TO:	Honorable Eddie Lucio, Jr., Chair, Senate Committee on Intergovernmental Relations
FROM:	Ursula Parks, Director, Legislative Budget Board
IN RE:	HB4347 by Wray ( Relating to the creation of the Midlothian Municipal Management District No. 3; providing authority to issue bonds; providing authority to impose assessments, fees, or taxes.), Committee Report 2nd House, Substituted

The Legislative Budget Board, in cooperation with the Texas Water Development Board (TWDB) and the Texas Commission on Environmental Quality (TCEQ), has determined that:
 
This bill amends the Special District Local Laws code by adding Chapter 3952 which creates Midlothian Municipal Management District No. 3 (District) with the powers and duties of a standard municipal management district under Local Government Code Chapter 375, a standard municipal utility district under Water Code Chapters 49 and 54, and a standard road utility district under Section 52(b), Article III, Texas Constitution, including chapter 441, Transportation Code.
Population - The very specific description of the proposed boundaries does not allow staff to develop precise population estimates. Based on the Original Texas Land Surveys mentioned in HB 4347, staff is unable to determine a population estimate.
     
Population growth in the specific area since the 2010 census is unknown. The 2010 population estimate for areas of Ellis County served by small systems or private wells (County-Other) is 6,012. The Ellis County-Other population projections approved for the 2017 State Water Plan projects the population to grow to 6,100 in 2020, 6,500 in 2030 and 7,177 in 2040.
 
Location - The Proposed district's initial boundaries are described with a combination of Original Texas Land Surveys, Ellis County Real Property Records and metes and bounds. Due to the complexity of these boundaries for the various sub areas of the district, staff is able to determine only the general location of the proposed district.
 
The proposed district's area is approximately 0.27 square miles in northwestern Ellis County, located partially within the city limits of the City of Midlothian along Farm to Market Road 663. The proposed district may overlap portions of an existing Certificate of Convenience and Necessity (CCN) boundary held by the City of Midlothian, Sardis-Lone Elm WSC, or Mountain Peak SUD. 
 
Comments on Powers/Duties Different from Similar Types of Districts: House Committee Substitute 2 adds section 3952.007, applicability of municipal management district law: except as provided by this chapter, Chapter 375, Local Government Code, applies to the District. House Committee Substitute 2 removes dollar limit amounts on board of directors' compensation and instead states that directors are entitled to receive fees of office and reimbursement for actual expenses in the manner provided by Water Code, Chapter 49.060. Local Government Code Section 375.069 states that a position on the board may not be construed to be a civil office of emolument for any purpose, including those purposes described by Article XVI, Section 40, of the Texas Constitution; House Committee Substitute 2 specifies that this section does not apply to the board. Local Government Code Section 375.070 states that a director is not entitled to compensation for service on the board but is entitled to be reimbursed for necessary expenses incurred in carrying out the duties and responsibilities of a directors; House Committee Substitute 2 specifies that this section does not apply to the board. House Committee Substitute 2 removes Section 3952.101 stating that an improvement project may be located inside or outside the District. The substitute removes Public Improvement District powers. The board may not finance a service or improvement project with assessments under this chapter unless a written petition requesting that service or improvement has been filed with the board in the manner provided by Local Government Code Section 375.14. The substitute removes the provision stating that Local Government Code Section 372.023 does not apply to the District. The substitute removes the provision stating that Local Government Code Section 375.161 does not apply to the District.

The District may not exercise any powers under this chapter until the development agreement is executed; the District is to be governed by a board of five voting directors that are appointed by the governing body of the City of Midlothian from a list of persons recommended by the board; the board of directors will also include the City's manager, and chief financial officer that will serve as non-voting directors; Texas Water Code, Section 49.052 (Disqualifications of Directors) will not apply to the District's board members; the bill specifies that the District may adopt rules to administer or operate the district and enforce its rules by injunctive relief; the District may not exercise the power of eminent domain; the District may not undertake an improvement project or service unless the board determines the project or service: is necessary to accomplish a public purpose of the district; complies with the development agreement and consent application agree to the project or service, in writing; and is authorized by an ordinance of the city that consents to the creation of the District; the bill specifies that planning, design, construction, improvement, or maintenance of a lake includes work done for drainage, reclamation, or recreation; the bill specifies that the District may contract with any person to accomplish any district purpose; before the District may issue bonds, impose taxes or assessments, or borrow money, the District must obtain city confirmation that the development agreement and consent application are enforceable and no defaults are known; the District may impose an assessment on property in the District if the assessment is authorized by an ordinance of the city to pay the cost or the cost of maintenance of any authorized district improvement; this bill specifies that Local Government Code Section 372.023(e), that states that the interest rate on unpaid amounts due under an installment sales contract, reimbursement agreement, temporary note, or time warrant of costs payable from a special assessment that is payable in installments, does not apply to the District; Local Government Code Section 375.161 states that an MMD may not impose an impact fee, assessment, tax, or other requirement for payment, construction, alteration, or dedication under this chapter on single-family detached residential property, duplexes, triplexes, and fourplexes; the bill specifies that this section does not apply to the District; the bill specifies that the District may issue bonds, notes, or other obligations payable wholly or partly from ad valorem taxes or assessments; Local Government Code Section 375.208 states that a District must obtain approval from the TCEQ if it issues bonds to provide, water, wastewater, or drainage facilities; Texas Water Code Chapter 49.181 and 49.182 state that a District may not issue bonds without TCEQ approval of feasibility and no substantial alterations may be made in the plans and specifications without the approval of the TCEQ; the bill specifies that these sections do not apply to the District; the District may impose an ad valorem tax; the governing body of the City may dissolve the district by ordinance.
 
Overlapping Services: TCEQ does not have mapping information for water and/or wastewater providers because this function was transferred from the TCEQ to the Public Utility Commission on September 1, 2014. As a result, TCEQ is unaware of possible overlapping service providers.
 
TCEQ's Supervision: As with general law districts, the TCEQ will have general supervisory authority, including bond review authority and review of financial reports.

Water Use - HB 4347 specifies that "the district has the powers provided by the general laws "relating to conservation and reclamation districts created under Section 59, Article XVI, Texas Constitution, including Chapters 49 and 54, Water Code".
 
Within Ellis County, 69 percent of the total water use was surface water in 2014. Seventy eight percent of all the surface water use was for municipal use. The water source of the proposed district might pursue is unknown.