By: Coleman H.B. No. 3275 A BILL TO BE ENTITLED AN ACT relating to the powers and duties of counties and political subdivisions of this state and entities created by those subdivisions. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Subchapter A, Chapter 375, Local Government Code, is amended by adding Section 375.005 to read as follows: Sec. 375.005. ELIGIBILITY FOR INCLUSION IN SPECIAL ZONES. All or any part of the area of the district is eligible to be included in: (1) a tax increment reinvestment zone created under Chapter 311, Tax Code; (2) a tax abatement reinvestment zone created under Chapter 312, Tax Code; (3) an enterprise zone created under Chapter 2303, Government Code; or (4) an industrial district created under Chapter 42, Local Government Code. SECTION 2. Subchapter E, Chapter 375, Local Government Code, is amended by adding Section 375.098 to read as follows: Sec. 375.098. DISTRICT ACT OR PROCEEDING PRESUMED VALID. (a) A governmental act or proceeding of a district is conclusively presumed, as of the date it occurred, valid and to have occurred in accordance with all applicable statutes and rules if: (1) the third anniversary of the effective date of the act or proceeding has expired; and (2) a lawsuit to annul or invalidate the act or proceeding has not been filed on or before that third anniversary. (b) This section does not apply to: (1) an act or proceeding that was void at the time it occurred; (2) an act or proceeding that, under a statute of this state or the United States, was a misdemeanor or felony at the time the act or proceeding occurred; (3) a rule that, at the time it was passed, was preempted by a statute of this state or the United States, including Section 1.06 or 109.57, Alcoholic Beverage Code; or (4) a matter that on the effective date of this section: (A) is involved in litigation if the litigation ultimately results in the matter being held invalid by a final judgment of a court; or (B) has been held invalid by a final judgment of a court. SECTION 3. Subchapter C, Chapter 382, Local Government Code, is amended by adding Section 382.113 to read as follows: Sec. 382.113. ANNEXATION OR EXCLUSION OF LAND. (a) A district may annex or exclude land from the district as provided by Subchapter J, Chapter 49, Water Code. (b) Before a district may adopt an order adding or excluding land, the district must obtain the consent of: (1) the county that created the district by a resolution of the county commissioners court; and (2) if powers have been delegated under Section 382.101(c), a municipality in which the district is located by a resolution adopted by the municipality's governing body. SECTION 4. Section 387.003, Local Government Code, is amended by amending Subsections (a), (b), (b-1), (c), (e), (f), and (h) and adding Subsections (a-1), (i), and (j) to read as follows: (a) The commissioners court of the county may call an election on the question of creating a county assistance district under this chapter. More than one county assistance district may be created in a county. (a-1) A district may [to] perform the following functions in the district: (1) the construction, maintenance, or improvement of roads or highways; (2) the provision of law enforcement and detention services; (3) the maintenance or improvement of libraries, museums, parks, or other recreational facilities; (4) the provision of services that benefit the public health or welfare, including the provision of firefighting and fire prevention services; or (5) the promotion of economic development and tourism. (b) The order calling the election must: (1) define the boundaries of the district to include any portion of the county in which the combined tax rate of all local sales and use taxes imposed, including the rate to be imposed by the district if approved at the election, would not exceed the maximum combined rate of sales and use taxes imposed by political subdivisions of this state that is prescribed by Sections 321.101 and 323.101, Tax Code [two percent]; and (2) call for the election to be held within those boundaries. (b-1) If the proposed district includes any territory of a municipality, the commissioners court shall send notice by certified mail to the governing body of the municipality of the commissioners court's intent to create the district. If the municipality has created a development corporation under Chapter 504 or 505, the commissioners court shall also send the notice to the board of directors of the corporation. The commissioners court must send the notice not later than the 60th day before the date the commissioners court orders the election. The governing body of the municipality may exclude the territory of the municipality from the proposed district by sending notice by certified mail to the commissioners court of the governing body's desire to exclude the municipal territory from the district. The governing body must send the notice not later than the 45th day after the date the governing body receives notice from the commissioners court under this subsection. The territory of a municipality that is excluded under this subsection may subsequently be included in: (1) the district in an election held under Subsection (f) with the consent of the municipality; or (2) another district after complying with the requirements of this subsection and after an election held under Subsection (f). (c) The ballot at the election must be printed to permit voting for or against the proposition: "Authorizing the creation of the ______ County Assistance District No. ____ (insert name of district) and the imposition of a sales and use tax at the rate of ____ [of one] percent (insert [one eighth, one fourth, three eighths, or one half, as] appropriate rate) for the purpose of financing the operations of the district." (e) If a majority of the votes received at the election are against the creation of the district, the district is not created. The failure to approve the creation of a district under this subsection does not affect the authority of the county to call one or more elections [another election] on the question of creating one or more [a] county assistance districts [district may not be held in the county before the first anniversary of the most recent election concerning the creation of a district]. (f) The commissioners court may call an election to be held in an area of the county that is not located in a district created under this section to determine whether the area should be included in the district and whether the district's sales and use tax should be imposed in the area. An election may not be held in an area in which the combined tax rate of all local sales and use taxes imposed, including the rate to be imposed by the district if approved at the election, would exceed the maximum combined rate of sales and use taxes imposed by political subdivisions of this state that is prescribed by Sections 321.101 and 323.101, Tax Code [two percent]. (h) If more than one election to authorize a local sales and use tax is held on the same day in the area of a proposed district or an area proposed to be added to a district and if the resulting approval by the voters would cause the imposition of a local sales and use tax in any area to exceed the maximum combined rate of sales and use taxes of political subdivisions of this state that is prescribed by Sections 321.101 and 323.101, Tax Code [two percent], only a tax authorized at an election under this section may be imposed. (i) In addition to the authority to include an area in a district under Subsection (f), the governing body of a district by order may include an area in the district on receipt of a petition or petitions signed by the owner or owners of the majority of the land in the area to be included in the district. If there are no registered voters in the area to be included in the district, no election is required. (j) The commissioners court by order may exclude an area from the district if the district has no outstanding bonds payable wholly or partly from sales and use taxes and the exclusion does not impair any outstanding district debt or contractual obligation. SECTION 5. Section 387.005, Local Government Code, is amended to read as follows: Sec. 387.005. GOVERNING BODY. (a) The commissioners court of the county in which the district is created by order shall provide that: (1) the commissioners court is the governing body of the district; or (2) the commissioners court shall appoint a governing body of the district. (b) A member of the governing body of the district [commissioners court] is not entitled to compensation for service [on the governing body of the district] but is entitled to reimbursement for actual and necessary expenses. (c) A board of directors appointed by the commissioners court under this section shall consist of five directors who serve staggered terms of two years. To be eligible to serve as a director, a person must be a resident of the county in which the district is located. The initial directors shall draw lots to achieve staggered terms, with three of the directors serving one-year terms and two of the directors serving two-year terms. SECTION 6. Section 387.006(a), Local Government Code, is amended to read as follows: (a) A district may: (1) perform any act necessary to the full exercise of the district's functions; (2) accept a grant or loan from: (A) the United States; (B) an agency or political subdivision of this state; or (C) a public or private person; (3) acquire, sell, lease, convey, or otherwise dispose of property or an interest in property under terms determined by the district; (4) employ necessary personnel; [and] (5) adopt rules to govern the operation of the district and its employees and property; and (6) enter into agreements with municipalities necessary or convenient to achieve the district's purposes, including agreements regarding the duration, rate, and allocation between the district and the municipality of sales and use taxes. SECTION 7. Section 387.007, Local Government Code, is amended by amending Subsection (b) and adding Subsection (c) to read as follows: (b) A district may not adopt a sales and use tax under this chapter if the adoption of the tax would result in a combined tax rate of all local sales and use taxes that would exceed the maximum combined rate prescribed by Sections 321.101 and 323.101, Tax Code, [of more than two percent] in any location in the district. (c) A district may define areas in the district to pay for improvements, facilities, or services that primarily benefit that area and do not generally and directly benefit the district as a whole. The district may impose different rates of sales and use tax in each defined area. The sales and use tax rate in each area may not exceed the rate approved at an election held under Section 387.003. SECTION 8. Section 387.009, Local Government Code, is amended to read as follows: Sec. 387.009. TAX RATE. The rate of a tax adopted under this chapter must be in increments of one-eighth[, one fourth, three eighths, or one half] of one percent. SECTION 9. Sections 387.010(a), (b), and (c), Local Government Code, are amended to read as follows: (a) A district that has adopted a sales and use tax under this chapter may, by order and subject to Section 387.007(b): (1) reduce [, change] the rate of the tax or repeal the tax without an election, except that the district may not repeal the sales and use tax or reduce the rate of the sales and use tax below the amount pledged to secure payment of an outstanding district debt or contractual obligation; (2) increase the rate of the sales and use tax, if the increased rate of the sales and use tax will not exceed the rate approved at an election held under Section 387.003; or (3) increase the rate of the sales and use tax to a rate that exceeds the rate approved at an election held under Section 387.003 after [if] the increase [change or repeal] is approved by a majority of the votes received in the district at an election held for that purpose. (b) The tax may be changed under Subsection (a) in one or more increments of one-eighth of one percent [to a maximum of one half of one percent]. (c) The ballot for an election to increase [change] the tax shall be printed to permit voting for or against the proposition: "The increase [change] of a sales and use tax for the ______ County Assistance District No. ____ (insert name of district) from the rate of ____ [of one] percent (insert [one fourth, three eighths, or one half, as] appropriate rate) to the rate of ____ [of one] percent (insert [one fourth, three eighths, or one half, as] appropriate rate)." SECTION 10. Section 387.012, Local Government Code, is amended to read as follows: Sec. 387.012. EFFECTIVE DATE OF TAX. The adoption of the tax, the increase or reduction [change] of the tax rate, or the repeal of the tax takes effect on the first day of the first calendar quarter occurring after the expiration of the first complete quarter occurring after the date the comptroller receives a copy of the order of the district's governing body [notice of the results of the election] adopting, increasing, reducing [changing], or repealing the tax. SECTION 11. Section 552.014, Local Government Code, is amended to read as follows: Sec. 552.014. CONTRACTS WITH WATER DISTRICTS OR NONPROFIT CORPORATIONS. (a) In this section: (1) "Project" means a water supply or treatment system, a water distribution system, a sanitary sewage collection or treatment system, works or improvements necessary for drainage of land, recreational facilities, roads and improvements in aid of roads, or facilities to provide firefighting services. (2) "Water district" [, "water district"] means a district created under Article XVI, Section 59, of the Texas Constitution. (b) A municipality or county may enter into a contract with a water district or with a corporation organized to be operated without profit under which the district or corporation will acquire for the benefit of and convey to the municipality or county, either separately or together, one or more projects [a water supply or treatment system, a water distribution system, a sanitary sewage collection or treatment system, or works or improvements necessary for drainage of land in the municipality]. In connection with the acquisition, the district or corporation shall improve, enlarge, or extend the existing municipal or county facilities as provided by the contract. (c) If the contract provides that the municipality or county assumes ownership of the project [water, sewer, or drainage system] on completion of construction or at the time that all debt incurred by the district or corporation in the acquisition, construction, improvement, or extension of the project [system] is paid in full, the municipality or county may make payments to the district or corporation for project [water, sewer, or drainage] services to part or all of the residents of the municipality or county. The contract may provide for purchase of the project [system] by the municipality or county through periodic payments to the district or corporation in amounts that, together with the net income of the district or corporation, are sufficient to pay the principal of and interest on the bonds of the district or corporation as they become due. The contract may provide: (1) that any payments due under this section are payable from and are secured by a pledge of a specified part of the revenues of the municipality or county, including revenues from municipal or county sales and use taxes [municipal water system, sewer system, or drainage system]; (2) for the levying of a tax to make payments due under this section; or (3) that the payments due under this section be made from a combination of revenues [from the system] and taxes. (d) The contract may provide that the district or corporation may use the streets, alleys, and other public ways and places of the municipality or county for project [water, sewer, or drainage] purposes for a period that ends at the time the indebtedness of the district or corporation is paid in full and the municipality or county acquires title to the project [system] in accordance with this section. (e) The contract may provide for the operation of the project [system] by the municipality or county, and, if so authorized, the municipality or county may operate the project [system]. (f) A contract under this section must be authorized by a majority vote of the governing body of the municipality or county. (g) This section does not authorize a water district or corporation described by Subsection (b) to participate in a project that the water district or corporation is not authorized to participate in under other law. SECTION 12. Sections 311.006(a) and (b), Tax Code, are amended to read as follows: (a) A municipality may not designate [create] a reinvestment zone if: (1) more than 30 [10] percent of the property in the proposed zone, excluding property that is publicly owned, is used for residential purposes; or (2) the total appraised value of taxable real property in the proposed zone and in existing reinvestment zones exceeds: (A) 25 [20] percent of the total appraised value of taxable real property in the municipality and in the industrial districts created by the municipality, if the municipality has a population of 100,000 or more [is the county seat of a county: [(i) that is adjacent to a county with a population of 3.3 million or more; and [(ii) in which a planned community is located that has 20,000 or more acres of land, that was originally established under the Urban Growth and New Community Development Act of 1970 (42 U.S.C. Section 4501 et seq.), and that is subject to restrictive covenants containing ad valorem or annual variable budget based assessments on real property]; or (B) 50 [15] percent of the total appraised value of taxable real property in the municipality and in the industrial districts created by the municipality, if [Paragraph (A) does not apply to] the municipality has a population of less than 100,000. (b) A municipality may not change the boundaries of an existing reinvestment zone to include property in excess of the restrictions on composition of a zone described by Subsection (a) [more than 10 percent of which, excluding property dedicated to public use, is used for residential purposes or to include more than 15 percent of the total appraised value of taxable real property in the municipality and in the industrial districts created by the municipality]. SECTION 13. Sections 311.009(a), (b), and (e), Tax Code, are amended to read as follows: (a) Except as provided by Subsection (b), the board of directors of a reinvestment zone consists of at least five and not more than 15 members, unless more than 15 members are required to satisfy the requirements of this subsection. Each taxing unit other than the municipality or county that designated [created] the zone that levies taxes on real property in the zone may appoint one member of the board if the taxing unit has approved the payment of all or part of the tax increment produced by the unit into the tax increment fund for the zone. A unit may waive its right to appoint a director. The governing body of the municipality or county that designated [created] the zone may appoint not more than 10 directors to the board; except that if there are fewer than five directors appointed by taxing units other than the municipality or county, the governing body of the municipality or county may appoint more than 10 members as long as the total membership of the board does not exceed 15. (b) If the zone was designated under Section 311.005(a)(4), the governing body of the municipality or county that designated the zone may provide that the board of directors of the zone consists of nine members appointed as provided by this subsection, unless more than nine members are required to comply with this subsection. Each taxing unit [school district, county, or municipality], other than the municipality or county that designated [created] the zone, that levies taxes on real property in the zone may appoint one member of the board if the taxing unit [school district, county, or municipality] has approved the payment of all or part of the tax increment produced by the unit into the tax increment fund for the zone. The member of the state senate in whose district the zone is located is a member of the board, and the member of the state house of representatives in whose district the zone is located is a member of the board, except that either may designate another individual to serve in the member's place at the pleasure of the member. If the zone is located in more than one senate or house district, this subsection applies only to the senator or representative in whose district a larger portion of the zone is located than any other senate or house district, as applicable. If fewer than seven taxing units, other than the municipality or county that designated the zone, are eligible to appoint members of the board of directors of the zone, the municipality or county may appoint a number of members of the board such that the board comprises nine members. If at least seven taxing units, other than the municipality or county that designated the zone, are eligible to appoint members of the board of directors of the zone, the municipality or county may appoint one member. [The remaining members of the board are appointed by the governing body of the municipality or county that created the zone.] (e) To be eligible for appointment to the board by the governing body of the municipality or county that designated [created] the zone, an individual must be at least 18 years of age and: (1) if the board is covered by Subsection (a): (A) be a resident of the county in which the zone is located or a county adjacent to that county [qualified voter of the municipality or county, as applicable]; or (B) [be at least 18 years of age and] own real property in the zone, whether or not the individual resides in the [municipality or] county in which the zone is located or a county adjacent to that county; or (2) if the board is covered by Subsection (b), [: [(A) be at least 18 years of age; and [(B)] own real property in the zone or be an employee or agent of a person that owns real property in the zone. SECTION 14. Sections 311.010(g) and (h), Tax Code, are amended to read as follows: (g) Chapter 252, Local Government Code, does not apply to a dedication, pledge, or other use of revenue in the tax increment fund for a reinvestment zone [by the board of directors of the zone in carrying out its powers] under Subsection (b). (h) Subject to the approval of the governing body of the municipality or county that designated [created] the zone, the board of directors of a reinvestment zone, as necessary or convenient to implement the project plan and reinvestment zone financing plan and achieve their purposes, may establish and provide for the administration of one or more programs for the public purposes of developing and diversifying the economy of the zone, eliminating unemployment and underemployment in the zone, and developing or expanding transportation, business, and commercial activity in the zone, including programs to make grants and loans [from the tax increment fund of the zone in an aggregate amount not to exceed the amount of the tax increment produced by the municipality and paid into the tax increment fund for the zone] for activities that benefit the zone and stimulate business and commercial activity in the zone. For purposes of this subsection, on approval of the municipality or county, the board of directors of the zone has all the powers of a municipality under Chapter 380, Local Government Code. The approval required by this subsection may be granted in an ordinance, in the case of a zone designated by a municipality, or in an order, in the case of a zone designated by a county, approving a project plan or reinvestment zone financing plan or approving an amendment to a project plan or reinvestment zone financing plan. SECTION 15. Sections 311.013(f), (l), and (n), Tax Code, are amended to read as follows: (f) A taxing unit is not required to pay into the tax increment fund any of its tax increment produced from property located in a reinvestment zone designated under Section 311.005(a) or in an area added to a reinvestment zone under Section 311.007 unless the taxing unit enters into an agreement to do so with the governing body of the municipality or county that designated [created] the zone. A taxing unit may enter into an agreement under this subsection at any time before or after the zone is designated [created] or enlarged. The agreement may include conditions for payment of that tax increment into the fund and must specify the portion of the tax increment to be paid into the fund and the years for which that tax increment is to be paid into the fund. In addition to any other terms to which the parties agree, the agreement may specify the projects to which a participating taxing unit's tax increment will be dedicated and that the taxing unit's participation may be computed with respect to a base year later than the original base year of the zone. The agreement and the conditions in the agreement are binding on the taxing unit, the municipality or county, and the board of directors of the zone. (l) The governing body of a municipality or county that designates an area as a reinvestment zone may determine, in the designating ordinance or order adopted under Section 311.003 or in the ordinance or order adopted under Section 311.011 approving the reinvestment zone financing plan for the zone, the portion of the tax increment produced by the municipality or county that the municipality or county is required to pay into the tax increment fund for the zone. If a municipality or county does not determine the portion of the tax increment produced by the municipality or county that the municipality or county is required to pay into the tax increment fund for a reinvestment zone, the municipality or county is required to pay into the fund for the zone the entire tax increment produced by the municipality or county, except as provided by Subsection (b)(1). (n) This subsection applies only to a school district whose taxable value computed under Section 403.302(d), Government Code, is reduced in accordance with Subdivision (5) [(4)] of that subsection. In addition to the amount otherwise required to be paid into the tax increment fund, the district shall pay into the fund an amount equal to the amount by which the amount of taxes the district would have been required to pay into the fund in the current year if the district levied taxes at the rate the district levied in 2005 exceeds the amount the district is otherwise required to pay into the fund in the year of the reduction. This additional amount may not exceed the amount the school district receives in state aid for the current tax year under Section 42.2514, Education Code. The school district shall pay the additional amount after the district receives the state aid to which the district is entitled for the current tax year under Section 42.2514, Education Code. SECTION 16. Chapter 311, Tax Code, is amended by adding Section 311.021 to read as follows: Sec. 311.021. ACT OR PROCEEDING PRESUMED VALID. (a) A governmental act or proceeding of a municipality or county, the board of directors of a reinvestment zone, or an entity acting under Section 311.010(f) relating to the designation, operation, or administration of a reinvestment zone or the implementation of a project plan or reinvestment zone financing plan under this chapter is conclusively presumed, as of the date it occurred, valid and to have occurred in accordance with all applicable statutes and rules if: (1) the second anniversary of the effective date of the act or proceeding has expired; and (2) a lawsuit to annul or invalidate the act or proceeding has not been filed on or before the later of that second anniversary or August 1, 2011. (b) This section does not apply to: (1) an act or proceeding that was void at the time it occurred; (2) an act or proceeding that, under a statute of this state or the United States, was a misdemeanor or felony at the time the act or proceeding occurred; (3) a rule that, at the time it was passed, was preempted by a statute of this state or the United States, including Section 1.06 or 109.57, Alcoholic Beverage Code; or (4) a matter that on the effective date of the Act enacting this section: (A) is involved in litigation if the litigation ultimately results in the matter being held invalid by a final judgment of a court; or (B) has been held invalid by a final judgment of a court. SECTION 17. Subchapter E, Chapter 42, Education Code, is amended by adding Section 42.2514 to read as follows: Sec. 42.2514. TAX INCREMENT FINANCING PAYMENTS. For each school year, a school district, including a school district that is otherwise ineligible for state aid under this chapter, is entitled to state aid in an amount equal to the amount the district is required to pay into the tax increment reinvestment fund for a reinvestment zone under Section 311.013(n), Tax Code. SECTION 18. Section 42.2516(b), Education Code, is amended to read as follows: (b) Notwithstanding any other provision of this title, a school district that imposes a maintenance and operations tax at a rate at least equal to the product of the state compression percentage multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year is entitled to at least the amount of state revenue necessary to provide the district with the sum of: (1) as calculated under Subsection (e), the amount of state and local revenue per student in weighted average daily attendance for maintenance and operations that the district would have received during the 2009-2010 school year under Chapter 41 and this chapter, as those chapters existed on January 1, 2009, at a maintenance and operations tax rate equal to the product of the state compression percentage for that year multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year; (2) an amount equal to the product of $120 multiplied by the number of students in weighted average daily attendance in the district; and (3) [an amount equal to the amount the district is required to pay into the tax increment fund for a reinvestment zone under Section 311.013(n), Tax Code, in the current tax year; and [(4)] any amount to which the district is entitled under Section 42.106. SECTION 19. Section 49.063, Water Code, is amended to read as follows: Sec. 49.063. NOTICE OF MEETINGS. (a) Notice of meetings of the board shall be given as set forth in the open meetings law, Chapter 551, Government Code, except that if a district does not have a meeting place within the district, the district shall post notice of its meeting at a public place within the district specified by the board in a written resolution, rather than at its administrative office. The board shall specify such public place to be a bulletin board or other place within the district which is reasonably available to the public. (b) The validity of an action taken at a board meeting is not affected by: (1) [Neither] failure to provide notice of the meeting if the meeting is a regular meeting; (2) [nor] an insubstantial defect in notice of the [any] meeting; or (3) failure of a county clerk to timely or properly post or maintain public access to a district notice of the meeting furnished to the county clerk in sufficient time for posting under Section 551.043(a) or 551.045, Government Code [shall affect the validity of any action taken at the meeting]. SECTION 20. Section 49.216, Water Code, is amended by amending Subsection (e) and adding Subsection (f) to read as follows: (e) Any peace officer who is directly employed by a district, before beginning to perform any duties and at the time of appointment, must take an oath and execute a bond conditioned on faithful performance of such officer's duties in the amount of $1,000 payable to the district. The oath and the bond shall be filed in the district office. (f) A peace officer contracted for by the district, individually or through a county, sheriff, constable, or municipality, is an independent contractor, and the district is responsible for the acts or omissions of the peace officer only to the extent provided by law for other independent contractors. SECTION 21. The following laws are repealed: (1) Section 382.155(d), Local Government Code; and (2) Section 387.010(d), Local Government Code. SECTION 22. This Act takes effect September 1, 2011.