HBA-EDN H.B. 702 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 702 By: Lewis, Ron Natural Resources 3/2/2001 Introduced BACKGROUND AND PURPOSE Drainage districts were originally created under the Texas Constitution during the early part of the 20th century. The drainage district laws were subsequently adopted by the legislature in 1907 and later codified into the Water Code. Until the last few years, the laws had remained virtually unchanged since their enactment. Recent attempts to modify these provisions did not include the issuance of bonds or other financing statutes. House Bill 702 modernizes provisions that have become outdated and modifies provisions relating to the issuance of bonds and other instruments of indebtedness of drainage districts. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS House Bill 702 amends the Water Code to modify provisions relating to the administration and issuing of bonds and other instruments of indebtedness of a drainage district (district). The bill requires that any person filing a petition for the creation of a district deposit cash with the clerk of the commissioners court in an amount to be determined by the county elections official. The bill sets forth procedures requiring the governing body of a district (board) to adopt a resolution and to post notice of a subsequent hearing to be scheduled on the resolution (Secs. 56.015 and 56.032). H.B. 702 provides that qualifications to serve as a director on the board are governed by the eligibility requirements for public office set forth in the Election Code (Sec. 56.062). H.B. 702 states that in any district in which the board is elected, the transfer of the board's powers, rights, and duties to the commissioners court shall not be made unless such a proposition shall first be submitted to the qualified voters of such district and the proposition adopted (Sec. 56.069). H.B. 702 increases, from $100 to $1,000, the maximum fine for a conviction of wilfully filling up, cutting, injuring, destroying, or impairing the usefulness of any work of a district used to drain and protect from overflow of water (Sec. 56.128). The bill authorizes the interest and sinking fund of a district to be invested for the benefit of the district as provided by law. The board is authorized to transfer money between the interest and sinking fund and the construction and maintenance fund to restore any funds which were improperly used (Sec. 56.182). H.B. 702 modifies the provisions relating to bonds, taxes, and elections to make the board subject to the requirements and authority that the commissioners court, the county judge, or the county clerk has under current law. The bill removes provisions entitling the county clerk to receive fees for recording district bonds. The bill requires bonds, including refunding bonds, to be signed by the board president, attested by the board secretary, and to have the seal of the district affixed to each bond. The bill also requires refunding bonds to be registered by the board secretary. H.B. 702 requires that bonds be issued in denominations and bear interest as authorized by the board of directors. The bill requires the district to submit to the attorney general, after the bonds are sold, a copy of the bonds, a certified copy of the order levying a tax to pay interest, and a statement of the district's total bonded indebtedness. The bill requires the board to deposit all money from the sale of bonds into the construction and maintenance fund (Secs. 56.202-56.205,56.207, 56.209, and 56.212). The bill deletes provisions regarding refunding bonds and authorizes a district to refund outstanding bonds by issuing new bonds in accordance with current law (Sec. 56.210). H.B. 702 removes the requirement that a maintenance tax be assessed at the same time that taxes are levied to pay bonded indebtedness. The bill authorizes the board to issue negotiable notes payable from this maintenance tax and sets forth guidelines regarding the notes. The bill also authorizes the board to borrow money for the payment of maintenance expenses and to evidence those loans with negotiable notes (Sec. 56.242). An election to approve the levy of taxes on the benefit basis must be held at the earliest legal time, no earlier than 30 days after the board orders an election (Sec. 56.249). H.B. 702 authorizes any resident freehold taxpayer of the district to present a petition requesting the dissolution of the district signed by at least 5% of the qualified voters of the district at a regular meeting of the board (Sec. 56.292). Any person filing a petition is required to deposit with the board an amount sufficient to pay the cost of conducting an election within the district (Sec. 56.293). The bill requires the commissioners court, prior to entering an order discharging the trustee and the trustee's bondsman and closing the trust estate, to order all transactions of the trustee audited by an independent certified public accountant. The bill requires a copy of the audit to be filed with the commissioners court, a copy to be filed with the Texas Natural Resource Conservation Commission, and a copy to be supplied to the trustee (Sec. 56.311). H.B. 702 deletes provisions relating to consolidation of districts. Provisions relating to the bond of a county judge, the registration of bonds, and certain purchases and contracts are also repealed in their entirety (Secs. 56.137, 56.206, 56.208, and 56.801-56.804). EFFECTIVE DATE September 1, 2001.