BILL ANALYSIS

Senate Research Center	H.B. 5012
	By: Clardy et al. (Birdwell)
	Natural Resources & Economic Development
	5/15/2023
	Engrossed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

Under current law, certain municipalities in Texas are authorized to receive a rebate for a period of 10 years of the state hotel occupancy taxes and state sales taxes collected at certain hotels and, in some cases, at certain qualified commercial retail outlets located within 1,000 feet. To qualify for a rebate, the hotel must, among other things, be located within 1,000 feet of a city-owned convention center facility and, in most cases, on land owned by a city. The rebated taxes can used by a city to service bonds or other obligations incurred for the construction of the project. After the 10-year period has elapsed, the rebates cease, and all state hotel taxes and state sales taxes collected are deposited to the state's general revenue fund. ��

Convention centers and convention center hotels assist the state economy by attracting out-of-state conventions, business meetings, and visitors to Texas in addition to assisting with local revitalization and development efforts. Having an adequate supply of hotel rooms located near a convention center is critical to event planners and makes Texas more competitive in national and international tourism. �

Accordingly, H.B. 5012 seeks to extend to additional municipalities the entitlement to receive those rebates and, following recommendations from the 87th interim hearings of the Senate Committee on Natural Resources and Economic Development, H.B. 5012 includes a "claw back" provision to ensure the state's revenues are recouped over time in certain newly authorized projects.

H.B. 5012 amends current law relating to the authority of certain municipalities to use certain tax revenue for hotel and convention center projects and other qualified projects.

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 351.1015(a)(2), Tax Code, to redefine "hotel-associated revenue."

SECTION 2. Amends Section 351.1015, Tax Code, by amending Subsections (b) and (e) and adding Subsections (j) and (k), as follows:

(b) Provides that Section 351.1015 (Certain Qualified Projects) applies only to a qualified project located in:

(1) creates this subdivision from existing text;

(2) a municipality described by Section 351.001(7)(B) (relating to providing that "eligible central municipality" includes a municipality with a population of 250,000 or more than meets certain criteria); or

(3) a municipality described by Section 351.152(5).

Makes a nonsubstantive change.

(e) Authorizes a municipality to pledge for the payment of certain monies the local revenue from certain eligible tax proceeds, excluding any amount received by the municipality:

(1) in connection with a qualified hotel, as defined by Section 351.151 (Definitions), located in the zone that exists on the date the municipality designates the zone; or

(2) creates this subdivision from existing text.

Makes a nonsubstantive change.

(j) Requires that the designation of a project financing zone by a municipality described by Subsection (b)(2), notwithstanding Subsection (a)(4)(D) (relating to defining "project financing zone") and except as otherwise provided by this subsection, expire not later than the 10th anniversary of the date of designation. Authorizes the legislature by adoption of a concurrent resolution approved by a record vote of a majority of the members of each house of the legislature to authorize a municipality described by Subsection (b)(2) to extend, in 10-year increments, a project financing zone designated by the municipality, provided that the zone is prohibited from being extended beyond the 30th anniversary of the date of designation.

(k) Prohibits a municipality described by Subsection (b)(2), notwithstanding any other provision of this section, from designating a project financing zone under this section before January 1, 2025. Provides that this subsection expires September 1, 2025.

SECTION 3. Amends Section 351.152, Tax Code, as follows:

Sec. 351.152. APPLICABILITY. Provides that Subchapter C (Municipal Hotel and Convention Center Projects) applies only to:

(1)-(4) makes no changes to these subdivisions;

(5) a municipality that contains more than 70 percent, rather than more than 75 percent, of the population of a county with a population of 1.5 million or more;

(6)� a municipality with a population of 175,000 or more, rather than 150,000 or more, but less than 200,000 that is partially located in at least one county with a population of 125,000 or more;

(7)� a municipality with a population of 250,000 or more, rather than 150,000 or more, but less than one million that is located in one county with a population of 2.5 million or more, rather than 2.3 million or more;

(8)-(10) makes no changes to these subdivisions;

(11) a municipality with a population of at least 95,000 that is located in a county that is bisected by United States Highway 385 and has a population of not more than 170,000, rather than a municipality with a population 99,900 or more but less than 111,000 that is located in a county with a population of 135,000 or more;

(12) makes no changes to this subdivision;

(13) a municipality with a population of 28,000 or more but less than 31,000 that is located in two counties, each of which has a population of 900,000 or more and a southern border with a county with a population of 2.5 million or more, rather than a municipality with a population of 9,000 or more but less than 10,000 that is located in two counties, each of which has a population of 662,000 or more and a southern border with a county with a population of 2.3 million or more;

(14)-(15) makes no changes to these subdivisions;

(16) a municipality with a population of 45,000 or more that meets certain criteria, including being located in two counties, one of which has a population of 2.5 million or more, rather than two million or more, and one of which has a population of 190,000 or more, rather than 149,000 or more;

(17) a municipality with a population of less than 10,000, rather than less than 6,000, that:

(A) is almost wholly located in a county with a population of 900,000 or more, rather than 600,000 or more, that is adjacent to a county with a population of 2.5 million or more, rather than two million or more;

(B) is partially located in a county with a population of 2.1 million or more, rather than 1.8 million or more, that is adjacent to a county with a population of 2.5 million or more, rather than two million or more; and

(C)-(D) makes no changes to these paragraphs;

(18) a municipality with a population of 60,000 or more, rather than 56,000 or more, that meets certain criteria, including being located in two counties, one of which has a population of less than 110,000, rather than less than 80,000;

(19) a municipality with a population of 110,000 or more, rather than 83,000 or more, that meets certain criteria, including being primarily located in a county with a population of less than 355,000, rather than less than 300,000;

(20) makes no changes to this subdivision;

(21) a municipality with a population of 75,000 or more that meets certain criteria, including being located wholly in one county with a population of 800,000 or more, rather than 575,000 or more, that is adjacent to a county with a population of four million or more;

(22) a municipality with a population of less than 70,000, rather than less than 75,000, that is located in three counties, at least one of which has a population of four million or more;

(23) an eligible coastal municipality with a population of 2,900 or more, rather than 3,000 or more, but less than 5,000;

(24)-(25) makes no changes to these subdivisions;

(26)� a municipality with a population of 25,000 or more but less than 30,000, rather than a population of 20,000 or more but less than 25,000, that meets certain criteria;

(27)-(30) makes no changes to these subdivisions;

(31) a municipality with a population of 70,000 or more but less than 115,000 that is located in two counties, one of which has a population of 1.1 million or more but less than 1.9 million, rather than a municipality with a population of 48,000 or more but less than 95,000 that is located in two counties, one of which has a population of 900,000 or more but less than 1.7 million;

(32)-(34) makes no changes to these subdivisions;

(35) a municipality that is the county seat of a county that meets certain criteria, including being adjacent to a county with a population of 2.1 million or more, rather than 1.8 million or more;

(36) a municipality that is the county seat of a county that meets certain criteria, including having a population of 800,000 or more, rather than 585,000 or more; and

(37) makes no changes to this subdivision;

(38) a municipality with a population of less than 17,000, rather than less than 6,100, that meets certain criteria, including being located in two counties, each of which has a population of 900,000 or more, rather than 600,000 or more, but less than two million;

(39) makes no changes to this subdivision;

(40) a municipality with a population of 3,200 or more, rather than 4,000 or more, that meets certain criteria;

(41) makes no changes to this subdivision;

(42) a municipality with a population of 28,000 or more that is located in a county with a population of 240,000 or more that contains a portion of the Blanco River and in which is located a historic railroad depot and heritage center;

(43) makes no changes to this subdivision;

(44) makes a nonsubstantive change to this subdivision;

(45) a municipality that meets certain criteria, including being located in two counties� with 90 percent of the municipality's territory located in a county with a population of at least 800,000, rather than at least 580,000, and the remaining territory located in a county with a population of at least four million;

(46) a municipality that:

(A) has a population of 100,000 or more; and

(B) is wholly located in, but is not the county seat of, a county with a population of one million or more:

(i) in which all or part of a municipality with a population of one million or more is located; and

(ii) that is adjacent to a county with a population of 2.5 million or more;

(47) a municipality that is the county seat of a county bordering the Gulf of Mexico and the United Mexican States;

(48) a municipality that is bisected by the Guadalupe River and is the county seat of a county with a population of 170,000 or more;

(49) a municipality with a population of 70,000 or more but less than 150,000 that borders Joe Pool Lake;

(50) a municipality with a population of 115,000 or more that borders the Neches River;

(51) a municipality described by Section 351.101(k) (relating to authorizing a municipality that is intersected by both State Highways 71 and 95 to use certain revenue for a certain purpose);

(52) a municipality that is the county seat of a county through which the Brazos River flows and in which a national monument is located;

(53) a municipality with a population of 45,000 or more that is not the county seat of a county, is located in a single county, and contains a portion of Lake Lewisville;

(54) a municipality that is the county seat of a county with a population of more than 900,000 that is adjacent to two counties, each of which has a population of more than 1.8 million;

(55) a municipality that hosts an annual wine festival and is located in three counties, each of which has a population of more than 900,000;

(56) a municipality that has a population of at least 150,000 but less than 1,300,000 and is partially located in a county that contains a portion of Cedar Creek Reservoir;

(57) a municipality that is located in a county that contains a portion of Cedar Creek Reservoir and in which a private college is located;

(58) a municipality that is the county seat of a county:

(A) with a population of one million or more;

(B) in which all or part of a municipality with a population of one million or more is located; and

(59) a municipality that is the county seat of a county that contains a portion of Cedar Creek Reservoir and borders a county with a population of more than 240,000;

(60) a municipality with a population of more than 80,000 but less than 150,000 that is located in a county with a population of more than 369,000 but less than 864,000 that contains part of an active duty United States Army installation;

(61) a municipality with a population of 750,000 or more that is located in a county with a population of 1.5 million or less;

(62) a municipality with a population of less than 7,000 that contains a country music hall of fame;

(63) a municipality with a population of 35,000 or more that contains a railroad museum and is located in a county that has a population of 800,000 or more and is adjacent to a county with a population of four million or more; and

(64) a municipality:

(A) that is the county seat of a county with a population of 60,000 or less and that borders the Rio Grande; and

(B) in which is located a United States military fort listed in the National Register of Historic Places.

SECTION 4. Amends Section 351.157, Tax Code, by amending Subsections (a) and (b) and adding Subsection (c-1), as follows:

(a) Redefines "qualified establishment."

(b) Provides that Section 351.157 (Additional Entitlement for Certain Municipalities) applies only to:

(1) makes no changes to this subdivision;

(1-a) a municipality described by Section 351.152(5);

(2)-(10) makes no changes to these subdivisions;

(11) makes a nonsubstantive change to this subdivision;

(11-a) a municipality described by Section 351.152(41);

(12) makes a nonsubstantive change to this subdivision;

(13) a municipality described by Section 351.152(46);

(14) a municipality described by Section 351.152(47);

(15) a municipality described by Section 351.152(49);

(16) a municipality described by Section 351.152(52);

(17) a municipality described by Section 351.152(53);

(18) a municipality described by Section 351.152(54);

(19) a municipality described by Section 351.152(56); and

(20) a municipality described by Section 351.152(58).

(c-1) Entitles a municipality to which this section applies to receive revenue under Subsection (d) (relating to entitling a municipality to which this section applies to receive the revenue derived form certain taxes generated, paid, and collected from a qualified establishment located in the municipality) derived from the following types of establishments that meet the requirements of certain subsections:

(1) restaurants;

(2) bars;

(3) retail establishments;

(4) recreation establishments; and

(5) swimming pools and swimming facilities owned or operated by the related qualified hotel.

SECTION 5. Amends Section 351.158, Tax Code, as follows:

Sec. 351.158. PERIOD OF ENTITLEMENT. (a) Creates this subsection from existing text.

(b) Entitles a municipality described by Section 351.152(2), notwithstanding Subsection (a) (relating to entitling a municipality to receive certain revenue until a certain date) or any other law, due to the effect of the COVID-19 pandemic on the tourism and hotel industry, to receive revenue as provided by Section 351.156 (Entitlement to Certain Tax Revenue) until the 12th anniversary of the date the qualified hotel to which the entitlement relates is open for initial occupancy if:

(1) the qualified hotel to which the entitlement relates is part of a qualified project that was commenced on or before March 15, 2020; and

(2) the entitlement of the municipality to receive revenue under Subsection (a) did not expire before the date prescribed by Subdivision (1) of this subsection.

SECTION 6. Amends Subchapter C, Chapter 351, Tax Code, by adding Section 351.161, as follows:

Sec. 351.161. RECAPTURE OF LOST STATE TAX REVENUE FROM CERTAIN MUNICIPALITIES. (a) Provides that this section applies only to a qualified project that:

(1) is authorized and commenced on or after January 1, 2027; or

(2) notwithstanding Subdivision (1), is located in a municipality that was not entitled to pledge or commit revenue under Section 351.155 (Pledge or Commitment of Certain Tax Revenue for Obligations for Qualified Project) before September 1, 2023.

(b) Requires the Comptroller of Public Accounts of the State of Texas (comptroller), on the 20th anniversary of the date a hotel designated as a qualified hotel by a municipality to which this section applies is open for initial occupancy, to determine:

(1) the total amount of state tax revenue received under Section 351.156 and, if applicable, under Section 351.157 by the municipality from the qualified project of which the qualified hotel was a part during the period for which the municipality was entitled to receive that revenue; and

(2) the total amount of state tax revenue described by Subdivision (1) received by the state during the period beginning on the 10th anniversary of the date the qualified hotel opened for initial occupancy and ending on the 20th anniversary of that date from the same sources from which the municipality received the revenue described by Subdivision (1).

(c) Requires the comptroller, if the amount determined under Subsection (b)(1) exceeds the amount determined under Subsection (b)(2), to promptly provide written notice to the municipality stating that the municipality is required to remit to the comptroller the difference between those two amounts in the manner provided by this subsection. Requires the municipality, using money lawfully available to the municipality for the purpose, to remit monthly payments to the comptroller in an amount equal to the total amount of municipal hotel occupancy tax revenue received by the municipality from the qualified hotel in the preceding month until the amount remitted to the comptroller equals the total amount due as stated in the notice. Prohibits the first payment required under this subsection from being made not later than the 30th day after the date the municipality receives the notice from the comptroller. Provides that subsequent payments are due on the 20th day of each month until the total amount stated in the notice is paid. Requires the comptroller to prescribe the procedure a municipality is required to use to remit a payment required by this subsection to the comptroller.

(d) Requires the comptroller to deposit revenue received under this section in the manner prescribed by Section 156.251 (Revenue Deposited in General Revenue Fund).

SECTION 7. Repealer: Section 351.157(c) (relating to entitling a municipality to receive revenue described by Subsection (d) derived from certain types of establishments), Tax Code.

SECTION 8. Effective date: September 1, 2023.