By Lewis of Orange                                     H.B. No. 702
         77R4646 SGA-F                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the administration of drainage districts and the
 1-3     issuance of bonds and other instruments of indebtedness by drainage
 1-4     districts; increasing a criminal penalty.
 1-5           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-6           SECTION 1. Section 56.015(a), Water Code, is amended to read
 1-7     as follows:
 1-8           (a)  Any person filing a petition shall deposit with the
 1-9     clerk of the commissioners court [$200 in] cash, in an amount to be
1-10     determined by the county election officer, which shall be held by
1-11     the clerk until the result of the election to create the district
1-12     and issue bonds is officially announced.
1-13           SECTION 2. Section 56.032(b), Water Code, is amended to read
1-14     as follows:
1-15           (b)  To operate under Article XVI, Section 59, of the Texas
1-16     Constitution, the board must adopt a resolution proposing the
1-17     change and schedule [district shall present the petition and make
1-18     the deposit required by Sections 56.014 and 56.015 of this code.
1-19     The commissioners court, by order entered in its minutes, shall
1-20     give notice and hold] a hearing on the resolution.  The hearing
1-21     must be held not earlier than the 30th day but not later than the
1-22     60th day after the date the resolution is adopted.  The board shall
1-23     give notice of the time and place of the hearing on the resolution
1-24     by posting a copy of the resolution for at least the 20 days
 2-1     preceding the date of the hearing in five public places in the
 2-2     county.  One of the copies shall be posted on the courthouse door
 2-3     and the other copies shall be posted within the boundaries of the
 2-4     district. Following the hearing, the board may adopt a resolution
 2-5     authorizing [petition as required by Sections 56.017 and 56.018 of
 2-6     this code and may by order authorize] the district to operate under
 2-7     the provisions of  Article XVI, Section 59, of the Texas
 2-8     Constitution.
 2-9           SECTION 3. Subchapter C, Chapter 56, Water Code, is amended
2-10     by adding Section 56.062 to read as follows:
2-11           Sec. 56.062.  ELIGIBILITY REQUIREMENTS FOR DIRECTORS. To be
2-12     eligible to serve as a director, a person must satisfy the
2-13     requirements of Section 141.001(a), Election Code.
2-14           SECTION 4. Section 56.069(a), Water Code, is amended to read
2-15     as follows:
2-16           (a)  The functions, powers, rights, and duties exercised by
2-17     or relating to the board of any district may be transferred to the
2-18     commissioners court of the county in which the district is wholly
2-19     located, but before the transfer is made, the commissioners court
2-20     and the board must pass resolutions authorizing the transfer.  In
2-21     any district in which the board is elected, the transfer may not be
2-22     made unless the transfer is approved by a majority of the voters
2-23     voting on that issue at an election held in the district.
2-24           SECTION 5. Section 56.128, Water Code, is amended to read as
2-25     follows:
2-26           Sec. 56.128.  INJURING DRAINAGE CANAL OR DITCH. Any person
2-27     who wilfully fills up, cuts, injures, destroys, or impairs the
 3-1     usefulness of any canal, drain, ditch, watercourse, or other work
 3-2     constructed, repaired, or improved by a district to drain and
 3-3     protect from overflow of water, upon conviction is punishable by
 3-4     confinement in the county jail for not more than two months or by a
 3-5     fine of not more than $1,000 [$100].
 3-6           SECTION 6. Sections 56.182(b) and (c), Water Code, are
 3-7     amended to read as follows:
 3-8           (b)  The interest and sinking fund consists of that portion
 3-9     of tax collections necessary for paying principal and interest on
3-10     bonded indebtedness, and this fund may be invested for the benefit
3-11     of the district as provided by law [in bonds and securities
3-12     approved by the attorney general].
3-13           (c)  Each fund shall be held for the purpose for which it was
3-14     created, and if money is improperly paid from either fund, the
3-15     board [commissioners court] may [have the county treasurer]
3-16     transfer money in the two funds to restore the fund which was
3-17     improperly used.
3-18           SECTION 7. Sections 56.202 and 56.203, Water Code, are
3-19     amended to read as follows:
3-20           Sec. 56.202.  ISSUANCE OF BONDS. When maps, profiles, and
3-21     estimates are filed, the board [commissioners court] shall issue an
3-22     order directing the issuance of bonds sufficient to pay for
3-23     proposed improvements together with necessary, actual, and
3-24     incidental expenses.  The bonds may not be issued in an amount
3-25     greater than the amount specified in the order and notice of
3-26     election, and in districts operating under Article III, Section 52,
3-27     of the Texas Constitution, the bonds may not be issued in an amount
 4-1     greater than one-fourth of the assessed valuation of the real
 4-2     property of the district.
 4-3           Sec. 56.203.  RECORD BOOK FOR BONDS. (a)  Before any bonds
 4-4     are issued, the board [commissioners court] shall provide a
 4-5     well-bound book in which the board [county clerk] shall keep a
 4-6     record of:
 4-7                 (1)  all bonds which have been issued;
 4-8                 (2)  the numbers of the bonds;
 4-9                 (3)  the amount of the bonds;
4-10                 (4)  the rate of interest on the bonds;
4-11                 (5)  the date of issuance of the bonds;
4-12                 (6)  the date on which the bonds are due;
4-13                 (7)  the place where the bonds are payable;
4-14                 (8)  the amount received for the bonds;
4-15                 (9)  the annual rate of assessment to pay interest on
4-16     and provide a sinking fund for the bonds; and
4-17                 (10)  the payment of each bond.
4-18           (b)  The board [county clerk] shall keep the book open at all
4-19     times for public inspection by district taxpayers and bondholders.
4-20           [(c)  The county clerk is entitled to receive for recording
4-21     district bonds and other instruments the same fees allowed by law
4-22     for recording other similar records.]
4-23           SECTION 8. Sections 56.204(a), (b), and (c), Water Code, are
4-24     amended to read as follows:
4-25           (a)  Bonds shall be issued in the name of the district,
4-26     signed by the board president [county judge], and attested by the
4-27     board secretary [county clerk], and each bond shall have the seal
 5-1     of the district [commissioners court] affixed to it.
 5-2           (b)  The bonds shall be issued in denominations [of not less
 5-3     than $100 nor more than $1,000] and shall bear interest as
 5-4     authorized by the board [which is payable annually or
 5-5     semiannually].
 5-6           (c)  The terms of the bonds shall include the time, places,
 5-7     manner, and conditions of payment and the rate of interest
 5-8     determined and ordered by the board [commissioners court].
 5-9           SECTION 9. Section 56.205(a), Water Code, is amended to read
5-10     as follows:
5-11           (a)  After the [Before any] bonds are sold [offered for
5-12     sale], the district shall submit to the attorney general:
5-13                 (1)  [a copy of] the actual bonds;
5-14                 (2)  a certified copy of the board's [commissioners
5-15     court] order levying a tax to pay interest and create a sinking
5-16     fund;
5-17                 (3)  a statement of the district's total bonded
5-18     indebtedness including the value of the bonds proposed to be issued
5-19     and the value of taxable property in the district as shown by the
5-20     last official assessment of the appraisal district in which the
5-21     district participates [county]; and
5-22                 (4)  other information the attorney general requires.
5-23           SECTION 10. Sections 56.207, 56.209, and 56.210, Water Code,
5-24     are amended to read as follows:
5-25           Sec. 56.207.  BONDS: SALE. (a)  The board [When the bonds are
5-26     registered, the county judge, under the direction of the
5-27     commissioners court,] shall advertise and sell the bonds on the
 6-1     best terms and for the best price possible.
 6-2           (b)  The board [county judge] shall deposit [pay to the
 6-3     county treasurer] all money from the sale of the bonds as it is
 6-4     received into [, and the county treasurer shall place the money in]
 6-5     the construction and maintenance fund [to the credit] of the
 6-6     district.
 6-7           [(c)  The county judge is entitled to receive one-half of one
 6-8     percent of the amount received from the sale of bonds sold by him
 6-9     as payment for his services.]
6-10           Sec. 56.209.  USE OF UNSOLD BONDS FOR MAINTENANCE PURPOSES.
6-11     If any bonds remain unsold which are not required to complete
6-12     improvements, the board [commissioners court] may enter its consent
6-13     on the public record to sell the bonds and place the proceeds in
6-14     the construction and maintenance fund for use in accomplishing the
6-15     purposes stated in Section 56.242 of this code.
6-16           Sec. 56.210.  REFUNDING BONDS. (a)  A [With the consent of
6-17     the bondholders, a] district may refund outstanding bonds by
6-18     issuing new [coupon] bonds as provided by Chapter 1207, Government
6-19     Code [in their place].
6-20           (b)  [Interest is shown by coupons attached to the bonds.
6-21     The commissioners court may pay the interest on the bonds annually
6-22     or semiannually.]
6-23           [(c)  The commissioners court may pay the refunding bonds
6-24     serially, or in any other manner they choose, but in districts
6-25     which are not operating under Article XVI, Section 59, of the Texas
6-26     Constitution, it shall pay the bonds not later than 40 years from
6-27     the date the bonds are issued.]
 7-1           [(d)]  The district shall issue the bonds in denominations to
 7-2     be determined by the board [of $100 or a multiple of $100,] and
 7-3     shall levy a tax sufficient to meet the payment of principal and
 7-4     interest of the refunding bonds before the bonds are delivered.
 7-5           [(e)  The commissioners court shall issue refunding bonds in
 7-6     the manner provided for other district bonds, and shall deduct any
 7-7     sum on hand to the credit of any sinking fund account in
 7-8     ascertaining the amount of refunding bonds to be issued.  This sum
 7-9     shall be applied to the payment of the outstanding bonds.]
7-10           [(f)  The commissioners court shall not issue refunding bonds
7-11     until they are approved by the attorney general and registered by
7-12     the comptroller.  The comptroller shall not register the refunding
7-13     bonds until the old bonds being replaced are presented to him for
7-14     cancellation.  After the comptroller registers the new bonds, he
7-15     shall cancel the old bonds and interest coupons and deliver the new
7-16     bonds to the proper bondholders.  The district may present the old
7-17     bonds for cancellation in installments, and the comptroller may
7-18     register and deliver a like amount of the new bonds.]
7-19           [(g)  In a district operating under Article XVI, Section 59,
7-20     of the Texas Constitution, if the holders of outstanding bonds do
7-21     not consent to the exchange of their bonds for refunding bonds, the
7-22     refunding bonds may be sold and the proceeds applied to the
7-23     purchase of the outstanding bonds when they become payable under an
7-24     option of prepayment contained in the bonds or when the bondholders
7-25     will accept payment.]
7-26           SECTION 11. Sections 56.211(b) and (c), Water Code, are
7-27     amended to read as follows:
 8-1           (b)  The board [commissioners court] shall call the election
 8-2     and the secretary [clerk] of the board [court] shall give notice of
 8-3     the time and places for holding the election.
 8-4           (c)  The notice shall be signed by the secretary [clerk] and
 8-5     shall
 8-6                 (1)  state the purpose of the election;
 8-7                 (2)  state the proposition to be voted on;
 8-8                 (3)  define the election precincts;
 8-9                 (4)  prescribe the polling places in the district; and
8-10                 (5)  list the names of the election officers.
8-11           SECTION 12. Sections 56.212(a), (b), and (c), Water Code, are
8-12     amended to read as follows:
8-13           (a)  If the board [commissioners court] declares the result
8-14     of the election under Section 56.211 of this code to favor the
8-15     issuance of refunding bonds and the levy of a tax to pay for the
8-16     bonds, refunding bonds with the seal of the district [commissioners
8-17     court] affixed to them may be issued in the name of the district.
8-18     The bonds shall be signed by the board president and [county
8-19     judge,] attested [by the county clerk,] and registered by the board
8-20     secretary [county treasurer].
8-21           (b)  The bonds together with the record relating to them
8-22     shall be submitted to the attorney general for his approval, as
8-23     required by Section 49.184.
8-24           (c)  When the attorney general approves the bonds, they shall
8-25     be delivered to the comptroller who shall register them and deliver
8-26     them in exchange for or on release of the obligations being
8-27     refunded at the time, in the manner, and in the amounts prescribed
 9-1     in the order of the board [commissioners court].  If the
 9-2     obligations being refunded are evidenced by outstanding securities,
 9-3     the comptroller shall cancel the outstanding securities
 9-4     concurrently with the registration and delivery of the bonds.
 9-5           SECTION 13. Section 56.241, Water Code, is amended to read as
 9-6     follows:
 9-7           Sec. 56.241.  LEVY OF TAXES TO PAY FOR BONDS. After bonds are
 9-8     authorized at an election, the board [commissioners court] shall
 9-9     have taxes annually assessed and collected on all property in the
9-10     district sufficient to pay interest and principal on the bonds.
9-11     Taxes collected under this section shall be placed in the interest
9-12     and sinking fund.
9-13           SECTION 14. Section 56.242, Water Code, is amended by
9-14     amending Subsection (a)  and by adding Subsections (c) and (d) to
9-15     read as follows:
9-16           (a)  The board [At the same time that taxes are levied to pay
9-17     bonded indebtedness, the commissioners court] shall have a tax
9-18     assessed and collected on district property sufficient to maintain,
9-19     repair, and preserve district improvements and to pay legal debts,
9-20     demands, and obligations of the district, but in districts
9-21     operating under  Article III, Section 52, of the Texas
9-22     Constitution, the tax may not be in an amount greater than one-half
9-23     of one percent of the total assessed valuation of the district for
9-24     that year.
9-25           (c)  The board may issue negotiable notes payable from the
9-26     maintenance tax authorized by Subsection (a)  to meet the financial
9-27     obligations of the district, as described by Subsection (a).  The
 10-1    notes shall be payable over a period not to exceed five years from
 10-2    the date of issuance.  Notes issued under this subsection are not
 10-3    required to be approved by the Texas Natural Resource Conservation
 10-4    Commission.  A district may not have outstanding, at any one time,
 10-5    notes in excess of $3 million under this subsection.
 10-6          (d)  The board may issue negotiable notes to pay any lawful
 10-7    expenditure of the district, other than principal and interest on
 10-8    debt, including all costs to improve or repair any existing
 10-9    drainage canal, ditch, watercourse, or other work constructed,
10-10    repaired, or improved by the district.  The notes may be payable
10-11    from and secured by a lien on and pledge of any available funds of
10-12    the district, including the proceeds of a maintenance tax.  Notes
10-13    issued under this subsection shall be payable over a period not to
10-14    exceed 20 years from the date of issuance and if issued for a term
10-15    longer than one year must be treated as "debt" as defined by
10-16    Section 26.012, Tax Code.  The maximum debt service on all notes
10-17    issued under this subsection may not exceed in any fiscal year of a
10-18    district an amount that could be paid from the proceeds of
10-19    one-fourth of the maximum tax the district is authorized by law to
10-20    levy on the date any notes are issued.
10-21          SECTION 15. Sections 56.249, 56.251, 56.292, and 56.293,
10-22    Water Code, are amended to read as follows:
10-23          Sec. 56.249.  AUTHORIZING TAXATION ON THE BENEFIT BASIS FOR
10-24    EXISTING DISTRICT. (a)  A district [operating under Article XVI,
10-25    Section 59, of the Texas Constitution,] may levy taxes on the
10-26    benefit basis as provided in this section.
10-27          (b)  Any person may present to the board [commissioners
 11-1    court] a petition, signed by 75 of the resident freehold taxpayers
 11-2    of the district whose land would be affected or by one-third of the
 11-3    freehold resident taxpayers of the district whose land would be
 11-4    affected if there are less than 75 in the district, requesting that
 11-5    taxes of the district be levied on the benefit basis and showing
 11-6    that the levy of taxes on the benefit basis will be fair and
 11-7    equitable to all landowners in the district.
 11-8          (c)  At the same meeting at which the petition is presented,
 11-9    the board [commissioners court] shall schedule a hearing on the
11-10    petition for either a regular meeting or a special meeting called
11-11    for that purpose to be held during the period beginning on the 30th
11-12    day and ending with the 60th day after the day the petition is
11-13    presented.
11-14          (d)  The board [commissioners court] shall [order the clerk
11-15    to] give notice of the time and place of the hearing by posting a
11-16    copy of the petition and the order of the board [commissioners
11-17    court] at five public places in the county during the 20-day period
11-18    immediately preceding the day of the hearing.  The board [clerk]
11-19    shall post one of the copies at the courthouse door and the other
11-20    four copies at four places within the boundaries of the district[,
11-21    and the district shall pay the clerk $1 for each notice he posts
11-22    and five cents a mile for each mile traveled in posting the
11-23    notices].
11-24          (e)  At the hearing, any person whose land would be affected
11-25    may appear before the board [commissioners court] and may support
11-26    or oppose the levy of taxes on a benefit basis and may offer
11-27    testimony to show whether or not the levy of taxes on the benefit
 12-1    basis will be fair and equitable to landowners in the district. The
 12-2    board [commissioners court] has exclusive jurisdiction to hear and
 12-3    determine this issue and matters relating to it and has exclusive
 12-4    jurisdiction in all subsequent proceedings.  The board
 12-5    [commissioners court] may adjourn the hearing from day to day, and
 12-6    judgments of the board [commissioners court] are final.
 12-7          (f)  If the board [commissioners court] finds that levying
 12-8    taxes on the benefit basis will not be fair and equitable to
 12-9    landowners in the district, an order shall be entered dismissing
12-10    the petition, and the district shall continue to levy taxes on an
12-11    ad valorem basis, but if the board [commissioners court] finds that
12-12    levying taxes on the benefit basis will be fair and equitable to
12-13    landowners in the district, the board [commissioners court] shall
12-14    order an election to be held in the district.
12-15          (g)  An election to approve the levy of taxes on the benefit
12-16    basis must be held on the earliest legal date that occurs on or
12-17    after the 30th day after the date the board orders the election
12-18    [during the period beginning on the 30th day and ending with the
12-19    60th day after the date of the election order].  Notice of the
12-20    election shall be given in the same manner as notice is given for
12-21    the hearing on the petition.  The board [commissioners court] shall
12-22    name polling places within the district and shall appoint judges
12-23    and other necessary election officers.  The ballots shall be
12-24    printed to provide for voting for or against the following
12-25    proposition:  "The levy of taxes in the district on the benefit
12-26    basis."
12-27          (h)  At least two-thirds of those persons voting in the
 13-1    election must vote in favor of the proposition for it to carry.
 13-2          (i)  If the proposition carries at the election, the order of
 13-3    the board [commissioners court] canvassing the election shall
 13-4    provide that taxes of the district are to be levied on the benefit
 13-5    basis, but if the proposition fails to carry at the election, the
 13-6    order of the board [commissioners court] canvassing the election
 13-7    shall provide that taxes of the district are to continue to be
 13-8    levied on an ad valorem basis.
 13-9          Sec. 56.251.  DETERMINING ACREAGE IN THE DISTRICT. (a)  In
13-10    districts levying taxes on the benefit basis, the board
13-11    [commissioners court] shall appoint three freehold taxpaying voters
13-12    in the district [county] as a committee [board] to determine the
13-13    number of acres of land owned by each landowner in the district. A
13-14    [The] person appointed by the board [commissioners court] shall
13-15    qualify by taking an oath to fairly and impartially hold hearings
13-16    and determine acreage.
13-17          (b)  The committee [board] to determine acreage shall give
13-18    notice of the time and place of the hearing on the acreage before
13-19    the 10-day period immediately preceding the day of the hearing.
13-20          (c)  At the hearing each landowner may testify about the
13-21    amount of land owned by him in the district.  The committee [board]
13-22    has final jurisdiction to determine the exact acreage of each
13-23    landowner in the district.
13-24          (d)  After the committee [board] makes its determination, the
13-25    land in the district shall be annually placed on the tax rolls
13-26    according to the acreage determined without rendition of taxes.
13-27          Sec. 56.292.  PETITION. At a regular meeting of the board
 14-1    [commissioners court], any resident freehold taxpayer of the
 14-2    district [person] may present a petition signed by at least five
 14-3    percent of the qualified voters [50 of the resident freehold
 14-4    taxpayers] of the district, or if there are fewer [less] than 100
 14-5    resident freehold taxpayers in the district, then by one-third of
 14-6    the resident freehold taxpayers [them] requesting the dissolution
 14-7    of the district, and on verification of the petition signatures,
 14-8    the board [commissioners court] shall order an election to be held
 14-9    in the district at the earliest legal time to determine whether or
14-10    not the district should be dissolved.
14-11          Sec. 56.293.  DEPOSIT. (a)  Any person filing a petition
14-12    shall deposit with the board an amount sufficient to pay the cost
14-13    of conducting an election within the district [county clerk $200 in
14-14    cash] which shall be held by the board [county clerk] until the
14-15    result of the election to dissolve the district is officially
14-16    announced and entered in the record of the district [commissioners
14-17    court].
14-18          (b)  If the result of the election favors dissolving the
14-19    district, the board [county clerk] shall return the deposit to the
14-20    petitioners or their agent or attorney, and the cost and expenses
14-21    of holding the election shall be paid by [charged to] the district
14-22    [and collected as other debts in this subchapter], but if the
14-23    result of the election is against dissolving the district, the
14-24    board [county clerk] shall pay the cost and expenses of the
14-25    election from the deposit [with vouchers signed by the county
14-26    judge] and return the balance of the deposit to the petitioners or
14-27    their agent or attorney.
 15-1          SECTION 16. Section 56.295(b), Water Code, is amended to read
 15-2    as follows:
 15-3          (b)  If the proposition carries, the board [commissioners
 15-4    court] shall declare the result and enter it in its minutes
 15-5    substantially as follows:
 15-6          "__________ and __________ others having petitioned for the
 15-7    dissolution of ______________ County Drainage District No. ______;
 15-8    an election having been held in the district on ______________; and
 15-9    a two-thirds majority of the votes cast in the election having
15-10    favored dissolution of the district;  now, therefore, the board of
15-11    directors [commissioners court] declares that ______________
15-12    Drainage District No. ______ is dissolved."
15-13          SECTION 17. Section 56.311, Water Code, is amended by adding
15-14    Subsection (d) to read as follows:
15-15          (d)  Before entering an order discharging the trustee and
15-16    the surety on the trustee's bond and closing the trust estate, the
15-17    commissioners court shall order all transactions of the trustee
15-18    audited by an independent certified public accountant.  A copy of
15-19    the audit shall be filed with the commissioners court and the Texas
15-20    Natural Resource Conservation Commission, and a copy shall be
15-21    provided to the trustee.
15-22          SECTION 18. Sections 56.137, 56.206, and 56.208, Water Code,
15-23    are repealed.
15-24          SECTION 19.  (a)  Section 56.128, Water Code, as amended by
15-25    this Act, applies only to an offense committed on or after the
15-26    effective date of this Act. For purposes of this section, an
15-27    offense is committed before the effective date of this Act if any
 16-1    element of the offense occurs before that date.
 16-2          (b)  An offense committed before the effective date of this
 16-3    Act is covered by the law in effect when the offense was committed,
 16-4    and the former law is continued in effect for that purpose.
 16-5          SECTION 20.  The changes in law made by this Act apply only
 16-6    to bonds issued on or after the effective date of this Act.  A bond
 16-7    issued before the effective date of this Act is governed by the law
 16-8    as it existed immediately before the effective date of this Act,
 16-9    and that law is continued in effect for that purpose.
16-10          SECTION 21. This Act takes effect September 1, 2001.