By: Krusee H.B. No. 3719

A BILL TO BE ENTITLED

AN ACT

relating to the creation, powers, and duties of a transportation infrastructure services district imposing taxes and authorizing bonds.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle I, Title 6, Transportation Code, is amended by adding Chapter 432 to read as follows: CHAPTER 432. TRANSPORTATION INFRASTRUCTURE SERVICES DISTRICT SUBCHAPTER A. GENERAL PROVISIONS

Sec. 432.001. DEFINITIONS. In this chapter:

(1) "Board" means a district's board of directors.

(2) "Bond" has the meaning assigned to "public security" by Section 1201.002(2), Government Code.

(3) "District" means a transportation infrastructure services district.

(4) "Principal municipality" means the most populous municipality in a county.

Sec. 432.002. NATURE OF DISTRICT. A district is a special district and a political subdivision of this state created under Section 59, Article XVI, Texas Constitution.

Sec. 432.003. PURPOSE; DECLARATION OF INTENT. The creation of a district is essential to accomplish the purposes of Sections 52 and 52-a, Article III, and Section 59, Article XVI, Texas Constitution, and other public purposes stated in this chapter.

(b) The creation of each district is necessary to ensure that necessary infrastructure services are provided to areas abutting controlled access highways in order to effectively promote, develop, encourage, and maintain employment, commerce, economic development, and the public welfare in those areas abutting controlled access highways.

(c) All of the land and other property to be included within the boundaries of a district will be benefited by the works and projects that are to be accomplished and the services to be provided by the district under powers conferred by Article III, Section 52, Article XVI, Section 59, and Article III, Section 52-a, of the Texas Constitution and other powers granted under this chapter.

(d) A district is created to serve a public use and benefit.

(e) The creation of a district is in furtherance of a legislative program for and is essential to the public purposes of safe, reliable, and adequate transportation systems, development and diversification of the economy of the state, the elimination of unemployment and underemployment, and the development or expansion of transportation and commerce and is in the public interest.

(f) The present and prospective traffic congestion in areas abutting controlled access highways, the need to plan for, manage, and control traffic and provide for the safety of pedestrians in those areas, and the limited availability of funds require the promotion and development of transportation infrastructure by new and alternative means, and a district will serve the public purpose of securing adequate infrastructure that is safe and will benefit not only the land and property in the district, but also the employees, employers, and consumers of the district and the general public.

(g) A district will not act as the agent or instrumentality of any private interests even though many private interests will be benefited by the district, as will the general public.

Sec. 432.004. CONSTRUCTION OF CHAPTER. This chapter shall be liberally construed in conformity with the purposes of this chapter. [Sections 432.005-432.050 reserved for expansion] SUBCHAPTER B. CREATION OF DISTRICT

Sec. 432.051. AREAS ELIGIBLE FOR CREATION OF DISTRICT. (a) A district may be created only in an area located:

(1) entirely in a county with a population of less than 1.3 million in which the principal municipality has a population of 600,000 or more;

(2) within five miles on either side of the center line of a controlled access highway that passes through the extraterritorial jurisdiction or corporate limits of the principal municipality;

(3) outside the extraterritorial jurisdiction of a municipality other than the principal municipality; and

(4) inside the extraterritorial jurisdiction of the principal municipality.

(b) A district created under this chapter may encompass all or part of the area described by Subsection (a)

(c) The area is not required to be immediately adjacent to a controlled access highway.

Sec. 432.052. HEARINGS. (a) Not earlier than the 60th day or later than the 30th day before the date the governing body of the principal municipality creates the district under Section 432.053, the governing body must hold two hearings to consider the creation of the proposed district.

(b) Not later than the seventh day before the date of each hearing, the principal municipality must publish notice of the hearing in a newspaper of general circulation in the area of the proposed district.

(c) The notice must state:

(1) the date, time, and place for the hearing;

(2) the boundaries of the proposed district, including a map of the proposed district;

(3) the powers of the proposed district, including the power to impose assessments and ad valorem taxes; and

(4) the imposition of a sales and use tax.

Sec. 432.053. CREATION BY ORDINANCE. (a) The governing body of the principal municipality by ordinance may create a district.

(b) The ordinance must:

(1) describe the district's boundaries; and

(2) name the district the "(insert name) Transportation Infrastructure Services District".

Sec. 432.054. MISTAKE IN BOUNDARY DESCRIPTION. If in the ordinance a mistake is made in the field notes or in copying the field notes of the boundaries of a district, the mistake does not affect:

(1) the organization, existence, and validity of the district;

(2) the right of the district to issue any type of bonds or refunding bonds for the purposes for which the district is created or to pay the principal of and interest on the bonds;

(3) the right of the district to levy and collect assessments, fees, or taxes; or

(4) the legality or operation of the district or its governing body.

Sec. 432.055. AUTOMATIC LIMITED-PURPOSE ANNEXATION. (a) On creation of the district, the area in the district is annexed to the principal municipality under Subchapter F, Chapter 43, Local Government Code, for limited purposes of applying planning, zoning, health, and safety ordinances without further action by the principal municipality. The principal municipality must adopt a regulatory plan not later than the 90th day after the date the district is created.

(b) The deadline imposed by Section 43.123(d)(2) does not apply to a limited-purpose annexation under this section. The principal municipality shall annex the area for full purposes not later than the fifteenth anniversary of the date the district is created.

Sec. 432.056. ADVISORY COMMITTEE. The principal municipality may not impose a change in its planning or zoning ordinances that apply to the area in a district unless the governing body of the principal municipality appoints an advisory committee consisting of representatives of a broad cross-section of the commercial interests and residents of the district as determined by the governing body. The advisory committee shall review all proposed changes by the principal municipality to its planning and zoning ordinances that would apply to the area in a district. If the advisory committee does not recommend that the principal municipality adopt the proposed changes, the principal municipality may not impose the changes without a public hearing noticed and conducted in the manner provided by Section 432.052.

Sec. 432.057. ANNEXATION OF DISTRICT TERRITORY BY PRINCIPAL MUNICIPALITY. (a) The principal municipality may annex all or part of the territory located in the district under Subchapter C-1, Chapter 43, Local Government Code.

(b) Except as provided by Section 432.217(d), full-purpose annexation of an area in the district does not affect the operation of the district in the area that is not annexed. [Sections 432.058-432.100 reserved for expansion] SUBCHAPTER C. BOARD OF DIRECTORS

Sec. 432.101. GOVERNING BODY. (a) The governing body of the principal municipality serves the board of directors of the district.

(b) The board is responsible for the management, operation, and control of the district and property belonging to the district.

Sec. 432.102. OFFICERS. The presiding officer of the governing body of the principal municipality serves as the presiding officer of the board. The board may elect an assistant presiding officer to preside in the absence of the presiding officer or when there is a vacancy in that office. The board may elect other officers as it considers appropriate.

Sec. 432.103. COMPENSATION; EXPENSES. A director serves without compensation or reimbursement of expenses. [Sections 432.105-432.150 reserved for expansion] SUBCHAPTER D. POWERS AND DUTIES

Sec. 432.151. GENERAL POWERS AND DUTIES. (a) A district shall have the functions, powers, authority, rights, and duties which will permit accomplishment of the purposes for which it was created or the purposes authorized by the constitution, this code, or any other law.

(b) A district is authorized to purchase, construct, acquire, own, operate, maintain, repair, improve, or extend inside and outside its boundaries any and all works, improvements, facilities, plants, equipment, and appliances necessary to accomplish the purposes of the district authorized by the constitution, this code, or other law, including all works, improvements, facilities, plants, equipment, and appliances incident, helpful, or necessary to:

(1) acquire a road facility, acquire property for a road facility, and construct or improve a road facility, inside or outside district boundaries as necessary to ensure an adequate transportation infrastructure;

(2) provide financing for a road facility or for construction, acquisition, or improvement of a road facility from money available to the district under this chapter;

(3) supply water for municipal uses, domestic uses, power, and commercial purposes and all other beneficial uses or controls;

(4) collect, transport, process, dispose of, and control all domestic, industrial, or communal wastes whether in fluid, solid, or composite state;

(5) gather, conduct, divert, and control local storm water or other local harmful excesses of water in a district;

(6) irrigate the land in a district;

(7) alter land elevation in a district where it is needed;

(8) reimburse a private entity for money spent to construct a road or any other improvement the district may make under this chapter that has been or will be dedicated or otherwise transferred to public use, or purchase a road or any other improvement the district may make under this chapter that has been or will be constructed by a private entity, regardless of whether the construction occurs before or after the creation of the district; and

(9) exercise other powers and duties to accomplish the purposes for which the district was created.

Sec. 432.152. SPECIFIC POWERS RELATED TO DRAINAGE. (a) A district may adopt:

(1) a master drainage plan, including rules relating to the plan and design criteria for drainage channels, facilities, and flood control improvements;

(2) rules for construction activity to be conducted within the district that:

(A) reasonably relate to providing adequate drainage or flood control; and

(B) use generally accepted engineering criteria; and

(3) reasonable procedures to enforce rules adopted by the district under this subsection.

(b) If a district adopts a master drainage plan, the district may adopt rules relating to review and approval of proposed drainage plans submitted by property developers. The district, by rule, may require that a property developer who proposes to subdivide land located in the district, and who is otherwise required to obtain approval of the plat of the proposed subdivision from a municipality or county, submit for district approval a drainage report for the subdivision. The drainage report must include a map containing a description of the land to be subdivided. The map must show an accurate representation of:

(1) any existing drainage features, including drainage channels, streams, flood control improvements, and other facilities;

(2) any additional drainage facilities or connections to existing drainage facilities proposed by the property developer's plan for the subdivision; and

(3) any other parts of the property developer's plan for the subdivision that may affect drainage.

(c) The district shall review each drainage report submitted to the district under this section and shall approve a report if it shows compliance with:

(1) the requirements of this section;

(2) the district's master drainage plan adopted under this section; and

(3) the rules adopted by the district under this section.

(d) On or before the 30th day after the date a drainage report is received, the district shall send notice of the district's approval or disapproval of the drainage report to:

(1) the property developer; and

(2) each municipal or county authority with responsibility for approving the plat of the proposed subdivision.

(e) If the district disapproves a drainage report, the district shall include in the notice of disapproval a written statement:

(1) explaining the reasons for the rejection; and

(2) recommending changes, if possible, that would make a revised version of the drainage report acceptable for approval.

Sec. 432.153. OTHER SPECIFIC POWERS. (a) A district has the powers necessary or convenient to carry out and effect the purposes and provisions of this chapter, including the powers granted in this section.

(b) A district has perpetual succession.

(c) A district may sue and be sued in courts of competent jurisdiction, may institute and prosecute suits without giving security for costs, and may appeal from a judgment without giving supersedeas or cost bond.

(d) A district may incur liabilities, borrow money on terms and conditions the board determines, and issue notes, bonds, or other obligations.

(e) A district may acquire by grant, purchase, gift, devise, lease, or otherwise, and may hold, use, sell, lease, or dispose of real and personal property, and licenses, patents, rights, and interests necessary, convenient, or useful for the full exercise of any of its powers under this chapter.

(f) A district may acquire, construct, complete, develop, own, operate, and maintain permanent improvements and provide services inside and outside its boundaries.

(g) A district may enter into agreements with a person or entity, public or private, for the joint use of facilities, installations, and property.

(h) A district may establish and maintain reasonable and nondiscriminatory rates, fares, charges, rents, or other fees or compensation for the use of the improvements constructed, operated, or maintained by the district, except that the district may not impose a toll on a road that is constructed in whole or in part with district funds.

(i) A district may enter into credit agreements pursuant to Chapter 1371, Government Code.

(j) A district may act jointly with any other person or entity, private or public, whether within the State of Texas or the United States, in the performance of any of the powers and duties permitted by this code or any other laws.

(k) A district may enter contracts, leases, and agreements with and accept grants and loans from the United States and its departments and agencies, the state and its agencies, counties, municipalities, and political subdivisions, including the principal municipality, public or private corporations, including a nonprofit corporation created under a resolution of the board, and other persons and may perform all acts necessary for the full exercise of the powers vested in it on terms and conditions and for the term the board may determine to be advisable.

(l) A district may acquire property under conditional sales contracts, leases, equipment trust certificates, or any other form of contract or trust agreement.

(m) A district may sell, lease, convey, or otherwise dispose of any of its rights, interests, or properties that are not needed for or, in the case of leases, that are not inconsistent with the efficient operation and maintenance of the district's improvements. A district may sell, lease, or otherwise dispose of any surplus material or personal or real property not needed for its requirements or for the purpose of carrying out its powers under this chapter.

(n) A district may purchase, construct, acquire, own, operate, repair, improve, or extend all works, improvements, facilities, plants, equipment, and appliances necessary to provide any services or facilities authorized to be provided by the district to areas contiguous to or in the vicinity of the district provided the district does not duplicate a service or facility of another public entity. A district providing potable water and sewer utility services to household users shall not provide services or facilities to serve areas outside the district that are also within the corporate limits of a city without securing a resolution or ordinance of the city granting consent for the district to serve the area within the city.

(o) A district shall not be required to hold a certificate of convenience and necessity as a precondition for providing retail water or sewer service to any customer or service area, notwithstanding the fact that such customer or service area may be located either within or outside the boundaries of the district or has previously received water or sewer service from an entity required by law to hold a certificate of convenience and necessity as a precondition for such service. This subsection does not authorize a district to provide services within an area for which a retail public utility holds a certificate of convenience and necessity or within the boundaries of another district without the consent of the governing body of the utility or the other district, unless the district has a valid certificate of convenience and necessity to provide services to that area.

(p) A district may lease projects or any part of a project to or contract for the use or operation of the projects or any part of a project by any operator.

(q) A district may conduct hearings and take testimony and proof, under oath or affirmation, at public hearings, on any matter necessary to carry out the purposes of this chapter.

(r) A district may procure and pay premiums to insurers for insurance of any type in amounts considered necessary or advisable by the board.

(s) A district has the economic development powers of a municipality under Chapter 380, Local Government Code.

(t) A district may do anything necessary, convenient, or desirable to carry out the powers expressly granted or implied by this chapter.

Sec. 432.154. EMPLOYEES. The board may employ and compensate persons for district purposes. An employee of another public entity may serve as an officer or employee of the district if the person does not receive any additional compensation for service as a district officer or employee. That person may be reimbursed for a reasonable and necessary expense incurred in the performance of any duties for the district.

Sec. 432.155. NO EMINENT DOMAIN POWER. A district may not exercise the power of eminent domain. [Sections 432.156-432.200 reserved for expansion] SUBCHAPTER F. FINANCIAL PROVISIONS

Sec. 432.201. GENERAL POWERS RELATING TO ASSESSMENTS. In addition to the powers provided by Subchapter E, the board of a district may undertake improvement projects and services that confer a special benefit on all or a definable part of the district. The board may levy and collect special assessments on property in that area, based on the benefit conferred by the improvement project or services, to pay all or part of the cost of the project and services. If the board determines that there is a benefit to the district, the district may provide improvements and services to an area outside the boundaries of the district.

Sec. 432.202. SPECIFIC POWERS RELATING TO ASSESSMENTS. (a) An improvement project or services provided by the district may include the construction, acquisition, improvement, relocation, operation, maintenance, or provision of:

(1) lighting; streets and sidewalks; pedestrian skywalks, crosswalks, and tunnels; drainage and navigation improvements; pedestrian malls; solid waste, water, sewer, and power facilities, including electrical, gas, steam, cogeneration, and chilled water facilities; off-street parking facilities, bus terminals, and heliports; and the cost of any demolition in connection with providing any of the improvement projects;

(2) other improvements similar to those described in Subdivision (1);

(3) the acquisition of real property or any interest in real property in connection with an improvement, project, or services authorized by this chapter;

(4) special supplemental services for health and sanitation, public safety, maintenance, security, or elimination or relief of traffic congestion; and

(5) expenses incurred in the establishment, administration, maintenance, and operation of the district or any of its improvements, projects, or services.

(b) An improvement project on two or more streets or two or more types of improvements may be included in one proceeding and financed as one improvement project.

Sec. 432.203. PROPOSED ASSESSMENTS. Services or improvement projects may be financed under this chapter after a hearing notice given as required by this subchapter and a public hearing by the board on the advisability of the improvements and services and the proposed assessments.

Sec. 432.204. NOTICE OF HEARING. (a) Notice of the hearing shall be given in a newspaper with general circulation in the county in which the district is located. The final publication must be made not later than the 30th day before the date of the hearing.

(b) The notice must include:

(1) the time and place of the hearing;

(2) the general nature of the proposed improvement project or services;

(3) the estimated cost of the improvement, including interest during construction and associated financing costs; and

(4) the proposed method of assessment.

(c) Written notice containing the information required by Subsection (b) shall be mailed by certified mail, return receipt requested, not later than the 30th day before the date of the hearing. The notice shall be mailed to each property owner in the district who will be subject to assessment at the current address of the property to be assessed as reflected on the tax rolls.

Sec. 432.205. CONCLUSION OF HEARING; FINDINGS. (a) A hearing on the services or improvement project, whether conducted by the board or a hearings examiner, may be adjourned from time to time.

(b) At the conclusion of the hearing, the board shall make findings by resolution or order relating to the advisability of the improvement project or services, the nature of the improvement project or services, the estimated cost, the area benefited, the method of assessment, and the method and time for payment of the assessment.

(c) If a hearings examiner is appointed to conduct the hearing, after conclusion of the hearing, the hearings examiner shall file with the board a report stating the examiner's findings and conclusions.

Sec. 432.206. AREA TO BE ASSESSED. (a) The area of the district to be assessed according to the findings of the board may be the entire district or any part of the district and may be less than the area proposed in the notice of the hearing.

(b) Except as provided by Subsection (c), the area to be assessed may not include property that is not within the district boundaries at the time of the hearing unless there is an additional hearing, preceded by the required notice.

(c) The owner of improvements constructed or land annexed to the district after the district has imposed assessments may waive the right to notice and an assessment hearing and may agree to the imposition and payment of assessments at an agreed rate for improvements constructed or land annexed to the district.

Sec. 432.207. OBJECTIONS; LEVY OF ASSESSMENT. (a) At a hearing on proposed assessments, at any adjournment of the hearing, or after consideration of the hearings examiner's report, the board shall hear and rule on all objections to each proposed assessment.

(b) The board may amend proposed assessments for any parcel.

(c) After all objections have been heard and action has been taken with regard to those objections, the board, by order or resolution, shall levy the assessments as special assessments on the property and shall specify the method of payment of the assessments and may provide that those assessments be paid in periodic installments, including interest.

(d) Periodic installments must be in amounts sufficient to meet annual costs for services and improvements as provided by Section 423.208 and continue for the number of years required to retire indebtedness or pay for the services to be rendered. The board may provide interest charges or penalties for failure to make timely payment and also may levy an amount to cover delinquencies and expenses of collection.

(e) If assessments are levied for more than one service or improvement project, the board may provide that assessments collected for one service or improvement project may be borrowed to be used for another service or improvement project.

(f) The board shall establish a procedure for the distribution or use of any assessments in excess of those necessary to finance the services or improvement project for which those assessments were collected.

Sec. 432.208. APPORTIONMENT OF COST. The portion of the cost of an improvement project or services to be assessed against the property in the district shall be apportioned by the board based on the special benefits accruing to the property because of the improvement project or services. The cost may be assessed:

(1) equally by front foot or by square foot of land area against all property in the district;

(2) against property according to the value of the property as determined by the board, with or without regard to structures or other improvements on the property; or

(3) on any other reasonable assessment plan that results in imposing fair and equitable shares of the cost on property similarly benefited.

Sec. 432.209. ASSESSMENT ROLL. If the total cost of an improvement project or services is determined, the board shall levy the assessments against each parcel of land against which an assessment may be levied in the district. With regard to an assessment for services, the board may levy an annual assessment that may be lower but not higher than the initial assessment. The board shall have an assessment roll prepared showing the assessments against each property and the board's basis for the assessment. The assessment roll shall be filed with the secretary of the board or other officer who performs the function of secretary and be open for public inspection.

Sec. 432.210. INTEREST ON ASSESSMENTS; LIEN. (a) Assessments bear interest at a rate specified by the board that may not exceed the interest rate permitted by Chapter 1204, Government Code.

(b) Interest on an assessment between the effective date of the order or resolution levying the assessment and the date the first installment and any related penalty is payable shall be added to the first installment. The interest or penalties on all unpaid installments shall be added to each subsequent installment until paid.

(c) An assessment or any reassessment and any interest and penalties on that assessment or reassessment is a lien against the property until it is paid.

(d) The owner of any property assessed may pay at any time the entire assessment against any lot or parcel with accrued interest to the date of the payment.

Sec. 432.211. SUPPLEMENTAL ASSESSMENTS. After notice and hearing in the manner required for original assessments, the board may make supplemental assessments to correct omissions or mistakes in the assessment:

(1) relating to the total cost of the improvement project or services; or

(2) covering delinquencies or costs of collection.

Sec. 432.212. APPEAL. (a) After determination of an assessment, a property owner may appeal the assessment to the board. The property owner must file a notice of appeal with the board not later than the 30th day after the date that the assessment is adopted. The board shall set a date to hear the appeal.

(b) The property owner may appeal the board's decision on the assessment to a court of competent jurisdiction. The property owner must file notice of the appeal with the court of competent jurisdiction not later than the 30th day after the date of the board's final decision with respect to the assessment.

(c) Failure to file either of the notices in the time required by this section results in a loss of the right to appeal the assessment.

(d) If an assessment against a parcel of land is set aside by a court of competent jurisdiction, found excessive by the board, or determined to be invalid by the board, the board may make a reassessment or new assessment of the parcel.

Sec. 432.213. APPEAL OF ORDER. A person against whom an assessment is made by board order may appeal the assessment to a district court in the county in which the district is located in the manner provided for the appeal of contested cases under Chapter 2001, Government Code. Review by the district court is by trial de novo.

Sec. 432.214. GOVERNMENTAL ENTITIES; ASSESSMENTS. Payment of assessments by municipalities, counties, other political subdivisions, and organizations exempt from federal income tax under Section 501(c)(3), Internal Revenue Code of 1986, shall be established by contract. Municipalities, counties, and other political subdivisions may contract with the district under terms and conditions those entities consider advisable to provide for the payment of assessments.

Sec. 432.215. IMPOSITION OF IMPACT FEES. (a) The board may impose impact fees to pay for the cost of providing improvements that the district is authorized to provide under this chapter.

(b) The board may provide for impact fees to be paid in periodic installments and may include an interest charge from the date the impact fees are imposed to the date the impact fees are paid.

(c) The board may provide interest charges and penalties for failure to make timely payment and also may levy an amount to cover delinquencies and expenses of collection.

Sec. 432.216. PROCEDURE FOR ADOPTING IMPACT FEES. Impact fees shall be adopted under the procedures provided by Chapter 395, Local Government Code.

Sec. 432.217. SALES AND USE TAX. (a) On creation of the district, there is imposed in the district a sales and use tax.

(b) The tax is imposed on the receipts from the sale at retail of taxable items in the district at the rate equal to the sales and use tax imposed by the principal municipality. Except as provided by Subsection (d), the tax rate changes to remain equal to the principal municipality's rate.

(c) Except as provided by this section, Chapter 321, Tax Code, governs the imposition, computation, administration, governance, and abolition of a tax imposed under this section.

(d) If any territory in the district is annexed by the principal municipality, both the principal municipality's and the district's sales and use tax applies in the annexed area. If the district's sales and use tax rate combined with any other sales and use tax applicable in the district exceeds two percent, the district's sales and use tax in the annexed area is abolished.

Sec. 432.218. AD VALOREM TAX AUTHORIZED; RATE. (a) The district is authorized to impose an ad valorem tax for any lawful purpose under this chapter.

(b) Notwithstanding any other provision of law, the district's tax rate may not exceed the rate of the ad valorem tax imposed by the principal municipality.

(c) The district shall publish notice and hold a hearing on the tax rate in the same manner as provided by Section 432.052.

(d) After the setting of the tax rate, the district is governed by the provisions of the Tax Code governing ad valorem taxes of home-rule municipalities.

(e) The initial tax rate does not take effect until the tax year beginning on a date after the first election for one or more members of the governing body at which residents of the district are entitled to vote for those members of the governing body under Section 43.130(a), Local Government Code.

Sec. 432.219. GENERAL OBLIGATION AND REVENUE BONDS. For the payment of all or part of the costs of an improvement project or services, the board may issue bonds in one or more series payable from and secured by ad valorem taxes, sales and use taxes, assessments, impact fees, revenues, grants, gifts, contracts, leases, or any combination of those funds. Bonds may be secured by liens on all or part of the revenue derived from improvements authorized under this chapter, including installment payments of special assessments or from any other source pledged to their payment.

Sec. 432.220. TERMS AND CONDITIONS OF BONDS. (a) Bonds may be issued to mature serially or otherwise not more than 40 years from their date of issue. Provision may be made for the subsequent issuance of additional parity bonds or subordinate lien bonds under terms or conditions that may be stated in the order or resolution authorizing the issuance of the bonds.

(b) The bonds are negotiable instruments within the meaning and for purposes of the Business & Commerce Code.

(c) The bonds may be issued registrable as to principal alone or as to both principal and interest, shall be executed, may be made redeemable before maturity, may be issued in the form, denominations, and manner and under the terms, conditions, and details, may be sold in the manner, at the price, and under the terms, and shall bear interest at the rates determined and provided in the order or resolution authorizing the issuance of the bonds.

(d) Bonds may bear interest and may be issued in accordance with Chapters 1201, 1204, and 1371, Government Code, Subchapters A-C, Chapter 1207, Government Code, and Subchapter C, Chapter 271, Local Government Code.

(e) If provided by the bond order or resolution, the proceeds from the sale of bonds may be used to pay interest on the bonds during and after the period of the acquisition or construction of any improvement project to be provided through the issuance of the bonds, to administrative and operation expenses to create a reserve fund for the payment of the principal of and interest on the bonds, and to create any other funds. The proceeds of the bonds may be placed on time deposit or invested, until needed, in securities in the manner provided by the bond order or resolution.

Sec. 432.221. PLEDGES. (a) The board may pledge all or part of the income or assessments from improvement projects financed under this chapter or from any other source to the payment of the bonds, including the payment of principal, interest, and any other amounts required or permitted in connection with the bonds. The pledged income shall be set and collected in amounts that will be at least sufficient, with any other pledged resources, to provide for all payments of principal, interest, and any other amounts required in connection with the bonds and, to the extent required by the order or resolution authorizing the issuance of the bonds, to provide for the payment of expenses in connection with the bonds and to pay operation, maintenance, and other expenses in connection with the improvement projects authorized under this chapter.

(b) Bonds may be additionally secured by a mortgage or deed of trust on real property relating to the facilities authorized under this chapter owned or to be acquired by the district and by chattel mortgages, liens, or security interests on personal property appurtenant to that real property. The board may authorize the execution of trust indentures, mortgages, deeds of trust, or other forms of encumbrance to evidence the indebtedness.

(c) The board may pledge to the payment of the bonds all or any part of any grant, donation, revenues, or income received or to be received from the United States government or any other public or private source.

Sec. 432.222. REFUNDING BONDS. (a) Bonds issued under this chapter may be refunded or otherwise refinanced by the issuance of refunding bonds under terms or conditions determined by order or resolution of the board. Refunding bonds may be issued in amounts necessary to pay the principal of and interest and redemption premium, if any, on bonds to be refunded, at maturity or on any redemption date, and to provide for the payment of costs incurred in connection with the refunding.

(b) The refunding bonds shall be issued in the manner provided by this chapter for other bonds.

Sec. 432.223. APPROVAL BY ATTORNEY GENERAL; REGISTRATION. (a) The district shall submit bonds and the appropriate proceedings authorizing their issuance to the attorney general for examination.

(b) If the bonds recite that they are secured by a pledge of assessments, impact fees, revenues, or rentals from a contract or lease, the district also shall submit to the attorney general a copy of the assessment procedures, impact fee procedures, contract, or lease and the proceedings relating to it.

(c) If the attorney general finds that the bonds have been authorized and any assessment, contract, or lease has been made in accordance with law, the attorney general shall approve the bonds and the assessment, impact fee, contract, or lease, and the bonds shall be registered by the comptroller.

(d) After approval and registration, the bonds and any assessment, impact fee, contract, or lease relating to them are incontestable in any court or other forum for any reason and are valid and binding obligations for all purposes in accordance with their terms.

Sec. 432.224. AUTHORIZED INVESTMENTS; SECURITY. (a) District bonds are legal and authorized investments for:

(1) banks, trust companies, and savings and loan associations;

(2) insurance companies;

(3) fiduciaries, trustees, and guardians; and

(4) all interest and sinking funds and other public funds of the state and agencies, subdivisions, and instrumentalities of the state, including counties, municipalities, towns, villages, school districts, and all other kinds and types of districts, public agencies, and bodies politic.

(b) District bonds are eligible and lawful security for deposits of counties, municipalities, towns, villages, school districts, and all other kinds and types of districts, public agencies, and bodies politic, to the extent of the market value of the bonds, when accompanied by any unmatured interest coupons appurtenant to the bonds.

Sec. 432.225. NO MUNICIPAL OBLIGATION. Except as provided by Section 432.253, the principal municipality is not obligated to pay any bonds, notes, or other obligations of the district.

Sec. 432.225. BONDS EXEMPT FROM TAXATION. Bonds issued under this chapter, the transfer of the bonds, and income from the bonds, including profits made on the sale of the bonds, are exempt from taxation in this state.

Sec. 432.226. CERTIFICATES OF OBLIGATION. The district may issue certificates of obligation in the manner provided by Subchapter C, Chapter 271, Local Government Code.

Sec. 432.227. APPLICATION OF OTHER LAW. Chapter 2007, Government Code, does not apply to a tax levied or fee or assessment adopted, imposed, or enforced by a district under this chapter or other law. [Sections 432.228-432.250 reserved for expansion] SUBCHAPTER G. DISSOLUTION

Sec. 432.251. DISSOLUTION BY PRINCIPAL MUNICIPALITY. After a hearing under Section 432.252, the governing body of the principal municipality may by resolution dissolve the district.

Sec. 432.252. HEARINGS. Before dissolution, the principal municipality shall publish notice and hold a hearing on the proposed dissolution in the manner provided by Section 432.052.

Sec. 432.253. ASSUMPTION OF ASSETS, DEBTS. (a) On dissolution, the principal municipality assumes the assets, debts, and other obligations of the district.

(b) On dissolution, the principal municipality is authorized to use any sources of revenue available to the district under Section 432.219 to satisfy debt or other obligations of the district assumed by the principal municipality.

SECTION 2. The heading to Subtitle I, Title 6, Transportation Code, is amended to read as follows:

SUBTITLE. I. TRANSPORTATION CORPORATIONS AND INFRASTRUCTURE SERVICE DISTRICTS

SECTION 3. Section 43.052(h)(5), Local Government Code, is amended to read as follows:

(h) This section does not apply to an area proposed for annexation if:

(5) the area is annexed under Section 43.026, 43.027, 43.029, 43.031, Local Government Code, or Subchapter B, Chapter 432, Transportation Code;

SECTION 4. 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, 2007.