TEXAS MUNICIPAL LEAGUE

LEGISLATIVE POLICY COMMITTEE ON

GENERAL GOVERNMENT

August 15, 2014 10:00 a.m.

Hilton Austin Airport 9515 Hotel Drive

Austin, Texas

CONTENTS List of Committee Members ....................................................................................1 Meeting Agenda .......................................................................................................5 Foreword ..................................................................................................................6 Carryover Business School District Impact Fee Exemption ......................................................10 Definition of “Substantially Erodes” for Tax Exemption Positions ..........11 Formalized TCEQ Communications Process ............................................13 Hotel Occupancy Tax Expansion (Schulenberg) .......................................14 General Law Annexation Authority (Waller) ............................................15 GLO Zoning Exemption (El Paso) ............................................................17 Harmful Legislation in General .............................................................................18 Public Safety Red Light Photo Enforcement ...................................................................19 School Bus Cameras ..................................................................................24 Engineering Practices Act Values (Sweeny) .............................................25 Dangerous Dogs .........................................................................................26 General Law City Sex Offender Regulations ............................................27 Mandatory Emergency Management Training .........................................29 Firearms .....................................................................................................30 TPCA Issues...............................................................................................31 Purchasing Unified Procurement Code ........................................................................32 Personnel Pension Reform ..........................................................................................34 TMRS Flexible COLAs .............................................................................37 Civil Service...............................................................................................39 Collective Bargaining ................................................................................41 Disease Presumption ..................................................................................43 Elections Moving Election Date Expiration (El Lago) ..............................................44 Unified Election Precincts (Killeen) ..........................................................46 Municipal Court

Municipal Court Collection of State Fees ..................................................47 Open Government TOMA Consultant Teleconferencing (Lubbock) ......................................55 Electronic Filing Fee (El Paso) .................................................................56 Open Meetings Act ...................................................................................56 Utilities Funding the State Water Plan ....................................................................57 Water Conservation, including Irrigation/Evapotranspiration ..................66 Desalination ..............................................................................................71 SAWS Permit Duration............................................................................. 73 Solid Waste Franchises ..............................................................................76 Exemptions from Municipal Drainage Fees ..............................................79

Collocation .................................................................................................80 Oil and Gas Well Regulation, including Fracking .....................................81 Rate Case Expenses ...................................................................................85 Litigation Governmental Immunity, including Contractual Immunity ......................89 Miscellaneous

TRAPS Legislative Program......................................................................91 City/County Funding (Rockport) ...............................................................93 Restrictions on Lobbying ...........................................................................95 Payday Lenders ..........................................................................................98 Plastic Bag Bans ......................................................................................103

Cell Phone Bans .......................................................................................105 Smoking Ban ............................................................................................108 Immigration..............................................................................................110

Distilleries (Livingston) ...........................................................................112

Texas Municipal League Legislative Policy Committee on General Government

Membership

Chair: Victor Gonzales, Mayor Pro Tem, Pflugerville Co-Vice Chairs: Emma Acosta, City Representative, El Paso Kathryn Wilemon, Mayor Pro Tem, Arlington Norma Aguilar-Grimaldo, City Secretary, Odessa Quinn Alexander, Mayor, Canyon Rob Atherton, City Attorney, Nacogdoches David Barber, Assistant City Attorney, Arlington Jeff Bearden, Mayor, Vernon Angela Bermudez, Councilmember, Alpine Gyna Bivens, Councilmember, Fort Worth Gerry Boren, City Manager, Gun Barrel City Kippy Caraway, Deputy Chief of Staff, Houston Michael Carpenter, Mayor, Schertz Xavier Cervantes, Director of Planning, San Juan John Chancellor, Police Chief, Shenandoah Jason Chessher, Deputy Health Director, Garland Jeanne Chipperfield, Chief Financial Officer, Dallas Billy Clemons, City Manager, Lorena Eddie Daffern, Mayor, Staples Jim Darling, Mayor, McAllen Kathy Davis, City Attorney, Killeen Mary Dennis, Mayor, Live Oak Kim Dobbs, Director of Community/Economic Development, Heath Kelly Dowe, Director of Finance, Houston Malcolm P. Duncan, Jr., Mayor, Waco Saundra Dunn, Mayor Pro Tem, Mount Vernon Allen Dunn, Councilmember, Cibolo Dale Fisseler, City Manager, Waco Mike Frisbie, Director of Transportation and Capital Improvements, San Antonio Teclo Garcia, Director of Government Affairs, McAllen Lionel Garcia, Councilmember, Plainview Andrea Marie Gardner, City Manager, Copperas Cove Rudy Garza, Councilmember, Corpus Christi Armando Garza, Mayor Pro Tem, San Juan Roger Garza, Mayor Pro Tem, Pleasanton Dave Gattis, Deputy City Manager, Benbrook Karen Gibson, Mayor Pro Tem, Lubbock Alysha Girard, Stormwater Program Manager, Round Rock Mitch Grant, City Manager, Vernon

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Holly Gray-McPherson, Mayor Pro Tem, Roanoke Marion Grayson, Mayor Pro Tem, Belton Bryan Guinn, Budget Officer, Sugar Land Cindy Hallett, Purchasing Manager, Cedar Park Will Hampton, Communications Director, Round Rock Paul Harpole, Mayor, Amarillo David Harris, Director of Utilities, Brownwood William Heuberger, Mayor, Reno Cary Hilliard, Councilmember, Canton Susie Houston, Mayor, Laguna Vista Johnny Isbell, Mayor, Pasadena Harish Jajoo, Councilmember, Sugar Land Julie Johnston Robinson, City Manager, Dickinson Terry Jones, Mayor, Big Lake Bill Jones, Councilmember, Webster Jill Jordan, Assistant City Manager, Dallas Charles Kelly, Mayor, Perryton Scott Kerwood, Chief, Hutto Fire Rescue, Hutto Kelvin Knauf, City Manager, Rockdale Marcus Knight, Mayor, Lancaster Lanny Lambert, City Manager, Kyle Bryan Langley, Assistant City Manager, Denton Howard Lazarus, Director of Public Works, Austin Aaron Leal, Deputy City Attorney, Denton Mike Lester, Director of Health, Baytown Isaac Linton, City Secretary, Aubrey Jason Little, City Manager, Melissa Mark Loethen, Deputy Director, Houston Chris Looney, Policy Administrator, Development Services Department, San Antonio Ray Lopez, Councilmember, San Antonio Keith Macedo, Information Services Director, Keller Tony Martinez, Mayor, Brownsville Sherry Mashburn, City Secretary, College Station Maher Maso, Mayor, Frisco Phyllis Mathison, Court Administrator, Bastrop Roy McDonald, Mayor, West Orange Scott McDonald, Building Official, Amarillo Colleen McIntyre, Councilmember, Corpus Christi Webb Melder, Mayor, Conroe Pat Miner, Councilmember, Plano Richard Molina, Councilmember, Edinburg Mark Nelson, Director of Transportation, Denton Cortney Niland, City Representative, El Paso Lisa J. Norris, Director of Human Resources, Grand Prairie Tammy Odom, Deputy Court Clerk, Sweeny Theresa O'Donnell, Interim Assistant City Manager, Dallas

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Jim Olk, Director of Community Services, Farmers Branch Mike Olson, Director of Community Development, McGregor W.L. Pate, Councilmember, Beaumont William Peche, Intergovernmental Relations Manager, San Antonio Tadd Phillips, Director of Human Resources, Georgetown Clay Phillips, City Manager, Coppell Shawn Poe, Assistant Director of Engineering, Allen Katherine Ragston, Councilmember, Hempstead Todd Reck, Water Utilities Director, Irving Karen Rhodes-Whitley, Budget Director, Plano Miles Risley, City Attorney, Wichita Falls Robert Rivera, Councilmember, Arlington Shirley Roberts, Mayor Pro Tem, Mesquite Glen Robertson, Mayor, Lubbock Carl Robinson, City Representative, El Paso Gustavo Roman, IT Business Service Manager, San Marcos Steve Ross, Fire Chief, Haltom City Laura Rothrock, Councilmember, Mexia Jerry Rusthoven, Manager for Planning Development and Review, Austin Terry Sain, Councilmember, Baytown Raul Salinas, Mayor, Laredo Dan Santee, City Attorney, Abilene Danny Scarth, Councilmember, Fort Worth Robert Scott, Assistant City Manager, Carrollton Mark Scott, Councilmember, Corpus Christi Brett Shannon, City Manager, Decatur Lissa Smith, Mayor Pro Tem, Plano Leo Smith, City Administrator, Bangs Greg Smith, City Administrator, Shenandoah Edward Smith, III, Mayor, Marshall Chance Sparks, Director of Planning, Buda Leslie Spear Pearce, City Attorney, Plainview David Speicher, Mayor Pro Tem, Justin Bill Spelman, Councilmember, Austin Brad Stafford, City Manager, Navasota Scott Swigert, Director of Parks and Recreation, Deer Park Freddie Taylor, Mayor Pro Tem, Sulphur Springs Ben Tibbs, Councilmember, Hempstead Mike Tugman, Commissioner, Burkburnett Tim Tumulty, City Engineer, Rockwall Beth Van Duyne, Mayor, Irving Ed Van Eenoo, Budget Officer, Austin Sydney Verinder, Councilmember, Schertz Terri Waggoner, Public Information Officer, Pflugerville C.J. Wax, Mayor, Rockport Dennis Webb, Councilmember, Irving

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B.J. Williams, Councilmember, Garland Kasha Williams, Councilmember, Longview Kevin Wilson, Councilmember, Bellmead Greg Wortham, Mayor, Sweetwater Lisa Youngblood, Library Director, Harker Heights Tamara Young-Hector, Councilmember, Willis Cathy Ziegler, Director of Libraries, Plano Joe Zimmerman, Councilmember, Sugar Land Zim Zimmerman, Councilmember, Fort Worth

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Meeting Agenda

1. Call to Order

2. Introductions

3. Staff Briefing

4. Consideration of Discussion Topics

5. Discussion of Additional Issues of Importance to Committee Members

6. Other Business

7. Adjourn

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FOREWORD

City officials across the state are well aware of the fact that many significant decisions affecting Texas cities are made by the Texas Legislature, not by municipal officials. Newly elected mayors and councilmembers quickly realize that cities are indeed “creatures of the state.” This subservient position of cities in the state’s intergovernmental system means that the legislature can address virtually any aspect of city government.

This fact is vividly demonstrated during each legislative session. For example, during the 2013 session, more than 6,000 bills or significant resolutions were introduced; almost 1,500 of them would have affected Texas cities in some substantial way. In the end, over 1,700 bills or resolutions passed and were signed into law; approximately 220 of them impacted cities in some way.

There is no reason to believe that the workload of the 2015 session will be any lighter; it may be greater. And for better or worse, city officials will have to live with all the laws that may be approved by the legislature. Thus, the League must make every effort to assure that detrimental bills are defeated and beneficial bills are passed.

The TML approach to the 2015 session will undoubtedly be guided by principles that spring from a deeply rooted TML legislative philosophy:

• The League will vigorously oppose any legislation that would erode the authority of Texas city officials to govern municipal affairs.

• Cities represent the level of government closest to the people. They bear primary responsibility for the provision of capital infrastructure and for ensuring our citizens’ health and safety. Thus, cities must be assured of a predictable and sufficient level of revenue and must resist efforts to diminish that revenue.

• The League will oppose the imposition of any state mandates that do not provide for a commensurate level of compensation, and resist any attempts to require cities to raise money for the state (reverse intergovernmental aid).

Schedule

Throughout 2014, legislative policy committees will help TML prepare legislative positions. The League’s legislative policy development schedule will be roughly as follows:

October 2013 – the 2013 TML Resolutions Committee met to consider resolutions. The recommendations of the Resolutions Committee went forward for consideration by the TML membership on the final day of the 2013 Annual Conference at the annual business meeting.

January - April 2014 – the chairs, vice-chairs, board representatives, and members of the League’s legislative policy committees were appointed by the TML President.

May - June 2014 – the committees met for the first time.

August 2014 – the committees will combine to form the General Government Committee, at which time they will finish their topic-specific work and consider additional items.

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September - October 2014 – the reports of the legislative policy committees will go forward to the 2014 TML Resolutions Committee for consideration. The recommendations of the Resolutions Committee will go forward for consideration by the TML membership on the final day of the 2014 Annual Conference at the annual business meeting.

December 2014 – the TML Board will finalize the League’s 2015-2016 legislative program based on resolutions passed in both 2013 and 2014.

Some Suggestions

As can be seen from the section above, the legislative policy committees provide the framework for the TML legislative policy development process. As an integral part of that committee process, you can significantly impact the outcome of the 2015 legislative session. As you undertake your committee work, you should keep in mind the following:

1. There is a practical limit to what the League – or any group, for that matter – can accomplish in any legislative session. It is obvious that all resources – human, financial, and political – are limited, and no group can hope to achieve all its legislative objectives. The most powerful interest groups in the state sometimes come away from a legislative session bruised and battered. On occasion, the best that can be expected is that no harm be done.

2. TML will expend the vast majority of its resources killing bad bills. This has always been so and will probably always be the case. At one point during the 2013 regular session, the League was monitoring more than 1,700 bills or resolutions, many of which were bad for cities. The League’s legislative philosophy has traditionally been, first and foremost, to defeat bad legislation and, secondarily, to seek passage of beneficial legislation as time, resources, and political realities permit.

It is unlikely that any other interest group in the state monitors and opposes as many bills as does the Texas Municipal League. During recent legislative sessions, the League took steps to oppose bad legislation dealing with everything from annexation to zoning and from birth records to cemeteries. The breadth of the League’s legislative focus becomes obvious each year when TML completes and submits its state-mandated lobbyist registration form. One schedule of the form asks which of 83 subject matters are of interest to TML. Of the 83, only four fall outside the League’s areas of interest.

Unfortunately, the number of bad city-related bills grows almost every year. (Please see the chart below.) As a result, the League has been forced to expend an ever-greater percentage of its resources simply fending off bad ideas.

Year Total Bills Introduced *

Total Bills Passed

City-Related Bills Introduced

City-Related Bills Passed

2001 5,712 1,621 1,200+ 150+

2003 5,754 1,403 1,200+ 110+

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2005 5,369 1,397 1,200+ 105+

2007 6,374 1,495 1,200+ 120+

2009 7,609 1,468 1,500+ 120+

2011 6,303 1,410 1,500+ 160+

2013 6,061 1,437 1,700+ 220+

* Includes bills and proposed Constitutional amendments; regular session only.

3. Given the League’s finite resources, and because vast amounts of those resources are necessarily expended in defeating bad legislation, the League must very carefully select bills that it will support or for which it will attempt to seek passage. A sharply focused legislative program is more likely to lead to success than is a very large and wide-ranging program. In addition, supporting a bill that has a low probability of passage requires a large amount of time and political resources that can be used more productively in other ways. Thus, it is important to advocate only those initiatives that are truly important and that have a realistic chance of passage.

4. How can the committee identify initiatives that are truly significant and that merit a place in the TML legislative program? Committee members may wish to ask the following questions about each discussion item:

♦ Does the initiative have wide applicability to a broad range of cities of various sizes (both large and small) and in various parts of the state?

♦ Does the initiative address a core municipal issue, such as erosion of local control and preservation or enhancement of municipal revenue?

♦ Will the initiative be vigorously opposed by strong interest groups and, if so, will member cities commit to contributing the time and effort necessary to overcome that opposition?

♦ Is this initiative, when compared to others, important enough to be part of TML’s list of priorities?

♦ Is this initiative one that city officials, more than any other group, should and do care about?

The foregoing suggestions are not meant to imply that TML can’t pass good, solid legislation. It can, it has in the past, and it will again. The suggestions are meant merely to emphasize the fact that any group, to succeed, must use its resources and its political strength wisely and selectively.

Categories

Legislative positions should reflect one of four categories that will direct League staff. Keep in mind that there is a difference between “seek introduction and passage” and “support.”

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• Seek Introduction and Passage means that the League can attempt to find a sponsor, will provide testimony, and will otherwise actively pursue passage. Bills in this category are known as “TML bills.” These bills require an enormous amount of time and resources, and the committee should be very cautious about putting items in this category.

• Support means the League will attempt to obtain passage of the initiative if it is introduced by some other entity. League staff will, based upon the foregoing principles and its knowledge of current legislative realities, determine the amount of time and resources devoted to an item in this category.

The committee must address each issue in this packet. It should do so by using the two terms described above or by recommending that TML “oppose” or “take no position.” The committee may also choose to not act on an item, which will result in the issue not appearing in the committee’s final report. Following most topics in this packet will be a list of any relevant positions adopted by the League prior to the 2013 legislative session. These positions are for this committee’s information only and need not guide the committee’s actions.

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School District Impact Fee Exemption

The Texas Legislature enacted the nation’s first comprehensive impact fee enabling statute in 1987. That statute, which was passed at the request of builders, authorizes cities to impose impact fees on new development. Although there has been occasional questions from builders, very few bills seeking to modify the statute have been introduced in recent years. The exception is S.B. 883, enacted in 2007. That bill provides that a school district is not required to pay a municipal impact fee unless the district agrees to do so. The legislation has had a detrimental effect on fast-growth cities with new school facilities. In late 2007, the Texas Education Agency requested an opinion from the Texas attorney general (RQ-0658-GA) as to whether various city fees are considered impact fees. The request also asked about the interrelationship of certain statutes that prohibit a school district from expending funds for offsite improvements to real property. In its comments on the request, TML restated the membership’s historic position: each city should decide, in cooperation with its school district, whether and how to impose development fees on a district. Development fees serve the purpose of placing the costs of new development, be it private or public, upon the appropriate entity. Some districts will conclude that the burden of providing infrastructure to their new school facilities should be shouldered by existing city residents, while others will not. In any case, the law allows for mutual agreements between cities and school districts, and any suggestion in the request that such agreements are prohibited is incorrect. (The attorney general agreed in Opinion No. GA-0637 (2008).) No further exemptions from municipal impact fees were sought in 2009. (However, one legislator introduced an odd bill that would have prohibited a city from taking an adverse action or penalizing a school district that, pursuant to the statute passed in 2007, does not consent to paying city impact fees. (Neither “adverse action” nor “penalize” was defined in the bill.) The bill did not pass. In 2011, both H.B. 3606 and H.B. 3555 would have exempted other political subdivisions from paying impact fees. Again, nothing passed. No harmful legislation was filed in 2013 relating to impact fees. However, with home starts on the rise in recent months, it is likely that legislators will attempt to limit municipal authority in this area, perhaps under the guise of affordable housing. The TML Regulation of Development Committee, on May 2, 2014, voted to recommend that the League continue to “oppose legislation that would exempt any entity from paying municipal impact fees.” The committee also asked that the school district issue be brought forward to the TML General Government Committee for discussion of whether to seek a repeal of the current impact fee exemption for school districts.

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Property Tax Exemptions In 2000, the TML Legislative Policy Committee on Municipal Revenue and Taxation recommended a change to the League’s traditional approach to proposed property tax exemptions. Rather than opposing all property tax exemptions, the committee recommended (and the TML membership and board of directors agreed) that the League should oppose only those exemptions that substantially erode the property tax base. Accordingly, TML has since taken no position on new exemptions that would be relatively low in cost and would serve some social benefit. The rationale behind the new approach was that the effective tax rate and rollback tax rate mechanisms provide dollar-for-dollar relief for small amounts of lost property tax base. The lost property tax base is simply shifted from exempt to non-exempt properties. Cities are still able to raise the same level of revenue without facing negative property tax consequences. The downside of new property tax exemptions is that residential property tends to disproportionately bear the shifted burden. While this is a valid concern, it is not a uniquely city concern. In response to most proposed exemptions, legislators are confronted by taxpayer groups who feel that property taxes are high enough already without raising them more to finance subsidies for privileged groups. Further, cities and counties share the property tax base with school districts, most of which are much closer to their maximum gross tax rates than are cities and counties. In other words, small, socially beneficial tax exemptions must run the full gauntlet of political examination, inquiry, and potential opposition. Because such exemptions must survive that exposure, and because municipal revenue is not harmed because the tax burden is simply shifted, TML committees recommended that the League take no position on minor property tax exemptions in the seven regular legislative sessions spanning from 2001 – 2013. Those seven sessions resulted in the enactment of only a few new property tax exemptions (other than the senior tax freeze and Super Freeport), and many of those contained local option provisions. In 2013, the legislature passed and the voters approved a constitutional amendment to exempt from property taxes the residence homestead of the surviving spouse of a member of the armed forces who was killed in action. According the fiscal note, this new exemption will cost all Texas cities roughly $90,000 per year in total. One of the advantages of the new approach is that it allows TML staff to focus on property tax issues that seriously endanger municipal revenue, such as strict revenue caps. At its May 16 meeting, the TML Legislative Policy Committee on Revenue and Finance voted to recommend that TML oppose legislation that would impose new property tax exemptions that substantially erode the tax base. This recommended position is in line with the League’s position on property tax exemptions dating back to 2000. However, the committee also issued a directive to TML staff to provide a briefing to the General Government Committee on clarification of the term “substantially erodes the tax base.”

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In order to determine whether a property tax exemption “substantially erodes” the tax base, League staff have typically looked at two primary factors. First, what is the bill’s overall cost to cities as reflected in the fiscal note prepared for the bill by the Legislative Budget Board. Although there is not necessarily a threshold cost above which any property tax exemption legislation would be considered to “substantially erode” the tax base, an exemption bill that would cost Texas cities tens of millions of dollars in revenue would almost certainly be opposed by the League under the current position. Secondly, the League will look at whether the exemption has wide applicability to a broad range of cities of various sizes and in various parts of the state. Taking both of these criteria together, League staff elected not to oppose S.B. 163 and H.J.R. 62 in 2013, the constitutional amendment that would exempt the residence homestead of the surviving spouse of a member of the armed forces who was killed in action. The fiscal note showed a fiscal impact to roughly 1,200 Texas cities at approximately $90,000 per year in the aggregate. The low cost to cities, coupled with the fact that residence homesteads eligible for an exemption under the new legislation are relatively rare was enough to satisfy League staff that the exemption did not “substantially erode” the property tax base. On the other hand, proposals like the one talked about on the campaign trial in 2014 to exempt senior citizens from paying any increase in property taxes would likely cost cities across the state millions of dollars, and would be opposed by the League because it would substantially erode the tax base.

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Formalized TCEQ Communications Process

The TML Transportation and Rights-of-Way Committee, which met on June 13, 2014, directed League staff to work with the City of Round Rock to prepare briefing materials for consideration by the General Government Committee relating to creating a more formalized communications process with the Texas Commission on Environmental Quality (TCEQ). The City of Round Rock believes it would be in cities’ best interest to formalize an ongoing relationship with TCEQ about stormwater issues. The challenge is that stakeholder groups meet and provide feedback to permit writers, who then fail to communicate with the TCEQ enforcement division and regional field offices. The result is a lack of consistency for cities throughout the state. The City of Round Rock believes that ongoing communication with TCEQ representatives from multiple departments would be beneficial to all cities. Additionally, the lack of a formal relationship with TCEQ led to some friction when cities began submitting input on the small cities “Phase II Stormwater Permit’ rewrite in 2013. TCEQ staff has hinted that upper management is unwilling to suffer through the delays and such intense feedback again. An ongoing formal relationship would serve to alleviate delays caused by waiting to provide feedback until permit renewal time. Furthermore, the effort to get a legal interpretation and consistent application across the agency regarding the Construction General Permit shed light on how difficult meaningful communication can be. League staff has been communicating with the City of Round Rock, but has not yet developed an appropriate plan of action. Discussions will continue. One option is to ask TCEQ to re-create a subcommittee of one of its existing working groups to deal with the stormwater communications challenges. Seeking that resolution does not require action by this Committee. With the Committee’s permission, League staff would like to continue working on this issue outside of the legislative policy development process.

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Use of Hotel Occupancy Tax Revenue for Sports Facilities and Fields Under current law, roughly 90 Texas cities may spend hotel occupancy tax revenue on the enhancement and upgrading of city-owned sports facilities and fields that are frequently used for district, state, regional, or national sports tournaments. The limited number of cities that can spend hotel occupancy tax revenue in this manner is the product of several “bracketed” bills being passed over the last several sessions that added individual cities to the relatively small (but growing) list of cities authorized to make these expenditures. The City of Schulenburg has asked the Committee to consider supporting legislation that would eliminate the population brackets or otherwise amend the statute in a manner that provides other Texas cities, to the maximum extent feasible and reasonable, the authority to spend hotel occupancy tax revenue on existing sports facilities and fields in a manner that promotes tourism and benefits the interest of the local hotel and motel industry.

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General Law City Annexation Authority

The City of Waller requested that the Committee consider an initiative relating to expanding the ability of a general law city to annex property. The city provided the following narrative as background.

Proposed Change in Annexation Law General Law Cities

The purpose of the proposed change is to allow general law cities to establish contiguity to a property within their extra-territorial jurisdiction (ETJ) whose owner has petitioned for annexation by annexing public right-of-way between the current city limits and the property. This change to Texas law would enable a general law city to provide services to a property owner within its ETJ who is interested in developing, receiving utilities, and becoming part of the city tax base – without infringing on the rights of intermediate owners (properties between the subject property and the current city limits) to make their own voluntary choice as to when, or if, they want to be part of the city. Current law prohibits a general law city such as Waller from annexing a property unless the owner petitions for annexation and the property is touching, or contiguous to, the current city limits. These restrictions are designed in law to prohibit smaller cities from unilateral annexing of properties whose owners do not want to be in the city. The current legal restriction on contiguity can create a problem for general law cities, when a property owner within the ETJ (but not touching the city limits) wants to develop the property and wants to be annexed by the city, generally in return for provision of city services such as utilities. If the intermediate property owners (between the current city limits and the subject property owner desiring services) are willing to also be annexed, then the city can annex the subject property and the provision of services can be matched to revenue from increasing the city tax base. If, however, the intermediate property owners do not want to be annexed, then the city is being asked to provide utilities without any certainty that the property can one day be annexed and added to the city tax base. If the city does not provide utilities, and the owner has to provide well and septic to facilitate development, then that owner may never be motivated to come into the city in the future, and the city: (a) will have lost the opportunity to add to its tax base, and (b) may be blocked by that property from being able to reach the next property when it becomes ready for development. In the case where a property owner within a general law city’s ETJ petitions for annexation and contiguity to the city’s corporate limits cannot be established by annexation of the intermediate

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properties, then contiguity may be established by annexation of adjacent public road right-of-way without petition from the public entity in whose jurisdiction the right-of-way lies. If the change in law is allowed, then a general law city will be empowered to provide requested city services to a property owner without infringing on the current rights of property owners to choose not to be a part of the city, thus continuing to fulfill the original intent of the restrictions. There is no direct cost to implementing the change in law. If the change is not implemented, then a general law city may be unable to effectively expand its tax base as development occurs within its extra-territorial jurisdiction but non-contiguous to its current corporate limits. This may result in a general law city in the path of development being surrounded by development using well and septic systems.

The Committee should consider whether to take a position in support of granting additional authority to a general law city to establish a property’s contiguity with city boundaries through annexation of adjacent road rights-of-way from the city’s boundaries to land petitioned for annexation at its closest point to that boundary, so long as the property lies within the city’s extraterritorial jurisdiction.

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General Land Office Zoning Exemption The City of El Paso has requested that the Committee consider an initiative relating to an exception in current law that allows the Texas General Land Office (GLO) to avoid municipal zoning regulations. The Zoning Enabling Act, found in Chapter 211 of the Local Government Code, provides that: Sec. 211.013. CONFLICT WITH OTHER LAWS; EXCEPTIONS. (c) This subchapter does not apply to a building, other structure, or land under the control, administration, or jurisdiction of a state or federal agency. (d) This subchapter applies to a privately owned building or other structure and privately owned land when leased to a state agency. Under subsection (c), the GLO can use its land without complying with zoning. The City of El Paso sought legislation during the 2013 session to remedy the problem. House Bill 3016 (Moody) would have added a new subsection to Section 211.013: For the purposes of Subsection (c), a building, other structure, or land in which the General Land Office retains an ownership interest wholly or partly and that is used by a person for commercial purposes is not under the control, administration, or jurisdiction of a state agency. The legislation did not pass, but the city will consider it for its legislative agenda again. The Committee may wish to consider taking a position on legislation that would subject to municipal zoning authority land in which the GLO retains an ownership interest wholly or partly and that is used by a person for commercial purposes.

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Harmful Legislation In General The Texas Municipal League traditionally includes the following position in its legislative program: The League will oppose legislation that would erode municipal authority in any way, would impose an unfunded mandate, or would otherwise be detrimental to cities. The League staff urges the committee to recommend that TML once again adopt this position.

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Red Light Photo Enforcement For many years, the authority of cities to impose a civil penalty for a red light violation caught on film was in doubt. Going into the 2007 session, most city officials believed that cities had such authority but realized that many legislators wished to repeal the authority. During the 2007 session, comprehensive red light photo enforcement legislation finally passed. The final bill (S.B. 1119) was a combination of three separate motives: (1) the desire of some legislators to clarify the legality of red light cameras; (2) the desire of other legislators to strictly regulate the installation and operation of red light cameras, if they were in fact to be legal; and (3) the desire by most legislators for the state to share in any proceeds generated by red light cameras. As passed, the bill did all three, and then some. S.B. 1119 does the following: (1) allows a city to implement a system by installing cameras at traffic lights in the city; (2) allows a city to contract with a private contractor for the administration and enforcement of the system, so long as the contractor’s payment is not based on a specified percentage or dollar amount of the citations issued; (3) provides that, before installing a system at an intersection, a city shall conduct a traffic engineering study of the intersection approach to determine whether, in addition to or as an alternative to the system, a design change to the approach or a change in the signalization of the intersection is likely to reduce the number of red light violations at the intersection; (4) requires a city to report results of that traffic engineering study to a citizen advisory committee consisting of one person appointed by each member of the governing body; (5) provides that the citizen committee shall advise the city on the installation and operation of the system; (6) requires the city to install signs along each roadway that leads to an intersection at which a system is in active use, and provides criteria for the signs; (7) provides that a city or the city’s contractor may not provide information about a violation to a credit bureau; (8) requires that an intersection approach must be selected based on specific criteria; (9) provides that before installing a system at an intersection, the city shall compile a written report of the number and type of traffic accidents that have occurred at the intersection for a period of at least 18 months before the date of the report, must submit that report to the Texas Department of Transportation (TxDOT), and must continue to monitor and report to TxDOT the effectiveness of the system; (10) provides for the creation of a class A misdemeanor for a person who uses a system for a purpose other than to enforce red light violations; (11) limits a civil or administrative penalty for a red light violation detected by the system to $75, and a late payment penalty to $25; (12) provides that a city shall send 50 percent of the revenue derived from civil or administrative penalties to the state comptroller for deposit to the credit of the regional trauma account created by the bill, and shall deposit the remainder of the revenue in a special account in the city's treasury to be used only to fund traffic safety programs (Note that the state has been collecting its share of the revenue, but as of summer 2012 has not disbursed any of the funds. The League has remained neutral on this issue because cities are in competition with one another for the funds.);

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(13) allows a city to retain an amount necessary to cover the costs of purchasing or leasing equipment, installing the system, operating the system, and maintaining the general upkeep and functioning of the system; (14) prohibits the imposition of a civil penalty on a driver who received a criminal citation for the same conduct; (15) specifies the contents of a notice of violation mailed to the owner of a motor vehicle that is photographed while running a red light; (16) prescribes mandatory administrative hearing procedures and authorizes the owner of a motor vehicle to appeal a civil penalty to the city's municipal court; (17) provides that at an intersection at which a photographic traffic monitoring system is in use, the minimum change interval for a steady yellow signal must be established in accordance with the Texas Manual on Uniform Traffic Control Devices; (18) provides that if the owner of a vehicle that ran a red light fails to timely pay the penalty, that person may not be arrested; (19) provides that if the owner of a vehicle that ran a red light is delinquent in paying the civil fine, the county tax assessor-collector or TxDOT may refuse to register the motor vehicle; and (20) provides that the imposition of a penalty authorized by this legislation is not a conviction for any purpose. Despite the comprehensive nature of S.B. 1119, red light camera authority was far from etched in stone. In 2007, a House floor amendment by then-Rep. Carl Isett would have imposed a 2009 sunset date for red light camera authority. It passed the House by a vote of 81 to 55 but was later stripped out in conference committee. Similarly, in 2009, H.B. 2639 by Isett would have eliminated red light authority statewide, but it did not pass. However, H.B. 300, the TxDOT sunset bill, had in its later versions the following provisions:

1. TxDoT shall have jurisdiction over red light camera systems in this state and shall adopt rules governing them, including: (a) the specifications for the systems; (b) the identification of intersections where a system may be installed; and (c) the operation and maintenance of the systems.

2. TxDoT may not approve the implementation or operation of a red light camera system that was not in operation on June 1, 2009, or for which a contract for the administration or enforcement of the system had not been entered into by a local authority on or before that date.

The bill with those provisions passed the House 138-6, but they were stripped out in a Senate committee. Upon appointment of a conference committee, the House voted 103-28 to specifically instruct the House conferees to retain the detrimental red light camera provisions. The bill eventually died over the numerous differences between the House and Senate versions, and a temporary extension of the agency through 2011 was passed during a special session. The TxDOT sunset bill passed in 2011 without the detrimental red light camera provisions.

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While the leader of the fight against red light cameras in the House, Carl Isett, was no longer in office, the vote counts above indicated that the issue would be front and center again in 2011. Indeed, numerous bills were filed that would have eliminated city authority or required burdensome actions by cities to continue using the systems:

• H.B. 1066 (Workman) – Red Light Cameras: would require a local authority, including a city, to install a timer at each intersection at which a photographic traffic signal enforcement system is used that displays the number of seconds that remain before the signal changes.

• H.B. 1365 (Callegari) – Red Light Cameras: would require that signs installed at an intersection alerting drivers to the presence of a photographic traffic monitoring system or photographic traffic signal enforcement system: (1) may not be located more than 750 feet from the intersection; (2) must have affixed a flashing yellow circular beacon; and (3) must comply with design and size requirements established by the Texas Department of Transportation.

• H.B. 1561 (Orr) – Red Light Cameras: would: (1) prohibit a city from adopting an ordinance to implement a photographic traffic signal enforcement system unless the city holds an election and a majority of the voters approve the proposition; and (2) require a city that currently has a photographic traffic signal enforcement ordinance to hold a referendum election no later than November 8, 2011, and if a majority of voters do not approve the proposition, allow the city to continue to operate the system until any related administration and enforcement contract expires.

• H.B. 1792 (Gutierrez) – Red Light Cameras: would provide that all revenue from red light camera violations, after a city has deducted its administrative costs, be deposited to the credit of the state’s regional trauma account.

• H.B. 2852 (Mallory Carraway) – Red Light Cameras: would provide that: (1) a city shall install a sign at each intersection at which a photographic traffic monitoring system is in active use and at which turning right is permissible; and (2) the sign must indicate the location at which the operator of the vehicle must stop the vehicle when facing a steady red signal.

• S.B. 500 (Jackson) – Red Light Cameras: would: (1) prohibit a local authority, including a city, from implementing or operating an automated traffic control system with respect to a highway or street under its jurisdiction (but would grandfather certain, existing contracts); (2) repeal a municipal court’s jurisdiction over cases involving photographic traffic signal enforcement offenses; (3) repeal provisions of the Health and Safety Code that establish regional trauma accounts; (4) repeal provisions of the Transportation Code that establish the amount of and direct the deposit of civil and administrative penalties collected as a result of a photographic traffic signal enforcement system; and (5) repeal Chapter 707 of the Transportation Code, which authorizes a photographic traffic signal enforcement system.

While none of the bills above passed, some media later reported interesting comments from a key Senator in the debate: Texas: Top State Senator Says Red Light Cameras About Money

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www.thenewspaper.com/news/36/3691.asp 1/17/2012 Top supporter of red light cameras in the Texas Senate now says photo enforcement is a bad deal. The most senior Texas state lawmaker admitted last week that he voted to save red light camera programs even though he knew they had no effect on public safety. State Senator John Whitmire (D-Houston), who was first elected to the legislature in 1973, appeared on KTRH radio's morning news program to discuss how public opposition to red light cameras persuaded legislators to devote some of the camera profit to trauma centers. "People went to Austin protesting it, and so John Carona -- a senator from Dallas -- didn't want to eliminate them," Whitmire explained. "He said, you know, it's obviously a revenue source. Local communities try to sell it as public safety, cutting down on red light running. He and I think most people would realize it's really a revenue source. John Carona in Austin said. I'm not going to eliminate but let the state have half of that revenue dedicated to trauma care which is badly underfunded." Though the money was promised to trauma care centers, over $4.1 million of this money has remained in the state's general fund and not been distributed to the trauma centers. "The budget writers in an effort to find resources and money to balance the budget never sent that," Whitmire explained. "It's wrong. It's wrong." Whitmire played an essential role in 2005 in blocking House legislation that would have banned red light cameras as well as an amendment that would have forced municipalities to obtain voter approval before instituting a red light camera program. The Senate voted 18 to 13 to against the referendum requirement. Whitmire explained that the mayor of Houston, a fellow Democrat, had pressed him for that vote. "Bill White came to Austin and he had two issues," Whitmire said. "The next vote that came up was to try to repeal red light cameras. The vote was whether we'd take that away from the cities. And I don't think Austin ought to be trying to run the cities on a day-to-day basis." Houston's cameras were ultimately shut down, but only after a heated legal and political battle. A federal judge even intervened to overturn the results of a public vote on the matter. "It is a bad deal and the people acted on it and repealed it," Whitmire said. "The issue of red light cameras, I was always suspect about it. I never thought it was about public safety. The greatest number of red light citations are issued to people who don't come to a complete stop on turning right or similar violations. It's a civil ticket, that shows you how insincere they are about it." A number of bills relating to red light cameras were filed in 2013, although none of them passed. House Bill 3025 by Zedler would have prohibited cities from operating red light camera systems or any other automated traffic control system. The bill did not receive a hearing. Other bills would have limited cities’ red light camera authority, although to a lesser extent than H.B. 3025.

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House Bill 2420 by Elkins would have prohibited a city red light camera ordinance from imposing a civil penalty on the owner of a motor vehicle that is turning right at an intersection. House Bill 3304 by Geren would have prohibited the county assessor-collector and the Texas Department of Motor Vehicles from refusing to register a motor vehicle when the owner of the motor vehicle is delinquent in the payment of a civil penalty resulting from the violation of a red light camera ordinance, thus taking away cities’ primary collection tool. The red light camera bill that made the most progress in 2013 was H.B. 3172 by Bohac. That bill would have required that a red light camera sign include the range of the dollar amounts of the monetary penalties that could be imposed for a violation recorded by the camera. The bill passed the House unanimously, but did not receive a committee hearing in the Senate. There has also been activity at the local level in a handful of home rule cities. For example, a referendum petition pursuant to the City of College Station charter in 2009 resulted in a ban on cameras in that city. In addition, a similar petition in the City of Houston led to the removal of cameras there in 2011. The Houston vote also led to a multimillion dollar settlement between the city and ATS Traffic Solutions, the camera operator, for the breach of contract caused by the referendum. “Texas Red Light Camera Coalition” is a group of cities that was formed in 2006 to prepare for the 2007 session. The Coalition is still active and has been involved in negotiating the specifics of bills and rules that relate to the systems. Relevant 2013 TML position:

• Oppose legislation that would repeal or limit red light camera authority generally. (Further, the committee recommends that TML defer to the Texas Red Light Coalition on more detailed matters relating to revisions to red light camera policy.)

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School Bus Stop Arm Cameras

A few Texas cities have adopted school bus stop arm camera ordinances that impose civil fines on drivers who are photographed passing stopped school buses that are picking up or dropping off children. Cities that have adopted these ordinances contend that some of the law relevant to the red light camera issue also provides the legal authority for cities to adopt school bus stop arm camera ordinances. In 2011, H.B. 1485 by West was filed, which would expressly authorize stop arm cameras. More specifically, the bill would have: (1) authorized a school district to implement a school bus monitoring system that takes live or recorded images, including images of vehicles that pass a stopped school bus; (2) allowed for the imposition of a civil penalty for the offense of passing a stopped school bus and provide other penalties for failure to comply with the bill; and (3) established procedures for the implementation of the system including authorization for a school district to enter into an interlocal agreement with a city regarding administrative hearings required under the bill. H.B. 1485 was reported from committee and received initial approval by the full Senate on second reading by a vote of 18 to 13, but was never passed by the Senate on third reading. Similar legislation was filed in 2013 (H.B. 3478 by Rep. Allen), but the bill did not receive a committee hearing. As more cities consider their options with regard to school bus stop arm cameras, it is likely that the legislature will consider bills to either expressly authorize city ordinances in this field, expressly preempt city ordinances in this field, or both. The Committee should consider taking a position on both types of legislation for the 2015 session.

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Engineering Practices Act Thresholds The City of Sweeny has requested that the Committee consider an initiative relating to raising the dollar amounts for projects that require a licensed engineer under Texas Law. Under the Texas Engineering Practices Act (Chapter 1001, Texas Occupations Code), “a political subdivision of the state may not construct a public work involving engineering in which the public health, welfare, or safety is involved, unless: (1) the engineering plans, specifications, and estimates have been prepared by an engineer; and (2) the engineering construction is to be performed under the direct supervision of an engineer.” In other words, most public projects require the city to use an engineer to prepare plans and oversee construction. Smaller projects are exempt under the Act: Sec. 1001.053. PUBLIC WORKS. The following work is exempt from this chapter: (1) a public work that involves electrical or mechanical engineering, if the contemplated expense for the completed project is $8,000 or less; (2) a public work that does not involve electrical or mechanical engineering, if the contemplated expense for the completed project is $20,000 or less… The mayor of the City of Sweeny, Rodney Weems, has asked about the need to raise the caps in the provision above to reflect today’s costs of doing business. According to the mayor, “larger cities typically have their own PE who can create their plans and place their stamp on completed drawings, but a city like us, to comply with the Act, must hire an engineer.” The Committee should decide whether to take a position related to raising the exemption amounts for public works in the Texas Engineering Practices Act.

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Dangerous Dogs

Approximately twenty individuals have been killed by dogs in the U.S. in 2014 so far. Thousands more are sent to emergency rooms each year. Many cities regulate dogs to prevent them from running at large or to prevent them from injuring or killing persons. Some breeds of dog are considered more dangerous than others, and regulation of these breeds has been considered by cities. In the 1980s, the City of Richardson enacted an ordinance regulating certain dog breeds. A dog owner group sued the city, and the case went all the way to the Supreme Court of Texas. In the case of City of Richardson v. Responsible Dog Owners of Tex., 794 S.W.2d 17 (Tex. 1990), the court ultimately upheld the city’s ordinance. The very next year, dog owners sought legislation to overturn the court’s opinion, and they succeeded. The Texas Legislature passed a comprehensive dangerous dog statute that includes Texas Health and Safety Code Section 822.047, which provides that a city may not pass an ordinance that regulates dogs by breed. Thus, a city may not adopt an ordinance banning or regulating pitbulls or any other particular breed of dog. In 2007 and 2009, the TML legislative program included a directive to support a repeal of the breed-specific ban. In 2007, legislation related to dangerous dogs passed, but the breed-specific ban remains intact. Rather than repeal the breed-specific ban, the legislation holds dog owners responsible if they fail to secure their dog and the dog injures or kills a person. It also allows concurrent municipal and state prosecution for attacks by a dangerous dog. In 2013, H.B. 297 was filed that would have provided for jury trials and appeals for dangerous dog determinations. The bill was left pending in committee. H.B. 2987, a bill that was filed but also failed to pass, would have prohibited a local animal shelter from refusing to adopt or transfer a dog or cat based solely on the animal's age, breed, type, breed mix, appearance, or size. No legislation relating to the breed-specific ban prohibition was filed in 2011 or 2013, but the Committee may wish to discuss whether to take a position regarding breed-specific ordinance authority. Relevant 2013 TML position:

• Endorse legislation that would permit local regulations to prohibit the ownership, possession, harboring, maintenance, transportation, or sales of specific breeds of dogs within a city and/or support the repeal of state law that prohibits breed-specific regulations by cities.

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General Law City Sex Offender Regulations A March 2007 attorney general opinion (GA-052) addressed a fast-growing trend among cities in Texas and nationwide: ordinances that restrict the residency of sex offenders within a city. Such ordinances typically prohibit convicted sex offenders from living within a certain distance of schools, churches, or the homes of children. The opinion concluded that home rule cities’ residency restrictions are not preempted by state law and are thus valid. The opinion also concluded, however, that general law cities do not have authority under current state law to adopt or enforce such an ordinance. Despite the attorney general opinion, some general law cities continue to place restrictions on sex offender residency based on the argument that numerous Local Government Code provisions give general law cities broad health, safety, and police powers, and that attorney general opinions are merely advisory. During the 2009 legislative session, the legislature considered – but did not pass – at least three bills relating to sex offender residency. H.B. 1224 would have authorized a general law city to determine the area within which a registered sex offender may not reside. H.B. 1681 would have provided that a general law city may prohibit a registered sex offender from going in, on, or within a specified distance of a child safety zone within the city. Finally, H.B. 2924 would have prohibited certain registered sex offenders previously convicted of a sexually violent offense involving a child from living within 1,000 feet of the premises of a school. Two bills relating to the issue were filed in 2011, but neither passed:

• H.B. 764 (Lozano) – Sex Offenders: would permit a general law city to prohibit a registered sex offender from going in, on, or within a specified distance of a child safety zone within the city.

• S.B. 1366 (West) – Sex Offender Registration: would, among several other changes to the sex offender registry program, prohibit a city from adopting an ordinance that restricts the location of the residence of an individual who is required to register as a sex offender.

Likewise, two bills relating to the issue were filed during the 2013 legislative session. Both H.B. 601 and H.B. 1177 would have authorized a general law city to prohibit a registered sex offender from going in, on, or within a specified distance of a child safety zone within the city. Neither bill passed. TML has had several recent calls from cities, including Bunker Hill Village, interested in pursuing legislation that will affirmatively clarify the authority of general law cities to enact sex offender residency restrictions. The committee may wish to discuss two issues with respect to sex offender residency restrictions:

1. Should the League help to advance legislation that would affirmatively clarify the authority of general law cities to enact sex offender residency restrictions? Though such

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legislation might be well-intentioned, it’s possible that some general law cities would object to it on the grounds that the filing of the bill implies that they don’t already have that authority (despite the attorney general’s conclusion).

2. It is possible that the legislature could propose state laws that govern sex offender residency, and those laws may preempt city regulations. Assuming such laws impose distance requirements similar, though not identical, to typical city ordinances in this area, should the League object? Another way of approaching this question is to ask which of the following is more important to cities: (1) local control over sex offender residency; or (2) the distance restrictions themselves, whether adopted by a city or imposed by the state.

Relevant 2013 TML positions:

• Endorse legislation that would clarify the authority of general law cities to enact sex offender residency restrictions

• Oppose legislation that would erode existing municipal authority relating to sex offender residency restrictions, or create a state standard that preempts current or future municipal sex offender residency restrictions.

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Mandatory Emergency Management Training Elected Officials The West fertilizer plant disaster April 17, 2013 took the lives of fifteen individuals, including many volunteer fire fighters who were onsite fighting the fire. The explosion also damaged many buildings around the plant. In response to the disaster, the House Homeland Security and Public Safety Committee had multiple hearings with invited state agency testimony regarding solutions to preventing future disasters like the one in West. At its April 2014 hearing, the committee discussed a number of items that would affect cities, including whether to require additional mandatory emergency management training for local government officials. Under current law, only an appointed city official with emergency management duties is required to take state emergency management training. A bill filed in 2007 (H.B. 3943 by Herrero) would have required each elected and appointed public official in the state to receive between five and eight hours of training related to emergency management responsibilities. This broad mandate was whittled down throughout the session and ultimately passed as an amendment to S.B. 11, a comprehensive homeland security bill. Only a small number of city officials had to complete a three hour training course under this mandate. In 2009, a bill passed that required only an appointed official who had emergency management responsibilities to take the three hour training. At the April 2014 Homeland Security Hearing, witnesses suggested that elected officials, such as the mayor, should be required to attend emergency management training. They also commented that the training should be free to elected officials. The Committee may wish to discuss taking a position related to any expansion of mandated emergency management training that would be an additional cost to cities or that would be more onerous than the current training mandate. Volunteer Fire Fighters Under current law, volunteer fire fighters are not required to be certified, nor receive any training. Despite the lack of a mandate, many volunteer firefighters choose to attend training given by the state. According to witnesses at the April 2014 Homeland Security and Public Safety Committee hearing mentioned above, the state collects $30 million a year designated to provide volunteer fire fighter training, but only $12 million dollars is used for the training. At the April hearing, witnesses suggested that training on hazardous materials and other fire training should be mandatory for volunteer fire fighters or for volunteer fire department chiefs. The committee also discussed the funding and time issue for volunteers if they were required to attend such training, which could take days or weeks to complete. The Committee may wish to discuss taking a position related to any mandated training for volunteer fire fighters that would include a cost, whether or not reimbursed by the state, or that would require an extensive time commitment for volunteer fire fighters.

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FIREARMS Like innocent bystanders in a shootout, cities and police officers may not know which way to turn for safety if there’s a showdown between the state and the federal governments on gun laws. A trio of bills filed (but not passed) in 2013 put cities, and especially their police officers, in a strange bind. The bills, H.B. 928 (Krause), H.B. 1076 (Toth), and H.B. 1314 (Creighton), are similar. If all of them had passed, they would have subjected city police to criminal charges for enforcing federal firearms laws, and would have subjected any city that allows such enforcement to a lawsuit by the state’s attorney general. When H.B. 928 was passed the House, a floor amendment was adopted to address the problem of what happens if cities get sued by the federal government for not enforcing federal laws. The solution: the Texas attorney general would defend any such city. The League has suggested that this sensible amendment be offered to the other two bills, as well. When H.B. 928 came up for a hearing in the Senate Committee on Agriculture, Rural Affairs, and Homeland Security, however, the first order of business was to lay out a committee substitute that removed the attorney general’s duty to defend the city. The reason given by Committee Chair Craig Estes, who laid out the bill, was that “the attorney general does not normally engage in these types of activities and did not wish to do that in the future.” The absurd result of the substituted bill: the state appeared willing and able to sue cities for not following the bills, but wouldn’t defend the very same cities from federal lawsuits for following those bills. This issue may be back in 2015, and the Committee may wish to take a position related to legislation that would subject city police to criminal charges for enforcing federal firearms laws, and/or subject any city that allows such enforcement to a lawsuit by the state’s attorney general.

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Texas Police Chiefs Association: (1) Obstruction; and (2) DNA Collection The Texas Police Chiefs Association, an affiliate of the Texas Municipal League, has submitted two issues for consideration by the Committee:

• DNA Collection: Amend the Government Code to require the collection of a DNA sample from all suspects who are arrested for a class B misdemeanor or higher. Currently, law enforcement takes fingerprints from all persons arrested for a crime. The collection of DNA could be done just as easily by simply swabbing the inside of a suspect’s cheek as part of the jail intake process. This simple, non-invasive procedure can provide crucial evidence in serious crimes that may otherwise go unsolved and has worked well at the federal level and in other states. (See S.B. 767/H.B. 1063 from the 83rd regular session).

• Obstruction or Retaliation Offense Amendment: Amend the offense of obstruction or

retaliation to make it an offense for a person to post on a publicly-accessible website the residence address or telephone number of an individual the actor knew was a public servant or member of a public servant’s family or household. (See S.B. 1798 from the 83rd regular session).

The Committee may wish to consider making a recommendation relating to the items above.

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Uniform Procurement Code Under current law, cities, counties, school districts, and other political subdivisions are subject to similar, but non-uniform, purchasing statutes. The Texas Public Purchasing Association (TxPPA), a Texas Municipal League affiliate, has proposed creating a uniform purchasing law. The following information is excerpted from TxPPA’s website: The Texas Public Purchasing Association is the first and only statewide multi-agency organization for public purchasing professionals in Texas. TxPPA members represent cities, counties, schools, colleges, universities, special districts, and state agencies. In just a few short years, TxPPA membership has more than doubled and is currently 566 members strong, representing 335 agencies in Texas. TxPPA’s primary goal is continuing education for members, their agencies, our legislators, contractors and citizens. One of our long term goals is to standardize the purchasing statutes that govern the various government agencies that we represent. TxPPA members endorsed this initiative by resolution at the TxPPA Annual Business Meeting on November 4, 2010. There are at least 16 other states that have preceded Texas in establishing a unified procurement code. TxPPA is seeking procurement stakeholders to help us overcome the inertia of tackling such a big project by forming a committee and appointing representatives from each type of agency to develop and ultimately utilize a Texas Unified Procurement Code (TxUPC). Various procurement statutes currently utilized:

• Government Code, Title 10, Subtitle D, State Purchasing and General Services

• Education Code, Chapter 44, Subchapter B, Purchases; Contracts • Local Government Code, Chapter 252, Purchasing and Contracting Authority

of Municipalities • Local Government Code. Chapter 262, Purchasing and Contracting Authority

of Counties • Local Government Code, Chapter 271, Purchasing and Contracting Authority

Municipalities, Counties, and Certain Other Local Governments • Government Code, Chapter 2254, Professional Services Procurement Act • Government Code, Chapter 2253, Bonding (requirements for certain public

works contracts) Key elements of a Unified Procurement Code:

• Establishes centralized procurement • Describes source selection and contract formation • Contains standards for developing, monitoring and using specifications • Covers construction, architectural/engineering and land surveying

procurement standards

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• Provides for contract modifications and termination of contracts • Discusses cost principles for determining reimbursable costs under a contract • Contains provisions for supply issues and the disposal of surplus property • Creates legal and contractual remedies in the case of protest or disputes • Encourages intergovernmental relations through cooperative purchasing • Offers assistance to small and disadvantaged businesses • Establishes standards for ethical conduct • Fosters a framework for universal certification of public purchasing

employees Advantages of a Unified Procurement Code:

• Establishes the same standards for all governmental agencies thus making it easier for elected officials, contractors, taxpayers, and public procurement officials to use and understand

• Facilitates cooperative purchasing through intergovernmental relations • Establishes standards for ethical conduct • Fosters a framework for universal certification of public purchasing

employees Nearby states that have already adopted a Unified Procurement Code: Arkansas (1979) Colorado (1982) New Mexico (1984) Arizona (1985) The Committee should consider whether to take a position on a unified procurement code. TxPPA members may be present to discuss their initiative.

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Texas Public Pension Reform Although Texas’ defined benefit (DB) plans seem to be in better shape than the rest of the country, the debate over shifting all government DB plans to defined contribution (DC) plans continues to build momentum. Organizations in Texas such as the Greater Houston Partnership, Texans for Public Pension Reform, the Texas Conservative Coalition, and the Texas Public Policy Foundation (TPPF) are all seeking reforms in public pensions, including advocating for a constitutional amendment against DB plans for public employees. TPPF issued a report in 2011 calling for the following changes in public retirement systems:

• Freeze the current defined benefit pension plan for all new and unvested employees. • Enroll newly-hired or unvested employees in a 401(k)-style defined contribution pension

plan. • Implement either a hard or soft freeze of the system for vested employees.

TPPF claims that these changes would save the state and local government considerable money over the long term. The report goes on to add:

With government workers now reaping more compensation than their private sector counterparts, taxpayers can no longer afford to subsidize generous retirements. During the past several years, state and municipal pension systems have implemented changes in the hopes of reigning in ballooning liabilities. Modifications like an increased minimum retirement age and readjusted benefit calculations have bought some time for the plans, but in no way have they gone far enough to keep long-term costs at bay.

Public-sector defined-benefit pension plans - retirement packages that promise retirees a set monthly income based on an employee’s salary history and years of service - are entitlements that transfer wealth from workers in the private sector to public sector retirees.

When pension funds fall short of their expected return rates (the case for the past several years), governments must eventually fill the gap by either increasing taxes or reallocating existing revenue. With public workers now making more than workers in the private sector, poorer taxpayers end up subsidizing generally wealthier government retirees.

The report concludes that the changes “would not only shield Texas from an inevitable public pension cost explosion, they would align public sector benefits with those in the private sector and create a more just retirement system.” To counter the efforts of TPPF and others, members of Texas employee pension systems, employee groups, unions, and other related groups benefiting firefighters, police, and municipal

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employees have formed an organization called Texans for Secure Retirement (TSR). TSR’s objectives include retaining DB plans as the primary retirement planning option for all current and future public employees in Texas; educating the business community about the advantage of DB plans for public sector employees, employee groups, and related institutions; and, enhancing public awareness about how DB plans for public employees are advantageous for the general public and the economy in Texas. With so many coordinated efforts to address public pensions, League staff expected a healthy debate on pension reform during the 2013 legislative session. Many bills were filed and a few passed. The following bills passed and are largely related to reporting, auditing, and training:

• H.B. 13 (Callegari/Duncan) – Pensions: this bill: (1) requires public pension systems to post the following documents on their Internet websites: (a) actuarial valuations; (b) annual financial reports; (c) member and retiree reports; (d) State Pension Review Board (Board) registration; and (e) reports of investment returns and assumptions; (2) imposes reporting requirements on the Board if a public retirement system does not post its required financial documents, including: (a) posting the names of the systems on its website; (b) notifying either the governor and Legislative Budget Board or the political subdivision of the failure, depending on the pension system; (3) requires the Board to create model ethical and conflict of interest rules for public pension systems to adopt voluntarily; (4) requires the Board to create an educational training program for public pension system administrators; (5) authorizes a public retirement system to provide its own educational training to trustees and system administrators if the Board determines that the system’s training meets or exceed the minimum training requirements; (6) requires a public retirement system to post certain contact information on a publicly-available Internet website; and (7) requires a public retirement system to submit to the Board an investment returns and actuarial assumptions report before the 211th day after the last day of its fiscal year. (Effective immediately.)

• S.B. 200 (Patrick) – Pension Review Board: this is the Pension Review Board

sunset bill. Of interest to cities, this bill: (1) continues the Pension Review Board until 2025; (2) authorizes the board to provide training to retirement trustees and administrators; (4) exempts some fire fighter pension plans from the certain state law requirements; (5) requires an audit for a public retirement system that is separate from a governmental entity’s general audit; (6) requires that a public retirement system inform its participants within 31 days of any significant change in the ordinances or regulations of the system that could affect contributions, benefits, or eligibility; and (7) eliminates certain actuarial valuations for defined contribution plans.

• S.B. 220 (Birdwell/Anchia) – Firefighters Pension Commissioner: among

other things, transfers the responsibilities of the firefighters’ pension commissioner to the Texas Emergency Services Retirement System and the local firefighters retirement systems. (Effective Immediately.)

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• S.B. 366 (L. Taylor) –Retirement Benefits: authorizes a city to: (1) establish a

Roth IRA program for its employees; and (2) develop procedures to allow retirement plan vendors to lend money to a participating employee.

The following, more burdensome bills, did not pass: H.B. 3356 (Callegari) – Retirement Systems: would: (1) require each actuarially funded retirement system to be funded at 100% by 2045; (2) require each actuarially funded retirement system to provide reports regarding its funding to its plan members, beneficiaries, plan sponsors, and board; (3) require certain retirement systems that have over $100 million in total assets to do an actuarial experience study; and (4) require each public retirement system to adopt ethical standards and conflict-of-interest policies at least as strict as state law. H.B. 3488 (Burkett) –Pensions: would provide that pensions, including city pensions, comply with certain accounting requirements that other postemployment benefits must already comply with under state law Because of the breadth of the pension reform passed in the 2013 session, it is unclear whether serious legislation will be filed this coming session. In any case, the Committee may wish to recommend a position on the issue. Relevant 2013 position:

• Oppose legislation that would further erode local control as it pertains to retirement issues.

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TMRS Flexible Cost of Living Adjustments (COLA) Provisions of the Texas Government Code provide for cost of living adjustments (COLAs) to annuities paid to Texas Municipal Retirement System (TMRS) retirees. Under current law, a COLA is calculated based on the level of the Consumer Price Index (CPI) when the employee retired. There are three optional increases allowed: 30 percent, 50 percent, or 70 percent of the change in CPI. Unless the ordinance that establishes the amount of the COLA is modified or repealed, the increase automatically repeats itself. Ultimately, this has had the effect of making the COLA a promised benefit to TMRS retirees because these annually repeating annuity increases were never built into the funding formulas. In recent years, TMRS actuaries began valuing the COLA as a promised benefit. As a result, the contribution rates and unfunded liabilities of member cities have increased dramatically. It is difficult for cities to modify the percentage amount of the COLA in their ordinance. For example, if a city decreases a COLA from 70 percent of CPI to 50 percent, most retirees would not see a benefit increase for a long time. Because the previous 70-percent COLA benefit would be greater that the 50-percent COLA, the retiree would not see another increase until the 50-percent COLA exceeded the 70-percent COLA increase received previously. The retrospective nature of the COLA also makes increases difficult. If a city was granting a 30-percent COLA and wants to increase it to 50 percent, calculating the increase in the benefit for several years becomes very costly for cities to implement. S.B. 1358 by Senator Seliger, filed in 2009, was sought by the cities of San Antonio, Amarillo, Abilene, Garland, and Carrollton. The bill would have provided TMRS member cities the option of calculating the amount of the annual COLA as an increase in the current benefit only. S.B. 1358 would have allowed cities the ability to effectively manage their retirement plans and control costs and continue to retain the adjustment as an additional benefit for retirees. S.B. 1358 was reported from the House Pensions and Investments Committee with some opposition. The Combined Law Enforcement Association of Texas (CLEAT), the Arlington Police Association, Arlington Professional Firefighters, and the Texas State Association of Fire Fighters all testified against the bill. If it had not been late in the legislative session, this bill would have likely been debated on the House floor with the possibility of passing. In 2011, Senator Seliger filed S.B. 642. The bill would have allowed a city participating in TMRS to adopt a non-retroactive, flat-rate COLA. An increased payment to an annuitant resulting from such a COLA adopted by a city would be limited to the cumulative increase the annuitant would have been entitled to receive if the 70 percent of the CPI limit under TMRS’s existing law had been applied to the annuity. The bill would have also required that if a city adopts an ordinance to either discontinue an annually repeating COLA or to change a annually repeating COLA, the city must give written notice to members and annuitants at least 60 days prior to the effective date of the change adopted in the ordinance. The bill didn’t pass. In 2013, Rep. John Smithee filed H.B. 718, which allowed a city participating in TMRS to adopt a non-retroactive, flat-rate COLA. Much like S.B. 642 in 2011, H.B. 718 ran into opposition from the unions and did not pass.

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The outlook for the 2015 legislative session may be brighter because unions may be amenable to compromise. Thus, the Committee may wish to take a position relating to additional, flexible COLA options that are not retroactive to a retiree’s date of retirement, such options to possibly include one-time increases tied to increases in the CPI or flat percentage increases. Relevant 2013 TML position:

• Endorse legislation that would create additional, flexible cost-of-living adjustment (COLA) options that are not retroactive to a retiree’s date of retirement, such options to possibly include one-time increases tied to increases in the consumer price index (CPI) or flat percentage increases.

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Civil Service

The fire and police civil service statute (Chapter 143 of the Local Government Code) has been the target of dozens of bills during the past twenty years. Some of these bills have been vigorously opposed by TML; others have been initiated and/or supported by TML. Chapter 143 applies to certain cities over 10,000 in population. The provisions of Chapter 143 apply in a city only if they are adopted by a vote of the people. Approximately 80 cities have adopted police and/or fire civil service to date. Upon adoption of civil service, the local governing body appoints a civil service commission to administer the system. Under Chapter 143, supervision of the fire-police civil service apparatus is removed from municipal elected officials and put under an independent commission. Promotion and disciplinary actions are channeled through procedures outside of the control of the city council, and aggrieved public safety personnel have access to binding arbitration or to an external appellate process that flows all the way up to the Texas Supreme Court. It is fair to say that civil service bills must be closely watched not only for direct attacks on civil service concepts, but also as “back-door” approaches to other personnel issues: collective bargaining, mandated benefits, staffing mandates, meet and confer, and more. Several bills considered during the 2013 legislative season would have been harmful to cities:

• H.B. 2924 (Sheets): requires a civil service city to give a fire fighter or police officer access to his or her military leave time account if they have been employed for at least three months and regardless of whether the person has exhausted their other paid leave.

• H.B. 1092 (Martinez): would have: (1) prohibited any condition from being placed on a

voluntary civil service suspension of a fire fighter or police officer, unless the individual retains the right to appeal the condition; and (2) granted to a fire fighter or police officer the right to appeal any condition added to a suspension

• H.B. 1312 (Fletcher): would have amended Chapter 143 of the Local Government Code

to provide that: (1) if a civil service commission finds that a period of disciplinary suspension should be reduced, the commission may order a reduction in the period of suspension; and (2) if the commission or a hearing examiner orders that a suspended firefighter or police officer be restored to the position or class of service from which the person was suspended, the firefighter or police officer is entitled to immediate reinstatement to the position or class of service from which the person was suspended, notwithstanding any action filed in a court by the city or department head challenging the commission’s decision.

House Bill 2924 passed, but was a narrow bill affecting only those civil service cities with a military leave time account. The other two bills did not pass. Relevant 2013 TML position:

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• Oppose legislation that would enact detrimental amendments to the civil service law (Chapter

143 of the Texas Local Government Code).

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Meet and Confer/Collective Bargaining

Though cities have long opposed legislation that would mandate more expansive collective bargaining rights for police and firefighters, cities did not completely reject the idea of a limited scheme of voluntary negotiations provided that certain conditions were met: namely, that such a scheme was not ultimately binding on a city against its wishes. Legislation that allowed for such informal discussions, sometimes referred to as “meet and confer” legislation, always met with city opposition when it failed to fully meet the criteria of voluntariness. Put another way, many meet and confer bills were often just a form of collective bargaining. In 2005, police and firefighter associations finally presented meet and confer legislation that, with some tinkering, cities could live with. The result was H.B. 304, which authorizes meet and confer for police officers in some cities, and H.B. 2892, which authorizes meet and confer for firefighters in some cities.

The committee should also be prepared to discuss legislation—or opposition to legislation—that might be needed in response to possible federal legislation that would impose collective bargaining nationwide. Such legislation has come close to passing Congress several times in the past few years.

Some versions of a federal collective bargaining bill would have granted state legislatures the right to exempt cities under 5,000 population, or with fewer than 25 full-time employees, from the mandated collective bargaining. If the federal law passes, there will likely be efforts to enact a collective bargaining bill in Texas.

Last session, additional bills were filed related to meet and confer and collective bargaining, but failed to pass. These included:

• H.B. 1364 (Lucio): would have reduced from 50,000 to 10,000 the minimum population allowing fire fighter meet and confer.

• H.B. 1524 (Anderson): would have changed the meaning of “exclusive bargaining

representative” under the Labor Code to include only the group who has been selected by secret ballot. (Companion bill was S.B. 674 by Seliger).

• S.B. 1911 (Garcia): would have provided that a public employee, on request, has the

right to be represented by a labor organization in a disciplinary proceeding initiated against the employee by the public employer of the employee, including an investigatory interview conducted by the employer that the employee reasonably believes may result in disciplinary action. (Note: This bill would have overturned a recently-issued Supreme Court of Texas opinion [City of Round Rock v. Rodriguez] in which the Court held in favor of the city.)

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The committee should recommend a TML position on any legislation that would broaden the meet and confer or collective bargaining statutes.

Relevant 2013 TML positions:

• Oppose legislation that would make meet and confer mandatory or expand the current meet and confer law.

• Oppose legislation that would make collective bargaining mandatory or impose expanded collective bargaining rights.

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Disease Presumption

After extensive negotiations between cities and firefighters, the legislature in 2005 passed a bill (S.B. 310) that provides that certain diseases contracted by firefighters and emergency medical technicians (EMTs) are presumed to be work-related and thus included in workers’ compensation coverage. The key to understanding S.B. 310 is to know that very expensive provisions that other states have included in their presumption bills were excluded from the Texas bill. A general presumption that heart disease is caused on the job, for example, would be extremely expensive and was not included in S.B. 310. To date, there have been few successful presumption claims, and total city liability has been limited. As a “compromise” bill, it’s not unreasonable for cities to take the position that no changes or expansion of the law should be considered for several years. Of course, some groups try to amend the statute anyway. During the 2013 session, new presumption legislation was filed:

• H.B. 365 (Martinez): would have provided that: (1) a firefighter or emergency medical technician (EMT) who has a heart attack or stroke while on duty is presumed to have suffered the illness or death during the course and scope of employment, which means he or she would be covered by workers’ compensation for that condition; (2) a firefighter or EMT who contracts acquired immune deficiency syndrome (AIDS), human immunodeficiency virus (HIV), hepatitis B, or hepatitis C is presumed to have contracted the disease during the course and scope of employment, which means he or she would be covered by workers’ compensation for that condition if, while on duty: (a) the firefighter or EMT was exposed to a person with these diseases who received treatment from the firefighter or EMT; or (b) the firefighter or EMT regularly responded to scenes or calls involving exposure to blood or other bodily fluids; and (3) a firefighter or EMT who contracts methicillin-resistant staphylococcus aureus (MRSA) resulting in illness or death is presumed to have suffered the illness or death during the course and scope of employment, which means he or she would be covered by workers' compensation for that condition if, while on duty, the firefighter or EMT was exposed to a person with MRSA who received treatment from the firefighter or EMT.

• H.B. 1091 (Martinez): would have extended the time frame for discovering an illness or

disease of police, EMS, and fire personnel to five years after they leave employment for which they may be entitled to benefits or compensation.

The committee should discuss recommending opposition to any substantive change or expansion to the scope of S.B. 310. Relevant 2013 TML position:

• Oppose legislation that would substantively change or expand the scope of the current disease presumption law.

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Changing Election Dates

Prior to 2005, most city elections had to be held on one of four uniform election dates. In 2005, the legislature passed H.B. 57, which deleted the February and September election dates, leaving only two uniform election dates: (1) the second Saturday in May and (2) the first Tuesday after the first Monday in November. H.B. 57 also gave cities the ability to change the date on which they held a general election to another authorized uniform election date, so long as the action was taken prior to December 31, 2005. Since then, numerous proposals have been filed, and some passed, that alter the deadline for a city to change the date of its general election. As an example, H.B. 3619 by Raymond passed in 2007 and would have extended the deadline for a city to change the date of its election to December 31, 2008. The governor vetoed that bill on the grounds that voters needed to have some confidence in when city elections were to take place. In his veto message, the Governor stated that “[w]hile some of the deadline extensions were necessary in sessions in which the legislature cut back the number of uniform election dates, we have now reached the point where the cities and other local subdivisions need to stop moving their election dates.” For whatever reason, the governor signed a bill (H.B. 401 by Raymond) extending the deadline for switching election dates in 2009, but with one slight change. H.B. 401 provided that a city that held its general election on the May uniform election date could change the date of the election to the November uniform election date no later than December 31, 2010. In other words, a city that held its general election in November had no statutory authority to move its elections to the May uniform election date. A major elections bill in 2011 further impacted a city’s ability to change the date of its general election. S.B. 100 by Van de Putte implemented the federal Military and Overseas Voter Empowerment (MOVE) Act of 2009. The MOVE Act, among other things, requires that ballots be transmitted to military and overseas voters 45 days prior to an election held in conjunction with a federal election to ensure that military and overseas voters would have ample time to return their ballots. S.B. 100 implemented the federal legislation by leaving the current primary election date intact but moving the primary runoff date, which used to be held on the second Tuesday in April of even-numbered years, to the fourth Tuesday in May of even-numbered years. This was needed to be able to transmit ballots overseas 45 days in advance of a primary runoff election. The election calendar changes of S.B. 100 meant that the May uniform election date would fall between the primary and primary runoff dates in even-numbered years. Counties were concerned that they would not be able to both lend their machines to cities and school districts for local elections on the second Saturday in May of even-numbered years, and have the electronic voting machines ready for use in the primary runoff election held at the end of May of even-numbered years. These concerns led to practical limitations on the availability of the May uniform election date in some locations. Following the passage of S.B. 100, a city could still hold an election on the second Saturday in May of an odd-numbered year or on the November uniform election date. However, counties might refuse to provide electronic voting machines to cities for use on the

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second Saturday in May of an even-numbered year due to the proximity of that election date to the primary runoff date in even-numbered years. As a result, some cities received notice from the county that they can no longer use the county’s electronic voting machines for this date, which forced those cities to take one of three actions: (1) move all elections to the November uniform election date; (2) unstagger terms of office for elected officials so that all officials are elected on the May uniform election date in odd-numbered years; or (3) purchase electronic voting machines so that May elections are not dependent upon the availability of machines from the county. S.B. 100, along with a separate bill, H.B. 1545, both extended the deadline to December 31, 2012, for cities with May elections to switch to the November uniform election date. That deadline remains in place. Consequently, a city currently has no statutory authority to move its general election to another uniform election date. This lack of flexibility has become problematic for many cities, primarily because counties still have the ability to refuse to provide electronic voting machines to cities conducting their elections in May of even-numbered years. Some theorize that certain legislators want all elections to be held on one date, such as the November uniform election date. Such a joint election would eliminate the need to procure the now-required electronic voting machines for a stand-alone municipal election. But many city officials are uncomfortable with that possibility. City officer elections and propositions, including important bond issues, could be shunted to the end of the ballot, and city issues could be drowned-out under huge national and state campaigns. In addition to considering taking a position on legislation that would eliminate any current uniform election dates, the City of El Lago has requested that the Committee consider taking a position to support legislation that would extend the deadline for cities to change the date of their general elections to another uniform election date.

Relevant 2013 TML position:

• Oppose legislation that would eliminate any of the current uniform election dates.

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Unified Election Precincts

Prior to 2013, a county election precinct could not contain territory from more than one of a number of different types of territorial units, including a single member district in a city with a population of 10,000 or more. In other words, counties were required to draw their election precincts to match single member districts in these specific cities. In 2013, H.B. 1164 by Rep. Ed Thompson passed, which eliminated the requirement that county election precincts must be drawn to match single member districts in cities with a population of more than 10,000. The passage of H.B. 1164 has created some administrative difficulties in some Texas cities with a population of more than 10,000 that have adopted single member districts, including the cities of Killeen and Temple. Cities often conduct elections in accordance with the county precincts. In the past, this was efficient because county precincts matched up with single member districts. But now counties can draw their precincts in a way that do not correspond with single member districts, which means there is often voter confusion at city elections because now one county election precinct could contain voters who are eligible to vote in two or more city council races. The Committee should consider taking a position on legislation that would reverse the effect of H.B. 1164 and require county election precincts and single member districts in cities over 10,000 to match.

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Municipal Court Collection of State Fees Municipal courts in Texas collect funds on behalf of the state for a wide variety of state programs. These state programs range from the Criminal Justice Planning Fund to the Crime Victims’ Compensation Fund. In most cases, the fees are imposed on persons convicted of any criminal offense. For these collection efforts, cities are generally allowed to keep some small amount of revenue as reimbursement for costs incurred to collect the fees and remit them to the state. Many city officials contend that state court costs adversely impact municipal courts in two ways. First, the state’s court costs are complicated to administer. While cities can keep a small percentage of the costs as an administrative fee, that amount is not sufficient to reimburse the cities for the bookkeeping and administrative problems connected with this function. Second, when setting an appropriate fine for an offense, a judge must consider the fact that the defendant will also be paying state court costs. As a result, municipal fine revenue is often lower than it would otherwise be because the judge has considered the state court costs when setting a defendant’s total fine. Municipal court clerks also point out that the state requires that, in the event of a partial payment, the state court costs must be paid first before the city can keep any of the fine. This means that the cities have to do all the work collecting fines but do not get to keep any money until the state court costs have been satisfied. The bottom line is that cities can’t raise court fines fast enough to satisfy the state’s ever-growing appetite for revenue, while simultaneously maintaining the amount retained by cities. In 1993, court costs imposed by the state grew dramatically. Over the objections of TML, the legislature passed H.B. 2178, a bill that increased the municipal court costs collected for the Crime Victims’ Compensation Fund. The League opposed the bill by arguing that municipal revenue decreases as state-imposed court costs increase. The legislature was not at all sympathetic to that argument and tended to view TML opposition to the bill as opposition to the crime victims’ fund. In 1995, the legislature considered several bills that would have imposed additional court fees, with the proceeds going to fund a variety of projects. For example, H.B. 2907 would have created a crime victims’ institute and imposed a municipal court fee to fund the institute. That bill failed to pass. In 1997, the legislature again considered several bills that would have imposed or increased state fees collected by municipal courts. One of those bills (H.B. 2272) was a TML priority bill designed to consolidate most state fees into one aggregate fee. That bill passed, but before the ink was dry, lawmakers had added two new, state-mandated court fees to the bill. The first was a five-dollar fee on misdemeanor convictions with the revenue going to a “fugitive apprehension account” in the state’s general revenue fund. The second fee was a 25-cent fee on all misdemeanor convictions, with the revenue going to the Center for the Study and Prevention of Juvenile Crime and Delinquency at Prairie View A&M University.

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The legislature also passed a bill that requires various courts, including municipal courts, to collect a 25-dollar fee from any person who seeks to pay a fine, court costs, or restitution over a period of time rather than immediately. The custodian of the municipal treasury shall send 50 percent of the revenue collected for this “time payment” fee to the state comptroller at least monthly. The remaining 50 percent shall be deposited in the municipal treasury; ten percent of this amount must be spent for the purpose of improving the efficiency of the administration of justice in the city. A third bill passed in 1997 increased from $20 to $25 the additional court costs for a traffic offense that occurs in a school crossing zone and for the offense of unlawfully passing a school bus. This increase applied only in a city with a population of 400,000 or more. That bill repealed the additional court costs for these offenses in all other cities. It is also interesting to note that the revenue collected in municipal courts for the Crime Victims’ Compensation Fund was the subject of a proposed constitutional amendment passed by the 1997 legislature. This amendment, which was ultimately adopted by the voters of Texas, made the Crime Victims’ Compensation Fund a separate, dedicated account of the Texas general fund. Money in the fund can be used only to assist victims of crimes as provided by statute. In 1999, the legislature passed several bills related to municipal courts. S.B. 229 clarified the statute imposing a $25 court cost on defendants who pay over time by defining “immediately” as 31 days. The legislature also passed S.B. 601, which authorizes a city to create a municipal court technology fund and to require court costs of not more than four dollars per conviction to generate revenue for the fund. Revenue in the fund may be used for computer hardware or software, electronic kiosks, electronic ticket writers, or docket management systems. Finally, S.B. 1187 raised the court costs for training of judicial and court personnel from one dollar to two dollars. In the TML legislative program for 2001, the TML Board included initiatives to seek introduction and passage of legislation that would “consolidate all state court costs into one fee payable to the state” and to oppose any legislation that would “require cities to act as collection agents for state revenue.” The 2001 legislature considered both of these issues. H.B. 2733 and S.B. 1208 would have consolidated all state fees into one payment. The state comptroller had issued a report recommending the passage of such legislation. Although the report stated that fee consolidation and simplified collection and reporting by municipal courts would lead to significant savings in time and money, the legislation didn’t pass. Meanwhile, the trend to impose or increase fees continued with the passage of S.B. 1421. This legislation increased (from 25 cents to 50 cents) the municipal court fee that funds the center for the Study and Prevention of Juvenile Crime and Delinquency at Prairie View A&M University, and imposed a new 50-cent fee for the Operation of the Correctional Management Institute of Texas at Sam Houston State University. (This trend toward using municipal courts to raise revenue for state universities is particularly troubling.)

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Two additional bills considered by the legislature in 2001 are noteworthy. The legislature passed S.B. 1377, which authorizes the state auditor to review each fund or account into which court fees are directed and determine whether: (a) the money is being used for the proper purpose, and (b) the amount of the court costs is appropriate. The legislature did not pass S.B. 1538, which would have eliminated court costs in municipal court for the Crime Victims’ Compensation Fund. (The bill would have provided that the $35 court fee for the Crime Victims’ Compensation Fund would be imposed only for a conviction of a crime that constitutes criminally injurious conduct punishable by confinement.) Finally, in 2001 the legislature passed (and the voters subsequently approved) significant legislation concerning court costs. S.J.R. 49 amended the Texas Constitution to provide that if the legislature enacts a bill to consolidate municipal court fees, all future fees must conform to that consolidation. Additionally, any fee adopted in the future may not take effect prior to the following January 1 unless the legislature approves the fee by a two-thirds vote of the members of each house. It should also be noted that the 2001 Texas Legislature passed a bill that once again allows all cities to add an additional $25 fee for a traffic offense committed in a school crossing zone and use the resulting revenue for child health and safety programs. In 2003, several bills passed based on interim committee recommendations. For example, S.B. 791 required the state comptroller to develop and submit a proposal for a monitoring program under which the comptroller will periodically monitor the collection, remittance, and reporting of court costs and fees collected by municipal courts. In addition, S.B. 1180 created a new state law index of all court costs and fees collected by all courts, including municipal courts. The index consolidates all existing court costs into a new Chapter 101 of the Texas Government Code. More importantly, H.B. 2424 was passed in 2003. H.B. 2424 was the state comptroller’s omnibus tax and fee bill. The bill incorporated many TML priority issues, including:

1. consolidation of the collection and remittance of all court costs and fees collected in municipal court;

2. establishing a court cost of $40 for all non-jailable misdemeanors; 3. providing a uniform definition for the term “conviction” for purposes of determining

when court costs and fees are due; and 4. providing for quarterly submittal of court fees.

In addition, the bill:

1. requires the state comptroller to compile a list of court fees adopted or increased during each legislative session and to publish the list in the Texas Register no later than the August 1 following the end of a legislative session.

2. provides that any new or increased court fee does not become effective until January 1 after the effective date of the law imposing the new cost or fee. (Note: this provision was

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enacted pursuant to S.J.R. 49, the Constitutional amendment approved by the voters in 2001.)

3. requires the Legislative Budget Board (LBB) to prepare an impact statement for each bill or proposed constitutional amendment that would impose a court cost on a criminal case or increase an existing court cost imposed in a criminal case (in practice, the LBB has refused to carry out this mandate, claiming that the LBB adheres only to procedural rules adopted by the legislature, not the laws passed by that legislature), and

4. provides that the impact statement (which the LBB refuses to prepare) must show the total amount of court costs and fees a person would be required to pay under the proposed bill or resolution.

The 2003 legislature also passed H.B. 1066, another TML priority bill. This bill extends indefinitely the authority of a municipal court to impose the municipal court technology fee and provides that the revenue may be used for maintaining (as well as purchasing) technological enhancements for the court.

Predictably, city successes in consolidating state fees did nothing to slake the state’s thirst for additional city fine revenue. Though the 2003 legislative policy as adopted by the TML membership called for the opposition to the imposition of any new state fees on municipal court convictions, the state continued to press for new fees. During the third special session in 2003, the legislature passed 3H.B. 2, which created a new $30 “state traffic fine” to fund the state’s general fund, transportation projects, and trauma care. This new $30 “fine” went right on top of the just-consolidated $40 fee created during the 2003 session.

One would think that by the time the 2005 regular and special legislative sessions rolled around, the amount of state fees and fines attached to municipal court convictions would have reached a saturation point, but that was not the case. During the 2005 regular session, the legislature enacted S.B. 1704, which imposed a new $4 court cost on each conviction of any offense (other than a pedestrian or vehicle-parking offense) in municipal court, and required the city to remit the revenue to the state to be used for increased jury pay. Jurors serving in almost every criminal court in the state benefit from the proceeds of the new fee—except municipal court jurors, who are not compensated for jury service. During the second special session in the summer of 2005, the legislature passed 2H.B. 11, which increased state judges’ salaries and paid for those salary increases, in part, by imposing a $4 court cost on any person convicted of any offense (other than a pedestrian or parking offense) in municipal court. The city retains $.60 of each fee to be used for law enforcement; the remaining $3.40 is remitted to the state. The 2007 legislative session saw one new court cost imposed and one existing court cost increased. The new court cost was $2 on any municipal court offense other than pedestrian or parking offenses, with the proceeds going to indigent defense in higher state courts. The $4 cost for state judges’ salaries, passed in 2005, was increased to $6. The 2009 session saw no new court fees on general traffic or other offenses, though there was a $.15 fee added to tickets for failure to properly secure a child in a safety seat.

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During the 2011 session, numerous bills were once again introduced to add various fees onto municipal court convictions:

• H.B. 331 – $1 equal justice and education fee for deposit into the fund. • H.B. 939 – $75 fee to be paid by a defendant convicted of a misdemeanor if the services

of a peace officer are required to locate the defendant to issue that notice. • H.B. 2174 – $5 fee for judicial access and improvement to be collected on certain

offenses and remitted to the comptroller for deposit in a judicial access and improvement account.

• H.B. 3550 – between $500 and $2000 to be paid to the state general fund upon conviction of certain commercial motor vehicle offenses.

• S.B. 994 – $100 fee to the state general fund for a class C drug-related misdemeanor. None of the bills listed above passed. However, city officials and municipal advocates had expected to see legislation that would raise the “state traffic fine” (a state fee imposed on certain convictions in municipal court), but no one expected what occurred on Monday, March 7, 2011.

First, some background.

In 2003, the legislature imposed a “state traffic fine” of $30 on each traffic violation conviction. That fine, which is really nothing more than a state-imposed tax on municipal court convictions, was in addition to many other state fees that had previously been tacked onto municipal court fines.

The state traffic fine is a way for the state to raise money by relying on some other entity (in this case, local governments) to actually generate the revenue. The fee produces approximately $90 million annually. Roughly 62 percent of the total goes to the state’s general fund, 33 percent goes to trauma centers, and five percent is kept by the cities and counties that collect the fee revenue.

Prior to the 2011 session, the Legislative Budget Board recommended a 50 percent increase in the state traffic fine: a bump from $30 to $45. This, of course, was an attractive option for lawmakers facing a huge budget-balancing problem.

H.B. 258 was filed by Rep. Naomi Gonzalez (D-El Paso) on Wednesday, March 2; the bill was referred to the House Ways and Means Committee the next day. None of this came as a surprise. The surprise came two business days later (Monday, March 7) when the House voted to suspend the posting rule and have an immediate committee hearing on H.B. 258.

The proponents of the bill (representatives of trauma centers) had clearly been informed in advance and were present at the hearing with prepared testimony. The TML staff was, as always, monitoring House actions, learned of the rules suspension, and rushed over to the hearing to oppose the bill.

Why would TML oppose? Again, some background.

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The fiscal note on H.B. 258 indicated that the bill would generate roughly $28.5 million in additional annual revenue for the state general fund, $14 million for trauma centers, and $2.4 million for local governments: the cities and counties that were tasked with imposing and collecting the fee.

But that fiscal note is very misleading. City officials know that as the state imposes more and more fees on municipal fines, the revenues generated for the city from the fines themselves will decrease. If a municipal judge normally imposes a total charge of $250 for a traffic conviction, each dollar that goes to the state is a dollar that won’t go into municipal coffers. And, as the state’s share goes up, the local share goes down. Thus, contrary to what the H.B. 258 fiscal note says, it is most likely that the bill would also reduce municipal revenue, costing cities even more.

City officials should have been given fair and ample notice of the committee hearing on H.B. 258. The League released the following press release on the issue on March 8, 2011, the day after the hearing:

State tax on cities is highway robbery

AUSTIN – The State of Texas takes the first $82 from every municipal traffic fine collected by cities, which amounted to $235 million in 2010. Monday, the House Ways and Means Committee considered a bill to increase the state’s take from every city traffic ticket, skimming off an additional $42 million per year from city traffic fines.

H.B. 258 by Rep. Naomi Gonzalez would increase the amount the state siphons off of every municipal traffic violation by $15 – from $82 to $97 – an 18-percent increase. Two-thirds of the revenue from the increase would go to the state’s general fund, and one-third would go to a fund for trauma care and emergency medical services.

“Trauma care is certainly an important and worthy service but if the state wants to increase funding for trauma care by $14 million a year, the legislature should do what every city council has to do: cut somewhere else or vote to raise taxes,” said Texas Municipal League President Robert Cluck, Mayor of Arlington. “Taking money out of city treasuries to pay for state services is simply highway robbery that forces cities to cut services or raise property taxes.”

Since 2002, the state tax on every municipal traffic violation has risen from $40 to $82. Regardless of the amount a city is able to collect on a traffic violation, the state gets $82 before the city gets any fine money.

“In defense of city taxpayers, we have to draw the line and strongly oppose any further increases in this state money grab,” Mayor Cluck said.

“It wouldn’t be so bad if the state helped pay for the cost of enforcing municipal traffic laws by providing cities with funding for police salaries, health insurance and retirement benefits or helped pay for the cost of municipal courts. But that’s never going to happen in Texas.”

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H.B. 258 ultimately did not pass. However, a similar battle was also being waged in the Senate when provisions of S.B. 726 (Rodriguez) – which would create a $10 fee to be collected by municipal courts for judicial access and improvement, to be used to fund basic civil legal service and criminal defense for indigents and electronic filing in court – were added to another bill, S.B. 1811. In response, the League issued yet another press release in May 2011. Ultimately, because of the League’s efforts, no legislation with a municipal court fee passed in 2011. A victory for Texas cities. In the 2013 session, as expected, bills increasing court costs were filed by state legislators:

• H.B. 211 – Would have raises the fee already assessed on conviction of any offense to pay for the services of a peace officer, if the officer was required to execute or process an arrest warrant, capias, or capias pro fine from $50 to $75.

• H.B. 1233 – Would have increased the amount of the “state traffic fine” on convictions in municipal court from $30 to $45.

• H.B. 1311 – Would have imposed a $100 court cost if the judge makes an affirmative finding of fact that the victim or intended victim was 65 years of age or older.

• H.B. 1656 – Would have added a $5 emergency medical air transportation surcharge. • H.B. 2890 – Would have increased the consolidated state court costs for class C

misdemeanors to $122; would also lower certain fees and allow a city to keep an administrative fee for failure to appear charges.

None of the above bills passed. Only one bill from the 2013 session passed that imposed an extra mandatory court cost on cities. S.B. 1419 requires that a city collect an additional $2 court cost, which will be deposited in a dedicated state account for truancy prevention and diversion. The bill does permit a city to deduct and retain 50 percent of the cost for the purposes of operating or establishing a juvenile case manager program and allows a city to request funds from the dedicated state account for providing truancy prevention and intervention services. Where do we stand now? On a typical traffic offense conviction, a municipal court defendant must currently pay $84 in state-imposed fees before any city fine is collected. The following chart is a comparison of the present situation to twelve years ago. January 2002 January 2014 Crime Victim Compensation $15.00 $15.00 Judicial/Court $2.00 $2.00 Personnel Training Fugitive Apprehension Fund $5.00 $5.00 Consolidated Court Costs* $17.00 $17.00 Juvenile Crime/Delinquency $.50 $.50

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(Prairie View A&M) Correction Management $.50 $.50 Institute (Sam Houston State) State Traffic Fine -- $30.00 Jury Pay -- $4 State Judges’ Salaries -- $6 Indigent Defense -- $2 Truancy Prevention and -- $2* Diversion Fund Total $40.00 $84.00 (+110%) * $1 may be deducted and retained by the city for their juvenile case manager program. The Committee should discuss whether, and how, the League should continue to oppose state fees tacked onto municipal court convictions. Is outright opposition futile? If so, should a policy of splitting new fees with the state (as was done in S.B. 1419 in 2013) the way to go? Relevant 2013 TML positions:

• Oppose legislation that would impose additional state fees or costs on municipal court convictions or require municipal courts to collect fine revenue for the state.

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TOMA Consultant Teleconferencing According to the Texas attorney general’s office, “it would be questionable to allow participation of a third party by teleconference in a meeting due to the strict requirements” of the Texas Open Meetings Act (TOMA). A meeting of a municipal governing body may be held by teleconference call only if:

1. an emergency or public necessity exists; and 2. it is difficult or impossible to convene a quorum at one location, or 3. the meeting is held by an advisory board.

The attorney general’s office concludes that the only exception is a TOMA provision that was added in 2001: Sec. 551.129. CONSULTATIONS BETWEEN GOVERNMENTAL BODY AND ITS ATTORNEY. (a) A governmental body may use a telephone conference call, video conference call, or communications over the Internet to conduct a public consultation with its attorney in an open meeting of the governmental body or a private consultation with its attorney in a closed meeting of the governmental body. (b) Each part of a public consultation by a governmental body with its attorney in an open meeting of the governmental body under Subsection (a) must be audible to the public at the location specified in the notice of the meeting as the location of the meeting. (c) Subsection (a) does not: (1) authorize the members of a governmental body to conduct a meeting of the governmental body by telephone conference call, video conference call, or communications over the Internet; or (2) create an exception to the application of this subchapter. (d) Subsection (a) does not apply to a consultation with an attorney who is an employee of the governmental body. (e) For purposes of Subsection (d), an attorney who receives compensation for legal services performed, from which employment taxes are deducted by the governmental body, is an employee of the governmental body… The City of Lubbock has asked that the League consider taking a position on allowing non-attorney consultants to participate by teleconference in executive sessions. The rationale is that the requirement that a consultant be physically present has the potential of driving up the cost to a city when a simple conference call, during executive session, would suffice. (*Note: This initiative relates to allowing individuals to call into otherwise allowable open meetings with a quorum in physical attendance. Separate legislation in 2013 permits videoconference open meetings in certain circumstances.) The Committee may wish to recommend a position on legislation that would expressly authorize non-attorney consultants to participate in a meeting by conference call.

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Public Information Act – Electronic Filing

A city that seeks a decision from the attorney general about whether information is excepted from public disclosure is currently able to submit the request and related information electronically, in addition to being able to submit the information by mail or in person. The cost for an electronically-submitted request for an attorney general decision is a $25 administrative convenience fee, plus a separate $5 administrative fee imposed by Texas.gov. The $25 administrative convenience fee is not specifically authorized by statute, but instead is set by the attorney general pursuant to administrative rules which provide as follows: “Each request for decision submitted through the attorney general's designated electronic filing system will be assessed a nonrefundable administrative convenience fee, to be set by the attorney general, that reasonably relates to the cost of the resources expended to develop and administer the attorney general's designated electronic filing system.” The City of El Paso has indicated a desire have legislation filed to reduce the administrative convenience fee charged by the attorney general for each electronic submission for a decision. The Committee may wish to consider taking a position on such legislation.

Open Meetings Act

The Texas Public Policy Foundation’s (TPPF) Center for Local Governance has approached League staff regarding seeking beneficial amendments to the Texas Open Meetings Act. Specifically, TPPF is seeking to enact provisions to allow: (1) the use of social media by elected officials without the fear of having an inadvertent illegal closed meeting; and (2) clarity in the criminal conspiracy provision that would remove the threat of jail time for casual discussions between less than a quorum of a city council.

While passing such initiatives would be a difficult proposition (largely due to the inevitable media opposition), a support position in the League’s program would allow staff to assist TPPF with their work.

The Committee may wish to recommend a position relating to legislation that would enact beneficial amendments to the Texas Open Meetings Act that relate to the use of social media and the discussion public business.

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Funding the State Water Plan

The Texas State Water Plan is designed to provide for the orderly development, management, and conservation of water resources in the state. The plan is intended to provide that sufficient water will be available at a reasonable cost to ensure the public health, to further economic development, and to protect the agricultural and natural resources of the entire state. The State Water Plan is the culmination of a regional planning process that the Texas Legislature established in 1997. Every five years, 16 planning groups – one for each regional water planning area – assess the projected population, water demands, and water supplies in their area for the next 50 years. Each planning group holds public hearings and meetings to develop its regional water plan, which lists the water supply projects needed to meet their water shortages.

Once a regional water planning group adopts its regional water plan, the plan is then sent to the TWDB for approval. The TWDB ultimately compiles the information to make the state water plan. The most recent iteration is the 2012 State Water Plan, which contains more than 3,000 strategies to meet water needs during a drought.

Before the 2013 session, the state legislature repeatedly failed to provide a funding source for the State Water Plan. Some history on the efforts to obtain a state funding source follows.

The Water Conservation Implementation Task Force that was created in 2003 discussed various funding mechanisms, including municipal “tap fees” to be remitted to the state. In 2005, the legislature considered S.B. 3. The bill, which did not pass, would have provided that each retail public utility (including city-owned utilities) shall collect a water conservation and development fee from each customer in the amount of thirteen cents for each 1,000 gallons of water sold to the customer, except that the first 5,000 gallons of water sold to the customer would be exempt from the fee if the customer is a resident of a single-family dwelling or a unit of a multifamily dwelling. The revenue from the fee would have been deposited to the credit of the water infrastructure fund, which is generally used to: (a) make loans to political subdivisions at or below market interest rates for water infrastructure projects; (b) make grants, low-interest loans, or zero-interest loans to political subdivisions for projects to serve areas outside metropolitan statistical areas; and (c) make loans at or below market interest rates for planning and design costs, permitting costs, and other costs associated with state or federal regulatory activities. City officials have traditionally been opposed to that initiative for various reasons, not the least of which is the fact that it would require cities to act as revenue-collection agents for the state. Leading into the 2009 session, it appeared that Senator Kip Averitt (the chair of the Senate Natural Resources Committee at the time) favored a state tax on bottled water. However, no such fee was enacted in 2009. Following the 2009 session, the House Committee on Natural Resources was charged to review implementation of the State Water Plan, but never issued an interim report on the subject. It appeared that the impending state budget shortfall in 2011 would have made it unlikely that further funding mechanisms would be proposed to fund the State Water Plan. However, the

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funding issue was pursued with renewed vigor by certain legislators because of the record drought that began that year. The Chairman of the House Natural Resources Committee introduced a new proposal that included a constitutional amendment and enabling legislation in the following bills:

• H.B. 3273 (Ritter) – State Water Implementation Fund: would have created a state water implementation fund to be administered by the Texas Water Development Board (TWDB) to pay the principal of and interest on, or to make payments under a bond enhancement agreement entered into by the TWDB with respect to the principal of or interest on, bonds issued for certain projects included in the state water plan. (Note: please see H.J.R. 138, below.)

• H.J.R. 137 (Ritter) – State Water Plan: would have amended the Texas Constitution to

provide that: (1) if the legislature requires the Texas Water Development Board to adopt a state water plan, the legislature shall provide for the imposition by the state of one or more fees, the proceeds of which must be deposited to the credit of a special fund in the state treasury to be known as the state water implementation fund for Texas, funds in which may be used only to fund projects included in the state water plan; and (2) the Texas Water Development Board may issue general obligation bonds, at its determination and on a continuing basis, for one or more accounts of the Texas Water Development Fund in amounts such that the aggregate principal amount of the bonds issued by the board that are outstanding at any time does not exceed $6 billion.

• H.J.R. 138 (Ritter) – State Water Plan: would have amended the Texas Constitution to:

(1) create the state water implementation fund for Texas in the state treasury to provide a method for financing projects included in the State Water Plan; (2) provide that the legislature: (a) shall provide for the imposition by the state of a fee or tax, the proceeds of which must be deposited to the credit of the fund and may provide for the deposit of other sources of revenue to the credit of the fund; and (b) may prescribe the manner in which money in the fund may be used; and (3) provide that a law dedicating revenue to the fund prevails over any law enacted in the same session of the legislature that purports to abolish dedications of revenue in the state treasury for a particular purpose, regardless of the relative dates of enactment. As later amended, H.J.R. 138 would have imposed a tap fee (see below).

This idea of a constitutional amendment coupled with the growing severity of the drought put the League in somewhat of a quandary. Outright opposition to tap fees in the face of these two factors—which was the League’s position going into the 2011 session—wasn’t politically realistic anymore. Cities were in real danger of simply losing on the issue, with nothing to show for it. Accordingly, the TML board decided to modify the League’s position on tap fees during the 2011 session. The result of that modification was the following position: Oppose legislation that would impose state “tap fees” or any other type of state charge on municipal water systems, except that TML would take no position on any tap fee proposal

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that contains all of the following features: (1) is adopted by popular vote pursuant to a constitutional amendment; (2) the proceeds of the fee shall fund water infrastructure and not state general revenue; (3) grants regional authority over expenditure of the revenue of such fees; (4) is fairly and proportionately levied not just on municipal water users, but on industrial and agricultural users as well; and (5) permits the collecting water system to retain a percentage of the fee necessary to offset the costs of collection and remittance to the state. Shortly after that position was adopted, H.J.R. 138 was amended to include a tap fee. The tap fee in that resolution worked like this: All “public utilities” shall collect a “water supply serve connection fee” in an amount set by the comptroller, but not to exceed one dollar each month for residential users; $5 a month for commercial users, and $100 a month for industrial users. All revenue from the fee would be deposited into a state water implementation fund and no statute could be enacted to abolish that dedication. H.B. 3273 would have permitted the water utility to retain one percent as a collection fee. However, neither bill met two of the more important conditions in the League’s position: (1) regional control over expenditures; and (2) that it be fairly levied on all users, including agriculture. None of the bills above made it out of the House. It appeared that political pressure related to “no new taxes” was more powerful than the effects of the drought. Heading into the 2013 session, the House Natural Resources Committee’s charge was to: Monitor the ongoing statewide drought and the performance of state, regional, and local entities in addressing it. Examine the impact of the drought on the state water plan, including an evaluation of how well the state’s existing water resources can meet demand, the need for additional funding sources to implement the plan, and the effectiveness of current drought planning and drought management policies. Identify short-term and long-term strategies to help the state better cope with drought and assess any obstacles, including state and federal regulations, to implementation of these strategies. Though the committee’s report to the legislature did not provide specifics, the committee’s recommendation was for the legislature to: Provide for the establishment of a dedicated fund and funding source for the implementation of the State Water Plan in order to offer meaningful funding alternatives and incentives to local entities. One of the first bills filled in the 2013 session was filed by the Chairman of the House Natural Resources Committee and provided a funding source for the State Water Plan. The bill, H.B. 4 (Ritter/Fraser) subsequently became law and passed and specifically provides that:

1. the state water implementation fund for Texas (SWIFT) is created as a special fund in the state treasury outside the general revenue fund.

2. the fund should never be used for a purpose other than the support of projects in the state water plan.

3. the fund consists of:

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a. money transferred or deposited to the credit of the fund by law; b. the proceeds of any fee or tax imposed by this state that the legislature by statute

dedicates for deposit to the credit of the fund; c. any other revenue that the legislature by statute dedicates for deposit to the credit

of the fund; d. interest earned on amounts credited to the fund; and e. money transferred to the fund under a bond enhancement agreement.

4. the Texas Treasury Safekeeping Trust Company (an existing state special purpose entity that was created to efficiently and economically manage, invest, and safeguard funds for the state and various subdivisions of the state) shall manage and invest the fund, maintaining sufficient liquidity to meet the needs of the fund and adopting a written investment policy appropriate for the fund.

5. at the direction of the Texas Water Development Board, the trust company shall make disbursements from the fund to another fund or account pursuant to a bond enhancement agreement in the amounts the board determines are needed for debt service payments on or security provisions of the board’s general obligation or revenue bonds.

6. of the money disbursed from the fund during the five-year period between the adoption of a state water plan and the adoption of a new plan, the board shall apply not less than: (a) 10 percent to support projects included in the state water plan that are for rural political subdivisions or for agricultural water conservation; and (b) 20 percent to support projects included in the state water plan that are for water conservation or reuse.

7. the board may direct the trust company to enter into bond enhancement agreements to provide a source of revenue or security for the payment of the principal or interest on bonds issued by the board to finance or refinance projects included in the state water plan, if the proceeds of the sale of the bonds have been or will be deposited to the credit of:

a. the state water implementation revenue fund for Texas; b. the water infrastructure fund; c. the rural water assistance fund; d. the Texas Water Development Fund II state participation account; or e. the agricultural water conservation fund.

8. the board may direct the trust company to make disbursements for the support of bonds the proceeds of which are used to provide financial assistance in the form of:

a. a loan bearing an interest rate of not less than 50 percent of the then-current market rate of interest available to the board;

b. a loan to finance a facility under repayment terms similar to the terms of debt customarily issued by the entity requesting assistance, not to exceed the lesser of the useful life or 30 years;

c. a deferral of loan payment; d. incremental repurchase terms for an acquired facility; or e. a combination of the these methods.

9. the board may not direct the trust company to enter into a bond enhancement agreement with respect to bonds issued by the board the proceeds of which have been or are to be used to make grants.

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10. each regional water planning group shall prioritize projects in its respective region using the uniform standards established by the board and the board shall prioritize projects in the state water plan for the purpose of providing financial assistance.

11. the State Water Implementation Fund for Texas Advisory Committee is created and is composed of the comptroller, three members of the senate appointed by the lieutenant governor, and three members of the house appointed by the speaker of the house.

12. the advisory committee shall submit recommendations to the board regarding the use of money in the fund for use by the board.

13. the state water implementation revenue fund for Texas is created as a special fund in the state treasury outside the general revenue fund to be used by the board only for the purpose of providing financing for projects included in the state water plan.

14. the board may sell to the state water implementation revenue fund for Texas any political subdivision bonds purchased with money in the water infrastructure fund.

H.B. 4 passed, along with S.J.R. 1, which presented to Texas voters an amendment to the Texas Constitution to authorize the transfer of $2 billion from the Economic Stabilization Fund (commonly referred to as the “Rainy Day Fund”) into the SWIFT for use in a low-interest loan program to fund water management strategies included in the State Water Plan. Texas voters’ overwhelming approved S.J.R. 1 (“Proposition 6”) on November 5, 2013. Proposition 6 passed with over 73 percent of the vote, enjoying bipartisan support and broad backing from business, environmental, and other interests. Since the passage of Proposition 6, the TWDB has been working to draft the rules required by H.B. 4 relating to allocation of the funding and prioritization of projects. Prior to drafting the proposed rules, the TWDB held two informal stakeholder meetings in Austin and four board meetings around the state during which interested parties were given the opportunity to provide public comments. The draft rules were published in the Texas Register on July 11, 2014. The TWDB conducted additional, formal work sessions around the state to accept public comments. The last of these work sessions is scheduled for August 21, 2014, in Arlington. The formal comment period is officially open and will continue until September 1, 2014. Interested parties can view the rules and submit comments on the TWDB website at http://www.twdb.texas.gov or by emailing comments to rulescomments@twdb.texas.gov. Although the legislature has finally provided a source of funding for the State Water Plan, questions still remain. This article from a November 2013 edition of the Dallas Morning News sums up sum of the concerns with the newly created SWIFT:

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Rural Texas counties fear cities’ thirst after water fund vote

By DAVID BARER Dallas Morning News Austin Bureau dbarer@dallasnews.com

Updated: 30 November 2013 08:18 AM AUSTIN — Most Texas counties said yes to big spending on water projects in this month’s constitutional amendment election. But in rural Texas, a few counties held out, wary of big-city thirst sucking them dry. The clusters of opposing counties share a common denominator: They’re uniquely able to produce water and relatively close to cities in need. Now, they fear, their needs will be sacrificed to maintain Texas’ economic growth and population boom. The counties’ dissent highlights the coming battle between big cities like Dallas and the rural areas with water to spare. The water funding measure, approved by nearly three-quarters of voters statewide, will move $2 billion from the rainy day fund into a new water bank to help finance projects, such as dams, pipelines and conservation endeavors. A revamped Water Development

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Board plans to prioritize projects from the 50-year state water plan starting in mid-September and should begin receiving applications for funding and disbursing money in 2015. D-FW’s benefits Perhaps no metropolis stands to benefit more from water funding than the Dallas-Fort Worth area. The planning area encompassing North Texas has hundreds of potential projects costing over $20 billion. That’s nearly half the projected total cost statewide of all projects for the next 50 years. The biggest project on North Texas’ list, estimated at $3.4 billion, is Lake Marvin Nichols. It would sit more than 50 miles northeast of Dallas mostly in Red River County, which voted against the water measure. The lake is possibly decades from being built, yet residents in the area, like Gary Cheatwood of Cuthand, feel the effects of the lake’s potential. Property values within the anticipated footprint of the lake have stalled and residents fret over losing a unique hardwood forest, among other things, Cheatwood said. “We are already designated a unique reservoir site; that puts us in jeopardy,” said Cheatwood, who volunteered as a representative of Red River County on the regional water planning committee and opposed the water funding measure. Only 20 percent of the water in Marvin Nichols would be reserved for area use. The rest would be for North Texas. Economic factors Supporters of the water plan have long said that Texas’ continued economic growth moves in tandem with plentiful water. Energy production, urban expansion and agriculture all sustain themselves on water. Dan Buhman, assistant general manager of the Tarrant Regional Water District, said that his district is working hard to increase conservation in Fort Worth. But if more water becomes necessary, as forecasts suggest, Marvin Nichols is a potential answer, Buhman said. “Projections are that demand is going to continue to grow, water demand. We have to plan for that,” Buhman said. Ann Rushing, mayor of Clarksville, the seat of Red River County, said residents worry about Marvin Nichols. But Texas will need the lake because of drought and population increase. Plus, the $200 million allotted in the plan for rural projects could help the county, she said. Rushing supported the water amendment, known as Proposition 6. She is vice president of the pro-Marvin Nichols Northeast Texas Water Coalition. “The people that

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voted against Proposition 6 were not looking at the big picture. It goes beyond individual needs,” Rushing said. ‘Profiteers’ In Central Texas, Bastrop County Judge Paul Pape said, residents have concerns about the exploitation of their underlying aquifer. Water utilities and corporations have worked for years and spent millions to secure and build the infrastructure necessary to pipe groundwater from the various aquifers of nearby Bastrop to expanding urban areas along Interstate 35, chiefly in fast-expanding Hays County, south of Austin. “We are not happy about making it easier or cheaper for water marketers or profiteers to pump and pipe our water away from here,” Pape said. “Someday in the future, we are going to need that water.” But the dissenters were badly outnumbered. All 20 dissenting counties statewide combined for less than 20,000 no votes. In Dallas County alone, more than 50,000 voted yes on the measure. Greg Flores, vice president of public affairs for the San Antonio Water System, said the system has tapped area aquifers for water. The San Antonio system was politically neutral on the water amendment, though it would benefit from state assistance on a desalination plant that will pull water from a brackish aquifer near San Antonio. Groundwater will supply almost 10 percent of the state’s water needs by 2060. Conservation and reuse projects are forecast to supply triple that amount, according to the plan. Flores said the state’s population will roughly double in 50 years, with most of that growth in urban areas. The state has to plan and make water available for urban growth in order to prosper. Texas’ “surface water, that is water that is in lakes and rivers, is, for all practical purposes, all allocated and all permitted,” Flores said. “So the state is going to have to look to groundwater to meet those future demands.” The committee should discuss the foregoing materials. It may wish to recommend a position on legislation related to State Water Plan funding or funding allocation, though the League has always been cautious of addressing regional allocation of state aid due to the potential for city vs. city conflicts.

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Relevant 2013 TML positions:

• Oppose legislation that would impose state “tap fees” or any other type of state charge on municipal water systems.

• Support legislation to provide funding for the State Water Plan in the form of a transfer of state money from the state’s “Rainy Day Fund.”

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Water Conservation The heart of the water conservation issue is that, while everyone agrees that water conservation is important for Texas, city officials have traditionally resisted the imposition of a uniform, statewide program that does not take into account the needs, financial and otherwise, of different parts of the state. In past years, the legislature has considered numerous bills related to statewide water conservation standards, and many have been enacted. For example, H.B. 3338 became law in 2003. That legislation requires any city that owns a retail public utility to perform a water audit in order to obtain any financial assistance from the Texas Water Development Board (TWDB). (Additional audit requirements were added in 2011 and 2013, and are discussed below.) In addition, H.B. 2660 (also enacted in 2003) requires all holders of water supply permits to establish quantifiable goals for drought contingency plans. The major water conservation news resulting from the 2003 session, however, was the passage of S.B. 1094. That bill created the Water Conservation Implementation Task Force to identify, evaluate, and select best management practices (BMPs) for cities, industries, and agricultural water users. The Task Force met throughout 2003 and 2004 to evaluate the costs and benefits of suggested BMPs and the implementation of water conservation strategies recommended in regional and state water plans. In addition, the Task Force met regularly to evaluate the proper role of state funding of incentive programs and to advise the TWDB and the Texas Commission on Environmental Quality (TCEQ) on establishing per capita water use targets and goals. TML, the Texas Municipal Utilities Association, and other interested groups participated actively in the meetings of the Task Force. In November 2004, the Task Force issued a report (which included suggestions for legislation in 2005) and a BMP guide for cities. The TML position was that, while the BMP guide is a good resource for cities, mandatory BMPs constitute an unacceptable, unfunded mandate. The BMPs in the guide issued by the Task Force are voluntary. The Task Force was later abolished on January 1, 2005. Another conservation issue relates to mandatory conservation water rates. Cities have the exclusive authority to set water rates within city limits. H.B. 3367, legislation that failed to pass in 2003, is worthy of mention because it would have required water utilities to: (1) adopt water rates that encourage conservation, and (2) dedicate revenue for conservation programs. Specifically, it would have required that the rate for nonresidential customers be a tiered rate structure, charging more for more water use. Many smaller cities with limited staff and financial resources would struggle to meet the challenge of changing policies and purchasing proper accounting tools to implement state-directed water rates. The 2007 session showed that water conservation continued to be an issue of concern, as lawmakers addressed water conservation in several ways. H.B. 4 took a direct approach. It requires each water utility with 3,300 or more connections to submit to the state a water conservation plan and a report on progress in carrying out the plan. (This provision was also

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passed as part of S.B. 3 that same session.) H.B. 4 also directed the TWDB to create and implement a statewide water conservation awareness program. The omnibus bill for 2007 was S.B. 3. As passed, this legislation requires the TWDB, when considering applications for water infrastructure funds and other state water development and conservation funds, to give priority to water supply projects and entities that have already demonstrated significant water conservation savings or that will achieve significant water conservation savings by implementing the proposed project. In addition, S.B. 3 provides for the:

• creation of the Water Conservation Advisory Council (WCAC), which is directed to: (1) monitor water conservation technologies, education, and implementation across the state; (2) provide biennial reports to the governor; and (3) conduct a study to evaluate the desirability of creating a certification process for water conservation training facilities;

• modification of current law relating to the acquisition and construction of reservoirs; and • creation of a joint interim legislative committee on state water funding. (Note: the

recommendations of this committee are discussed further in the “Funding the State Water Plan” section of this packet.)

The WCAC has been hard at work since its creation, and has developed numerous BMPs, including municipal BMPs, that are available at www.savetexaswater.org. During the 2007 session, the legislature also examined irrigation technologies as a way of conserving water. In the end, lawmakers passed a bill mandating that a city with a population of more than 20,000 must require an installer of an irrigation system to be licensed under the Texas Occupations Code and to obtain a permit from the city before installing an irrigation system in the city or its extraterritorial jurisdiction. In addition, the bill requires a city to regulate the design, installation, and operation of irrigation systems in accordance with Section 1903.053 of the Occupations Code and any rules adopted by the TCEQ. The bill also authorizes a city that is required to regulate irrigation installers and systems to employ or contract with a licensed plumbing inspector or a licensed irrigation inspector to enforce the regulations. Finally, the bill allows the city to recover its costs of administering the regulatory program by placing a fee on irrigation system installers for obtaining or renewing an irrigation permit. During public comment on the proposed rules to implement H.B. 1656, many organizations, including some cities, spoke. TML did not file comments on the proposed rules because some cities strongly supported them, while others felt they were too financially burdensome. The rules went into effect on January 1, 2009. As the new irrigation rules went into effect, there were concerns regarding the interaction of the new rules with the existing plumbing license requirements in Chapter 1301 of the Texas Occupations Code. Some cities require a plumber/landscape irrigator to be permitted under both the city’s plumbing ordinance and the new irrigation program, and there is a concern about charging fees for both permits, rather than only one. In addition, concerns arose regarding a section of Chapter 1301 of the Texas Occupations Code, which seems to include landscape

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irrigation as a plumbing activity to be licensed under that chapter. This could have the unintended effect of requiring cities with irrigation licensing programs to comply with Chapter 1301 when implementing those programs; to determine whether a plumber has a certificate of insurance; and to require the cities to accept permit applications, to collect fees, and to issue permits by fax, email, or phone. While these concerns were raised with TCEQ staff, there do not appear to have been any amendments made to the existing rules. The League has not heard from cities about this problem in recent times. In addition, lawmakers in 2007 introduced two bills that would have mandated the use of “evapotranspiration-based irrigation control” technology. “Evapotranspiration” is a scientific term that simply means the process by which water is lost to the atmosphere through evaporation (the loss from open bodies of water, such as lakes and reservoirs, wetlands, and bare soil) and transpiration (the loss from plant surfaces). Several factors influence the evapotranspiration process, including: (1) physical characteristics of water, soil, and plant surfaces; (2) solar radiation; (3) surface area of open bodies of water; (4) wind speed; and (5) seasons of the year. The technology that would have been mandated in the two bills uses a controller that is added to an irrigation system to automatically adjust the amount of water applied to the landscape. Some “smart” controllers receive radio, pager, or Internet signals with evapotranspiration information. Other controllers use historical data to adjust watering. The bills, H.B. 2299 and S.B. 1838, would have directed the TCEQ to require each city to adopt a local ordinance that requires new irrigation systems to have evapotranspiration-based irrigation control systems and irrigation schedules, and would have imposed the evaoptranspiration requirements on new irrigation systems in any political subdivision that did not adopt an ordinance by January 1, 2009. At a time when municipal budgets are stretched to the limit and the ability of cities to raise revenue is under attack by some lawmakers and other state officials, city officials are forced to make tough budget decisions. Each city has a unique perspective on priorities relating to water conservation, and a mandate that cities install (and require their citizens to install) evapotranspiration controllers that don’t even guarantee water savings doesn’t appear to make sense. The bills didn’t pass. The 2009 session was relatively quiet in the areas of water conservation and irrigation/evapotranspiration. H.B. 2134 and S.B. 2315, which did not pass, dealt with mandatory water audits. (Similar bills ultimately passed in 2011, and are discussed below.) The only conservation-related bill that passed in 2009 was H.B. 2667, which provides that: (1) certain plumbing fixtures, such as shower heads, faucets, toilets, and others must meet detailed water-saving performance measures; and (2) the governing body of a city or county by ordinance or order may allow the sale in the city or county of a urinal or toilet that does not comply with the bill’s requirements if the governing body finds that to flush a public sewer system in a manner consistent with public health, a greater quantity of water is required because of the configuration of the drainage systems of buildings located in the city or county or the public sewer system.

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Several bills passed in 2011 related to conservation measures. H.B. 1732 provides that an applicant for certain financial assistance or loans from the Texas Water Development Board (including assistance through the water infrastructure fund) may not receive the assistance if the applicant has failed to satisfactorily complete a request by the agency’s executive administrator or a regional planning group for information relevant to the project for which the assistance is being requested, including a water infrastructure financing survey. (S.B. 370 contained substantially similar provisions.) H.B. 3090 provides that: (1) a water utility providing potable water that receives financial assistance from the TWDB shall perform and file an annual water audit computing the utility’s system water loss during the preceding year; (2) a utility that does not receive financial assistance from the TWDB shall perform and file an audit described in (1), above, every five years; and (3) the categories into which cities are grouped by population for purposes of TWDB-developed water audit methodologies and submission dates are modified to combine in the lowest population group all cities with populations of 10,000 or less. S.B. 181 and S.B. 660 (the TWDB sunset bill) require that: (1) the TWDB and TCEQ develop a uniform, consistent methodology and guidance for calculating water use and conservation to be used by a city in developing water conservation plans and preparing certain reports required by state law; (2) the methodology and guidance include: (a) a method of calculating total water use, including water billed and nonrevenue water used, (b) a method of calculating water use for each sector of water users, (c) a method of calculating total water use by a city in gallons per capita per day, (d) a method of classifying water users within sectors, (e) a method of calculating water use in the residential sector that includes both single-family and multifamily residences, in gallons per capita per day, (f) a method of calculating water use in the industrial, agricultural, commercial, and institutional sectors that is not dependent on a city’s population, and (g) guidelines on the use of service populations by a city in developing a per-capita-based method of calculation, including guidance on the use of permanent and temporary populations in making calculations; (3) the TWDB and TCEQ use the methodology and guidance developed in evaluating a water conservation plan, program of water conservation, survey, or several other types of reports required by state law; (4) the TWDB create a data collection and reporting program for cities with more than 3,300 connections; and (5) the TWDB and TCEQ adopt rules as necessary to implement the bill. The TWDB has adopted the rules required by S.B. 181 and S.B. 660. Their “Guidance and Methodology for Reporting on Water Conservation and Water Use” intended to guide water providers through the process is available at: http://www.twdb.state.tx.us/conservation/doc/SB181Guidance.pdf The only bill related to irrigation in 2011 was H.B. 2507, which passed. The bill makes it a class C misdemeanor for a person who is required to be licensed by the TCEQ to install an irrigation system to do so without the required license. No city mandates were introduced in 2011.

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Water was one of the main topics of the 2013 session. Several water conservation bills were filed that ultimately passed. H.B. 252 requires that each municipally owned utility notify the TCEQ when its available water supply is less than 180 days. H.B. 857 requires certain municipally owned utilities to file an annual water loss audit with the TWDB, and H.B. 1461 requires the utilities that file a water loss audit to notify each of its customers of the water loss reported in the audit.

A bill related to cities’ water conservation measures, H.B. 449, was filed in 2013. This bill would have prohibited a city from enacting or enforcing an ordinance that prohibits or unreasonably restricts a property owner from xeriscaping the owner’s property. This bill failed to pass. Which method of addressing water shortages—restricting usage, repairing/replacing inefficient infrastructure, or scarcity pricing—is the best? Whatever a city council decides is right for its city is usually the correct method. Local control, in other words, is the best method.

Numerous cities have imposed watering restrictions in recent years. The have done so because the city council decided that was the correct course of action for those cities.

Water restrictions, conservation education, and higher prices have achieved the result of Texans using less water. According to the League’s survey, the average monthly residential consumption is decreasing each year (with a few outliers), averaging a total of 6,523 gallons in 2014 compared to 8,581 in 2002.

Interestingly, one side effect of lower use is a loss of millions of dollars in anticipated revenue to some cities. For example, the City of Wichita Falls, has reported that conservation efforts have resulted in water revenue down 9 million dollars from fiscal year 2012-2013 to fiscal year 2013-2014. Anticipated water revenue is generally budgeted to pay for fixed or infrastructure costs and in certain cases, to pay off debt. In some cases, the debt was issued to finance new wastewater plants or water-related projects.

Each city has a unique perspective and resulting priorities for expending resources to save water. Climate, population density, availability of water resources, and the ratio of industrial to residential water use in the city are but a few of the various factors that affect conservation decisions across the state. Water conservation continues to be a major issue in many parts of Texas, and it appears that legislation passed in recent sessions has already created a comprehensive scheme to address the issue. The committee should discuss the foregoing materials. It may wish to recommend a position on local control of water conservation measures and mandated irrigation control requirements. Relevant 2013 TML positions:

• Oppose legislation that would impose on cities any additional mandates relating to

irrigation/sprinklers. • Oppose legislation that would impose mandatory water conservation measures on cities.

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Desalination

Recently, there has been a growing trend towards advancing desalination as a water supply source for the state. The impetus for this trend is the progress of new desalination technologies, along with the growing need for the development of new water resources. Desalination is the process by which some device separates saline water into two streams: one stream that is almost free of dissolved salts (the freshwater stream or permeate) and the other stream containing most of the dissolved salts (the concentrated stream or concentrate). There are three major sources of water used in desalination facilities: brackish surface water, brackish groundwater, and seawater. The major distinguishing factor between brackish waters and seawater is the concentration of total dissolved solids (TDS). The concentration of brackish waters ranges from 1,000 to 10,000 mg/L TDS, whereas seawater breaches 22,000 mg/L TDS. Desalination requires energy to separate the particulate matter from the water molecules, so more energy is required to desalinate seawater than brackish. In 1997, the Texas Legislature first looked at desalination as a water supply strategy. The legislature passed S.B. 1, which included provisions to encourage the consideration of alternative water supply options such as reuse and desalination in addressing the future water needs of the state. However, it is in recent years, during the current period of drought, that desalination has started to become a priority for the Texas legislature. Following the 2011 legislative session, the interim charges for the House Natural Resources Committee included a charge to look at desalination. The committee held a hearing on desalination and provided the following recommendations to the 2013 legislature:

• Pilot Studies and Permitting: Consider the effectiveness of pilot studies and testing requirements in the development of desalination projects. Continue streamlining the process review for planning in order to expedite the permitting process for a desalination plant.

• Local and Regional Planning: Encourage local and regional entities to further consider desalination as an available alternative water supply to meet immediate demands, especially in times of drought.

• Waste Disposal of Brine: Continue studying the environmental impacts of brine disposal, while continuing to improve and advance more cost-effective disposal methods.

• Distinguishing Between Fresh Groundwater and Brackish Groundwater: Consider clarifying statutory language in order to distinguish fresh groundwater from brackish groundwater in the management and development of groundwater resources.

During the 2013 session, several bills related to desalination were filed, none of which passed:

• H.B. 2752 (Larson) – Brackish Groundwater Desalination: would have: (1) allowed an advanced brackish groundwater desalination project to receive funding from the Texas Water Development Board in the same manner as a project included in the state water

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plan; and (2) created a presumption that an advanced brackish groundwater desalination project is a water conservation or reuse project. (Companion was S.B. 1285 by Schertner.).

• H.B. 2334 (Callegari) – Brackish Water: would have exempted a water supply entity from obtaining a permit to appropriate for any beneficial use state water that consists of brackish or marine water.

• H.B. 2578 (Larson) – Brackish Groundwater: would have required the Texas Water Development Board to develop and make available model rules for the permitting of brackish groundwater production.

Following the 2013 session, Senate and House members were appointed to a Joint Interim Committee to Study Water Desalination. The committee held three public hearings, including one hearing held in Austin where League staff appeared and testified. Two additional hearings were held outside of Austin, in Corpus Christi and Wichita Falls. The committee’s recommendations should provide insight on what desalination legislation will be filed in the 2015 session. Desalination can be a viable solution to immediate needs, especially during a time of extreme drought when few other alternatives exist. For long-term planning, however, high cost may remain an obstacle to widespread implementation of desalination. The Committee may want to discuss the foregoing materials and make recommendations related to legislation that relates to desalination.

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Groundwater Conservation District Permitting The San Antonio Water System (SAWS) frequently utilizes groundwater to provide water to its customers. To that end, SAWS is seeking a legislative change relating to the duration of groundwater permits from groundwater conservation districts. The districts have taken the position that they can issue only short-term permits. This has the effect of reducing long-term financing options for SAWS. The following information was presented by SAWS for the Committee’s consideration:

Support Long-Term Groundwater Permitting Proposal

• A bill that allows a long-term permit for a city that intends to purchase and transfer water outside of a Groundwater Conservation District (GCD)

• Existing Section 36.122 of the Water Code already requires the issue of a permit for the

transfer of groundwater out of a GCD for a period of at least 30 years when infrastructure is built

• Some GCDs interpret the Water Code to authorize a requirement for two separate

permits; a withdrawal permit issued for as little as one year AND a separate transfer permit to be issued for 30 years, defeating the certainty and purpose of Section 36.122

• The long-term water permitting proposal will clarify that a single long-term permit for

production and transportation of groundwater is required, and will provide needed stability for cities during the groundwater permitting process

• Groundwater Conservation Districts maintain the ability to make changes to long-term

permits

• Existing section 36.122 already allows a GCD to review and make reductions to address groundwater availability, aquifer conditions, subsidence, depletion, and effects on other users, as often as District desires, so long as all permits are treated equitably

Benefits of Stable Long-Term Water Permits

• Facilitates development of needed municipal water infrastructure projects that require long-term financing and expenditure of hundreds of millions of dollars

• Reflects a legislative understanding of the need for permit reliability to secure customary

30-year project financing that was originally envisioned in Section 36.122

• Meets ratepayer expectations of a long-term and stable water supply

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• Reduces the potential for contested cases every few years where cities can spend

substantial time and expense in courtrooms and hearings, rather than serving customers

• Balances both long-term certainty for cities AND flexibility for GCDs to manage and protect groundwater

Cities Need Groundwater Regulatory Reform to Plan for the Future

Help Cities Meet Ratepayer Expectations of Long-Term Water Supply

Cities Need Groundwater Conservation Districts Long-Term Permitting Certainty

• The development of sufficient water supplies is the critical issue for Texas cities

• Drought and population growth have placed significant stress on our state’s

surface water supplies, increasing focus on the development of vast groundwater sources to meet long-term needs

• In order to meet ratepayer expectations of a long-term and stable water

supply, cities need groundwater regulatory reform.

• A key element in the development of public-sector water infrastructure projects is a stable regulatory environment, particularly the permit reliability needed to secure customary 20-30 year project financing

• Section 36.122 of the Water Code requires that permits for the transfer of

groundwater be issued for at least 30 years when infrastructure is built

• But many districts are interpreting the Water Code to authorize two separate permits: a very short-term production permit for up to 5 years; and a second transfer permit for 30 years, defeating the purpose of Section 36.122

• These short-term production permits make financing projects, and long-term

water supply planning, very difficult when a large project must be based on a 1-5 year production permit, in a locally politicized regulatory environment

• In addition, the potential for contested cases every few years at the expiration of a production permit mean that utilities spend substantial time and expertise in courtrooms and hearings, rather than serving customers.

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• Costly water projects financed over 20-30 years cannot be built responsibly

on short-term permits without certainty beyond a 1-5 year permit term

• There are approaches being negotiated to provide greater project stability, including long-term production permits or automatic renewal of permits, which would provide districts flexibility to manage and protect groundwater

• Water infrastructure projects are sound public investments and provide good

paying jobs. The U.S. Department of Commerce estimates that each job created in water infrastructure creates 3.68 jobs in other sectors

Cities Need Groundwater Regulatory Reform to Plan for the Future

The Committee may wish to consider a position related to SAWS initiative to seek the permit reliability needed to secure customary 20-30 year water project financing.

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Solid Waste Franchises Since 1971, Texas cities have been authorized to provide, or contract with a private company to provide, exclusive garbage collection services within their city limits. The provisions in the Texas Health and Safety Code granting that authority have been amended several times during recent legislative sessions, and those amendments have created some confusion regarding municipal authority. In 2001, the legislature added to the Texas Health and Safety Code this amendment that appeared to erode the authority of a city to provide exclusive garbage collection services: This section does not apply to a person who provides the public or private entity, public agency, or county with written documentation that the person is receiving solid waste disposal services from another entity. During the House debate, the author of the amendment stated that the amendment “allows a person who already has a contract for waste disposal to exempt out of the county contract.” (Emphasis added.) Based on that legislative intent, the 2001 amendment arguably did not limit city authority regarding solid waste franchises. In 2003, the legislature again changed the law: Nothing…shall limit the authority of a municipality to enforce its grant of a franchise for solid waste collection and transportation services within its territory. The amendment worked to remove any ambiguity regarding the 2001 change and city authority in general. In 2007, during the closing hours of the Eightieth Legislative Session, the legislature passed a bill that some have argued could once again impact municipal solid waste franchises. House Bill 1251 amended Section 364.034 of the Texas Health and Safety Code to eliminate city authority to enter into exclusive solid waste franchises for the collection of grit or grease trap waste. That provision was detrimental to at least one city, but most others were not negatively affected by it. More importantly for all cities, the bill was amended late in the process to add a new Subsection (h), which reads as follows: This section does not apply to a private entity that contracts to provide temporary solid waste disposal services to a construction project. Some cities (and some solid waste haulers) feared that the new provision was intended to exclude temporary construction projects from an exclusive municipal franchise agreement. If read in isolation, this interpretation could make sense. However, the most significant portion of the change made by Subsection (h) is the limitation of its applicability to Section 364.034 only. Numerous other statutes also provide the basis for municipal authority regarding solid waste. Those statutes, read in their totality, provide a regulatory scheme that should continue to authorize cities to enforce their solid waste franchises.

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That interpretation is bolstered by a letter sent by the Texas Association of Builders (TAB) to State Representative Dennis Bonnen (R – Angleton), Chair of the Texas House Committee on Environmental Regulation. In the letter, the TAB (the organization that sought the 2007 amendment) explains that the provision was added “with the intent to expand the ability of counties to address the problem of illegal dumping within their jurisdictions by allowing counties to enter into exclusive franchise agreements for solid waste collection.” (Emphasis added.) According to TAB, it was “the addition of this language authorizing exclusive franchise agreements in the unincorporated areas of the state that caused our industry to seek clarification that these county agreements only deal with residential waste in an attempt to address illegal dumping….[and]…[n]othing in the new Subsection (h) is intended to in any way impact the ability of municipalities to enter into exclusive franchise agreements.” (Note: H.B. 3600 was introduced in 2011. That bill would have deleted subsection (h) entirely, but it did not pass.) The bottom line is that H.B. 1251 probably shouldn’t have had an effect on municipal solid waste franchises, but some ambiguity and confusion remains. No bills relevant to solid waste franchises passed in 2009 or 2011, but a court opinion from 2009 construing Health and Safety Code Section 364.034(e) casts some doubt on municipal authority. Section 364.034(e) currently provides: Except as provided by Subsections (f), (g), and (h), this section does not apply to a person who provides the public or private entity, public agency, or county with written documentation that the person is receiving solid waste disposal services from another entity. Nothing in this section shall limit the authority of a public agency, including a county or a municipality, to enforce its grant of a franchise or contract for solid waste collection and transportation services within its territory. Except as provided by Subsection (f), the governing body of a municipality may provide that a franchise it grants or a contract it enters into for solid waste collection and transportation services under this subchapter or under other law supersedes inside of the municipality’s boundaries any other franchise granted or contract entered into under this subchapter. Adams v. City of Weslaco, a 2009 Corpus Christi Court of Appeals opinion, reads the first two sentences of Subsection (e) together “to allow an opt-out and still allow enforcement of a duly authorized franchise, which by the very statutory limitation of its legislative grant, may not disallow an opt-out.” In this way, the court attempts to alleviate the tension between the constitutional prohibition against monopolies and the police power of a city to regulate garbage collection. Because the factual background of City of Weslaco involves an exclusive franchise to collect grease and grit, the implications of the case for other areas of municipal solid waste collection is unclear. (Legislation exempts grease and grit trap waste from a municipal franchise.) Moreover, the court did not explain whether the opt-out provision is operative in a small window of time. In other words, the facts in the case involved the city’s initial adoption of an exclusive franchise. The court also failed to reconcile its construction with Section 364.034(a)(2), which expressly authorizes a city to require the use of its service. Finally, the court did not examine other

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authority under which a city may enter into an exclusive franchise agreement for solid waste disposal services. For example, Chapter 363 of the Health and Safety Code broadly authorizes a city to enter into contracts to furnish or receive solid waste management services on the terms considered appropriate by the city council. For those reasons, a defensive posture may be appropriate for the League. No legislation was introduced in the 2013 session that would impact a city’s authority to enter into a solid waste franchise agreement, but the committee may want to recommend a related position. Relevant 2013 TML position:

• Oppose legislation that would limit a city’s authority to enter into a solid waste franchise.

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Exemptions from Municipal Drainage Fees Section 552.041 of the Texas Local Government Code authorizes cities to establish municipal drainage systems to “protect the public health and safety in municipalities from loss of life and property caused by surface water overflows.” In order to fund these drainage systems, a city is authorized to charge benefited properties for the use of the drainage system. Cities must set out a fee schedule that is “nondiscriminatory, equitable, and reasonable,” and the drainage fees charged by the city “must be directly related to drainage.” During the 2003 legislative session, lawmakers exempted state agencies and public institutions of higher education from the requirement to pay drainage fees. Prior to the passage of this exemption, cities were authorized to collect drainage fees from these entities just like any other entity. According to the amendment’s author, the logic behind the amendment is that it doesn’t make sense to have one taxpayer-funded entity paying a fee to another. Subsequently, some private entities also tried to avoid paying their fair share for the drainage systems from which they benefit. Specifically, legislators later considered a bill that would have expanded the newly-adopted state agency and public university exemption to include private institutions of higher education. Of course, the aforementioned policy reason for exempting public entities from the drainage fee requirement does not extend to private entities. Further, private campuses are often a major source of impervious cover, which increases runoff to drainage systems. Despite the League’s efforts and the efforts of several cities, S.B. 3 (the omnibus water bill passed during the 2007 legislative session) contained a provision that exempts private institutions of higher education from paying municipal storm water fees. The cost of providing drainage services or maintaining the drainage system infrastructure does not simply go away because the legislature provides an exemption for some. When private institutions don’t pay their fair share for the drainage system that they use, the city is forced to look to other sources of revenue to compensate. Essentially, this means a shift of the costs to homeowners and businesses. No generally-applicable legislation relating to drainage utility exemptions was filed in 2009 or 2011, but 2013 saw renewed activity. One spooky bill, H.B. 1168, would have exempted property that is a dedicated cemetery from payment of municipal drainage fees. Another, H.B. 3652, would have prohibited a city from imposing an assessment, charge, or fee on property for drainage or stormwater control, if the property has a retention pond or other retention device that benefits the city by preventing the necessity for city expenditures for drainage or stormwater control in the property’s location. Neither passed, but the Committee should consider adopting a position related to further exemptions from the fees. Relevant 2013 TML position:

• Oppose legislation that would exempt any entity from paying municipal drainage fees.

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Telecommunications Collocation On September 27, 2013, the Federal Communication Commission (FCC) released a Notice of Proposed Rulemaking (NPRM), related to how wireless tower siting applications (e.g., for cell phone and similar communications systems) are processed by cities. The 86-page NPRM covers several issues. Most important to cities is the issue relating to the FCC proposing rules to implement legislation (Section 6409 of the Middle Class Tax Relief and Job Creation Act of 2012) passed by Congress last year. Section 6409 provides that: Notwithstanding . . . any other provision of law, a State or local government may not deny, and shall approve, any eligible facilities request for a modification of an existing wireless tower or base station that does not substantially change the physical dimensions of such tower or base station. The FCC sought comments to clarify the provision above. While the language seems clear, some industry groups have contended – among many other things – that it mandates cities to allow access to city facilities for wireless facility placement. In comments filed by the National League of Cities, the National Association of Telecommunications Officers and Advisors, the National Association of Counties, and the United States Conference of Mayors, those national organizations urged the FCC not to hinder broadband deployment by adopting formal rules that would impose a one size fits all interpretation. The Texas Municipal League and the Texas Coalition of Cities for Utility Issues filed reply comments to supplement the national organizations. The comments essentially state that the FCC should not attempt to preempt local authority relating to wireless facilities. The FCC will now consider the numerous governmental and industry comments that were filed. In the meantime, the national wireless association – known as “PCIA” – has been seeking legislation at the state level to accomplish its goal of preemption of municipal regulations. In 2013, Georgia was able to stop state-level legislation from passing, but the following were not so lucky: (1) New Hampshire; (2) North Carolina; (3) Pennsylvania, and (4) Wisconsin. In those states, telecommunications providers have claimed that colocation is necessary for public safety providers, and that city regulations are endangering lives. That position is incorrect. The Committee may wish to consider a position against federal and state preemption of municipal colocation regulations.

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Oil and Gas Well Regulation

During the 2009 legislative session, lawmakers considered several bills related to municipal authority over gas wells, distribution pipelines, and drilling sites. The issue has been a very important one, especially for those cities in the Barnett Shale region. (And now for those in the Eagle Ford Shale region as well.) Some of the bills would have regulated the safety aspects of gas pipelines. None of those bills passed. One bill that passed in 2009 was beneficial for cities. H.B. 2333 provides that a city may enter into a lease for an oil, gas, or mineral interest in a street, alley, or public square (not including a public park) if the lease prohibits the lessee from using the surface of the land for drilling, production, or other operations. Two bills, H.B. 2572 and S.B. 686, relating to the placement of gas pipelines were passed. In 2009, certainly the most alarming bill (which ultimately did not pass thanks to the efforts of city officials and property owner groups) was H.B. 2110 by Bryan Hughes (R - Mineola). That bill would have provided that any city regulation that takes, damages, destroys, impairs, or prohibits development of a mineral interest shall be subject to the Private Real Property Rights Preservation Act. That Act: (1) waives sovereign immunity to suit and liability for a regulatory taking; (2) authorizes a private real property owner to bring suit to determine whether the governmental action of a city results in a taking; (3) requires a city to prepare a “takings impact assessment” prior to imposing certain regulations; and (4) requires a city to post 30-days notice of the adoption of most regulations prior to adoption. In general terms, H.B. 2110 would have required that a city either: (1) pay the owner of the property if the city limits the location of oil or gas well drilling, or (2) waive the city’s location regulations altogether. The League submitted written testimony against the bill, but no other witnesses testified. One witness testified in favor and indicated that North Texas cities’ gas-well-drilling ordinances were the reason for the bill. (Flower Mound was mentioned by name, but many cities have similar ordinances.) The author explained the bill as simply adding mineral rights to the Private Real Property Rights Preservation Act (Chapter 2007, Government Code). Of course, that’s not all the bill would have done. It also would have made city ordinances affecting those rights (e.g., oil and gas drilling ordinances) subject to the law. The author stated that, “We’re not trying to make this where you can put an oil well in your backyard.” But that is exactly what the bill would have allowed unless a city paid compensation to every property owner for any alleged reduction in value due to the city’s ordinance. (Similar bills, H.B. 3105 by Rep. Jim Keffer [2011] and H.B. 1496 by Rep. Van Taylor [2013] were subsequently filed, but did not pass.) In 2009, another harmful bill that did not pass was H.B. 4654. That bill would have: (1) directed the Texas Railroad Commission (RRC) to create model rules for regulating the drilling of oil and gas wells within city limits; and (2) required a city to adopt an ordinance in accordance with those rules, unless the RRC approved of a conflicting ordinance, after a hearing. In addition, the bill would have preempted any existing ordinance on the date the RRC model was published.

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Each city is different, and each has different needs with regard to the regulation of oil and gas drilling. A model policy prepared by a state agency is not the way to protect the residents of individual cities and could actually serve as an impediment to future development of mineral resources. Why is that? Because the cities that have adopted ordinances in this area have done so after many hours of public and industry input and have tailored an appropriate balance between mineral development and quality of life. As opposed to rural residents, people move to cities with the expectation that their property will be protected for the good of the city as a whole. Mineral interests are a large part of the Texas economy, but the ability of cities to protect the health and safety of their citizens through thoughtful regulations keeps Texas an attractive place to live. In 2010, a group of North Texas public officials and members of the Texas Pipeline Association (TPA) worked in a collaborative manner to improve communications between the pipeline industry and local governments. The results of this collaborate effort was the Best Practices for Pipeline and Municipality Relations. This document is designed to enhance the pipeline routing process through communication and mutual respect. In 2010, the TML Utilities and Transportation Committee appointed a subcommittee to examine issues related to gas wells. The subcommittee’s recommendations ultimately became part of the League’s 2011 legislative program. During the 2011 session (as the subcommittee predicted), attention was focused on the air quality issues surrounding gas wells and related facilities, among other issues. Numerous bills were filed that did not pass, including:

• H.B. 3066: would have included a structure, device, item, equipment, enclosure, or appurtenance associated with an oil or gas well in the definition of “facility” under the Texas Clean Air Act.

• H.B. 3792: would have provided, among other things, that a city may adopt an ordinance that establishes conditions for mapping, inventorying, locating, or relocating pipelines and related appurtenances, including pumps, compressors, separators, dehydration units, and tank batteries, located within the city’s boundaries.

• S.B. 103: would have provided, among other things, that a gas well operator or similar entity that lays wastewater pipelines on public rights-of-way must comply with various requirements.

• S.B. 104: for gas wells on the Barnett Shale, would have: (1) created several requirements for natural gas wells to minimize the risk of release of gas and other associated vapors; (2) required the Texas Railroad Commission to implement rules to enforce those requirements; and (3) allowed a city to create an ordinance to implement the requirements.

S.B. 1134 – which passed – was directed at the air quality issue, and provides, among other things, that the RRC may not adopt a new permit by rule or a new standard permit or amend an existing permit by rule or an existing standard permit relating to certain oil and gas facilities

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unless the commission: (1) conducts a regulatory analysis of the permit; (2) determines, based on the evaluation of credible air quality monitoring data, that the emissions limits or other emissions-related requirements of the permit are necessary to ensure that the permit protects the public’s health and physical property; (3) establishes any required emissions limits or other emissions-related requirements based on the evaluation of credible air quality monitoring data and credible air quality modeling that is not based on the worst-case scenario of emissions or other worst-case modeling scenarios unless the actual air quality monitoring data and evaluation of that data indicate that the worst-case scenario of emissions or other worst-case modeling scenarios yield modeling results that reflect the actual air quality monitoring data and evaluation; and (4) considers whether the requirements of the permit should be imposed only on facilities that are located in a particular geographic region of the state. The bill also provides an affirmative defense to enforcement for emissions events in certain circumstances. Heading into the 2013 session, all of the above issues continued to percolate. The most detrimental bill filed was H.B. 2828 (Dale). The bill would have eliminated municipal land use authority over gas and other transmission pipelines and facilities. Specifically, the bill would have overturned a 2010 Fifth Circuit Court of Appeals opinion (City of Grand Prairie v. Texas Midstream Gas) that allowed the City of Grand Prairie to enforce various land use regulations against a Texas Midstream Gas Services (TMGS) compressor station. The Grand Prairie city code required a specific use permit, and various other permits, for the construction of a compressor station in certain zoning districts. The code also established conditions for the issuance of the permits, including minimum setbacks, roof pitch, building material requirements, architectural design compatibility with surrounding development, noise limitations, and a “security fence” of at least eight feet in height to enclose the area. TMGS sued the city, claiming that the federal Pipeline Safety Act (PSA) and state law preempt the city’s requirements. The PSA prescribes safety standards not only for pipelines, but also for related structures, including compressor stations. The court concluded that, with the exception of the “security fence” requirement, the city code does not address compressor station “safety.” Rather, it relates to general aesthetics and community enhancement and was designed to protect property values: Our decision today is the first to consider whether the PSA preempts a setback requirement for a compressor station. However, our decision is consistent with PSA preemption jurisprudence from our court and elsewhere…Cases decided under the PSA’s predecessor statutes have uniformly invalidated parochial safety provisions…[but] [n]one of these cases foreclose laws primarily related to aesthetics or non-safety police powers. The PSA preempts safety standards for natural gas pipeline facilities. Grand Prairie’s setback requirement is not a safety standard in letter, purpose, or effect. It may remain in force. The opinion was a good one for those cities that regulate natural gas compressor stations and other equipment. The author of H.B. 2828 explained his bill at the hearing as merely requiring uniform “safety standards.” Current law already provides for that, however. The bill would clearly have preempted municipal land use regulations like those at issue in the court’s opinion.

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In recent months, the widespread use of hydraulic fracturing (“fracking”) as a means to extract oil and natural gas, some city officials are concerned of the possible ill-effects of that process. (S.B. 1049 from the 2011 session and H.B. 448 form the 2013 session, which did not pass, would have imposed additional disclosure requirements related to fracking operations.) The City of Denton, in June 2014, received an initiative petition under its charter to adopt an ordinance banning all fracking within the city’s limits. A 13-hour public hearing was held on July 15, 2014. Landowners, gas companies, environmentalists, state-level elected and appointed officials, and even a former Texas Supreme Court Chief Justice (now representing the Texas Oil and Gas Association) testified on the petition. In the end, the council voted 5-2 to reject the fracking ban. That vote will, pursuant to the city’s charter, result in the issue being placed on the ballot in November. The Denton fracking ban vote could have far-reaching effects. If it goes into place, gas companies will likely bring lawsuits against the city raising issues of: (1) state preemption; (2) regulatory takings under the Texas and U.S. Constitutions, (3) permit vesting; and (4) whatever other causes of action they can think of. The result of the vote and/or lawsuits will then likely lead to legislation on the issue. All of these concerns illustrate that municipal drilling ordinances regulating location and other issues are the first line of defense in the fight for public safety and quality of life in this area. City officials appreciate the economic value of the gas underneath cities, and have sought to balance that with resident demands. The Committee should discuss whether to recommend a position on legislation relating to gas wells, pipelines, and production. Relevant 2013 TML positions (Note: The text of these positions relates solely to gas development and does not mention oil development):

• Support legislation that would increase state authority over air emissions or water quality as those items relate to gas development, so long as municipal authority in those areas is not eroded.

• Support legislation that would grant cities or counties additional authority to regulate gas wells in a city’s extraterritorial jurisdiction (ETJ), so long as municipal authority in the ETJ remains superior to that of the county.

• Oppose legislation that would establish model rules relating to municipal regulation of gas wells, gas pipelines, or other gas-related equipment, unless the legislation or rules apply to only county regulation in the unincorporated area of the county.

• Oppose legislation that would weaken the ability of cities to regulate gas wells, gas pipelines, or other gas-related equipment.

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Utility Rate Cases Texas cities have a long history of participation in the ratemaking process for both gas and electric utilities in the State of Texas. In addition, a few cities are active in the area of water rates. A 2010 article from the Texas City Attorneys Association newsletter related to municipal participation follows: Prior to the enactment of the Public Utility Regulatory Act (PURA) in 1975 and the Gas Utility Regulatory Act (GURA) in 1983, utility rates were set exclusively at the city level, with any appeals of municipal rate ordinances decided in the courts. Currently, under PURA and GURA, cities have original jurisdiction over the utility rates within their city limits. This means that the Railroad Commission (RRC) and the Public Utility Commission (PUC) have original jurisdiction over gas and electric rates in service areas outside city limits and also within the city limits of those cities that have ceded their original jurisdiction to the agency. In addition, the PUC and RRC have appellate jurisdiction over rate ordinances and orders of cities concerning electric and gas utility service within a city’s limits. Recognizing the important role cities play in the regulation of utilities, hundreds of cities across the state participate in ratemaking proceedings at both the PUC and the RRC in order to ensure fair, just, and reasonable rates, as well as adequate and efficient services for the city and its residents. Historically, cities have formed coalitions to represent the collective interests of cities and their citizens before the regulatory agencies and courts. By forming coalitions, cities have been able to present a strong voice for consumers for over 30 years. This has served to reduce the costs that cities and their residents pay for electric and gas service. Cities’ active participation in rate cases demonstrates their concern for reliability, quality of service, and the prices their citizens pay for gas and electricity. In numerous instances, without city participation, rate increases would have gone into effect without any party scrutinizing the utility’s application. City coalitions have been effective in ensuring that utilities charge cities and their residents reasonable rates. In 2010, cities successfully fought to mitigate excessive rate increase requests by both gas and electric utilities, playing a vital role advocating on behalf of consumers. For example, in Oncor Electric Delivery Company’s (“Oncor”) last rate case, Oncor sought to increase its rates by $253 million annually. However, based on many of the recommendations made by cities, the PUC determined that Oncor was entitled to a rate increase of just $130 million. In another notable electric rate case in 2010, cities negotiated a settlement with Texas-New Mexico Power Company (“TNMP”). TNMP originally sought a $20.1 million rate increase, but after lengthy negotiations, the parties agreed to an increase of just $10.25 million. Additionally, the cities were able to obtain a more favorable rate design structure for residential rates in order to reduce the impact of the rate increase on that rate class. Because

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of their strong presence, cities were able to secure rates and a rate structure that was as good as, if not better than, a result that could have been expected had the case been fully litigated. Similarly, cities have recently participated in gas proceedings brought by the various divisions of the Atmos Energy Corporation. For example, in March 2010, the Atmos Mid-Tex division filed for a $56.8 million rate increase. After lengthy negotiations, the parties reached a settlement that provided for a $27 million increase in annual revenue (less than half of the company’s initial request). City coalitions also participated in a rate case brought by CenterPoint Energy Entex (Houston Division) and decided by the RRC in February 2010. While CenterPoint initially sought a $25.4 million increase, the RRC adopted almost all of the accounting adjustments recommended by cities, resulting in an increase of only $5 million (one-fifth of CenterPoint’s original request). In each of these cases, cities have saved their ratepayers money by refusing to accept the utilities’ rate increase requests at face value. By participating in rate cases, cities are able to dig into the complex calculations of ratemaking to determine whether a utility has made a reasonable request. When cities determine that a utility’s request is unreasonable, they present evidence supporting the findings to the PUC or RRC and recommend reducing the rate increase requested by the utility. Both PURA and GURA allow for cities to be reimbursed by the utility company for their reasonable rate case expenses associated with participation in ratemaking proceedings. In providing for the reimbursement of rate case expenses in the statutes, the Texas Legislature has acknowledged the important role that cities play in protecting citizens from unreasonable utility costs. Because these expenses are ultimately passed on to consumers by the utility, cities are always cost-conscious. Cities must balance the cost of participation in a ratemaking proceeding against the need to protect the interests of their residents. In prior cases, however, municipal participation has resulted in a net savings for ratepayers because the utility’s rate increase was reduced by an amount far in excess of the expenses incurred by the cities. Cities’ participation in utility ratemaking proceedings have proven time and again to be a good value for consumers. It seems clear that municipal participation in ratemaking has prevented large increases in consumer utility rates and that cities value this authority. And it appears to be true that most city officials would agree that the League should oppose legislation that would erode municipal authority over rate cases. For example, H.B. 3407 was filed in 2011 and would have provided that: (1) in establishing a gas utility’s rates, the regulatory authority (e.g., a city or the RRC) may not allow the utility to recover through its rates the attorney’s fees or other expenses incurred by any party in a rate proceeding or in an appeal of a rate proceeding; and (2) a court may not award to a party the right to recover through a gas utility’s rates the attorney’s fees or other expenses incurred by any party in a rate proceeding conducted or in an appeal of a rate proceeding. Assuming that cities wish to continue participating in gas rate cases, H.B. 3407 would have all but eliminated their ability to do so. It did not pass.

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However, the issue returned with a vengeance in 2013. H.B. 1148 as-filed would have provided that: (1) an electric or gas utility is not required to reimburse a city for the city’s rate case expenses if, under a franchise with the city, the utility has agreed to pay more than two percent of gross receipts as a franchise fee; and (2) in order to receive reimbursement for its electric or gas rate case expenses, a city must first “prepay” its rate case expenses to its attorneys and consultants, as well as must adopt an ordinance that expressly assumes the obligation to pay the expenses and declares that the obligation is not contingent on the city's receipt of reimbursement. H.B. 1149 would have: (1) expanded the RRC’s exclusive jurisdiction (and therefore remove original municipal jurisdiction) over the rates and services of a gas utility to include an area the a gas utility treats as an “integrated rate area;” (2) provided that a gas utility may identify and establish an integrated rate area that includes one or more cities and related unincorporated areas for which the commission has exclusive original jurisdiction to establish the gas utility's rates on an area-wide basis; (3) provided that the integrated rate area is established on the date the gas utility files notice of the area’s establishment with the commission; and (4) provided that the gas utility must deliver a copy of the notice to each city included in the area. The League remained opposed to both bills because city participation in rate cases has saved consumers hundreds of millions of dollars, with relatively miniscule costs incurred by the cities. It is unlikely that the staff of any state agency has the resources or the wherewithal to accomplish those same results. In fact, municipal original jurisdiction over gas cases often results in settlement at the city level. Without it, a state agency would likely be overwhelmed. Original jurisdiction and reimbursement provide many benefits to consumers: (1) a city can take action to reduce rates or force concessions that benefit city residents when a company is overearning and the state agency refuses to take action; (2) a city can, particularly in gas rate cases, resolve a rate increase request at the local level, which helps to avoid costly litigation at the state level; (3) discovery that is begun at the local level reduces the amount of discovery necessary once a case gets to the state agency; and (4) local media is more likely to follow rate regulatory matters when the city is involved, which leads to greater transparency and greater citizen confidence that someone is looking out for their interests. Municipal participation is an important reminder of a vital public trust held by private utility companies. Cities were once the exclusive providers of many utility services. Years ago, decades in some cases, some Texas cities chose to delegate the provision of utility services to private companies. Those firms were given something by those cities that few other businesses in America enjoy: a monopoly to provide services within a city, lasting in perpetuity. What cities seem to be unwilling to depart with, however, is the jurisdiction of the city council over utilities, which allows them to help determine what rates are reasonable in exchange for that monopoly. The House Committee on State Affairs Committee never voted out H.B. 1148 or H.B. 1149. That alone would seem to send a clear signal from lawmakers that the current system should be left in place. However, the RRC issued proposed rule in July 2014 to attempt to

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administratively enact provisions that would similarly limit municipal participation in gas rate cases. The RRC has actually proposed two new rules: (1) one that would consolidate city intervenors and limit discovery (the RRC intends to limit the number of “requests for information” – a discovery tool – that a city can make to obtain information from a utility about a proposed rate increase); and (2) one that would address city rate case expenses. The rate case expense rule would relieve a utility from its obligation to reimburse a city’s rate case expenses until a city actually pays those expenses upfront or commits itself to pay them. It also puts the burden of litigation expenses on the cities that challenge the rate. The process for a city or coalition of cities to intervene is a complex one, and only a handful of attorneys in the state have the expertise to do so. According to those attorneys, the purpose of the rule is clear: to stop cities from keeping investor owned utility rates reasonable. The Committee should discuss whether to take a position on administrative action and/or legislation that would have the effect of eliminating municipal intervention in gas, electric, and/or water utility rate cases. Relevant 2013 position:

• Oppose legislation that would erode municipal authority to participate in utility rate cases.

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Governmental Immunity

Legislation passed in 2005 waives a city’s governmental immunity from suits for breach of contract claims. The bill was passed in response to a string of cases in which cities had claimed (rightly, at the time) that they couldn’t be sued for walking away from contractual obligations. Legislation passed in 2007 similarly waived cities’ governmental immunity from suits for alleged non-payment of back wages to police and firefighters, again in response to actual cases of refusal to pay wages under protection of governmental immunity. These cases serve as a potent reminder that governmental immunity is something cities enjoy only with the consent of the legislature. It seems like the legislature continues to attempt to chip away further at municipal governmental immunity, most likely in reaction to well-publicized instances of perceived abuses or misuses. For instance, cases of city sewer backups that ruin the interiors of homes are reported in newspapers when cities claim, rightly, that they aren’t generally liable for such damages. Legislation passed in 2009 provides that a city may pay property damages caused by sewer backups regardless of a city’s actual legal liability. It wouldn’t be surprising to see further legislation in this area. As another example, a case of a stop light falling through the window of a car beneath it permitted a city to claim complete governmental immunity for property damages because nobody was injured. The underlying wisdom of governmental immunity as a concept tends to get lost during such cases. Put another way, bad facts tend to make bad law. In 2011, the usual bills that were narrowly-tailored to waive immunity in response to certain situation were filed, but none passed. In addition, at least two bills – H.B. 617 and S.B. 368 – would have broadly waived a city’s immunity to suit and liability. In the end, neither of those passed either. In 2013, H.B. 3511 was another example of the “chipping away” of contractual immunity. That bill waived contractual immunity for a city supplying water to an electric company. In 2014, the issue of contractual immunity has come to a head. A number of courts of appeals have reached different conclusions on whether a tort law distinction should apply to contracts cases. The Supreme Court of Texas has agreed to hear one of the cases to resolve the circuit split. Essentially, the issue is whether a city that is contracting to perform a “proprietary” function should be subject to a waiver of contractual governmental immunity, even if the current state statute wouldn’t otherwise waive immunity for the contract. A proprietary function is distinguishable from a “governmental function.” The Texas Tort Claims Act waives immunity, up to a certain dollar amount, for governmental functions, such as the provision of police and fire service, the running of parks, traffic control devices, etc. But that waiver is limited to a certain dollar amount, and only if a city employee is using motor driven equipment or tangible personal property and is negligent in providing those services. (For example, a police officer who crashes into and injures someone during a chase,

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because she is using a police car [motor driven equipment] could subject the city to liability [if she was negligent]). The Tort Claims Act waives immunity and provides for unlimited liability for a city that is performing a proprietary function. A proprietary function is one that a private entity might provide, such as (1) the operation and maintenance of a public utility; (2) amusements owned and operated by a city; or (3) any activity that is abnormally dangerous or ultrahazardous. The recent cases attempt to apply the governmental/proprietary distinction from the tort statute to contractual immunity. (They typically deal with a city electric utility purchasing long-term power from some other entity.) The League’s position in an amicus brief filed at the Supreme Court of Texas is that the courts can’t take language from one statute (the Tort Claims Act) and superimpose it on another (the existing contractual waiver statute). The Committee should consider whether to adopt: (1) a continued defensive position related to further erosion of municipal governmental immunity; and/or (2) a position related to affirmatively seeking legislation should the Supreme Court of Texas issue an unfavorable opinion. Relevant 2013 TML position:

• Oppose legislation that would erode municipal governmental immunity.

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Texas Recreation and Park Society Legislative Program The Texas Recreation and Park Society, a soon-to-be affiliate of the Texas Municipal League That will replace the current parks affiliate, has submitted its legislative program for consideration by the Committee:

The Texas Recreation and Park Society’s (TRAPS) primary objectives in the 84th Session of the Texas Legislature:

1. Seek, introduce and support passage of legislation that would restore full funding to the Texas Recreation and Parks Accounts (TRPA) No. 467 & Large County and Municipality Recreation and Parks Account No. 5007 (both accounts are also known as the Local Park Grant Program);

2. Support the pass through of federal dollars used for parks, recreation, open space, trails, and tourism from any of the following but not limited to the United States Department of the Interior Land and Water Conservation Fund (LWCF) and the fund’s reauthorization, the Sport Fish Restoration Boat Access program and the United States Department of Transportation Recreation Trails program;

3. Support legislation that would directly benefit parks, recreation, open space and trails on utility corridors and waive all liability for those purposes to the utilities;

4. Support legislation that would ensure parks and recreation agencies are included as eligible partners and beneficiaries in any strategy or guideline aimed at benefiting healthy lifestyles, increasing physical activity, conservation or preservation;

5. Support legislation that would either appropriate funds or that directly benefit parks, recreation, open space, trails, and tourism;

6. Seek, introduce and support passage of legislation that would remove the cap on sporting goods sales tax revenues for State and local parks and/or increase the Texas Recreation and Parks Accounts (TRPA) funding No. 467 & Large County and Municipality Recreation and Parks Account No. 5007;

7. Seek, introduce and support passage of legislation that would create a Constitutional dedication of sporting goods sales tax revenues for use in State

2014-2015 TRAPS Legislative Platform

Adopted May 8, 2014

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and local parks that would directly benefit parks, recreation, open space, trails and tourism;

8. Oppose legislative appropriation riders that set Texas Recreation and Parks Accounts (TRPA) funding No. 467 & Large County and Municipality Recreation and Parks Account No. 5007 funds for specific projects or locales;

9. Oppose legislation and/or unfunded mandates that would be detrimental to parks, recreation, open space, trails, and tourism.

The Committee should discuss whether to take a position on any or all of the above.

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City/County Funding A continuing dilemma is the way in which cities and counties fund their services. When a city is incorporated, it is sometimes “left on its own” to fund services that the county may have previously funded. This frequently necessitates a city-adopted property tax. The unresolved issue seems to be that the city residents still pay county property taxes, but those revenues are often spent by the county only in the unincorporated area. Adding insult to injury, a county often require cities to pay the county to provide services that it already provides in the unincorporated area. Some call this system one of “double taxation.” Under current law, once a city incorporates, a county is no longer required to provide many services that would be considered “basic” services in the incorporated area. For example, a 1997 attorney general opinion (LO-1997-084, available at https://www.oag.state.tx.us/opinions/opinions/48morales/lo/1997/pdf/lo1997084.pdf) concluded that a county may not spend county funds to maintain a city street within the county. That opinion was later overruled by another opinion (LO-1998-079, available at https://www.oag.state.tx.us/opinions/opinions/48morales/lo/1998/pdf/lo1998079.pdf), which concludes that a county can maintain city streets. Yet another opinion (JC-0352, available at https://www.oag.state.tx.us/opinions/opinions/49cornyn/op/2002/pdf/JC0532.pdf) discusses the “option,” but not the mandate, of interlocal law enforcement services. In Texas, no “treatise” or article explaining the reasoning is available. Attorney general opinions provide the most guidance in the area. Opinion No. MW-0588 (available at https://www.oag.state.tx.us/opinions/opinions/46white/op/1982/pdf/MW0588.pdf) discusses a county’s duty with regard to estray livestock in a city within the county. The opinion concludes that a county has a duty to pick up estray livestock, even within a city located in the county. The estray statutory language is obviously very old, and it probably doesn’t come up frequently in modern times. But it serves as an example of how the legislature can force a county to do essentially whatever the legislature mandates. (The estray provisions require an election of the “freeholders” in the county to impose the duty.) Clearly, this is an esoteric law. But it does tend to show that legislation could be enacted to require a county to operate a service in the entire area of the county, including within a city. By way of further example, the City of Rockport points out that most counties are also inconsistent on the issue. Take the issue of animal control. The county wanted the city to pay additional dollars for the same level of animal control services as was being provided everywhere else in the county. However, there was no additional charges suggested for sheriff deputies serving civil paper within the city. The argument could be made that because there was no additional charge for the deputies, there should be none for animal control; the county could argue the reverse. The problem is especially an issue in combined county/city operations that are presumably created under the banner of saving taxpayer dollars, such as consolidated dispatch, fire, EMS, airports, and libraries. If a portion of the taxpayer base is paying a higher per capita or ad valorem charge for the same service, there needs to be an easily understood reason for doing so.

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Related issues – especially “consolidation” of city/county services – have been studied by interim committees in recent years. The City of El Paso and El Paso County have been at the forefront of the discussions. The Senate Intergovernmental Relations committee had a charge to study it prior to the 2011 session. The result of the study was a bill that makes it easier to do long-term interlocal contracts. Any funding change mandates would be a dramatic shift from current practice and would likely draw opposition from county organizations. Moreover, mandates are something that cities and counties have joined together to oppose. The Committee may wish to discuss options related to city/county funding.

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Restrictions on Lobbying Prior to the 2007 legislative session, interim legislative committees studied the question of so-called “taxpayer-funded lobbying.” One reason for this research was that local government officials and their membership organizations (like TML) had been successful in previous legislative sessions in defeating numerous bad ideas—the foremost of which were harmful appraisal caps and revenue caps—that were being pushed by influential state officials and various interest groups. In preparation for what the League knew would be an assault on its ability, and the ability of its membership, to lobby the legislature, a special TML Legislative Task Force on Intergovernmental Relations was convened to study this and other issues concerning the League’s relationship with state government. The conclusions of that task force were ultimately embodied in the following positions taken by the League in 2007:

1. Oppose legislation that would limit or prohibit the authority of city officials to use municipal funds to communicate with legislators.

2. Oppose legislation that would limit or prohibit the authority of the Texas Municipal

League to use any revenue, however derived, to communicate with legislators. Those positions were adopted none too soon, as 2007 did indeed bring about legislation that would have harmed the League and its members. H.B. 1517, by Paxton, had two significant components. The first component related to legislative consultants hired by Texas cities. It would have required that: (1) a person who is required under current law to register as a lobbyist must indicate whether he/she lobbies on behalf of a local government entity or any other entity (such as a chamber of commerce) that pays the lobbyist for the benefit of a local government entity; and (2) a registered lobbyist who is paid to represent a local government entity must provide, as part of the lobbyist registration, the exact amount he/she is paid and a detailed listing of the issues for which the lobbyist is reimbursed, retrained, or employed. The second part of H.B. 1517 related to keeping records of legislative communications undertaken by city officials. It provided that a city’s annual financial statement must show: (1) each expenditure for legislative communication, including amounts paid to registered lobbyists, amounts spent by municipal officers or employees in connection with legislative communications, and membership dues paid to organizations that engage in legislative communications on behalf of local governmental entities; and (2) for each expenditure described above, a detailed description of the issue to which the expenditures related and the local government entity’s position on the issue. The bill was approved by the House State Affairs Committee, but died prior to a House vote. In all fairness, H.B. 1517 didn’t prohibit or limit any legislative communication; it required the compiling of information and record-keeping relating to such communication (albeit in a burdensome way.)

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The same cannot be said of H.B. 1753 by Rep. Frank Corte (and its companion bill, S.B. 1944 by Sen. Dan Patrick). Those bills had nothing to do with legislative communications undertaken by city officials, nor did they relate to the authority of cities to contract for the services of a legislative consultant – a “hired gun lobbyist.” Rather, H.B. 1753 and S.B. 1944 would have prohibited a city from paying dues to an organization if that organization or an employee of that organization directly or indirectly influences or attempts to influence the outcome of any legislation pending before the legislature. In other words, the bills were designed to force TML to stop lobbying on behalf of its member cities or force cities to stop paying dues to TML. The introduction of bills like H.B. 1753 and S.B. 1944 raises an interesting question. Why does TML spend any resources, however derived, on attempting to influence legislation? The answer is simple: TML does so because legislative advocacy is the service that city officials most want from the League. Every membership survey conducted by the League has shown that “lobbying” is the League’s most important activity. It is also worth remembering that the legislative program that directs the TML advocacy efforts is developed and adopted by the League’s membership-at-large and its Board of Directors, not by the TML staff. It stands to reason, then, that future bills resembling H.B. 1753 and S.B. 1944 should be of the most concern to city officials, not to the TML staff. Such bills would prevent the League from speaking out against the dozens of unfunded state mandates that are proposed each legislative session. They would also prohibit the League from speaking in opposition to legislation that increases the liability of city officials and endangers their personal resources. They would, most importantly, prevent the League from promoting the authority of local officials to respond to the needs and desires of local citizens. Narrow legislation passed in 2009 requires that cities with federal lobbying contracts file certain reports, but only if the lobbyist doesn’t otherwise file such reports under state or federal law. In 2013, Senator Patrick filed S.B. 754, which would have placed some disclosure requirements on registered lobbyists who represent governmental entities. More specifically, the bill would have: (1) required a person registering as a lobbyist to indicate on his/her registration, if applicable, whether the person who reimburses, retains, or employs the registrant is a governmental entity or an entity that reimburses, retains, or employs the registrant on behalf of a governmental entity and the name of the governmental entity on whose behalf the registrant is reimbursed, retained, or employed; (2) required that compensation or reimbursement required to be reported by a person registering as a lobbyist be reported as an exact amount if the registrant is reimbursed, retained, or employed by a governmental entity or by another entity on behalf of a governmental entity; and (3) provide that the reimbursement, retention, or employment of a registrant by an attorney to communicate directly with a member of the legislative or executive branch to influence legislation or administrative action on behalf of a governmental entity is not the provision of legal representation subject to attorney-client privilege and must be disclosed as required by law. S.B. 754 did not receive a committee hearing.

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With two of the authors of the legislation on this topic in sessions past running for statewide elected office in November of 2014, the Committee should consider taking a position on this legislation for the 2015 session. Relevant 2013 TML positions:

• Oppose legislation that would require the reporting of lobbying activities beyond the requirements in current law.

• Oppose legislation that would limit or prohibit the authority of city officials to use

municipal funds to communicate with legislators.

• Oppose legislation that would limit or prohibit the authority of the Texas Municipal League to use any revenue, however derived, to communicate with legislators.

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Payday and Auto Title Lenders

In Texas and across the country, the payday and auto title lender industry (also referred to as the “Credit Access Business Industry” or “CABs”) has grown dramatically. The Office of Consumer Credit Commissioner (OCCC) reports that there are an estimated 3,000 payday lender locations in Texas alone. Companion bills passed in the 2011 legislative session─House Bill 2592 and House Bill 2594─addressed some of the concerns associated with payday and auto title lenders in a superficial way. House Bill 2592 requires these lenders to provide consumer disclosures regarding their loan products, fees, interest charges, and percentage rates. House Bill 2594 requires these lenders to obtain a license with the OCCC, and grants authority to the OCCC to regularly examine these businesses. In sum, the 2011 Texas Legislature gave the Texas Finance Commission and the OCCC certain licensing, examination, and enforcement authority over payday and auto title lenders, but no substantive authority over the businesses. Within Texas, the CAB model is a three-party transaction: the consumer, the credit access business, and the actual lender. The lender is a separate company that lends money at an effective annual rate of ten percent or less and, thus, is not licensed or regulated by the state. The storefront is operated by an unaffiliated CAB, which must be registered with the Texas Secretary of State and, as a result of H.B. 2594, licensed by the OCCC. These storefront operations offer short-term, high-interest (some reportedly as high as 500%) loans to consumers. Because of their proliferation and the sense that the 2011 legislation was not sufficiently comprehensive, Texas cities have begun to regulate these storefront operations. The CABs have been active in opposing these ordinances and some cities, such as the City of Austin and City of Dallas, have been sued over their regulations. There are two basic components to the City of Austin’s regulations: (1) zoning, which is not currently being challenged; and (2) “business regulations,” such as the total amount of the loan. It is these business regulations which are the subject of the current suit. Among other things, the plaintiff (Consumer Service Alliance of Texas, Inc., a trade association representing the CABs) claims that the business regulations run afoul of state law, which they argue already regulates the extension of these types of loans. During the 2013 legislative session, then-Senator John Carona (R – Dallas) filed S.B. 1247. The as-filed version of the bill would have imposed some restrictions on lenders, but it would have preempted city regulations over the businesses (other than zoning). When the bill emerged from Senate committee, it was much worse; the substantive regulations were weaker, and the city preemption clause was stricter. (The committee version would even have preempted municipal health and safety regulations, such as fire and building codes.) A series of successful Senate floor amendments changed the bill dramatically. One amendment effectively canceled the preemption clause over city ordinances, meaning that cities would be free to impose stricter regulations over the industry than contained in the bill. Another amendment capped interest rates on the loans at 36 percent (some lenders currently charge in

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excess of 400 percent, thanks to a legal loophole that exempts the industry from usury laws). In all, fourteen amendments were adopted, most of them beneficial. However, some of the floor amendments that were planned in advance by the bill’s author appeared to make the bill unacceptable to the payday lending lobbyists, who promptly set about trying to kill their own bill. Though they didn’t succeed in the Senate, they did in the House. What did the death of S.B. 1247 mean for Texas cities? On a positive note, the troublesome preemption clause in the as-filed and committee versions didn’t become law. On the negative side, there would be no statewide regulation and the payday industry will likely continue their lawsuits challenging that city ordinances are preempted under current law. (On a further note, there were several bills filed in 2013 that would have simply preempt city authority over payday lending without a corresponding increase in state regulation. None of those bills passed.) After the 2013 legislative session, the League issued the following press release: TML to Help Cities That Want to Regulate Predatory Payday Lenders AUSTIN – The Texas Municipal League (TML) has created a clearinghouse to assist Texas cities interested in adopting ordinances regulating payday and auto title lending after the legislature failed, once again, to pass a law to address predatory lending practices. “Because the legislature can’t or won’t deal with this problem, some Texas cities are stepping forward to adopt ordinances aimed at ending the cycle of debt and making it more likely borrowers can pay back their loans,” said TML Executive Director Bennett Sandlin. “Many other states have imposed limits on interest rates and outlawed some of the abusive practices of this industry. Because of our legislature’s inaction, these companies are free to prey on Texans who may be in dire straits by charging interest rates exceeding 500 percent per year and locking borrowers into a cycle of debt that’s reminiscent of indentured servitude,” Sandlin said. In response to requests for assistance from cities across the state, TML has set up a website providing background information on payday and auto title lending, an example ordinance similar to the one already adopted by six Texas cities, and copies of the pleadings in lawsuits payday lenders have filed against cities to try to stop enforcement of the new rules on their business practices. The six Texas cities that have passed similar ordinances on payday and auto title lenders as of this spring are Austin, Balcones Heights, Dallas, Denton, El Paso, and San Antonio. Payday lending companies have filed lawsuits against all of these cities except Balcones Heights which has delayed enforcement of its ordinance pending the outcome of the litigation against other cities. The lawsuits challenge the authority of cities to regulate payday lenders.

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“We’re not talking about drastic governmental regulation here,” Sandlin said. “These ordinances don’t even attempt to limit the interest rates and fees charged by payday lenders. The main things they do are limit the size of a loan to a percentage of the borrower’s income and limit the number of times a loan can be rolled over.” As major cities adopt these ordinances, Sandlin said payday lenders are scurrying out into suburbs and smaller cities that may not have the resources to fend off industry lawsuits. The purpose of the TML clearinghouse is to provide a resource that saves taxpayer dollars by sharing information. The clearinghouse is available on TML’s website at www.tml.org/payday-updates. Following the creation of the website, a number of additional cities have adopted the example ordinance provided there. As of July 2014, the following cities have adopted the “business regulations” in the ordinance:

1. Austin 2. Balcones Heights 3. Baytown 4. Bellaire 5. Bryan 6. College Station 7. Dallas 8. Denton 9. El Paso 10. Flower Mound 11. Garland 12. Houston 13. Midland 14. San Antonio 15. Somerset 16. South Houston 17. Universal City 18. West University Place

The following cities have enacted land use regulations limiting the proliferation of storefronts:

1. Browsville 2. Corinth 3. Garland 4. Irving 5. Little Elm 6. Mesquite 7. Missouri City 8. Richardson

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9. Sachse 10. Watauga

On Wednesday May 21, 2014, the House Investments and Financial Services Committee held a public hearing on its interim charges, which includes a charge to monitor the agencies under the committee’s jurisdiction. One of those agencies is the Office of Consumer Credit Commissioner (OCCC). OCCC has a limited degree of oversight over payday and auto title lending companies operating in the state. The current consumer credit commissioner, Leslie Pettijohn, testified at the hearing. In her testimony, Commissioner Pettijohn was asked whether city ordinances regulating payday and auto title loans would “override” state authority. The question led to a debate amongst some of the committee members about the concept of “local control.” Commissioner Pettijohn disagreed with the notion that city ordinances would override state authority, but she did state that city ordinances impact the OCCC’s ability to regulate payday and auto title loans. Specifically, she mentioned that city ordinances have led to inconsistency in product offerings because some payday and auto title lenders are altering the structure of their loans to comply with city ordinances, and that inconsistency has made state oversight more difficult. No data was cited showing that payday and auto title loan terms are more variable as a direct result of city ordinances, leaving open the possibility that any product inconsistency simply represents the latest business model shift in an industry with a history of regularly modifying its products. In June 2014, the City of Dallas once again prevailed in its lawsuit with the Consumer Service Alliance (CSAT – the payday lender association) and a number of individual payday lending businesses. At the trial court level, the payday industry plaintiffs claimed – among other things – that the city is preempted by state law. The trial court held that it had no jurisdiction to hear the case. The Dallas Court of Appeals concluded that the trial court was correct. After a detailed analysis of legal procedure, the court essentially concluded that the plaintiffs haven’t been harmed in any way. That results in no legal claim for a court to resolve.

The Committee should discuss whether TML should continue to take a position on legislation that would preempt or prohibit the regulation of payday and auto title lenders by cities. The Committee may also wish to discuss whether preemption might be acceptable in exchange for a statewide bill that is substantially similar to the regulations in the “example ordinance” adopted by 18 cities.

Relevant 2013 TML position:

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• Oppose legislation that would preempt or prohibit the regulation of payday and auto title lenders by a city.

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Plastic Bag Bans Plastic retail bags take between 500 and 1000 years to decompose in landfills. The amount of time to decompose and the number of plastic bags handed out by retailers has led to litter issues in many Texas cities. In response to the litter issue, as well as plastic bag debris’ effects on ocean and other wildlife, some Texas cities have begun banning or taking other action against plastic bans. Cities such as Brownsville, Fort Stockton, South Padre Island, and Austin have already taken action to limit the detrimental effects of plastic bags, with many other cities considering taking action. In 2011, the Texas Legislature considered the issue in a number of bills that would have regulated plastic bags or limited the authority of a city to decide how to deal with plastic bags. The following bills were filed in 2011:

• H.B. 1877 (Coleman) – Recycling: would have: (1) created a local recycling assistance grant program available only to cities and counties; (2) created a five cent disposable bag fee for every disposable plastic bag provided to a retail customer, to be collected by the retailer and remitted to the comptroller in order to fund the recycling assistance grant.

• S.B. 338 (Van de Putte) – Plastic Bags: would have created a “plastic checkout bag”

recycling program that would preempt local ordinances on the same topic.

• S.B. 908 (Fraser) – Plastic Bags: would have: (1) required certain businesses to take certain actions to reduce the use of plastic checkout bags; and (2) preempted a conflicting local ordinance or rule. (Companion bill is H.B. 1913 by Hancock.)

Senate Bill 908 by Fraser was heard in the Senate Natural Resources Committee. At the hearing on the bill, Senator Fraser stated that the purpose of the bill is not to ban plastic bags, but rather “just to start down that road.” Ultimately, none of the bills pertaining to plastic bags passed in 2011. In 2013, Representative Drew Springer filed H.B. 2416, the so-called “Shopping Bag Freedom Act.” H.B. 2416 would have simply preempted any city ordinance that prohibited or restricted a business from providing a bag, package, or other container made from any material. The bill received a hearing in the House Urban Affairs committee, where the League, other cities, and environmental groups testified against it, and did not advance to the House floor. In March 2014, Representative Flynn requested an opinion from the attorney general’s office on whether or not an existing state statute—Health and Safety Code Section 361.0961—preempts cities from adopting an ordinance banning the use of plastic bags. At the time of this writing, no opinion has been issued by the attorney general. Regardless of the conclusion reached by the attorney general in the coming months, it is likely that legislation relating to city plastic bag ban ordinances will be filed in 2015.

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Relevant 2013 TML position:

• Oppose legislation that would preempt existing or future bans on the use of plastic bags in a city.

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Cell Phone Bans In 2007, the Town of Highland Park became the first city in Texas to ban cell phone use (including the use of text messaging) while driving in school zones within the city. The ordinance provided exceptions for emergencies and the use of a “hands-free” device. Several other cities followed suit and enacted similar bans. That same year, the legislature considered, but did not pass, two bills (H.B. 397 and H.B. 200) that would have: (1) made the use of a cell phone or other wireless communication device by the operator of a motor vehicle moving through a school crossing zone illegal, with some exceptions; and (2) mandated that a city send 50 percent of the fines collected under the new law to the state comptroller at the end of the fiscal year, to be donated to the foundation school fund. H.B. 3689 (Coleman) and its companion S.B. 154 (Wentworth), would have gone even further and banned the use of a cell phone or other wireless communication device by the operator of a motor vehicle when the vehicle is in motion, with some exceptions. H.B. 55, passed in 2009, makes it a state offense to use a cell phone in a school zone under some circumstances. The bill makes the use of a wireless communication device while operating a motor vehicle within a school crossing zone a class C misdemeanor, unless the vehicle is stopped or the device is being used in a hands-free mode. In other words, the bill apparently preempts all municipal ordinances governing cell phone use in school zones. However, H.B. 55 requires a city that enforces the prohibition to post a sign that complies with standards adopted by the Texas Department of Transportation at each school crossing zone in the city in order to inform an operator of a motor vehicle of the prohibition. Because of that particular wording, some city officials have questioned whether the bill requires a city to install signs, or if it gives a city the option to do so. City attorneys throughout the state have reached different conclusions on this question. One thing is reasonably certain, however: the bill provides no penalties or enforcement methods against cities that choose not to install signs (or are unable to do so because of budget or economic conditions). Further, a city may not enforce the bill’s cell phone ban unless signs are posted. More recently, several Texas cities have passed ordinances banning “texting” while driving anywhere within the city limits, and others have considered bans on cell phones while driving unless a hands-free device is used. It was a certainty that legislation relating to the various facets of cell phone/texting use would be filed in 2011, and in fact dozens of bills were filed. (Interestingly, however, no bill would have clearly made the provisions of H.B. 55 [discussed above] mandatory for all cities.) H.B. 242 (Craddick/Hegar) passed and would have, among other things: (1) required the head of a local law enforcement agency at which a person last served as a reserve law enforcement officer to issue the person photo identification if the person holds a certificate of proficiency; (2) prohibited the operator of a motor vehicle from using a hand-held wireless communication device to read, write, or send a text-based communication while operating the vehicle unless the vehicle is stopped; (3) excepted the operator of a motor vehicle from prosecution for violating the prohibition in (2), above, if the operator uses a hand-held wireless communication device: (a)

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to read, select, or enter a phone number or name to make a phone call; (b) in conjunction with voice-operated technology or a hands-free device; or (c) to navigate using a global positioning system; and (4) excepted the operator of a motor vehicle from prosecution for violating the prohibition in (2), above, if the hand-held wireless communication device is used by the operator to relay information between the operator and a dispatcher in the course of the operator’s occupational duties and is affixed to the vehicle. However, the bill was later vetoed by the governor. According to the governor’s veto message, “[t]exting while driving is reckless and irresponsible. I support measures that make our roads safer for everyone, but House Bill 242 is a government effort to micromanage the behavior of adults. Current law already prohibits drivers under the age of 18 from texting or using a cell phone while driving. I believe there is a distinction between the overreach of House Bill 242 and the government's legitimate role in establishing laws for teenage drivers who are more easily distracted and laws providing further protection to children in school zones.” The message further stated that, “[t]he keys to dissuading drivers of all ages from texting while driving are information and education. I recommend additional education on this issue in driving safety and driver's education courses, public service ads, and announcements, and I encourage individuals and organizations that testified in favor of the anti-texting language included in this bill to work with state and local leaders to educate the public of these dangers.” In 2013, Representative Craddick again filed his proposed ban on texting while driving in the form of H.B. 63. As originally filed, H.B. 63 preempted more stringent city ordinances relating to a driver using a handheld wireless communication device to read, write, or send a text message. The use of this language meant that city ordinances prohibiting people from talking on non-hands-free cell phones, like those adopted in El Paso and Amarillo, could remain in effect and were not preempted since H.B. 63 only specifically targeted texting while driving. However, when H.B. 63 was discussed on the House floor, the bill was amended to preempt city ordinances relating to “to using a wireless communication device while operating a motor vehicle,” meaning city ordinances related to talking on cell phones while driving would be preempted. (Note: another amendment passed allowing El Paso to keep its ordinance in place.) H.B. 63 passed the House on a 97 to 45 vote. The bill received a hearing in the Senate Transportation Committee, but was never put to a vote in committee. One bill that did pass in 2013 relating to cell phone use was H.B. 347 by Rep. Pitts. As passed, this bill expands the prohibition on using a cell phone in a school zone (H.B. 55 in 2009) to apply to other areas at the school like driveways and parking lots. More specifically, H.B. 347: (1) prohibits a motor vehicle operator from using a wireless communication device on the property of a public elementary, middle, junior high, or high school for which a local authority has designated a school crossing zone, during the time a reduced speed limit is in effect; and (2) preempts all local ordinances, rules, or regulations that are inconsistent with (1), above, unless a city ordinance or rule prohibits the use of wireless communication devices while operating a motor vehicle throughout the jurisdiction of the city. The Committee should discuss a TML position on any such legislation.

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Relevant 2013 TML positions:

• Oppose legislation that would specify what and how cities may regulate with regard to cell phones.

• Oppose legislation that would repeal existing municipal ordinances relating to cell phone bans or create a state standard that preempts more restrictive current or future municipal cell phone bans.

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Smoking Ban Legislation considered in 2007 would have imposed a statewide smoking ban in certain areas. As it passed the House, the bill (H.B. 9) would have eliminated smoking except in the numerous areas that were exempted from the bill’s provisions. Those exemptions included private clubs, bingo halls, tobacco shops, some bars, and (most importantly) any private property if the owner of the property designates the property as exempt by posting notice that smoking is allowed on the property. The bill also provided that: (1) the voters in any home rule city may, in the manner used for a charter amendment, vote to allow the governing body to adopt an ordinance restricting or prohibiting smoking to a lesser degree than allowed by the bill, but the election must be held on May 10, 2008; (2) the bill’s provisions preempt and supersede any local ordinance, rule, or regulation that prohibits smoking to a lesser degree, unless the local ordinance, rule, or regulation was adopted prior to September 1, 2007, in a city of less than 50,000 in population; and (3) any city may, after September 1, 2007, restrict smoking to a greater degree than the bill’s provisions. (Note: the filed version of the bill was even stricter in its preemptive effect on city ordinances in that any less restrictive ordinance would have been preempted by the bill.) The bill died in the Senate. Legislation was also filed in 2009. S.B. 544 (Ellis) and its companion H.B. 5 (Crownover) would have: (1) prohibited smoking in most public places, in places of employment, in seating areas at outdoor events, or within 15 feet of an enclosed area in which smoking is prohibited; (2) provided that the bill’s provisions preempt and supersede a local ordinance, rule, or regulation that prohibits smoking to a lesser degree; (3) provided that a local ordinance, rule, or regulation that prohibits or restricts smoking to a greater degree than the bill is not preempted; (4) required the Texas Department of State Health Services to annually request other government agencies to establish local operating procedures to comply with the bill, including urging all federal, state, county, and municipal governments, as well as independent school districts, to update existing smoking control regulations to be consistent with the current health findings regarding secondhand smoke; and (5) required any entity that grants business licenses, including a city, to provide notice of the state smoking law to each license applicant. Neither bill passed. The same authors filed similar legislation in both 2011 (H.B. 670 and S.B. 355) and in 2013 (H.B. 400 and S.B. 86). While both bills received committee hearings in 2011, neither bill received a committee hearing in 2013. Because the bills would have had a preemptive effect over some city ordinances and because the issue will likely rise again in 2015, the Committee should discuss a position on legislation that would impose a statewide smoking ban. The Committee should also discuss what position to take if the legislation would preempt city ordinances that are less restrictive. Relevant 2013 TML position:

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• Oppose legislation that would impose a statewide smoking ban that would preempt existing or future municipal smoking bans.

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Immigration

The 2011 and 2013 sessions saw numerous bills filed that dealt with immigration issues, some of which spilled over to the special session. Generally, these bills fell into two categories: (1) requirements concerning verification of immigration status of individuals applying for licenses and employment or otherwise contracting with the city; and (2) requirements concerning law enforcement policies and procedures. With regard to the first category of immigration legislation, several bills were filed in both 2011 and 2013 that would have required Texas employers, including cities, to participate in the federal government’s program for electronic verification of employee immigration status, also known as E-Verify. Other bills prohibited cities from offering economic development incentives or entering into contracts with businesses that did not use the E-Verify system, and prohibited cities from issuing licenses or permits to individuals without first verifying immigration status. The League opposed much of this legislation on the grounds that placing requirements on cities as employers constituted an unfunded mandate from state government, while other ideas like prohibiting cities from contracting with or offering economic development incentives to certain business prospects undermined the concept of “local control.” Ultimately, none of these proposals gained much momentum in 2011 or 2013. Legislation placing requirements on law enforcement policies and procedures concerning immigration did receive a good amount of attention in 2011. Most notable was H.B. 12 by Rep. Solomons, which was aimed at stopping the proliferation of so-called “sanctuary cities,” or cities that have adopted policies that prevent law enforcement officers from inquiring into the immigration status of a person arrested or lawfully detained. Interestingly enough, the author of the bill admitted in a committee hearing that he was unaware of the existence of any sanctuary city in the state, but that the legislation was needed because enough people perceive that there is a problem with sanctuary cities. H.B. 12 would have done two things to punish cities that adopted policies prohibiting law enforcement from inquiring into an individual’s immigration status: (1) it would have provided that the city could not receive any state grant funds after a final judicial determination that the city had intentionally prohibited the enforcement of state or federal immigration laws; and (2) it would have allowed any citizen to file a complaint with the attorney general regarding a sanctuary city, and the attorney general could then file a civil lawsuit against the city to prevent the enforcement of the city’s policy. The League testified in committee regarding concerns raised by numerous cities. Most notable was that—because sanctuary cities arguably don’t actually exist—any litigation brought by the state against a city was likely to be frivolous in nature. As a result, TML argued (to no avail) that a “loser pays” system should be applied to suits against suspected sanctuary cities that would require the state to pay the legal expenses of city if the lawsuit was unsuccessful. H.B. 12 was ultimately voted out of the House, but was amended in Senate committee and never made it to a vote on the Senate floor. The proposal was re-filed as part of S.B. 9 during the special session, where the reverse of what happened to H.B. 12 during the regular session occurred—the bill received the approval of the full Senate, but failed to be reported out of a House committee.

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Interestingly enough, for all of the attention the sanctuary city issue received in 2011, no bill addressing sanctuary cities was filed in 2013. The absence of a sanctuary cities bill was emblematic of a more “hands-off” approach by the legislature with regard to immigration-related issues in 2013. In fact, one new idea was filed in the form of H.B. 3738 by Burnam and S.B. 526 by Rodriguez that would have expressly prohibited a peace officer from inquiring as to the nationality or immigration status of a victim of or witness to a criminal offense, except under certain limited circumstances. H.B 3738 was reported favorably from the House State Affairs Committee, but did not come up for a vote on the House floor. The other major immigration issue related to law enforcement procedures in 2011 was the attempt to require law enforcement agencies to verify the immigration status of any individual who was arrested and detained in a city jail within 48 hours by use of the federal Secure Communities program operated by the U.S. Immigration and Customs Enforcement. The vehicle for this idea during the regular session was S.B. 9 by Senator Williams. Due to the training and maintenance costs associated with the Secure Communities program, this proposal, by definition, was an unfunded mandate. The League contended that the more prudent approach would be to allow cities 48 hours to request immigration status information from any source, including another law enforcement agency or federal law enforcement agency that is authorized under federal law to verify immigration status. Because every county in the state already has adopted the Secure Communities program, it made little sense to require many cities to do the same. S.B. 9 ended up passing through the Senate but stalling out in House committee. The issue was revived during the special session, and was included with the sanctuary city legislation in S.B. 9, which ultimately failed to pass. Similar legislation was filed in 2013—H.B. 359 and H.B. 2187, both by Rep. Krause—but neither bill received a committee hearing. Due to the push for immigration reform legislation during the 2011 and 2013 sessions, and due to the recent focus on child immigration, it is very likely that immigration bills will resurface in 2015. The Committee should consider a position on legislation that would implement immigration reforms by mandating action by cities. The committee should also discuss legislation that would prohibit policies adopted by cities relating to immigration status. Relevant 2013 TML position:

• Should legislation be filed that relates to immigration and that would affects cities, League staff should seek the guidance of the TML Executive Committee regarding the League’s position on such legislation.

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Distilleries

During the 2013 session, legislation (S.B. 905 – Van de Putte) passed to authorize a distillery in certain “wet” areas to sell a limited number of commemorative bottles for off-premise consumption.

The City of Livingston asked that the League consider supporting legislation in 2015 that would clarify the terms of S.B. 905.

The following information was submitted by the city for the Committee’s consideration:

• Historically, Polk County, which includes the City of Livingston, was a “dry” county

• By a 2006 local option election, voters gave approval for:

sale of wine & beer for off-premise consumption,

and sale of mixed drinks by holders of food and beverage permits (restaurants) • A 2013 amendment to the Alcoholic Beverage Code (S.B. 905), allows a distiller:

if located in a “wet” area, to sell to consumers, for off-premise consumption, no more than two commemorative bottles per month of its product. SB 905 did not define “wet”. A December 16, 2013 Letter to Distillers, published on the TABC website, from Carolyn Beck, Governmental Relations person of TABC, states: “Senate Bill 905 by Senator Leticia Van de Putte authorized distilleries in a “wet” area to sell product made on the premises direct to consumers at the distillery. In this context, a location is determined to be “wet” for on-premise sales if the community has legalized the sale of mixed beverages, or the sale of mixed beverages in restaurants.” • A person has approached the City, proposing to open a distillery in Livingston, and

wants to take advantage of the commemorative bottle sale opportunity afforded by SB 905. It seems like a good idea, tourist draw, good addition to downtown, economic development stimulus, etc.

• Research is undertaken regarding the licensing/permitting issue, especially on the

commemorative bottle sales issue, since off-premise sales of distilled spirits was not authorized by the local option election.

• The whole concept of alcohol regulation in Texas starts with a negative - it is dry everywhere unless the voters make it wet. The 2006 local option elections approved

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only off-premise beer & wine sales, and mixed drinks in restaurants. Two particular statutes define in one way or another what is wet or dry:

Alcoholic Beverage Code Sec. 251.71. Wet and Dry Areas. (a) An area is a “dry area” as to an alcoholic beverage of a particular type and alcohol content if the sale of that beverage is unlawful in the area. An area is a “wet area” as to an alcoholic beverage of a particular type and alcohol content if the sale of that beverage is lawful in the area. Election Code, Sec. 501.0235 (g). In an area where the sale of a particular type of alcoholic beverage has been legalized only for off-premise consumption, no alcoholic beverage may be consumed on any licensed premises and no type of alcoholic beverage other than the type legalized may be sold.

• A conversation with Thomas Graham of the TABC to attempt to clarify the conclusions stated in the 12/16/13 Letter to Distillers, as to the “wet” definition, resulted in the stock TABC answer that a City had to make its own determination; if the City Secretary confirmed the wet status, TABC would issue the permit, etc, etc., etc. However, Mr. Graham did say that they had received multiple questions on this issue, that it may take future legislative action to clarify the issue, and they were working with the author of SB 905 to see what was the intent of the bill. In other words, reading between the lines: “We can’t tell you how to interpret that part of SB 905, but we’re not sure now either”.

• The final word to the proposed distiller was that the City Secretary could NOT in

good conscience certify to TABC that the proposed distillery, proposing to sell the commemorative bottles, was located in an area that was wet for the proposed permit.

The Committee may wish to consider a position related to beneficial amendments to S.B. 905 from 2013.

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