BILL ANALYSIS

C.S.H.B. 3031

By: Keffer

Natural Resources

Committee Report (Substituted)

BACKGROUND AND PURPOSE

Possum Kingdom Lake is a reservoir maintained by the Brazos River Authority that was created by the Morris Sheppard Dam in 1941. The lake is primarily in Palo Pinto County with 310 miles of shoreline. The Brazos River Authority exists to develop, manage, and protect the water resources of the Brazos River Basin to meet the needs of Texas. However, because of historical circumstances the authority became responsible for residential land management within its boundaries. Approximately 1,500 residential lease sites are managed by the authority on the property surrounding the lake. 

C.S.H.B. 3031 authorizes the authority to seek bids for the purchase of the residential leased land in a single bulk sale. The bill requires a purchaser to offer individual lots for sale to a leaseholder for a specified amount. The bill authorizes the leaseholder, if declining to purchase, to continue to lease under specified terms. The bill requires the authority to offer to sell the property directly to the leaseholder for a period of at least two years if the authority does not sell the property to a bulk purchaser by the end of 2010. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 3031 amends the Special District Local Laws Code to set forth procedures, requirements, and restrictions for the sale by the Brazos River Authority of certain residential and commercial leased lots and other real property in the immediate vicinity of Possum Kingdom Lake.

C.S.H.B. 3031 authorizes the authority to sell a leased tract in whole or in part, prior to January 1, 2011, to a purchaser in accordance with applicable law. The bill makes it a requirement of any sale of a leased tract to a purchaser that each leaseholder is provided the opportunity to buy the leaseholder's individual leased tract from the purchaser or to continue leasing the tract from the purchaser in accordance with prescribed purchase or lease options, sets forth additional procedures for a leaseholder who desires to buy the leaseholder's individual leased tract, and requires a closing on a leased tract between the authority and a purchaser to occur not later than December 31, 2010. The bill requires the authority to post the effective date of a contract for purchase or sale of a leased tract with a purchaser and the anticipated date of closing, which is required to be at least six months from the effective date of the contract, on its website not later than 30 days after entering into a contract.

C.S.H.B. 3031 sets forth provisions relating to the sale of a leased tract to a leaseholder, effective January 1, 2011, and applicable only to those portions of a leased tract for which closing has not occurred on or before December 31, 2010. The bill requires the authority to suspend any applicable sale efforts to a purchaser under the above provisions for a period of two years beginning on January 1, 2011 and initiate a tract by tract sale of a leased tract to the then-current leaseholders. The bill requires the authority to determine if and how any undeveloped strips of land will be divided between adjacent leaseholders and incorporated into any individual leased tract, specifying that a leaseholder is not required to accept any such undeveloped strips. The bill provides application procedures for, and responsibilities of, a leaseholder purchasing a tract and requires a leased tract be sold to a leaseholder for 90 percent of the land only assessed value without any exemptions, as determined by the appraisal district, for the year in which the leaseholder's application of intent to purchase is submitted to the authority, or for the year 2008, whichever is greater. The bill requires purchases of an individual leased tract by a leaseholder to be completed not later than June 30, 2013, and for any applications on a tract for which closing has not occurred to be terminated. The bill provides for the automatic extension as necessary for one year terms of any ground lease which would otherwise expire to permit a leaseholder the full two-year application of intent period to purchase the leaseholder's individual leased tract. The bill requires the owner of a tract sold to a leaseholder to pay the authority any reasonable fees set by the authority for any services the owner accepts from the authority. The bill prohibits any tract subject to a ranch agreement between the authority, the Ranch on Possum Kingdom, L.P., and Hill County Arbor Village, L.P., effective as of August 1, 1997, from sale to a leaseholder unless the authority is released from its obligations under the ranch agreement.

C.S.H.B. 3031 exempts the sale of an individual leased tract to a leaseholder from provisions under the Local Government Code relating to the sale or lease of property by municipalities, counties, and certain other local governments, under the Water Code relating to the sale or exchange of real or personal property owned by a district, and under the Special District Local Laws Code governing the Brazos River Authority relating to disposition of real property. The bill makes any provision that applies to a leaseholder under these provisions applicable to any subsequent owner of the leased tract. The bill requires the authority's board of directors to sell any portion of a leased tract which has not been sold on or before June 30, 2013, pursuant to terms and conditions determined by the board of directors.

C.S.H.B. 3031 sets forth restrictions on a leased tract sold under these provisions, the substance of which is required to be prepared by the authority in a declaration of restrictive covenants, easements, and conditions and recorded in the applicable county records prior to any sale under these provisions. The bill specifies the authority reserves for itself, its successors, assigns and designees the non-exclusive right and easement, but not the obligation, to enter upon a leased tract and authority land, the lake and other bodies of water within these areas to fulfill the authority's obligations, and requires the authority to provide written notice of such an entry to the purchaser or owner at least 48 hours prior to entry except in the event of an emergency in which case the authority is required to provide written notice as soon as practicable. The bill provides for the inclusion of additional land in a leased tract of authority land by the authority, as long as the authority owns any portion of the property by recording an amendment to the restrictions in each of the counties in which the property is located.

C.S.H.B. 3031 prohibits the restrictions from modification or termination, in whole or in part, without the consent of the owners or purchasers of at least 60 percent of the individual lots which comprise the residential leased land and commercial leased land, the owners or purchasers of at least 60 percent of the land area of the authority land, and the authority. The bill establishes a term of 50 years from the date of execution by the authority for the restrictions and for the automatic renewal for successive periods of five years.

C.S.H.B. 3031 requires a FERC project area buffer zone removed from a leased tract, or any portion thereof, that has been removed from the project area at the time of closing to be included in a leased tract being conveyed to a purchaser or owner. The bill requires the authority to provide a purchaser or owner for a buffer zone not removed from the project area at the time of closing, a residual interest in that portion of the buffer zone adjacent to the leased tract and covered by the residual ground lease to automatically vest upon the approval of an amendment to the FERC license removing the zone from the boundaries prescribed by the license, or the FERC license expires or is terminated. The bill terminates any such residual interest that has not vested on or before August 31, 2040.

C.S.H.B. 3031 establishes, for purposes of determining the purchase price or lease rate, that in the event a county does not provide an assessed value for the applicable portion of a leased tract for the applicable year, then the land only assessed value without any exemptions for the applicable portion of the leased tract shall be calculated based on the assessed value per square foot of comparable lots with similar physical characteristics in the applicable county or adjoining counties, as determined by the authority.

C.S.H.B. 3031 requires the authority or purchaser, whichever is applicable, to transfer its interest in the roads to the applicable county in which the roads, or any portion thereof, are situated in a prescribed manner and provided the transfer of any portion of a road located within the FERC project area is in accordance with the FERC license. The bill removes any obligation of the authority or purchaser regarding such roads beginning on the date of transfer, requires the roads to be transferred in "as-is" condition, and releases the authority or purchaser from any obligation to ensure that the roads, or any portion thereof, complies with the standards in effect at the time of transfer in the applicable county for like roads currently maintained by that county. The bill requires the authority to transfer money to counties in which the roads are located and sets forth the formula to calculate the appropriate amount to transfer. The bill establishes that the authority shall retain ownership of any portion of a publicly inaccessible road. The bill prohibits a sale of the leased tract under this section from being subject to provisions relating to county regulation of subdivisions or any other platting requirement.  The bill requires the authority to reserve its interest in all oil, gas, and other minerals in and under the leased tract, or any portion thereof, sold under these provisions.

C.S.H.B. 3031 establishes these provisions as prevailing if any of these provisions conflict with any other provisions of the Special District Local Laws Code relating to the Brazos River Authority.

C.S.H.B. 3031 defines "authority land," "buffer zone," "close" or "closing," "commercial leased land," "consumer price index," "contract," "driveways," "environmental laws," "FERC license," "FERC project area," "ground lease," "hazardous materials," "lake," "leased tract" or "tract," "leaseholder," "lienholder," "owner," "property," "purchaser," "ranch," "ranch agreement," "ranch declarations," "residential leased land," "restrictions," "roads," "shoreline management plan," and "undeveloped strips."

EFFECTIVE DATE

On passage, or, if the act does not receive the necessary vote, the act takes effect September 1, 2009.

COMPARISON OF ORIGINAL AND SUBSTITUTE

C.S.H.B. 3031 removes a provision in the original requiring the sale price set by the Brazos River Authority of a leased tract to exceed 50 percent of the land only assessed value of the tract without exemptions as determined by the county appraisal district for the year 2008. The substitute adds a provision not in the original requiring a leaseholder to have received an elderly residence homestead exemption on the individual leased tract by January 1, 2009, to be offered a new 20-year lease under provisions related to a sale to a purchaser. The substitute establishes that, with certain exceptions, neither a purchaser nor the authority shall have any obligation to cure any items on the title commitment or survey or incur any expense in doing so when a purchaser sells an individual tract to a leaseholder, whereas the original required the authority to cure such items and incur any expense in doing so. The substitute differs from the original by authorizing, with no required obligation, the authority to cure any objections a leaseholder may have to items on the title commitment in a direct sale of an individual tract to a leaseholder, whereas the original required the authority to do so.

C.S.H.B. 3031 differs from the original by requiring a leased tract to be sold for 90 percent, rather than 65 percent, of the land only assessed value without any exemptions, as determined by the appraisal district, rather than the county appraisal district as in the original. The substitute prohibits restrictions on a leased tract from modification or termination without the consent of the owners or purchasers of at least 60 percent, rather than 75 percent as in the original, of the lots comprising the residential and commercial leased land, of the owners or purchasers of at least 60 percent, rather than 75 percent as in the original, of the land area of the authority land, and of the authority.

C.S.H.B. 3031 differs from the original by setting forth county-specific terms for the authority to transfer its interest in roads to applicable counties whereas the original requires the authority to transfer its interest in roads on or before December 31, 2010.  The substitute specifies that either the authority or purchaser, whichever is applicable, shall transfer its interest in roads, rather than only the authority as in the original. The substitute requires a road transfer located within the FERC project area to be in accordance with the FERC license, rather than subject to FERC approval as in the original. The substitute removes any obligation of the authority or purchaser regarding such roads beginning on the date of such transfer, requires the roads to be sold in their "as-is" condition, and releases the authority or purchaser from any obligation to ensure that the road complies with the standards in effect at the time of transfer, whereas the original requires the authority to ensure such standards prior to the time of transfer. The substitute adds provisions not in the original requiring the authority to transfer money to counties in which the roads are located and sets forth the formula to calculate the appropriate amount to transfer. The substitute adds a provision not in the original establishing that the authority retains ownership of any portion of publicly inaccessible road.

C.S.H.B. 3031 differs from the original by clarifying a section heading to mineral interests, rather than mineral and groundwater interests. The substitute clarifies that the bill's provisions prevail if conflicting with any other provisions of the Special District Local Laws Code relating to the Brazos River Authority, rather than with the entire Special District Local Laws Code as in the original. The substitute specifies that the definition of "consumer price index" means the index for Dallas-Fort Worth area housing, rather than for residential and commercial real property as in the original.