By:  Wentworth                                                    S.B. No. 1879
	(In the Senate - Filed April 21, 2005; April 25, 2005, read 
first time and referred to Committee on Intergovernmental 
Relations; April 29, 2005, reported favorably by the following 
vote:  Yeas 5, Nays 0; April 29, 2005, sent to printer.)

relating to the creation of special districts for improvements in certain counties, including authority to acquire, construct, and improve water, wastewater, and drainage improvements; providing authority to impose a tax and issue bonds. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Chapter 372, Local Government Code, is amended by adding Subchapter C to read as follows:
Sec. 372.101. DEFINITIONS. In this subchapter: (1) "Board" means the board of directors of a district. (2) "Commissioners court" means the governing body of the county in which a district is located. (3) "County" means the county in which the district is located. (4) "District" means an improvement district created under this subchapter. (5) "Hotel" has the meaning assigned by Section 156.001, Tax Code, and includes a timeshare, casita, or condominium during the time the timeshare, casita, or condominium is rented by a person who is not the owner of the timeshare, casita, or condominium. (6) "Municipality" means the municipality in which the district is located. Sec. 372.102. PURPOSE. By enacting this subchapter, the legislature has created a program for economic development as provided in Section 52-a, Article III, Texas Constitution. A district created under this subchapter is created to serve a public use and benefit. Sec. 372.103. NATURE OF DISTRICT. A district created under this subchapter is a political subdivision of this state. Sec. 372.104. APPLICABILITY; CONFLICT OF LAWS. In the event of a conflict between this subchapter and Subchapter A, this subchapter controls. Sec. 372.105. CREATION OF DISTRICT. (a) After a county with a population of one million or more receives a petition satisfying the requirements of Section 372.005, the commissioners court of that county may by order create a district located in the extraterritorial jurisdiction of a municipality in that county. (b) The order must: (1) describe the district's territory; (2) specifically authorize the district to exercise the powers of this subchapter; and (3) state whether the petition provides for improvements to be financed and paid for with taxes authorized by this subchapter instead of or in addition to assessments. Sec. 372.106. GOVERNING BODY; TERMS. A district is governed by a board of five directors who serve staggered terms of two years, with two or three directors' terms expiring June 1 of each year. Sec. 372.107. ELIGIBILITY. (a) A director must be at least 18 years old. (b) If the population of the district is more than 1,000, a director must be 18 years old and: (1) a resident of the district; (2) an owner of property in the district; (3) an owner of stock, whether beneficial or otherwise, of a corporate owner of property in the district; (4) an owner of a beneficial interest in a trust that owns property in the district; or (5) an agent, employee, or tenant of a person described by Subdivision (2), (3), or (4). Sec. 372.108. APPOINTMENT OF DIRECTORS. Directors are appointed by position as follows: (1) the county judge shall appoint three directors; and (2) the commissioners court shall appoint two directors. Sec. 372.109. VACANCIES; QUORUM. (a) A board vacancy is filled in the same manner as the original appointment. (b) A vacant board position is not counted for the purposes of establishing a quorum of the board. Sec. 372.110. CONFLICTS OF INTEREST; ONE-TIME AFFIDAVIT. (a) Except as provided by this section: (1) a director may participate in all board votes and decisions; and (2) Chapter 171 governs conflicts of interest for directors. (b) Section 171.004 does not apply to the district. A director who has a substantial interest in a business or charitable entity that will receive a pecuniary benefit from a board action shall file a one-time affidavit declaring the interest. An additional affidavit is not required if the director's interest changes. After the affidavit is filed with the board secretary, the director may participate in a discussion or vote on that action if: (1) a majority of the directors have a similar interest in the same entity; (2) all other similar business or charitable entities in the district will receive a similar pecuniary benefit; or (3) the director owns property in the district. (c) For purposes of this section, a director has a substantial interest in a charitable entity in the same manner that a person would have a substantial interest in a business entity under Section 171.002. Sec. 372.111. COMPENSATION. (a) In this section, "performs the duties of a director" means substantial performance of the management of the district's business, including participation in board and committee meetings and other activities involving the substantive deliberation of district business and in pertinent educational programs, but does not include routine or ministerial activities such as the execution of documents or self-preparation for meetings. (b) A director is entitled to compensation of $50 a day for each day that the director actually performs the duties of a director. Sec. 372.112. OATH AND BOND; BUSINESS. As soon as practicable, a board member shall give the bond and take the oath of office prescribed by Section 375.067, and the board shall elect officers and conduct business in accordance with Subchapter D, Chapter 375. Sec. 372.113. POWERS AND DUTIES. (a) A district has the powers and duties of: (1) a county development district under Chapter 383; (2) a road district under Section 52, Article III, Texas Constitution, and Chapter 257, Transportation Code; and (3) a municipality or county under this subchapter or Chapters 380 and 381, including the acquisition, construction, or improvement of water, wastewater, or drainage facilities or improvements under Section 372.003(b)(9). (b) A district may not exercise the powers and duties of a road district under this section unless the municipality consents by resolution. Sec. 372.114. DEVELOPMENT AGREEMENTS. A district may enter into a development agreement with owners of land in the district. The agreement may be amended by the parties. Sec. 372.115. ECONOMIC DEVELOPMENT AGREEMENT; ELECTION; TAXES. (a) A district may enter into an agreement, on terms and conditions the board considers advisable, to make a grant or loan of public money to promote state or local economic development and to stimulate business and commercial activity in the district, including a grant or loan to induce the construction of a tourist destination or attraction in accordance with Chapter 380 or 381. (b) If the grant or loan agreement has been approved by the voters of the district at an election held in the district for that purpose, the grant or loan may be payable over a term of years and be binding and enforceable on the district in accordance with the terms of the agreement and the conditions of the election, which may include the irrevocable obligation to impose an ad valorem tax, sales and use tax, or hotel occupancy tax over a term of years not to exceed 30 years, and if authorized at the election, the district may contract and covenant to pay the taxes to the recipient of the grant or loan in accordance with the agreement. Sec. 372.116. CONTRACTS; GENERAL. (a) A district may contract with any person, including the municipality or county, on the terms and conditions and for a period of time the board determines, to: (1) accomplish any district purpose, including a contract to pay, repay, or reimburse from tax proceeds or another specified source of money any costs, including reasonable carrying costs, incurred by a person on the district's behalf, including all or part of the costs of an improvement project; and (2) receive, administer, and perform the district's duties and obligations under a gift, grant, loan, conveyance, or other financial assistance arrangement relating to the investigation, planning, analysis, study, design, acquisition, construction, improvement, completion, implementation, or operation by the district or another person of an improvement project or proposed improvement project. (b) A state agency, municipality, county, other political subdivision, corporation, or other person may contract with the district to carry out the purposes of this subchapter without further authorization. Sec. 372.117. PROCUREMENT CONTRACTS. A district may contract for materials, supplies, and construction: (1) in accordance with the laws applicable to counties; or (2) in the same manner that a county local government corporation created pursuant to Chapter 431, Transportation Code, is authorized to contract. Sec. 372.118. RULES; ENFORCEMENT. The board may adopt rules: (1) to administer and operate the district; (2) for the use, enjoyment, availability, protection, security, and maintenance of the district's property and facilities; or (3) to provide for public safety and security in the district. Sec. 372.119. FEES. A district may establish, revise, repeal, enforce, collect, and apply the proceeds from user fees or charges for the enjoyment, sale, rental, or other use of the district's facilities or other property, or for services or improvement projects. Sec. 372.120. ELECTIONS. A district may hold an election on any date. Sec. 372.121. RULES; REGULATION OF ROADS AND OTHER PUBLIC AREAS. (a) A board may adopt rules to regulate the private use of public roadways, open spaces, parks, sidewalks, and similar public areas in the area of the district. (b) To the extent rules adopted under this section conflict with a rule, order, ordinance, or regulation of the county or municipality, the county or municipality rule, order, ordinance, or regulation controls. (c) A rule adopted under this section may provide for the safe and orderly use of public roadways, open spaces, parks, sidewalks, and similar public areas in the area of the district. Sec. 372.122. SERVICE PLAN REQUIRED. A district must annually prepare and present to the commissioners court a service plan, as provided for by Section 372.013, for the commissioners court's review and approval. Sec. 372.123. NO EMINENT DOMAIN. A district does not have the power of eminent domain. Sec. 372.124. BONDS; NOTES. (a) A district may issue bonds. (b) A district may issue a negotiable promissory note or notes. (c) Bonds, notes, and other district obligations may be secured by district revenue or any type of district taxes or assessments. Sec. 372.125. AUTHORITY TO IMPOSE ASSESSMENTS AND AD VALOREM, SALES AND USE, AND HOTEL OCCUPANCY TAXES; ELECTION. (a) A district may accomplish its purposes and pay the cost of services and improvements by: (1) imposing an assessment; (2) levying an ad valorem tax; (3) imposing a sales and use tax; or (4) imposing a hotel occupancy tax. (b) If approved at an election called by the board, a district may impose an ad valorem tax, hotel occupancy tax, and sales and use tax to accomplish the economic development purposes prescribed by Section 52-a, Article III, Texas Constitution. (c) The rate at which the district imposes a hotel occupancy tax, sales and use tax, or ad valorem tax must be approved by the commissioners court. A tax rate approved by the commissioners court and pledged to secure bonds, notes, grant agreements, or development agreements may not be reduced until the obligations of those instruments have been satisfied. Sec. 372.126. USE OF REVENUE FROM TAXES. A tax imposed under this subchapter may be used to accomplish any improvement project or provide any service authorized by: (1) this chapter; (2) Chapter 381; (3) Chapter 383; or (4) Chapter 257, Transportation Code. Sec. 372.127. HOTEL OCCUPANCY TAX. (a) A district may impose a hotel occupancy tax on a person who pays for the use or possession of or for the right to the use or possession of a room that is ordinarily used for sleeping in a hotel in the district. (b) The district shall impose a hotel occupancy tax as provided by Chapter 383, Local Government Code, and Section 352.107, Tax Code, except that a hotel occupancy tax: (1) may be used for any district purpose; and (2) is imposed by the district. (c) The hotel occupancy tax rate is the greater of nine percent or the rate imposed by the municipality. Sec. 372.128. SALES AND USE TAX. (a) A district may impose a sales and use tax in increments of one-eighth of one percent up to a rate of two percent. (b) Except as otherwise provided in this subchapter, a sales and use tax must be imposed in accordance with Chapter 383, Local Government Code, and Chapter 323, Tax Code. Sec. 372.129. AD VALOREM TAX. (a) A district may impose an ad valorem tax on property in the district in accordance with Chapter 257, Transportation Code. (b) Before imposing an ad valorem tax for district operations or to pay bonds, notes, or other obligations, the district must obtain the approval of the commissioners court. Sec. 372.130. BORROWING. A district may borrow money for any district purpose, including for a development agreement that authorizes the district to borrow money. Sec. 372.131. REPAYMENT OF COSTS. A district may, by a lease, lease-purchase agreement, installment purchase contract, or other agreement, or by the imposition or assessment of a tax, user fee, concession, rental, or other revenue or resource of the district, provide for or secure the payment or repayment of: (1) the costs and expenses of the establishment, administration, and operation of the district; (2) the district's costs or share of costs of an improvement project; or (3) the district's contractual obligations or indebtedness. Sec. 372.132. LIABILITIES; ASSUMPTION OF ASSETS AFTER COMPLETE ANNEXATION. (a) If the municipality annexes the entire district territory, the municipality shall succeed to the district's assets but is not liable for the district's debt or other obligations. (b) If the district has debt or other obligations, the district remains in existence after the territory is annexed by the municipality solely for the purpose of satisfying any preexisting district debt or other obligations. After the debt or other obligations have been discharged or two years have expired since the date of the annexation, the district is dissolved. Sec. 372.133. AUTHORITY TO IMPOSE TAXES OR ASSESSMENTS AFTER PARTIAL OR COMPLETE ANNEXATION. (a) After a district has been annexed by a municipality wholly or partly for general purposes, the district may not impose an ad valorem tax, hotel occupancy tax, or sales and use tax, or collect an assessment in the area that the municipality overlaps the district, except as provided by Section 372.132(b). (b) A district may continue to impose a tax in an area that the municipality annexes for limited purposes and in which the municipality does not impose taxes, including a tax that the municipality does not impose if the municipality imposes other taxes in the area. SECTION 2. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2005.
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