1. (1) A municipality and a special district whose boundaries adjoin or overlap may adjust the boundary of the special district to include more or less of the municipality, including the expansion area identified in the annexation policy plan adopted by the municipality under Section 10-2-803, in the special district by following the same procedural requirements as set forth in Section 17B-1-417 for boundary adjustments between adjoining special districts.

2. (2)

   1. (a) Notwithstanding any other provision of this title, a municipality annexing all or part of an unincorporated island or peninsula under Title 10, Chapter 2, Classification, Boundaries, Consolidation, and Dissolution of Municipalities, that overlaps a municipal services district organized under Chapter 2a, Part 11, Municipal Services District Act, may petition to withdraw the area from the municipal services district in accordance with this Subsection (2).

   2. (b) For a valid withdrawal described in Subsection (2)(a):

      1. (i) the annexation petition under Section 10-2-806 or a separate consent, signed by owners of at least 60% of the total private land area, shall state that the signers request the area to be withdrawn from the municipal services district; and
      2. (ii) the legislative body of the municipality shall adopt a resolution, which may be the resolution adopted in accordance with Subsection 10-2-812(3)(a), stating the municipal legislative body's intent to withdraw the area from the municipal services district.
   3. (c) The board of trustees of the municipal services district shall consider the municipality's petition to withdraw the area from the municipal services district within 90 days after the day on which the municipal services district receives the petition.

   4. (d) The board of trustees of the municipal services district:

      1. (i) may hold a public hearing in accordance with the notice and public hearing provisions of Section 17B-1-508;
      2. (ii) shall consider information that includes any factual data presented by the municipality and any owner of private real property who signed a petition or other form of consent described in Subsection (2)(b)(i); and
      3. (iii) identify in writing the information upon which the board of trustees relies in approving or rejecting the withdrawal.

   5. (e) The board of trustees of the municipal services district shall approve the withdrawal, effective upon the annexation of the area into the municipality or, if the municipality has already annexed the area, as soon as possible in the reasonable course of events, if the board of trustees makes a finding that:

      1. (i)

         1. (A) the loss of revenue to the municipal services district due to a withdrawal of the area will be offset by savings associated with no longer providing municipal-type services to the area; or
         2. (B) if the loss of revenue will not be offset by savings resulting from no longer providing municipal-type services to the area, the municipality agreeing to terms and conditions, which may include terms and conditions described in Subsection 17B-1-510(5), can mitigate or eliminate the loss of revenue;
      2. (ii) the annexation petition under Section 10-2-806, or a separate petition meeting the same signature requirements, states that the signers request the area to be withdrawn from the municipal services district; or

      3. (iii) the following have consented in writing to the withdrawal:

         1. (A) owners of more than 60% of the total private land area; or
         2. (B) owners of private land equal in assessed value to more than 60% of the assessed value of all private real property within the area proposed for withdrawal have consented in writing to the withdrawal.
   6. (f) If the board of trustees of the municipal services district does not make any of the findings described in Subsection (2)(e), the board of trustees may approve or reject the withdrawal based upon information upon which the board of trustees relies and that the board of trustees identifies in writing.

   7. (g)

      1. (i) If a municipality annexes an island or a part of an island before May 14, 2019, the legislative body of the municipality may initiate the withdrawal of the area from the municipal services district by adopting a resolution that:

         1. (A) requests that the area be withdrawn from the municipal services district; and
         2. (B) a final local entity plat accompanies, identifying the area proposed to be withdrawn from the municipal services district.

      2. (ii)

         1. (A) Upon receipt of the resolution and except as provided in Subsection (2)(g)(ii)(B), the board of trustees of the municipal services district shall approve the withdrawal.
         2. (B) The board of trustees of the municipal services district may reject the withdrawal if the rejection is based upon a good faith finding that lost revenues due to the withdrawal will exceed expected cost savings resulting from no longer serving the area.

   8. (h)

      1. (i) Based upon a finding described in Subsection (e) or (f):

         1. (A) the board of trustees of the municipal services district shall adopt a resolution approving the withdrawal; and
         2. (B) the chair of the board shall sign a notice of impending boundary action, as defined in Section 67-1a-6.5, that meets the requirements of Subsection 67-1a-6.5(3).

      2. (ii) The annexing municipality shall deliver the following to the lieutenant governor:

         1. (A) the resolution and notice of impending boundary action described in Subsection (2)(g)(i);
         2. (B) a copy of an approved final local entity plat as defined in Section 67-1a-6.5; and
         3. (C) any other documentation required by law.

   9. (i)

      1. (i) Once the lieutenant governor has issued an applicable certificate as defined in Section 67-1a-6.5, the municipality shall deliver the certificate, the resolution and notice of impending boundary action described in Subsection (2)(h)(i), the final local entity plat as defined in Section 67-1a-6.5, and any other document required by law, to the recorder of the county in which the area is located.
      2. (ii) After the municipality makes the delivery described in Subsection (2)(i)(i), the area, for all purposes, is no longer part of the municipal services district.

   10. (j) The annexing municipality and the municipal services district may enter into an interlocal agreement under Title 11, Chapter 13, Interlocal Cooperation Act, stating:

       1. (i) the municipality's and the district's duties and responsibilities in conducting a withdrawal under this Subsection (2); and
       2. (ii) any other matter respecting an unincorporated island that the municipality surrounds on all sides.

3. (3) After a boundary adjustment under Subsection (1) or a withdrawal under Subsection (2) is complete:

   1. (a) the special district shall, without interruption, provide the same service to any area added to the special district as provided to other areas within the special district; and
   2. (b) the municipality shall, without interruption, provide the same service that the special district previously provided to any area withdrawn from the special district.
4. (4) No area within a municipality may be added to the area of a special district under this section if the area is part of a special district that provides the same wholesale or retail service as the first special district.

Amended by Chapter 399, 2025 General Session