Amend HB 3438 (Senate committee printing) by adding the following appropriately numbered SECTIONS to the bill and renumbering subsequent SECTIONS accordingly: SECTION __. Chapter 49, Water Code, is amended by adding Subchapter O to read as follows:SUBCHAPTER O. EFFECT OF SUBDIVISION OF NONAGRICULTURAL LAND ON WATER RIGHTS Sec. 49.501. DEFINITIONS. In this subchapter: (1) "Authority" means the Rio Grande Regional Water Authority. (2) "Municipal water supplier" means a municipality or a water supply corporation. Sec. 49.502. APPLICABILITY. This subchapter applies only to a district, other than a drainage district, located wholly or partly in a county: (1) that borders the Gulf of Mexico and the United Mexican States; or (2) that is adjacent to a county described by Subdivision (1). Sec. 49.503. PETITION BY MUNICIPAL WATER SUPPLIER TO CONVERT WATER USE AFTER SUBDIVISION. (a) This section applies only to land: (1) that is: (A) subdivided into town lots or blocks or small parcels of the same general nature as town lots or blocks; (B) designed, intended, or suitable for residential or other nonagricultural purposes, including streets, alleys, parkways, parks, detention or retention ponds, and railroad property and rights-of-way; or (C) in a subdivision created to meet the requirements of a governmental entity authorized to require a recorded plat of subdivided lands; (2) that is in a subdivision for which a plat or map has been filed and recorded in the office of the county clerk of each county in which the subdivision is wholly or partly located; and (3) that is or was assessed as flat rate irrigable property in the municipal water supplier's certificated service area or its corporate area. (b) A municipal water supplier that serves land described by Subsection (a) may petition the district in accordance with this section to convert the proportionate irrigation water right to the Rio Grande from irrigation use to municipal use with municipal priority of allocation under commission rules, for the use and benefit of the municipal supplier. (c) The municipal water supplier must file the petition with the district not later than January 1 after the expiration of two years after the date the plat or map was recorded under Subsection (a). The district shall consider the petition not later than January 31 of the year following the year in which the petition was filed. (d) The petition must identify by subdivision name or other sufficient description the land that the municipal water supplier supplies or has the right to supply potable water. (e) This section applies only to one subdivision of the land recorded under Subsection (a). This section does not apply to any further subdivision of the same property. Sec. 49.504. EFFECT OF MUNICIPAL WATER SUPPLIER'S FAILURE TO FILE A PETITION. (a) If a municipal water supplier does not file a petition under Section 49.503, the district may retain the water rights for use by the district or may declare the water as excess and contract for the sale or use of the water as determined by the district. (b) Before a district may contract for the sale or use of water for more than one year with a purchaser located outside of a county described by Section 49.502, the district must, for 90 days: (1) make the water available under the same terms to all municipal water suppliers located in those counties; and (2) advertise the offer to sell or contract for the use of the water by posting notice on: (A) any website of the Rio Grande Watermaster's Office; (B) any website of the authority; and (C) the official posting place for the district's board meetings at the district's office. (c) If, after the 90th day after the last date on which the district posted notice, a municipal water supplier in a county described by Section 49.502 has not contracted with the district for the sale or use of the water, the district may contract with any other person for the sale or use of the water under the terms of the offer advertised under Subsection (b). Sec. 49.505. CALCULATION OF PROPORTIONATE WATER RIGHTS. A district that receives a petition under Section 49.503 shall compute the proportionate amount of water rights to the Rio Grande. The proportionate amount of water rights is equal to the amount of irrigable acres of land in the subdivision multiplied by the lesser of: (1) 1.25 acre-feet per irrigable acre; or (2) the sum of all irrigation water rights owned by the district on September 1, 2007, as if the water rights had been converted to municipal use under applicable commission rules, divided by the total amount of irrigable acres of land in the district on September 1, 2007. Sec. 49.506. PROVISION OR CONVERSION OF PROPORTIONATE WATER RIGHTS BY DISTRICT. (a) Not later than the second anniversary of the date the municipal water supplier files a petition under Section 49.503: (1) a district shall provide the municipal water supplier with the proportionate water rights described by Section 49.505 from the district's existing water rights; or (2) a district shall, if the district does not have sufficient existing water rights: (A) apply for appropriate amendments to the district's water rights under commission rules to convert the proportionate water rights from irrigation use to municipal use with municipal priority of allocation; and (B) provide to the municipal water supplier the converted rights described by Section 49.505. (b) The district may continue to use the irrigation use water for district purposes until: (1) the commission approves the amendment to the district's water rights; or (2) the water is otherwise provided to the municipal water supplier. (c) A district that applies for appropriate amendments under Subsection (a)(2) shall provide the municipal water supplier with an estimate of the district's reasonable costs for the administrative proceedings. The district is not required to begin the proceedings until the municipal water supplier deposits the amount of the estimate with the district. The municipal water supplier shall pay the district any reasonable costs that exceed the estimate. The district shall refund the balance of the deposit if the actual cost is less than the estimate. Sec. 49.507. CONTRACT TO PURCHASE PROPORTIONATE WATER RIGHTS; WATER RIGHTS SALE CONTRACT. (a) A municipal water supplier may contract to purchase the proportionate water rights described by Section 49.505. (b) The purchase price may not exceed 68 percent of the current market value, as determined under Section 49.509, for the year that the municipal water supplier petitions the district. (c) The contract must be in writing in a document entitled "Water Rights Sales Contract." (d) The contract must include the purchase price for the water rights or, if the consideration for the sale is not monetary, the terms of the sale. (e) The municipal water supplier shall file the contract with the Rio Grande watermaster not later than the 10th day after the date the contract is executed. (f) The municipal water supplier shall pay the purchase price when the proportionate amount of water rights is made available to the municipal water supplier. Sec. 49.508. CONTRACT TO USE PROPORTIONATE WATER RIGHTS; WATER SUPPLY CONTRACT. (a) A municipal water supplier may contract to use water associated with the proportionate water rights described by Section 49.505. (b) The contract must be for at least 40 years. (c) The price for the contractual right to use the municipal use water is based on an amount for one acre-foot of municipal use water with a municipal use priority of allocation and may not exceed the sum of: (1) an amount equal to the district's annual flat rate charge per assessed acre; and (2) the equivalent of the charge for four irrigations per flat rate acre of irrigable property in the district. (d) The parties to the contract shall agree on the terms of payment of the contract price. (e) The board periodically shall determine the flat rate charge and irrigation per acre charge described by Subsection (c). (f) The contract must be in writing in a document entitled "Water Supply Contract." The contract may contain any terms to which the parties agree. (g) The municipal water supplier shall file the contract with the Rio Grande watermaster not later than the 10th day after the date the contract is executed. Sec. 49.509. DUTY OF AUTHORITY TO CALCULATE CURRENT MARKET VALUE. (a) The authority annually at its January meeting shall calculate the current market value by using the average price per acre-foot of municipal use water after conversion from irrigation use water to municipal use water with a municipal priority of allocation under commission rules of the last three purchases involving: (1) a municipal water supplier; (2) a party other than a municipal water supplier; and (3) at least 100 acre-feet of municipal use water, with municipal priority of allocation. (b) The authority shall use information from the water rights sales contracts reported to the Rio Grande Watermaster's Office to calculate the current market value. (c) The authority shall make the calculation: (1) without charging any of the parties involved; and (2) using 100 percent of the value of monetary exchanges, not in-kind exchanges. Sec. 49.510. ACCOUNTING FOR SALE OF WATER RIGHTS. A district shall maintain an accounting of money received from the sale of water rights under this subchapter. Sec. 49.511. CAPITAL IMPROVEMENTS. A district shall designate at least 75 percent of the proceeds from the sale of water rights for capital improvements in the district. Sec. 49.512. MAP OF SERVICE AREA. (a) In this section, "outer boundaries of a district" means district boundaries without considering any exclusion of land from inside the district. (b) Each municipal water supplier that has a certificate of convenience and necessity service area in the outer boundaries of a district shall file a map of the service area with the district. (c) The municipal water supplier shall update the map and forward the map to the district when changes are made. (d) A district periodically shall provide to a municipal water supplier that serves territory in the district a copy of the district's map showing the outer boundaries of the district. (e) A district may request from a municipal water supplier a map of the municipal suppliers's service area, and a municipal water supplier may request from the district a map of the district's outer boundaries. On request, the district and a municipal water supplier shall provide the map free of charge to each other at least one time each year. If the district or municipal water supplier receives more than one request a year for a map, the district or municipal water supplier may charge a reasonable fee for the map. SECTION ___. Subchapter D, Chapter 43, Local Government Code, is amended by adding Section 43.0741 to read as follows: Sec. 43.0741. ABOLITION OF CERTAIN WATER CONTROL AND IMPROVEMENT, WATER IMPROVEMENT, AND IRRIGATION DISTRICTS THAT DELIVER RAW WATER TO MUNICIPALITIES. (a) This section applies only to: (1) a water control and improvement, water improvement, or irrigation district: (A) at least 60 percent of the territory of which is located in a single municipality as a result of annexation or incorporation; (B) that diverts raw water from the Rio Grande and in a 12-month period delivers at least 80 percent of that raw water to the municipality for municipal use; and (C) that has no outstanding bonded indebtedness; and (2) a municipality that: (A) receives raw water from a district described by Subdivision (1); and (B) is located in a county that has a population of 400,000 or more, borders the United Mexican States, and has three or more cities that each have a population of more than 25,000. (b) A municipality may adopt an ordinance abolishing a district by a vote of at least two-thirds of the membership of the municipality's governing body if the governing body determines that: (1) at least 80 percent of the raw water diverted by the district in any 12-month period was for municipal use by the municipality; (2) the district has no outstanding bonded indebtedness; (3) the services furnished and functions performed by the district can be furnished and performed by the municipality; and (4) the abolition of the district is in the best interests of the residents and property of the municipality and the district. (c) The voters of the municipality may protest the enactment or enforcement of the ordinance by filing a petition with the secretary of the municipality. The petition must be signed by a number of qualified voters of the municipality that is equal to at least 10 percent of the number of voters who voted in the most recent election for municipal officers. The petition must be filed not later than the 30th day after the later of: (1) the date the municipality finally approves the ordinance; or (2) the date of publication of the ordinance, if the ordinance is published before it is scheduled to take effect. (d) The secretary shall verify the signatures on a petition filed in accordance with Subsection (c) and present the verified petition to the governing body of the municipality at its next scheduled meeting. (e) On receipt of a verified petition, the governing body of the municipality shall suspend the ordinance, and the municipality may not take an action under the ordinance. (f) The governing body of the municipality shall reconsider the suspended ordinance at its next meeting. If the governing body does not repeal the ordinance, the governing body shall submit a proposition for or against the ordinance to the voters at the next municipal election or at a special election the governing body may order for that purpose. The ordinance does not take effect unless a majority of the voters voting in the election vote for the ordinance. (g) The ordinance takes effect on: (1) the expiration of the period for filing a petition under Subsection (c) if the voters of the municipality do not file a petition that meets the requirements of that subsection before the expiration of that period; or (2) the approval of the ordinance at an election under Subsection (f). (h) If the ordinance takes effect: (1) the district is abolished; (2) except as provided by Subdivision (3), the property and other assets of the district vest in the municipality; (3)__ percent of the cash reserves of the district shall be paid to Rio Grande Regional Water Authority; (4) the municipality becomes responsible for operating the district's facilities for the benefit of the district's existing customers and performing the services and functions that were performed by the district; and (5) the municipality assumes all the debts, liabilities, and obligations of the district. (i) A district that is abolished under this section shall provide its management and operational records to the municipality to ensure the orderly transfer of management and operational responsibility to the municipality. SECTION ___. Subchapter O, Chapter 49, Water Code, as added by this Act, applies only to a subdivision for which a plat or map has been recorded in the office of the county clerk of a county on or after the effective date of this Act. A subdivision for which a plat or map was recorded before the effective date of this Act is covered by the law in effect on the date the plat or map was recorded, and the former law is continued in effect for that purpose.