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The Senate Committee on Local Government met to take up interim charges on affordable housing, taxpayer funded lobbying, extraterritorial jurisdictions, and special purpose districts. This report covers the charge on extraterritorial jurisdictions and special purpose districts only. To listen to the archive: https://tlcsenate.granicus.com/MediaPlayer.php?view_id=52&clip_id=17049 (4:45:00)

 

This report is intended to give you an overview and highlight of the discussions on the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

 

Extraterritorial Jurisdictions

Jeff Archer, Texas Legislative Council & Trey Burke

  • Archer- Not the same in any two states
  • Archer- Provided background on ETJ
  • Bettencourt – how do our laws stack up against other states?
    • Archer – We have a more vigorous regime but don’t see consistency from one state to another
  • Burke – Over time it has gotten more complex and there are a lot of carve outs
  • Burke – Provided more background on the history, in 1963 the legislature tried to put in place standard procedures on annexation and ETJ (ch 42 and 43)
  • Burke – ETJ needs to be unincorporated, contiguous, and distance of how it extends out is defined in statute (the band can grow and shrink)
  • Burke –they have shifted ETJ from non-consent to consent
  • Burke – there are several methods for dis-annexation
  • Bettencourt – dis-annexation is not as well coded/developed as annexation
    • Burke – over the years there have numerous court cases, there have been bills over sessions trying to clarify it
  • Menendez – inquired about the Texas Military Preparedness Commission, moving forward need to consider DOD and impact to military installations (over $100 billion of possible economic impact)
  • Eckhardt – asked about dis-annexation and service plan, confirms burden is on city
    • Burke – current law provides ability for residents to petition municipality
    • Burke – was not sure who has the burden
    • Bettencourt – not a lot of statutory provision or law in this area
  • Eckhardt – what are pros and cons of handling on case by case basis with judge vs a more prescriptive attribute
    • Burke – if you want to give a judge more leeway then would need to do so legislatively
    • Burke – look to them to determine policy language they think is needed

 

Scott Norman, Texas Association of Builders

  • Dual regulation and ETJ is an area of interest
  • Could take years arguing so in 2001 a good bill was passed that said interlocal agreement is needed to work out all of the regulations
  • Some feel like cities are better, others counties – not one size fits all
  • There are considerations and special circumstances, notes military is not vast majority of the state
  • Members trying to Housing and Apartments on the ground, need one set of rules and who is providing
  • Eckhardt and Norman discuss unincorporated areas and it varies across the state
  • Eckhardt – inability to have revenues to provide transportation, and authority for water and emergency response
  • Eckhardt – used to say make unincorporated area so nice, another municipality will annex it
  • Eckhardt – do you think Counties need more revenue if unincorporated areas stay that way for a while, and notes they can not have utilities
    • See increase in special districts, in some cases that model works better
    • Eckhardt -agrees it is a fee-based arrangement and very good
    • Eckhardt – utility and CCN can refuse to provide services in ETJ and unincorporated areas
  • Notes dual compliance is impossible, and time to work out can be devastating – thinks this is one area we could get resolutions
  • Certainty of which one (County or City) applies is needed
  • Menendez – Builders made a lot because of ETJ and the way state protects, if didn’t have military then it would be an issue
    • Not saying ETJ is in itself a bad thing, dual authority is his main complaint

 

James Quintero, Texas Public Policy Foundation

  • People are the master, Government is the servant
  • Anti-democratic arrangements is not about serving the people but the system, ideology, etc
  • Residents in ETJ denied the right to participate in election on those who govern their day to day lives
  • No prospect of relief since there is no statutory requirement they be released from the setting
  • Equally troubling is dis-annexation, need to apply for a writ or wait for a particular set of circumstances to develop, etc
  • Large cities have began to aggressively annex without informed consent and those residents have no real way out
  • Consider abolishing ETJ all together
  • Consider extending dis-annexation by petition process
  • Eckhardt – is a community dis-annexes should they reimburse the services for the services they used?
    • Think a fair formula to address but need to be able to leave
    • Some sort of special district creation may be warranted in this circumstance

 

Ryan Brannan, Save Lost Creek

  • Were forcibly annexed prior to law change, post law change any neighborhood annexed must vote to do so
  • They never had an option to not be part of the municipality
  • Learned as bill last session was moving through the process that they had others who were in similar circumstances and wanted the bracket of the bill to be expanded to them
  • Want to work on an equitable solution that does not use their tax dollars against them or involved more courts
  • Springer – mentioned the bill was killed last session on point of order, working with anyone on a draft this time that would not have a PO
    • Working on a bill that would avoid that point of order
  • Eckhardt  – why bracket the bill? Wouldn’t it be good for other communities?
    • Agree, thinks it needs to be statewide
  • Eckhardt – what is status on your filing a writ? Would you recommend any changes to the statute to address this?
    • Would take a lot of funds, years and years and no one has success going that route
    • Thinking of it, will consider and look at
    • Currently focusing on legislation but happy to look at all avenues
    • Eckhardt and Brannan continue to discuss the merits and considerations of the legislation avenue vs the legal avenue

 

Jeff Deweese, Signorelli Company

  • Provides example of a planned development that would target first time buyers and then move up
  • City wanted a 60 ft wide minimum lot development, which was not feasible, would have put starting price at $500k which is not a the price for a first home or market for it
  • After over 8 months of discussions they terminated the discussions and as far as they know the land is still sitting there
  • Regulations are increasing and makes it harder for first time home buyers
  • Springer – what city was that?
    • Prefer not to answer
  • Springer – was there negotiation on this? Was part of this decision due to neighboring communities?
    • It was cut and dry, not room for negotiations, and it was unfortunate given they spent a lot of time on it and it would have been good for the community
    • No it was not about surrounding community input, thinks councilmembers had attachment to the property and did not want their development
    • Springer – hear its about control of property, look they wanted/aesthetically pleasing
    • Menendez – seems like this would be a disservice to people they represent because their community could not have a first time home, want to talk more to him after the hearing

 

David Billings, Mayor City of Fate

  • Concern is that cities have liability for fire, water, sewer, etc. & ETJ doesn’t pay property tax, sales tax doesn’t cover the services
  • Shifting tax burden from ETJ residents to city residents

 

Special Purpose Districts.

Jeff Archer, Texas Legislative Council

  • Only one MUD template, drafted in the House
  • No templates ever approved or adopted for the other types of districts
  • Chair Bettencourt – Should we not have model templates for the others?
    • If it works for you it works for us
  • Shawn Harrison will speak on MUD templates, Jessie Colter will talk about MMD
  • Get more MUD requests by far than any other type, MMDs are right behind; 100/year drafted for MUDs, 30-45 MMDs

 

Shawn Harrison, Texas Legislative Council

  • Provides overview of special districts, can be created by local law & typically with a confirmation election and notice requirements
  • Can also be created by general law, different general laws apply to different districts
  • Local laws used to go into Session Laws before the Special District Local Laws Code, started this code a few sessions ago & codifying districts into that code
  • New bills for special districts are amendments to those; can include new districts or new laws governing some aspects of the district
  • Special districts also governed by Election Code, Local Government Code, etc.
  • TCEQ maintains a water district database that contains what exists and how they were made, TCEQ has regulatory authority over the water districts
  • Template exists for MUDs as there are so many of those, drafted this at the behest of the legislature
  • Templates don’t exist for other districts due to small number and variability, but can create if legislature wants; if others are wanted, would be helpful to have one standard across the House & Senate
  • Will be updating MUD template to change the dates, do this every interim, but can incorporate other changes needed
  • Chair Bettencourt – Don’t want districts morphing into other districts, there was a freshwater district that morphed into having road powers; want people to stay in their lane
  • Chair Bettencourt – Want a MMD template & should get started on that; don’t want one special district to become another
    • General law has provisions allowing districts to convert from one type to another
    • Can sometimes create uncertainty on powers they have following the conversion
    • Archer, TLC – Will draft what is asked of us; point well taken on Frankenstein districts
    • Harder to determine if Chapter 46 applies, eminent domain, taxing, etc.
  • Chair Bettencourt – Looking for general consensus, if they come to this committee want to ensure we know what lanes we’re in; expect to at least be told about Frankenstein districts ahead of time; would like an MMD template
  • Springer – Understands on Frankenstein districts, will have a different set of regulations for each one

Jessie Coulter, Texas Legislative Council

  • Speaking on MMDs, usually created inside cities to supplement city services & in areas of lots of activity; can apply to a variety of categories
  • Chair Bettencourt – Don’t need district morphing into cities and/or counties
  • Coulter notes there is no official MMD template, but there is a document that comes from the 86th interim House report; TLC helped the committee draft
  • This template has default provisions and then options at the end, so TLC does have “a thing” for MMDs
  • Chair Bettencourt – Make sure you send “thing” to us
    • Will send
  • Other type of district TLC gets the most requests for is Emergency Services Districts, can’t be done via local law, provide EMS or fire, run on property taxes or sales taxes, board can be appointed by county or elected; each ESD can be tailored very specifically on services and structure
  • Chair Bettencourt – Will take a look at the MMD one and may need to do one for ESDs; need to have a conversation on ESD property tax and sales tax usage
  • Eckhardt – 670 special districts under local laws, of the 300 ESDs, only 254 counties, Travis has 16 ESDs; with cities unable to annex we will have more of these, how will we manage them? Will we utilize counties? Would get very uneven services based on property tax valuation
  • Chair Bettencourt – Which leads to de-annexation conversation
  • Eckhardt – There is a reasonably good de-annexation provision in Health & Safety for municipalities that want out of their ESDs, might look at this as a template
  • Eckhardt – Statewide issue, struggling to conceive of this as a one-size for the state; GCDs, MUDs, etc. are also highly specialized and variable; template needs to be the floor and not the ceiling
    • TLC refers to templates for local laws, no local laws for ESDs, all done under general law
  • Chair Bettencourt – Very complex, so many taxing units that can levy tax, need to not relabel districts that can tax
  • Eckhardt – No mapping of the boundaries of special district taxing, e.g. maps don’t exist; CADs assess taxes
  • Chair Bettencourt – Well, they have to have some shape file to do this
  • Eckhardt – Let’s go looking; would be difficult to determine geographically what it costs an average person to get services because boundary and overlap maps don’t exist
  • Chair Bettencourt – sounds like a recommendation from the committee
  • Eckhardt – Will also reveal comparative cost of living inside of a city versus outside
  • Chair Bettencourt – And multiple overlapping special districts too
    • Archer, TLC – Will go back and talk to mapping and see what we do have
    • Probably have a good start on some of it; one issue is city, district boundaries are changing, some don’t have anything to give us
  • Chair Bettencourt – No metes and bounds?
    • Have metes and bounds but where is that on the ground? Markers have been removed, roads change, etc.
  • Springer – On MMDs, debt service in MMDs were defined, whereas MUDs were more left to elected people, debt wasn’t exactly defined, had dates for when it would come back to city?
    • Coulter, TLC – Don’t remember that coming up but can get back to you
  • Springer – Being able to see identifiers for different districts in templates would be helpful

 

Public Testimony

Ty Embrey, Lloyd Gosselink Attorneys at Law

  • Provides overview of legal basis for special purpose district creation; created through general law via TCEQ or counties & special laws that create MUDs, etc.
  • Typically districts need to be confirmed by voters within districts, particularly if you assess a tax
  • Petitioning via the TCEQ or county route needs a majority of landowners
  • Template is nice to inform client about what will require more attention
  • Special purpose districts do file annual updates to info that will provide taxing rates, etc.
  • Eckhardt – By address, but I’m looking for geographic boundaries
  • Chair Bettencourt – What would you want to add or change?
    • Process has become more transparent over the years, legislature has made it a lot more transparent
  • Springer – Through the TCEQ process, elections are with one person, correct?
    • Depending on number of voters
  • Springer – Cities have been able to identify developers as they show up in June as soon as session is out, don’t want to work with cities, etc.; how do we bring this in where there is a working relationship without one side dominating the conversation
    • Our experience is that legislature requires consent before confirmation elections, led to a lot of good conversations between developers, cities, etc.
  • Springer – And the ISD sometimes gets brought in, etc.; want to bring everybody working together, instead of a situation where people are using specific methods
    • Put together a chart of the creation of districts & hopefully will benefit you

 

Rod Borland

  • Need to improve upon transparency, like the idea of a template and getting a handle on limitations of districts to avoid overlapping jurisdictions
  • Legislature has done a lot to put reporting reqs in the Gov Code, Comptroller collects data on a number of districts that meet certain thresholds
  • No real way for determining if districts meet the Comptroller threshold, however, and should have some audit power int eh Comptroller’s Office, also could subject districts to some form of Sunset review
  • Could also have a reauthorization by public vote on some sort of cycle for those authorized by public vote
  • Chair Bettencourt – On audit ability, will be talking about that tomorrow with Truth in Taxation forms; good idea on Sunset review, but needs to be a distributed regional system rather than legislative review
  • Eckhardt – What would you do with the debt if a MUD was de-authorized?
    • Don’t have an answer, would need to explore how you would recapitalize; if you were going to take a vote then would need some mechanism
  • Eckhardt – Also talking about this with de-annexation as well, when taxpayers don’t want to pay for the thing but still want to enjoy that thing, need to recognize that you can’t
  • Springer and Bettencourt discuss the concept of reviewing districts
  • Chair Bettencourt – Would be some type of performance review rather than a Sunset review; just trying to figure out a way for the public to petition the government
  • Hall – Might look at something similar to toll roads
    • Could also look at wind downs, recapitalization, etc.
  • Chair Bettencourt – Had to pass a bill because the Richmond Management District was issuing more debt after the public had petitioned and closed them down

 

David Billings, Mayor City of Fate

  • Have 5 recommendations in written testimony to improve transparency; want to expand the transparency rules last session
  • Would like a better process to wind down a MUD and get this done faster & easier
  • Prefer all MUDs going through elected officials to be approved, issues with MUDs that have votes based on one voter
  • Hall – What are your thoughts on secondary debts and approval for debts?
    • Don’t think we should have secondary debts for MUDs, tax on citizens and hurts ability to provide services
  • Hall – So the MUD is there for a purpose and not in perpetuity
    • Yes, should have an end date
  • Hall – Should consider having an end date or process in the template

 

Closing Comments

  • Hall – Will be providing written input from a soon-to-be County Commissioner