10/03/2005-CC-Agenda Packet-Work Sessione
AGENDA
CITY COUNCIL
WORKSHOP
MONDAY, OCTOBER 3, 2005
6:00 P.M.
201 BOLIVAR
1. Call Meeting to order.
2. Discussion Regarding Financing for Water Districts
3. Adjourn.
Pursuant to the Texas Open Meetings Act, Chapter 551, Texas Government Code, one or more of the
above items may be considered in executive session closed to the public. Any final action, decision
or vote on such matter will be made in open session following the conclusion of the executive session.
�alie Chavez, Cit.
�rO
e & Time Posted
This facility is wheelchair accessiti��F�ai#�� a�,c�.��ss#life parking spaces are available. Requests for
accommodations or interpretive services must be made 48 hours prior to this meeting. Please contact
the City Secretary's office at (940) 45 8-793 0 for further information.
Memorandum CMEM078
September 30, 2005
Tommy Kincaid
Mike Lawler
Glenn Ervin
Robert. Patton_
Joe Higgs
Mike -James
Rose Chavez
From: Jack Smith
Subject: Water District Financing,
Monday night�we:will.hay:a v�rorkshop va►tth Dan Airraon°to discuss the way
water districts are finaneed. if you .do not feel that districts are necessary to
u$ then we will not continue on. In the past several of the council has
asked my opinion on. water districts, specifically The Tomlin Group east of
the City. I have walked the fence on this issue because there are obviously
strong points both directions. However I have been giving much thought
and have come to the conclusion that I do support the project for the
following reasons:
1. The only draw back I can think of is that we will not receive ad
valorem tax as soon as,we normal.ly_would with new homes however
will the property develop as quickly without a district?
2. The location of the project is in the exact location our land use plan
calls for.
3. The Tomlin Group will market this project nationally which will bring
to the attention of the retail market the growth in Sanger.
-1-
4. As more people come to Sanger to respond to the marketing efforts
of Tomlin our current builders will benefit from the increased traffic
flow*
5. The Tomlin Group will fight our battle with Bolivar Water for us to get
the water CCN.
6. The sewer taps fees ( some of which can be gotten up fronts will
probably exceed $ 8,000,000.
7. Size of house, building materials, etc. can be negotiated with the
developers agreement.
8. We can contract police and fire protection and still receive the fees
from the County on fire runs.
9. We will obtain land for ambulanceffire site.
10. Sanger ISD will receive sites for future schools.
11. And lastly the point that finally changed my mind, earlier this week
Mayor Brock was quoted in the paper that the City of Denton has
reached 100,000 population and now their ETJ increased to 5 miles.
I feel that Denton is going to engulf us if they possibly can. With the.
Tomlin project we can annex a 10 foot strip around the project and
keep moving our city to the east.
-2-
DATE: October 3, 2005
To: Honorable Mayor and City Council
Fr: Rose Chavez, City Secretary/Assistant City Manager
Re: Dinner
We will be providing dinner between 5:30pm and 6:OOpm.
Please join us.
Law VV O1� ices L of
Clay E. C r,.iwbrd 1" C
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AN oVERV1Ew of
WATER DISTR14CT BOND FINANCING
OF DEVELOPER PROJECTS
I. Authority of Texas Commission nn Environmental duality ("TGE�")
A. General
1, TCEQ has duty to create, supervise, and dissolve certain water districts;
and approve engineering projects and the issuance and sale of bonds.
30 TAC 293.1(a)
2. Powers and duties of districts are subject to continuing right of supervision
of TCEQ. 30 TAC 293.3(a)
B. Issuance of Bonds
1: TCEQ has responsibility to approve projects relating to the issuance of
bonds for districts. This includes certain revenue notes and contract I.M.
obligations.
30 TAC 293.41(b)
2. Such authority does not relate to:
a. refunding bonds;
b. bonds issued to Farmers Home Administration;
c. bonds .issued to Texas Water Development Board;
d. certain districts that include one entire county; were created by
special legislative act; and meeting certain other very specific
requirements.
30 TAC 293.41(a)(c)
3. TCEQ has elected to exercise limited jurisdiction over district road
projects.
a. Requirement for completion of street construction for water,
wastewater, and drainage bond projects; 3a TAC 293.48
b. Approval of acquisition df road utility district powers under
Chapter 441, Texas Transportation Code, by districts operating
under Chapter S4, Texas Water Code. 30 TAC 293.241
c. Bonds issued for road .district purposes under Chapter 257.003, Texas
Transportation Code, by districts operating under Chapter 53, Texas
Water Code, are only required to meet $2.50 "combined no -growth"
tax rate test of Office of Texas Attorney General.
II. Developer Projects
A. General
A developer project is a district project which provides water, wastewater or
drainage service for property owned by a developer of property in the district.
The term "developer" is defined by Texas Water Code, §49.052(d) as follows:
"any person who owns land located within a district covered under this section
and who has divided or proposes to divide the Land into two or more parts for the
purpose of laying out any subdivision or any tract of land or any addition to any
town or city, or for laying out suburban lots or building lots, or any lots, streets,
alleys, or parks or other portions intended for public use, or the use of purchasers
or owners of lots fronting thereon or adjacent thereto." 30 TAC 293.44
B. Construction prior to Commission Apt�roval
1. A developer may proceed with financing or construction of water,
wastewater, and drainage facilities contemplated for purchase by the
district prior to TCEQ approval of the .district bond .issue designed to
finance such facilities under certain conditions, including the following:
a. executed construction/reimbursement agreement with district;
b, construction plans and specifications and contract documents
approved by district and fled with TCEQ;
c. plans must be approved by all cities and agencies with jurisdiction;
d. TCEQ advised of all bid openings; and
e. contract advertising and award, and facility construction must be
accomplished in manner required by general laws relating to
districts. 30 TAC 293.46
2. TCEQ economic feasibility rules require a developer to proceed with
project construction prior to TCEQ approval of bonds therefor. However,
the developer has no assurance that funds will be authorized for acquiring
such facilities.
C. Thirty Percent of District Construction Costs to Be Paid by Developer
1. In certain districts 30% of water, wastewater, and drainage facility costs
must be paid by the developer to insure feasibility of district construction
project. 30 TAC 293.47(a)
2. Applicable to aIi districts EXCEPT:
a, a district which has a ratio of debt (including proposed debt) to
certified assessed value of 10% or less; 30 TAC 293.47(a)(1)
b. a district which obtains an acceptable credit rating on its proposed
bond issue independent of credit enhancement technique;
(i) Moody's Baa3 or higher;
Standard and Poors BBB or higher; or
(111) Fitch BBB or higher.
30 TAC 293.47(a)(2)
c. a district which obtains a credit enhanced rating on its proposed
bond issue by virtue of guaranty insurance (subject to TCEQ
executive director approval);
(i) Moody's An or higher;
(ii) Standard and Paors AA or higher; or
Fitch AA or higher.
30 TAC 293.47(a)(3)
d. a district which has entered into a contract with a .political
subdivision or entity created by a political subdivision under which
sales and use taxes or other revenues generated by -the project are
provided to the district. 30 TAC 293.47(a)(4)
3. Certain facilities are exempted from this requirement, including:
a. wastewater treatment plants and sites;
b. water supply, treatment and storage facilities and sites;
c. levee "stormwater pump stations and sites;
d. offsite water and wastewater lines to connect to offsite souree or
regional system;
e. onsite pump stations and force mains connecting district's system
to regional system;
£ water transmission or wastewater trunk lines shared with other
districts;
g, water or wastewater lines servicing 1,000 or more acres within a
district;
h. certain drainage channels, levees and other flood control facilities
and stormwater detention facilities;
i. land costs for levees or stormwater detention facilities; and
j. alternate water supply interconnects with other entities.
30 TAC 293.47(d)
i3. Ieveloper Interest Reimbursement
- i. - A developer may be reimbursed by a district for interest accrued for a
period of up to two years on construction pay estimates, professional fees,
and attendant non -construction costs. The initiation of the two year
interest accrual period for construction will be six months from the date
the contract is 95% complete. 30 TAC 293.50(a)
2. The interest rate shall not exceed the lesser of the net .effective interest rate
on the bonds sold, or the interest rate actually paid by the developer for
loans obtained. If developer equity rather than borrowed funds is used, the
net effective interest rate on the bonds applies. 30 TAC 293.50(a)
3. Reimbursement for accrued developer interest up to five years may be
allowed under certain conditions:
a. actual costs plus interest due, not exceed present day cost of facilities;
and
b. total accrued developer interest, accrued interest on any district notes,
and capitalized interest does not exceed an amount equal to four years'
interest on total bond issue. 30 TAC 293.50(b)
4. No reimbursement may be paid to developer for accrued interest on 30%
developer contribution. 30 TAC 293.50(c)
5. Time limitations on accrued developer interest do not apply to certain
facilities serving or programmed to serve 2,000 acres or more; and internal
lines serving 1,000 acres or more. 3Q TAC 293.50(d)
III.Economic Feasibility
A. General
Economic feasibility is the determination of whether the land values, existing
improvements, and projected improvements in the district will be sufficient to
support a reasonable tax rate for debt service payments for existing and proposed
bond debt while maintaining competitive utility rates. 30 TAC 293.59(b)
B. First Bond Issue
1. Comparison of combined district and
other competing projects in market area.
2. Three different cash flow analyses:
overlapping tax rates to those of
30 TAC 293.59(k)(1)
a. projected debt service revenue and acceptable projected tax rate
($0.80 to $1.00 in greater Dallas area); 30 TAC 293.59(k)(2)
b. combined projected tax rate that may not exceed certain maximum
amount that varies by county ($1.00 to $i.2Q in greater .Dallas
area); and 1 30 TAC 293.59(k)(3)
c. combined no growth tax rate that may not exceed certain
maximum amount that varies by county ($2,00 to $2,2Q in greater
Dallas area). 30 TAC 293.59(k)(4)
See attached Appendix for greater detail.
3. Completion of Necessary Facilities
a. Facilities to be financed by proposed bond issue and necessary to
serve projected build out shall be at least 95% complete;
b. All necessary permits obtained;
c. Sufficient lift station and plant capacities necessary to serve
connections projected for first 18 months are 95% complete; and
funds for capacities needed for projected build out must be in bond
issue or otherwise secured by acceptable financial guarantee; and
d. Streets and roads necessary to serve projected build out shall be
95% complete. 30 TAC 293.59(k)(6)
4. At least 257o of projected value of improvements shown in projected tax
rate calculations must be completed. 30 TAC 293.59(k)(7)
5. Thirty year waiver by developer of agricultural, open -space, timberland, or
inventory valuation for land, homes or buildings that it owns with respect
to district taxation. 30 TAC 293.59(k)(8)
6. Market study supporting building program for first three years of projected
tax rate calculations. 30 TAC 293.59(k)(10)
C. For Second and Subsequent Bond Issues
Essentially the same as for first bond issue except taxable improvements equal to
75% of the projected build -out used in the projected tax rate calculations
contained in all prior bond issues shall be completed. Such improvements may be
located in combined area of prior bond issue, proposed bond issue, and future
bond issues. 30 TAC 293.59(1)(4)
D. Performance of Developer in Other District Proi�cts
In evaluating an application by a district for approval to reimburse construction
funds to a developer, the TCEQ may consider the performance of the developer or
related or affiliated entities in projects located in other districts and may condition
reimbursement on certain actions of the developer or related or affiliated entities.
1. Issues which may be considered in evaluating the performance of a
developer may include the past history o the developer and related or
affiliated entities with respect to.
a. payment of financial obligations including taxes, standby fees and
other user fees to any district;
b. devaluation of property values by claiming special exemptions
within any district after the TCEQ's approval of bonds in said
district without compensating agreements with the district;
c. compliance with TCEQ rules and orders; and
d. performance under agreements with any district including, but not
limited to, cost sharing and maintenance agreements, street and
road construction agreements, 30% cost participation agreements,
and financial guarantees. 30 TAC 293.60(a)
2. Does nat include the developer's lender, unles$ it is a joint venture partner.
30 TAC 293.60(c)
IV. TCEQ Approval Process
A. Application to TCEQ
1. Regular vs. expedited review 30 TAC 293.42(a), (b), and (c}
2. Contents
a. district board resolution;
b. compliance with municipal consent conditions, if any;
c. filing fee $500 plus cost of nonce;
d. Bond Application Report; and
e. other (Market Study). 30 TAC 293.43
B. TCE(� Hearing
C. TCEQ authorization to purchase from or reimbursement to developer
D. Audit of Payment to Developer
30 TAC 293.69
30 TAC 293.70
APPENDIX
Economic Feasibility
Cash Flow Structure Assumptions:
a. each ending debt service balance will be not Less than 25% of the
following year's debt service requirement;
b. interest income may be shown on the ending debt service balance only for
the first two years;
c. 90% tax collection rate for "projected" tax rate cash'flow and 100% tax
collection rate for "no -growth" cash flow, and
d. projected tax rate shall be level or decreasing for life of the bonds.
Ke�Definitions:
"Projected debt service tax rate" means "the tax rate required to meet projected annual
debt service requirement using projected assessed valuations and an appropriate tax
collection rate. The projected annual debt service requirement shall include the previous
and proposed debt."
"No growth debt service tax rate" means "the tax rate required to meet projected annual
debt service requirements using the current assessed value and a 100% tax collection
rate.
"Combined no -growth tax rate"means the sum of the following:
"(1) No -growth debt service tax rate of the district;
(2) Projected no -growth debt service tax rate %J all overlapping entities specifically
attributable to water, wastewater, -drainage that ,are smaller in size than a county,
and for roads if the entity is a road district or road utility district smaller in size
than a county commissioner's precinct. In other words, for road districts or road
utility districts that are as large as one county commissioner's precinct, the road
district tax is not counted;
(3) An equivalent surcharge tax rate for water and wastewater surcharge, if any;
(4) City tax rate specifically attributable to water, sewage and drainage if the district
is located within a city;
(5) Current or proposed district or overlapping maintenance tax levy, if any;
(6) Contract tax, if any; and
(7) Less any equivalent tax rebate or other payments."
"Combined projected tax rate" means the sum of the following:
"(1) Projected debt service tax rate of the district;
(2) Projected debt service tax rate of all overlapping entities specifically attributable
to water, wastewater, and drainage, and for roads if the entity is a road district or
road utility district smaller in size than a county commissioner's precinct;
(3) An equivalent surcharge tax rate for water and wastewater surcharge, if any;
(4) City tax rate specifically attributable to water, sewage and drainage if the district
is located within a city;
(5) Current or proposed district or overlapping maintenance tax levy, if any;
(4) Contrast Sax, if any; and
(7) Less any equivalent tax rebate or other payments."
Tax Rate Limitations:
"The combined projected tax rate shall not exceed the following:
(A) $1.50 in Harris, Galveston, Montgomery, Fort Bend, Waller, and Brazoria
Counties;
(B) $1.20 in Dallas, Denton, Collin, Tarrant, Travis, Hays, Williamson, Comal, and
Guadalupe Counties;
(C) $1.00 in all other. counties."
"The combined no growth tax rate shall not exceed the following:
(A) $2.50 in Harris, Galveston, Montgomery, Fort Bend, Waller, Brazoria Counties;
(B) $2.20 in Dallas, Denton, Collin, Tarrant, Travis, Hays, Williamson, Comai, and
Guadalupe Counties;
(C) $2.00 for all other counties."
Law Offices of
C>lav E. Cmwfor& P*C.
IT) SIT, 1_,1111�0_ 551111� ilk;
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-
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September 2, 2005
Mr. Dan Tomlin, Jr.
Tomlin Investments
1265 Kellway Circle
Addison, Texas 75001
Re: General Information Regarding.Fresh Water Supply Districts ("FWSD" or
FWSDs") Located within Denton County, Texas
Dear Dan:
The purpose of this letter is to describe in a very general manner the process for
the creation of a FWSD; its powers with respect to financing the acquisition and
construction of public infrastructure to serve new development; and the regulatory
framework within which it must operate. As the county in which a FWSD- is located will
determine certain of its powers, this letter addresses only FWSDs located within Denton
County. I have also attached a Memorandum describing these matters in much greater
detail, as well as a summary of the rules of the Texas Commission on Environmental
Quality ("TCEQ") regarding bond financings by "developer" water districts, including a
FWSD.
A FWSD provides permanent financing on a tax exempt basis for the cost to
acquire or construct water, sanitary sewer, and road infrastructure. This would include
drainage improvements required for roads. However, the financing is in the form of
"take -out" funding, -requiring initial .interim -funding by -the -developer .pursuant to .a
reimbursement agreement with the FWSD. FWSD financing becomes available at such
time as the project to be financed meets certain criteria established by the TCEQ, as to
water and sanitary sewer improvements, and the Office of the Attorney General of Texas
("OAG"), as to roads. The criteria essentially require a level of development to be in
place before FWSD bonds are sold in order to assure a reasonable and competitive tax
rate for the development. For Denton County, our experience is that a reasonable and
competitive total overlapping tax rate generally should not exceed $3.10 per $100 of
Mr. Dan Tomlin, Jr.
Tomlin Interests
September 2, 2005
Page 2
assessed valuation, with the FWSD tax rate of no more than $100. These criteria are
outlined below.
Timing of Bond Financing (per phase}
Water and Sewer Project Financing
• Utilities, roads, and plant capacities for phase are 95% complete
• 25% of projected assessed value of phase is complete
• Within $1.20 maximum "growth" tax rate cash flow
• Within $2.20 maximum no growth" tax rate cash flow
Road Project Financing
• I/4 debt to value ratio
• Within $2.20 maximum "no growth" tax rate cash flow
The amount of financing available for a project is dependent mainly upon two (2)
factors: state constitutional and statutory limitations; and limitations of reasonable and
competitive total overlapping tax rates.
Amount of Project Financing
• FWSD creation and initial operations —100%
• Roads -and related drainage (including engineering, grading, and land) —
100% (but limited to 1/4 debt to value ratio)
e Water and sanitary sewer (including engineering and -grading)
Onsite easements — 0%
Offsite easements and plant-sites—100%
Plants f 100%
Internal Lines — 70%
(can be 100% on 1/10 debt to value ratio or investment grade
rating)
• Plus 2 years' interest at bond rate
A FWSD is created by petition,. hearing and election process as follows:
• Petition to the County Commissioners Court signed by a majority of
qualified electors of FWSD that awn land within district and any
iienholders;
• Hearing before County Commissioners Court must be held within 30 days
from date of submission of Petition; and
• If approved, FWSD calls election within district to confirm creation and
appoint initial FWSD Board of Supervisors.
Mr. Dan Tomlin, Jr.
Tomlin Interests
September 2, 2005
Page 3
In the event the land comprising the development is located within the
extraterritorial jurisdiction of a city, city consent to creation of the FWSD is required.
This process is generally as follows.
• Petition to the City Council signed by majority of qualified voters of
FWSD that own land within district and any lienholders;
• City adopts ordinance consenting to FWSD creation; and
• City may establish conditions to consent regarding terms for issuing
bonds, adding land to FWSD, etc.
Quite often, the submission of a FWSD consent petition will lead to the
negotiation of a development agreement between the developer and the affected city that
addresses many aspects of the development, including the FWSD. The development
agreement typically addresses the following matters.
• Relationship between developer/FWSD/and cities;
• Land use/densities/building codes;
• Utility construction and service plan;
• Public services plan;
• Annexation lockout until developer reimbursement; and
• FWSD matters.
The activities of a FWSD are highly regulated by different levels of state and
local government, each with its own set of requirements...- After -you have had an
opportunity to review this information, I would be pleased to have the opportunity to
meet with you and address these criteria, and any -questions that you may have.
I lank forward to speaking with yau.
Very- truly yaurs,
Clay E. Crawford
Enclosures
CEC/tdm
t•
Law Ounces of
Clay E. Crawford, P.C.
19 Friar Hollow Lane, Suite 245 3100 McKim= St., Suite 950
Houston, Texas 77027 Dallas, Texas 75201
FAX 713.621.3909 713062103707 FAX 21140981109071 21409819090
mrawford@crawlaw.net
MEMORANDUM
To: Mr. Dan Tomlin, Jr.
Tomlin Investments
From: Clay E. Crawford
Date: September 2, 2005
Re: Fresh Water Supply Districts Located in Denton County, Texas
.INTRODUCTION
The purpose of this memorandum is to generally describe the process for the
creation of a fresh water supply district ("FWSD" or "FWSDs"); its powers with respect
to the construction, operation, maintenance, and financing of public infrastructure to
serve new development; and the regulatory framework within which it must operate.
This memorandum is organized to first present a summary of this information, followed
by a more -detailed discussion.
history
• Authorized by 1904 and 1917 Constitutional amendments
• FWSD authorized by 19191egislative act
• Currently, over 1,30Q special districts of various Types, including more than 50
FWSDs
Purposes and Authority
• Chapters 30, 49, and 53, Texas Water Cade
• Water, sanitary sewer, roads (in certain counties), fire departments, peace
officer/patrol, and parks and recreation
Powers
• Acquire, construct, own, lease, operate, and maintain facilities for authorized
purposes
• issue bonds securedby revenues and/or ad valorem taxes
• Eminent domain within and outside district boundaries
• May add land only upon petition of landowner
• May divide into new district (in certain counties)
Creation
• Municipal consent (if within ETJ)
• Elector/landowner petitions county commissioners court
• Notice of hearing before commissioners court
• Hearing on sufficiency of petition: boundaries, project description, necessity,
feasibility and name
• Commissioners court order granting petition and appointing five (5) interim
10
supervisors
• Interim supervisors meet, organize, call, and conduct district confirmation and
supervisor election, and sanitary sewer, road, fire department, maintenance tax,
and bond elections
• Order canvassing returns filed with Texas Commission on Environmental Quality
("TCEQ") and in county deed records
Management
• Board of five t5) supervisors
• Staggered four (4) year terms
• Resident elector of district
• Initially appointed, subsequently elected
• Conflict of interest disqualifications
• Consultants
Regulatory Oversight/Public Disclosure
• Creation: county and city (if wn ETJj
• Plans and construction review: TCEQ, county, and city (if within ETJ)
• Issuance of debt: TCEQ, Office of the Texas Attorney General ("OAG"), and city
(if within ETJ)
• Elections: Secretary of State and OAG
• Finances: TCEQ
• Subject to open meetings, open records, public bidding laws, and annual financial
disclosure to TCEQ
• District Information Forms in county real property records, signage, and land
purchaser disclosure
• Bond information disclosure: District Information Form, TCEQ, and filing with
Municipal Advisory Council
Benefits/Rationale
-2-
• Long term financing of infrastructure on tax exempt basis is source of
infrastructure funding versus lot price
• Provides effective financing mechanism for improvements needed to comply with
Federal, State and local requirements, including fire prevention/suppression
• Only area benefited pays for improvements
• Provides mechanism to fund regional governmental approved and regulated
facilities versus individual wells and septic systems
• Provides entity to contract with other political subdivisions for provision of
services
• Provides governmental entity to survive developer for long term ownership,
management, and financing of infrastructure
GENERAL DISCUSSION
History of FWSIDs
Authority for the creation of special purpose districts to control and use the state's
surface waters was first provided by the addition of Article III, Section 52 to the Texas
Constitution in 1904. Pursuant to this authorization, the Legislatures adopted general laws
that empowered counties to create districts to finance and construct projects to develop
the- state's agricultural land. In 1917, Article YVI, Section 59 was added to the Texas
Constitution, authorizing the formation of conservation and reclamation districts with
more liberal .provisions and powers. The .statutory authority -for the creation of FWSDs
was adopted by the Legislature initially in,1919. The FWSD was the first type of special
district created for the purpose of providing water to residential users. During the late
1950's the use of special districts for urban residential development began to increase
significantly. This _process intensified in the 1970's, 1980's, and 1990's as the state's
population grew. According to Water District Update, PD-0031014, No. 6 (February
2001) published by the Texas Natural Resource Conservation Commission, predecessor
to the TCEQ, there are more than 14 types of special districts authorized by general law,
and as of December 31, 1999, there were over 1,300 special districts in Texas, including
approximately 50 FWSDs.
Purposes and Authority
The authority and powers of FWSDs are provided primarily by Chapters 30, 49,
and 53, Texas Water Code, as amended ("Water Code") (All statutory references herein
are to the Water Code, unless otherwise stated). Upon its creation, a FWSD has the
authority to provide. water asupply for domestic and commercial purposes (Section
53.101); employ peace officers (Section 49.216); and parrs and recreational facilities
(Section 49.463). A FWSD may obtain the power to provide sanitary sewer systems if
-none is available within the District and if authorized by the district's -electors (Section
53.121). This power is in addition to the authority to participate in regional waste
disposal systems (Section 30.021). If a FWSD is located in a county or adjacent to a
county which has a population of 1.3 million or more and in which a municipality with a
population of more than 1.0 million is primarily located, and if authorized by the district's
electors, it may assume the powers of a road district and provide subdivision roads,
_3_
thoroughfares and arterials. Finally, a FWSD is authorized to establish, operate and
maintain a fire department after approval of the district's electors (Section 49.351).
Powers
FWSDs have all requisite authority for the acquisition, construction, and
development of the -improvements authorized by the Water Code. A FWSD -may also
issue debt to finance such activities. Such debt may be secured by revenues and/or, with
the exception of parks and recreational facilities in most counties, ad valorem tax
proceeds. There is no constitutional limitation on the rate of taxation of a FWSD. Other
than with .respect to roads, there is no constitutional limitation on the amount -of debt that
a FWSD may issue. With respect to roads, a FWSD may not issue debt greater than 25%
A its certified assessed value for such purpose. The issuance of bonds by a FWSD is
subject to initial authorization by district electors if ad valorem taxes are to be pledged;
feasibility and engineering review by the TCEQ, other than with respect to roan board
issues; and legal and, with respect to road bond issues, feasibility review by the Office of
the Texas Attorney General. Under certain circumstances, a municipality in whose
extraterritorial jurisdiction (" ETP) a FWSD is located may place certain conditions of the
issuance of bonds by the FWSD.
A FWSD may annex land only upon petition of a landowner (Section 49.301 and
49.302). FWSDs that meet certain conditions may divide into two new districts, subject
to approval by the district electors (Section 53.029). However, the Public Finance
Division of the OAG has taken the position that it is unlikely that such districts could
exercise this power by annexing non-contiguous territory and then dividing off such
territory. Also, a FWSD may exercise the right of eminent domain to acquire IancL both
inside and outside of its boundaries, to Chapter 21, Property Code.
Creation
If the proposed district is located within a municipality's ET7, consent to the
district's creation by the municipality is required (Section 42.042, 3,oca1 Government
Code). A FWSD is created by petition, hearing, and election (Section 53.011). A person
may present a petition requesting district creation to the commissioners court of the
county which includes the land in the district (Section 53.013). The petition must contain
the signatures of 50 or a majority of the district electors who own land in the district. The
petition must state: the boundaries of the district, general nature of the proposed projects;
necessity of the district, feasibility of the district, and the name of the district. The
presenter of the petition must pay a $100 to the county clerk. The commissioners court
sets a time and.place for the hearing; and such hearing must be held between the 15t' and
3& day after the day the petition is presented (Section 53.016). The county clerk shall
issue notice of the hearing and deliver the notice to any person willing to execute and
post it (Section 53.017). The person receiving the notice shall post a copy of it at the
Courthouse door and at four (4) different places inside the district. The notice shall be
posted at least 10 days before the date of the hearing (Section 53.018). The
commissioners court shall have jurisdiction to determine all issues pertaining to the
sufficiency of the petition, and shall allow any interested person to appear before it in
person or by attorney to offer testimony relative to the sufficiency of the petition (Section
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53.019). This section gives the court broad discretion in conducting the hearing (Tex.
Atty Gen. Op. No. JC-0406, 2001). If the commissioners court grants the petition, it shall
appoint five (5) temporary supervisors to serve on the board of the district until
permanent supervisors are elected. After appointment of the temporary supervisors, they
shall meet and organize (Section 53.020). Before issuing debt obligations, an election is
held within the district to determine if the district shall be established and to elect five (5)
-permanent -directors (Section 49.102). -Such election -is to be nailed and conducted by the
district (Tex. Atty Gen. Op. No. JC-0406, 2001). The temporary board shall canvass the
results at the earliest practical time. I€ a majority of the votes cast in the election are in
favor of the district, then the district is created and the order canvassing the election shall
be filed with the TCEQ and in the county deed records. The five (5) persons receiving
the highest number of votes for supervisor shall have been elected as permanent
supervisors.
Management
A FWSD is governed by a board of five (5) supervisors (Section 53.062). The
supervisors are initially appointed by the commissioners court. To be qualified to serve
as a supervisor, a person must be a registered voter of the district (Section 53.063). A
supervisor may be disqualified as a result of certain relationships (Section 49.052); and is
subject to the provisions of Chapter 171, Local Government Code, relating to the
regulation of conflicts of interest (Section 49.058). District supervisors are elected to
four (4) year staggered -terms. Supervisor elections are held the second Saturday in May
in each even numbered year (Section 49.103). In the event of resignation or vacancy, a
majority of the remainder of the supervisors can fill such vacancy (Section 49.105). The
FWSD may employ engineers, attorneys, financial advisors, operators, bookkeepers, tax
assessor -collectors, auditors, and staff to assist in the management of the distriefs affairs
(Section 49.057).
Regulatory Oversight
Authority for the creation of a FWSD is granted to the commissioners court.
However, if the proposed district is located within the ETJ of a municipality, the consent
of the municipality to tthe district creation is required. Once the FWSD is created, it is
subject to the continuing supervision of the TCEQ (30 TAC Section 293.3). Plans and
specifications for district facilities are subject to review by the TCEQ, county, and other
overlapping local jurisdictions. The TCEQ and the OAG have approval authority over
the issuance .of bonds by a FWSD. For water .and .sanitary sewer bond issues in Denton
County, the TCEQ rules limit the amount of bonds which can be sold by a district to that
amount which can be supported by a combined (water, sewer, drainage and paving)
projected tax rate of $1.20 per $100 of assessed value, and a combined no -growth tax rate
of $2.20 per $100 assessed value. The OAG has established a combined (water, sewer,
drainage and paving) no -growth tax rate of $2.50 per $100 assessed value as a
requirement for the issuance of road bonds. The OAG also must approve the legality of
all district bonds.
Meetings of the FWSD board of supervisors are subject to the requirements of the
open meetings law, Chapter 551, Government Cade. FWSDs are under a duty to have
their fiscal accounts and records audited on an annual basis (Section 49.191). The FWSD
audit must be filed with the TCEQ within 135 days after its fiscal year end. The FWSD
board shall keep a complete account of all of its meetings and proceedings, and shall
preserve its minutes and records (Section 49.065). A FWSD is subject to the open
records law, Chapter 552, Government Code.
The existence of a district and its boundaries are required to be flied of public
record. This information is filed with the TCEQ and in the county deed records (Section
49.103 (f). Section 49.455 also requires a district to file with the county clerk in the
county where the district is located certain information and to keep such information
updated. Some of this information includes: district name; legal description of
boundaries; most recent rate of district ad valorem property tax; amount of bonds which
may be issued by the district; amount of bonds that have been issued by the district, and a
form of Notice to Purchaser. Sellers of land within a district must provide a Notice to
Purchase including this information prior to and at closing (Section 4.9,452). Finally, the
district must file information regarding its outstanding bonds with the Municipal
Advisory Council of Texas and other depositories of information regarding municipal
issuers and securities.
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