EFFECT OF ANNEXATION BY CITY OF DENISON.

(a) The City of Denison may annex part of the district into its corporate limits without annexing the entire district under the terms of a development agreement executed under Section 8359.004 between the City of Denison and the owners of the land in the district that is covered by the development agreement. If a development agreement is not executed under Section 8359.004 or the agreement has expired, nothing in this chapter limits the right of the City of Denison to annex the district.

(b) If the City of Denison annexes all or part of the district into its corporate limits:

(1) the district is not dissolved;

(2) the ability of the district to issue bonds is not impaired or precluded; and

(3) unless otherwise approved by the board and the governing body of the City of Denison, the city:

(A) may not take over the property or other assets of the district;

(B) may not assume any debts, liabilities, or other obligations of the district;

(C) is not obligated to perform any functions of the district; and

(D) is not obligated to pay a landowner or developer for expenses incurred by the landowner or developer in connection with the district that would otherwise be eligible for reimbursement from the proceeds of bonds issued by the district.

(c) Notwithstanding Section 54.016(f)(2), Water Code, an allocation agreement between the City of Denison and the district that provides for the allocation of the taxes or revenues of the district and the city following the date of inclusion of all the district's territory in the corporate limits of the city may provide that the total annual ad valorem taxes collected by the city and the district from taxable property in the district may exceed the city's ad valorem tax on that property.