(a) In this section:
(1) “District” means a conservation and reclamation district operating under Chapter 49, Water Code. The term does not include a groundwater conservation district operating under Chapter 36, Water Code, or a special utility district operating under Chapter 65, Water Code.
(2) “Limited district” means a district that, pursuant to a strategic partnership agreement, continues to exist after full-purpose annexation by a municipality in accordance with the terms of a strategic partnership agreement.
(3) “Strategic partnership agreement” means a written agreement described by this section between a municipality and a district.
(b) The governing bodies of a municipality and a district may negotiate and enter into a written strategic partnership agreement for the district by mutual consent.

(c) A strategic partnership agreement shall not be effective until adopted by the governing bodies of the municipality and the district. The agreement shall be recorded in the deed records of the county or counties in which the land included within the district is located and shall bind each owner and each future owner of land included within the district’s boundaries on the date the agreement becomes effective.
(d) Before the governing body of a municipality or a district adopts a strategic partnership agreement, it shall conduct two public hearings at which members of the public who wish to present testimony or evidence regarding the proposed agreement shall be given the opportunity to do so. Notice of public hearings conducted by the governing body of a municipality under this subsection shall be published in a newspaper of general circulation in the municipality and in the district. The notice must be in the format prescribed by § 43.123(b) and must be published at least once on or after the 20th day before each date. Notice of public hearings conducted by the governing body of a district under this subsection shall be given in accordance with the district’s notification procedures for other matters of public importance. Any notice of a public hearing conducted under this subsection shall contain a statement of the purpose of the hearing, the date, time, and place of the hearing, and the location where copies of the proposed agreement may be obtained prior to the hearing. The governing bodies of a municipality and a district may conduct joint public hearings under this subsection, provided that at least one public hearing is conducted within the district.
(e) The governing body of a municipality may not annex a district for limited purposes under this section or under the provisions of Subchapter F until it has adopted a strategic partnership agreement with the district. The governing body of a municipality may not adopt a strategic partnership agreement before the agreement has been adopted by the governing body of the affected district.
(f) A strategic partnership agreement may provide for the following:
(1) limited-purpose annexation of the district on terms acceptable to the municipality and the district provided that the district shall continue in existence during the period of limited-purpose annexation;
(2) limited-purpose annexation of a district located in a county with a population of more than 3.3 million:
(A) only if the municipality does not require services, permits, or inspections or impose fees for services, permits, or inspections within the district; and
(B) provided that this subsection does not prevent the municipality from providing services within the district if:
(i) the provision of services is specified and agreed to in the agreement;
(ii) the provision of services is not solely the result of a regulatory plan adopted by the municipality in connection with the limited-purpose annexation of the district; and
(iii) the district has obtained the authorization of the governmental entity currently providing the service;
(3) payments by the municipality to the district for services provided by the district;
(4) annexation of any commercial property in a district for full purposes by the municipality, notwithstanding any other provision of this code or the Water Code, except for the obligation of the municipality to provide, directly or through agreement with other units of government, full provision of municipal services to annexed territory, in lieu of any annexation of residential property or payment of any fee on residential property in lieu of annexation of residential property in the district authorized by this subsection;
(5) a full-purpose annexation provision on terms acceptable to the municipality and the district;
(6) conversion of the district to a limited district including some or all of the land included within the boundaries of the district, which conversion shall be effective on the full-purpose annexation conversion date established under Subdivision (5);
(7) agreements existing between districts and governmental bodies and private providers of municipal services in existence on the date a municipality evidences its intention by adopting a resolution to negotiate for a strategic partnership agreement with the district shall be continued and provision made for modifications to such existing agreements; and
(8) such other lawful terms that the parties consider appropriate.
(g) A strategic partnership agreement that provides for the creation of a limited district under Subsection (f)(6) shall include provisions setting forth the following:
(1) the boundaries of the limited district;
(2) the functions of the limited district and the term during which the limited district shall exist after full-purpose annexation, which term may be renewed successively by the governing body of the municipality, provided that no such original or renewed term shall exceed 10 years;
(3) the name by which the limited district shall be known; and
(4) the procedure by which the limited district may be dissolved prior to the expiration of any term established under Subdivision (2).
(h) On the full-purpose annexation conversion date set forth in the strategic partnership agreement pursuant to Subsection (f)(5), the land included within the boundaries of the district shall be deemed to be within the full-purpose boundary limits of the municipality without the need for further action by the governing body of the municipality. The full-purpose annexation conversion date established by a strategic partnership agreement may be altered only by mutual agreement of the district and the municipality. However, nothing herein shall prevent the municipality from terminating the agreement and instituting proceedings to annex the district, on request by the governing body of the district, on any date prior to the full-purpose annexation conversion date established by the strategic partnership agreement under the procedures prescribed by Subchapter C-1. Land annexed for limited or full purposes under this section shall not be included in calculations prescribed by § 43.055(a).
(i) A strategic partnership agreement may provide that the district shall not incur additional debt, liabilities, or obligations, to construct additional utility facilities, or sell or otherwise transfer property without prior approval of the municipality.
(j) Except as limited by this section or the terms of a strategic partnership agreement, a district that has been annexed for limited purposes by a municipality and a limited district shall have and may exercise all functions, powers, and authority otherwise vested in a district.
(k) A municipality that has annexed all or part of a district for limited purposes under this section may impose a sales and use tax within the boundaries of the part of the district that is annexed for limited purposes. Except to the extent it is inconsistent with this section, Chapter 321, Tax Code, governs the imposition, computation, administration, governance, and abolition of the sales and use tax.
(l) An agreement or a decision made under this section and an action taken under the agreement by the parties to the agreement are not subject to approval or an appeal brought under the Water Code unless it is an appeal of a utility rate charged by a municipality to customers outside the corporate boundaries of the municipality.
(m) A municipality that may annex a district for limited purposes to implement a strategic partnership agreement under this section shall not annex for full purposes any territory within a district created pursuant to a consent agreement with that municipality executed before August 27, 1979. The prohibition on annexation established by this subsection shall expire on September 1, 1997, or on the date on or before which the municipality and any district may have separately agreed that annexation would not take place whichever is later.
(n) This subsection applies only to a municipality any portion of which is located in a county that has a population of not less than 315,000 and not more than 351,000 and that borders the Gulf of Mexico and is adjacent to a county with a population of more than 3.3 million. A municipality may impose within the boundaries of a district a municipal sales and use tax authorized by Chapter 321, Tax Code, or a municipal hotel occupancy tax authorized by Chapter 351, Tax Code, that is imposed in the municipality if:
(1) the municipality has annexed the district for limited purposes under this section; or
(2) following two public hearings on the matter, the municipality and the district enter a written agreement providing for the imposition of the tax or taxes.
(n-1) At the conclusion of the term of an agreement between a municipality and a district under Subsection (n), the district and the municipality may extend the agreement for a period not to exceed 10 years. An agreement may be extended only once under this subsection.
(o) Repealed by Acts 2019, 86th Leg., R.S., Ch. 155 (H.B. 347), Sec. 1.01(17), eff. May 24, 2019.
(p) An agreement under this section:
(1) may not require the district to provide revenue to the municipality solely for the purpose of obtaining an agreement with the municipality to forgo annexation of the district; and
(2) must provide benefits to each party, including revenue, services, and regulatory benefits, that must be reasonable and equitable with regard to the benefits provided by the other party.
(q) Except for Sections 43.130(a) and (b), Subchapter F does not apply to a limited-purpose annexation under a strategic partnership agreement.
(r) A district or the area of a district annexed for limited purposes under this section must be:
(1) in the municipality’s extraterritorial jurisdiction; and
(2) contiguous to the corporate boundaries of the municipality or an area annexed by the municipality for limited purposes, unless the district consents to noncontiguous annexation under a strategic partnership agreement with the municipality.
(s) Notwithstanding any other law other than § 43.083, the procedures prescribed by Subchapters C-3, C-4, and C-5 do not apply to the annexation of an area under this section. Except as provided by Subsection (h), a municipality shall follow the procedures established under the strategic partnership agreement for full-purpose annexation of an area under this section.