PROVISION OF WATER AND SANITARY SEWER UTILITY SERVICE.

(a) A district existing on September 1, 1997, that, within 10 years after the date of its creation, has not provided water and sanitary sewer utility service from its facilities to all household users in its territory shall:

(1) provide water and sanitary sewer utility service from its facilities to all household users in its territory not later than September 1, 1998; or

(2) for that part of the district for which the district does not provide water and sanitary sewer utility service, and for which a municipality does provide those services, provide for periodic payments, as described by Subsection (b), by the district to the municipality that provides the services.

(b) Payments made under Subsection (a)(2) are operation and maintenance expenses of the district and shall be made at least every three months. The total annual amount of the payments may not exceed the lesser of:

(1) the total annual cost to the municipality of providing the water and sanitary sewer utility service, including both capital and operation and maintenance costs and expenses; or

(2) the total annual amount of maintenance and operation taxes and debt service or bond taxes paid to the district by the owners of taxable property within the district that receives water and sanitary sewer utility service from the municipality.

(c) For purposes of Subsection (b)(2), the value of taxable property that receives the utility service shall be determined by the most recent certified tax roll provided by the central appraisal district in which the property is located. The amount of the taxes shall be determined using rates from the district's most recent tax levies.

(d) A district that on January 1, 1997, was providing water and sanitary sewer utility service to households outside the territory of the district may not discontinue that service and shall continue to provide that service on the basis of rates established by the district in accordance with Chapter 13, Water Code.

(e) In this section, "district" means a conservation and reclamation district of more than 10,000 acres that provides water and sanitary sewer utility service to households and parts of which are located in two or more municipalities, one of which has a population of more than 1.6 million.