-9     of certain land is subsequently determined to be invalid and (1)
1-10     such land was contained within a water or sewer district, as that
1-11     term is defined in Section 43.071 of this Subchapter as of the date
1-12     of the annexation; and (2) such district was purported to have been
1-13     dissolved pursuant to said invalid annexation, the district shall
1-14     resume its functions as before the annexation and purported
1-15     dissolution.  The resumption of functions by the district shall
1-16     commence on the thirtieth day after a final non-appealable decision
1-17     of a Texas court of competent jurisdiction is rendered that (1) the
1-18     annexation is invalid; or (2) that a statute which serves to
1-19     prohibit annexation under conditions which exist for such annexed
1-20     land is determined to be constitutional.
1-21           (b)  The municipality which had annexed the land contained
 2-1     within the district shall at its expense within thirty days of such
 2-2     non-appealable decision or on the effective date of this act, if
 2-3     such decision has already been rendered, complete the following:
 2-4                 (1)  Transfer all of the district's assets, including
 2-5     revenues from taxes levied by the district back to the possession
 2-6     of the district.
 2-7                 (2)  Notify in writing all financial institutions with
 2-8     whom assets of the district had been held at the time of the
 2-9     purported dissolution, all owners of the district's bonds, and all
2-10     water and sewer customers of the district of the resumption of the
2-11     district's functions and duties.
2-12                 (3)  Provide to the board of directors of the district
2-13     a written accounting of all assets of the district held by the
2-14     municipality and of all assets or obligations disposed of by the
2-15     municipality, including the amounts of proceeds from the sale of
2-16     any district assets.  At the discretion of the board of directors
2-17     of the district, an independent appraisal of the reasonableness of
2-18     the sales price of any such asset together with interest thereon at
2-19     the rate of six percent (6%) per annum from the date the
2-20     municipality received the sales proceeds may be required and shall
2-21     be paid for by the municipality.  A municipality shall pay to the
2-22     district the amount of money equal to the difference between the
2-23     value established by the independent appraisal and the sales price
2-24     received by the municipality, if the sales price is less than the
2-25     value established by the independent appraisal, together with
 3-1     interest thereon at the rate of six percent (6%) per annum from the
 3-2     date the municipality received the sales proceeds.
 3-3                 (4)  Pay to the owners of taxable property in the
 3-4     district from whom the municipality collected ad valorem taxes, the
 3-5     amount of such taxes collected together with interest at a rate of
 3-6     six percent (6%) per annum.
 3-7                 (5)  Provide to the board of directors of the district
 3-8     a written accounting of all revenues received and expenses incurred
 3-9     from the municipality's operation of the district's water and
3-10     sanitary sewer systems and pay to the district the amount of any
3-11     excess of such revenues over such expenses.
3-12           (c)  The elected or duly appointed directors who were serving
3-13     as directors at the time of the purported dissolution of the
3-14     district shall resume their positions as directors and be
3-15     authorized to assume their powers and duties under state law.
3-16     Their oaths of office and bonds shall be reinstated.  In the event
3-17     a director is no longer qualified to serve pursuant to the
3-18     requirements of state law, the vacancy shall be filled by
3-19     appointment of the board.  If the number of directors is reduced to
3-20     fewer than a majority, the vacancies shall be filled by the
3-21     appointment by the commission of the Texas Natural Resource
3-22     Conservation Commission within twenty days of the receipt of a
3-23     written request by any remaining director of the board or by any
3-24     landowner within the district.  A director appointed to fill a
3-25     vacancy shall serve until the next regular election date for the
 4-1     district.
 4-2           (d)  All contracts and other outstanding obligations,
 4-3     including bonded indebtedness, which existed at the time of the
 4-4     purported dissolution shall be of full force and effect, except for
 4-5     any conditions imposed by the municipality pursuant to Section
 4-6     54.016, Water Code, which conditions are hereby annulled and at no
 4-7     further force or effect.  Any obligations incurred by the
 4-8     municipality for the direct benefit of the land or water or sewer
 4-9     customers of the district after the purported annexation may be
4-10     assumed by the district at the sole discretion of its board of
4-11     directors.  Those obligations not assumed by the district shall
4-12     remain the obligations of the municipality.  The municipality shall
4-13     not seek reimbursement from the district for monies spent or assets
4-14     of the municipality consumed by the municipality for the benefit of
4-15     the district, landowners or the district's water or sewer customers
4-16     during the period of the invalid annexation.
4-17           (e)  All water and/or sewer customers located within the
4-18     boundaries of the district or its preexisting out-of-district
4-19     service area, if any, and connected to the water and/or sewer
4-20     facilities of the district prior to or after the municipality's
4-21     annexation and purported dissolution of the district shall be
4-22     customers of the district.  The municipality shall not be
4-23     authorized to discontinue service to customers until the district
4-24     is able to resume its operations of the water and/or sewer system.
4-25           (f)  All voted authority of the district, including taxing
 5-1     authority and authority to issue bonded indebtedness secured by
 5-2     taxes and/or revenues shall be in effect as if the annexation and
 5-3     purported dissolution had not occurred.
 5-4           SECTION 2.  The importance of this legislation and the
 5-5     crowded condition of the calendars in both houses create an
 5-6     emergency and an imperative public necessity that the
 5-7     constitutional rule requiring bills to be read on three several
 5-8     days in each house be suspended, and this rule is hereby suspended,
 5-9     and that this Act take effect and be in force from and after its
5-10     passage, and it is so enacted.