1-1 By: Thompson, Menendez H.B. No. 3172 1-2 (Senate Sponsor - Van de Putte) 1-3 (In the Senate - Received from the House April 23, 2001; 1-4 April 24, 2001, read first time and referred to Committee on 1-5 Intergovernmental Relations; May 11, 2001, reported favorably, as 1-6 amended, by the following vote: Yeas 5, Nays 0; May 11, 2001, sent 1-7 to printer.) 1-8 COMMITTEE AMENDMENT NO. 1 By: Lindsay 1-9 Add the following language in Section 12 of HB 3172: 1-10 Amend Section 372.014(a), Local Government Code to read as follows: 1-11 (a) An assessment Plan must provide that at least 10% of the 1-12 cost of an improvement be paid by special assessments against 1-13 property in the improvement district. The assessment plan must be 1-14 included in the annual service plan. 1-15 Amend Section 16 by inserting the following sentence just prior to 1-16 the final sentence of Section 16: 1-17 "Delinquent installments of the assessment shall incur 1-18 interest, penalties and attorneys' fees in the same manner as 1-19 delinquent ad valorem taxes." 1-20 COMMITTEE AMENDMENT NO. 2 By: Lindsay 1-21 Add the following language in Section 372.003(d), Local Government 1-22 Code of HB 3172: 1-23 A county may establish a public improvement district unless within 1-24 30 days of a county's action to approve such a district, a home 1-25 rule municipality objects to its establishment within the 1-26 municipality's corporate limits or extraterritorial jurisdiction. 1-27 A BILL TO BE ENTITLED 1-28 AN ACT 1-29 relating to the authority of a county to establish public 1-30 improvement districts. 1-31 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-32 SECTION 1. The heading to Chapter 372, Local Government Code, 1-33 is amended to read as follows: 1-34 CHAPTER 372. IMPROVEMENT DISTRICTS IN MUNICIPALITIES AND 1-35 COUNTIES 1-36 SECTION 2. Section 372.002, Local Government Code, is amended 1-37 to read as follows: 1-38 Sec. 372.002. EXERCISE OF POWERS. Powers granted under this 1-39 subchapter may be exercised by a municipality or county in which 1-40 the governing body of the municipality or county initiates or 1-41 receives a petition requesting the establishment of a public 1-42 improvement district. A petition must comply with the requirements 1-43 of Section 372.005. 1-44 SECTION 3. Section 372.003(a), Local Government Code, is 1-45 amended to read as follows: 1-46 (a) If the governing body of a municipality or county finds 1-47 that it promotes the interests of the municipality or county, the 1-48 governing body may undertake an improvement project that confers a 1-49 special benefit on a definable part of the municipality or county 1-50 or the municipality's extraterritorial jurisdiction. A project may 1-51 be undertaken in the municipality or county or the municipality's 1-52 extraterritorial jurisdiction. 1-53 SECTION 4. Section 372.005(a), Local Government Code, is 1-54 amended to read as follows: 1-55 (a) A petition for the establishment of a public improvement 1-56 district must state: 1-57 (1) the general nature of the proposed improvement; 1-58 (2) the estimated cost of the improvement; 1-59 (3) the boundaries of the proposed assessment 2-1 district; 2-2 (4) the proposed method of assessment, which may 2-3 specify included or excluded classes of assessable property; 2-4 (5) the proposed apportionment of cost between the 2-5 public improvement district and the municipality or county as a 2-6 whole; 2-7 (6) whether the management of the district is to be by 2-8 the municipality or county, the private sector, or a partnership 2-9 between the municipality or county and the private sector; 2-10 (7) that the persons signing the petition request or 2-11 concur with the establishment of the district; and 2-12 (8) that an advisory body may be established to 2-13 develop and recommend an improvement plan to the governing body of 2-14 the municipality or county. 2-15 SECTION 5. Section 372.006, Local Government Code, is amended 2-16 to read as follows: 2-17 Sec. 372.006. FINDINGS. If a petition that complies with 2-18 this subchapter is filed, the governing body of the municipality or 2-19 county may make findings by resolution as to the advisability of 2-20 the proposed improvement, its estimated cost, the method of 2-21 assessment, and the apportionment of cost between the proposed 2-22 improvement district and the municipality or county as a whole. 2-23 SECTION 6. Section 372.007(a), Local Government Code, is 2-24 amended to read as follows: 2-25 (a) Before holding the hearing required by Section 372.009, 2-26 the governing body of the municipality may use the services of 2-27 municipal employees, the governing body of the county may use the 2-28 services of county employees, or the governing body of the 2-29 municipality or county may employ consultants to prepare a report 2-30 to determine whether an improvement should be made as proposed by 2-31 petition or otherwise or whether the improvement should be made in 2-32 combination with other improvements authorized under this 2-33 subchapter. The governing body may also require that a preliminary 2-34 estimate of the cost of the improvement or combination of 2-35 improvements be made. 2-36 SECTION 7. Section 372.008(a), Local Government Code, is 2-37 amended to read as follows: 2-38 (a) After receiving a petition that complies with Section 2-39 372.005, the governing body of the municipality or county may 2-40 appoint an advisory body with the responsibility of developing and 2-41 recommending an improvement plan to the governing body. 2-42 SECTION 8. Sections 372.009(a)-(c), Local Government Code, 2-43 are amended to read as follows: 2-44 (a) A public improvement district may be established and 2-45 improvements provided by the district may be financed under this 2-46 subchapter only after the governing body of the municipality or 2-47 county holds a public hearing on the advisability of the 2-48 improvement. 2-49 (b) The hearing may be adjourned from time to time until the 2-50 governing body makes findings by resolution as to: 2-51 (1) the advisability of the improvement; 2-52 (2) the nature of the improvement; 2-53 (3) the estimated cost of the improvement; 2-54 (4) the boundaries of the public improvement district; 2-55 (5) the method of assessment; and 2-56 (6) the apportionment of costs between the district 2-57 and the municipality or county as a whole. 2-58 (c) Notice of the hearing must be given in a newspaper of 2-59 general circulation in the municipality or county. If any part of 2-60 the improvement district is to be located in the municipality's 2-61 extraterritorial jurisdiction or if any part of the improvements is 2-62 to be undertaken in the municipality's extraterritorial 2-63 jurisdiction, the notice must also be given in a newspaper of 2-64 general circulation in the part of the extraterritorial 2-65 jurisdiction in which the district is to be located or in which the 2-66 improvements are to be undertaken. The final publication of notice 2-67 must be made before the 15th day before the date of the hearing. 2-68 The notice must state: 2-69 (1) the time and place of the hearing; 3-1 (2) the general nature of the proposed improvement; 3-2 (3) the estimated cost of the improvement; 3-3 (4) the boundaries of the proposed assessment 3-4 district; 3-5 (5) the proposed method of assessment; and 3-6 (6) the proposed apportionment of cost between the 3-7 improvement district and the municipality or county as a whole. 3-8 SECTION 9. Section 372.010, Local Government Code, is amended 3-9 to read as follows: 3-10 Sec. 372.010. IMPROVEMENT ORDER. (a) During the six-month 3-11 period after the date of the final adjournment of the hearing under 3-12 Section 372.009, the governing body of the municipality or county 3-13 may authorize an improvement district if, by majority vote of all 3-14 members of the governing body, the members adopt a resolution 3-15 authorizing the district in accordance with its finding as to the 3-16 advisability of the improvement. 3-17 (b) An authorization takes effect when it has been published 3-18 one time in a newspaper of general circulation in the municipality 3-19 or county. If any part of the improvement district is located in 3-20 the municipality's extraterritorial jurisdiction or if any part of 3-21 the improvements is to be undertaken in the municipality's 3-22 extraterritorial jurisdiction, the authorization does not take 3-23 effect until the notice is also given one time in a newspaper of 3-24 general circulation in the part of the extraterritorial 3-25 jurisdiction in which the district is located or in which the 3-26 improvements are to be undertaken. 3-27 (c) Actual construction of an improvement may not begin 3-28 until after the 20th day after the date the authorization takes 3-29 effect and may not begin if during that 20-day period written 3-30 protests signed by at least two-thirds of the owners of record of 3-31 property within the improvement district or by the owners of record 3-32 of property comprising at least two-thirds of the total area of the 3-33 district are filed with the municipal or county secretary or other 3-34 officer performing the duties of the municipal or county secretary. 3-35 A person whose name appears on a protest may withdraw the name from 3-36 the protest at any time before the governing body of the 3-37 municipality or county convenes to determine the sufficiency of the 3-38 protest. 3-39 SECTION 10. Section 372.012, Local Government Code, is 3-40 amended to read as follows: 3-41 Sec. 372.012. AREA OF DISTRICT. The area of a public 3-42 improvement district to be assessed according to the findings of 3-43 the governing body of the municipality or county may be less than 3-44 the area described in the proposed boundaries stated by the notice 3-45 under Section 372.009. The area to be assessed may not include 3-46 property not described by the notice as being within the proposed 3-47 boundaries of the district unless a hearing is held to include the 3-48 property and notice for the hearing is given in the same manner as 3-49 notice under Section 372.009. 3-50 SECTION 11. Section 372.013(a), Local Government Code, is 3-51 amended to read as follows: 3-52 (a) The advisory body shall prepare an ongoing service plan 3-53 and present the plan to the governing body of the municipality or 3-54 county for review and approval. The governing body may assign 3-55 responsibility for the plan to another entity in the absence of an 3-56 advisory body. 3-57 SECTION 12. Section 372.014(b), Local Government Code, is 3-58 amended to read as follows: 3-59 (b) The municipality or county is responsible for payment of 3-60 assessments against exempt municipal or county property in the 3-61 district. Payment of assessments by other exempt jurisdictions 3-62 must be established by contract. An assessment paid by the 3-63 municipality or county under this subsection is considered to have 3-64 been paid by special assessment for the purposes of Subsection (a). 3-65 SECTION 13. Sections 372.015(a) and (c), Local Government 3-66 Code, are amended to read as follows: 3-67 (a) The governing body of the municipality or county shall 3-68 apportion the cost of an improvement to be assessed against 3-69 property in an improvement district. The apportionment shall be 4-1 made on the basis of special benefits accruing to the property 4-2 because of the improvement. 4-3 (c) The governing body may establish by ordinance or order: 4-4 (1) reasonable classifications and formulas for the 4-5 apportionment of the cost between the municipality or county and 4-6 the area to be assessed; and 4-7 (2) the methods of assessing the special benefits for 4-8 various classes of improvements. 4-9 SECTION 14. Sections 372.016(a) and (b), Local Government 4-10 Code, are amended to read as follows: 4-11 (a) After the total cost of an improvement is determined, 4-12 the governing body of the municipality or county shall prepare a 4-13 proposed assessment roll. The roll must state the assessment 4-14 against each parcel of land in the district, as determined by the 4-15 method of assessment chosen by the municipality or county under 4-16 this subchapter. 4-17 (b) The governing body shall file the proposed assessment 4-18 roll with the municipal secretary or other officer performing the 4-19 functions of the municipal secretary or in a district formed by a 4-20 county, the county tax assessor-collector. The proposed assessment 4-21 roll is subject to public inspection. The governing body shall 4-22 require the municipal secretary or other officer or county tax 4-23 assessor-collector to publish notice of the governing body's 4-24 intention to consider the proposed assessments at a public hearing. 4-25 The notice must be published in a newspaper of general circulation 4-26 in the municipality or county before the 10th day before the date 4-27 of the hearing. If any part of the improvement district is located 4-28 in the municipality's extraterritorial jurisdiction or if any part 4-29 of the improvements is to be undertaken in the municipality's 4-30 extraterritorial jurisdiction, the notice must also be published, 4-31 before the 10th day before the date of the hearing, in a newspaper 4-32 of general circulation in the part of the extraterritorial 4-33 jurisdiction in which the district is located or in which the 4-34 improvements are to be undertaken. The notice must state: 4-35 (1) the date, time, and place of the hearing; 4-36 (2) the general nature of the improvement; 4-37 (3) the cost of the improvement; 4-38 (4) the boundaries of the assessment district; and 4-39 (5) that written or oral objections will be considered 4-40 at the hearing. 4-41 SECTION 15. Section 372.017, Local Government Code, is 4-42 amended to read as follows: 4-43 Sec. 372.017. LEVY OF ASSESSMENT. (a) At or on the 4-44 adjournment of the hearing referred to by Section 372.016 on 4-45 proposed assessments, the governing body of the municipality or 4-46 county must hear and pass on any objection to a proposed 4-47 assessment. The governing body may amend a proposed assessment on 4-48 any parcel. 4-49 (b) After all objections have been heard and the governing 4-50 body has passed on the objections, the governing body by ordinance 4-51 or order shall levy the assessment as a special assessment on the 4-52 property. The governing body by ordinance or order shall specify 4-53 the method of payment of the assessment. The governing body may 4-54 provide that assessments be paid in periodic installments. The 4-55 installments must be in amounts necessary to meet annual costs for 4-56 improvements and must continue for a period necessary to retire the 4-57 indebtedness on the improvements. 4-58 SECTION 16. Section 372.018, Local Government Code, is 4-59 amended to read as follows: 4-60 Sec. 372.018. INTEREST ON ASSESSMENT; LIEN. (a) An 4-61 assessment bears interest at the rate specified by the governing 4-62 body of the municipality or county, but may not exceed a rate that 4-63 is one-half of one percent higher than the actual interest rate 4-64 paid on the public debt used to finance the improvement. Interest 4-65 on the assessment between the effective date of the ordinance or 4-66 order levying the assessment and the date the first installment is 4-67 payable shall be added to the first installment. The interest on 4-68 any delinquent installment shall be added to each subsequent 4-69 installment until all delinquent installments are paid. 5-1 (b) An assessment or reassessment, with interest, the 5-2 expense of collection, and reasonable attorney's fees, if incurred, 5-3 is a first and prior lien against the property assessed, superior 5-4 to all other liens and claims except liens or claims for state, 5-5 county, school district, or municipality ad valorem taxes, and is a 5-6 personal liability of and charge against the owners of the property 5-7 regardless of whether the owners are named. The lien is effective 5-8 from the date of the ordinance or order levying the assessment 5-9 until the assessment is paid and may be enforced by the governing 5-10 body in the same manner that an ad valorem tax lien against real 5-11 property may be enforced by the governing body. The owner of 5-12 assessed property may pay at any time the entire assessment, with 5-13 interest that has accrued on the assessment, on any lot or parcel. 5-14 SECTION 17. Section 372.019, Local Government Code, is 5-15 amended to read as follows: 5-16 Sec. 372.019. SUPPLEMENTAL ASSESSMENTS. After notice and a 5-17 hearing, the governing body of the municipality or county may make 5-18 supplemental assessments to correct omissions or mistakes in the 5-19 assessment relating to the total cost of the improvement. Notice 5-20 must be given and the hearing held under this section in the same 5-21 manner as required by Sections 372.016 and 372.017. 5-22 SECTION 18. Section 372.020, Local Government Code, is 5-23 amended to read as follows: 5-24 Sec. 372.020. REASSESSMENT. The governing body of the 5-25 municipality or county may make a reassessment or new assessment of 5-26 a parcel of land if: 5-27 (1) a court of competent jurisdiction sets aside an 5-28 assessment against the parcel; 5-29 (2) the governing body determines that the original 5-30 assessment is excessive; or 5-31 (3) on the written advice of counsel, the governing 5-32 body determines that the original assessment is invalid. 5-33 SECTION 19. Section 372.021, Local Government Code, is 5-34 amended to read as follows: 5-35 Sec. 372.021. SPECIAL IMPROVEMENT DISTRICT FUND. (a) A 5-36 municipality or county that intends to create a public improvement 5-37 district may by ordinance or order establish a special improvement 5-38 district fund in the municipal or county treasury. 5-39 (b) The municipality or county annually may levy a tax to 5-40 support the fund. 5-41 (c) The fund may be used to: 5-42 (1) pay the costs of planning, administration, and an 5-43 improvement authorized by this subchapter; 5-44 (2) prepare preliminary plans, studies, and 5-45 engineering reports to determine the feasibility of an improvement; 5-46 and 5-47 (3) if ordered by the governing body of the 5-48 municipality or county, pay the initial cost of the improvement 5-49 until temporary notes, time warrants, or improvement bonds have 5-50 been issued and sold. 5-51 (d) The fund is not required to be budgeted for expenditure 5-52 during any year, but the amount of the fund must be stated in the 5-53 municipality's or county's annual budget. The amount of the fund 5-54 must be based on an annual service plan that describes the public 5-55 improvements for the fiscal year. 5-56 (e) A grant-in-aid or contribution made to the municipality 5-57 or county for the planning and preparation of plans for an 5-58 improvement authorized under this subchapter may be credited to the 5-59 special improvement district fund. 5-60 SECTION 20. Section 372.022, Local Government Code, is 5-61 amended to read as follows: 5-62 Sec. 372.022. SEPARATE FUNDS. A separate public improvement 5-63 district fund shall be created in the municipal or county treasury 5-64 for each district. Proceeds from the sale of bonds, temporary 5-65 notes, and time warrants, and other sums appropriated to the fund 5-66 by the governing body of the municipality or county shall be 5-67 credited to the fund. The fund may be used solely to pay costs 5-68 incurred in making an improvement. When an improvement is 5-69 completed, the balance of the part of the assessment that is for 6-1 improvements shall be transferred to the fund established for the 6-2 retirement of bonds. 6-3 SECTION 21. Sections 372.023(b), (d), and (e), Local 6-4 Government Code, are amended to read as follows: 6-5 (b) A cost payable by the municipality or county as a whole 6-6 may be paid from general funds available for the purpose or other 6-7 available general funds. 6-8 (d) A cost payable from a special assessment that is to be 6-9 paid in installments and a cost payable by the municipality or 6-10 county as a whole but not payable from available general funds or 6-11 other available general improvement funds shall be paid by the 6-12 issuance and sale of revenue or general obligation bonds. 6-13 (e) While an improvement is in progress, the governing body 6-14 of the municipality or county may issue temporary notes or time 6-15 warrants to pay for the costs of the improvement and, on completion 6-16 of the improvement, issue revenue or general obligation bonds. 6-17 SECTION 22. Section 372.025, Local Government Code, is 6-18 amended to read as follows: 6-19 Sec. 372.025. TERMS AND CONDITIONS OF BONDS. (a) Revenue 6-20 bonds may be issued to mature serially or in any other manner but 6-21 must mature not later than 40 years after their date. A provision 6-22 may be made for the subsequent issuance of additional parity bonds 6-23 or subordinate lien bonds under terms and conditions specified in 6-24 the ordinance or order authorizing the issuance of the bonds. 6-25 (b) The bonds shall be executed and the bonds and interest 6-26 coupons appertaining to them are negotiable instruments within the 6-27 meaning and for all purposes of the Uniform Commercial Code 6-28 (Section 1.101 et seq., Business & Commerce Code). The ordinance 6-29 or order authorizing the issuance of the bonds must specify: 6-30 (1) whether the bonds are issued registrable as to 6-31 principal alone or as to both principal and interest; 6-32 (2) whether the bonds are redeemable before maturity; 6-33 (3) the form, denomination, and manner of issuance; 6-34 (4) the terms, conditions, and other details applying 6-35 to the bonds including the price, terms, and interest rates on the 6-36 bonds; and 6-37 (5) the manner of sale of the bonds. 6-38 (c) The ordinance or order authorizing the issuance of the 6-39 bonds may specify that the proceeds from the sale of the bonds: 6-40 (1) be used to pay interest on the bonds during and 6-41 after the period of acquisition or construction of an improvement 6-42 financed through the sale of the bonds; 6-43 (2) be used for creating a reserve fund for payment of 6-44 the principal of and interest on the bonds and for creating other 6-45 funds; and 6-46 (3) may be placed in time deposit or invested, until 6-47 needed. 6-48 SECTION 23. Sections 372.026(a), (b), and (c), Local 6-49 Government Code, are amended to read as follows: 6-50 (a) For the payment of bonds issued under this subchapter 6-51 and the payment of principal, interest, and any other amounts 6-52 required or permitted in connection with the bonds, the governing 6-53 body of the municipality or county may pledge all or part of the 6-54 income from improvements financed under this subchapter, including 6-55 income received in installment payments under Section 372.023. 6-56 (b) Pledged income must be fixed and collected in amounts 6-57 sufficient, with other pledged resources, to pay principal, 6-58 interest, and other expenses related to the bonds, and to the 6-59 extent required by the ordinance or order authorizing the bonds, to 6-60 pay for the operation, maintenance, and other expenses related to 6-61 improvements authorized by this subchapter. 6-62 (c) The bonds may also be secured by mortgages or deeds of 6-63 trust on any real property related to the facilities authorized 6-64 under this subchapter that are owned or are to be acquired by the 6-65 municipality or county and by chattel mortgages, liens, or security 6-66 interests on any personal property appurtenant to that real 6-67 property. The governing body may authorize the execution of trust 6-68 indentures, mortgages, deeds of trust, or other forms of 6-69 encumbrances as evidence of the indebtedness. 7-1 SECTION 24. Sections 372.027(a) and (b), Local Government 7-2 Code, are amended to read as follows: 7-3 (a) Revenue bonds issued under this subchapter may be 7-4 refunded or refinanced by the issuance of refunding bonds, under 7-5 terms or conditions set forth in ordinances or orders of the 7-6 municipality or county issuing the bonds. The provisions of this 7-7 subchapter applying generally to revenue bonds, including 7-8 provisions related to the issuance of those bonds, apply to 7-9 refunding bonds authorized by this section. The refunding bonds 7-10 may be sold and delivered in amounts necessary for the principal, 7-11 interest, and any redemption premium of the bonds to be refunded, 7-12 on the date of the maturity of the bond or any redemption date of 7-13 the bond. 7-14 (b) Refunding bonds may be issued for exchange with the 7-15 bonds they are refunding. The comptroller of public accounts shall 7-16 register refunding bonds described by this subsection and deliver 7-17 the bonds to holders of bonds being refunded in accordance with the 7-18 ordinance or order authorizing the issuance of refunding bonds. The 7-19 exchange may be made in one delivery or several installment 7-20 deliveries. 7-21 SECTION 25. This Act takes effect immediately if it receives 7-22 a vote of two-thirds of all the members elected to each house, as 7-23 provided by Section 39, Article III, Texas Constitution. If this 7-24 Act does not receive the vote necessary for immediate effect, this 7-25 Act takes effect September 1, 2001. 7-26 * * * * *