BILL ANALYSIS

C.S.H.B. 5012

By: Clardy

Ways & Means

Committee Report (Substituted)

BACKGROUND AND PURPOSE

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

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 5012 amends the Tax Code to include the following municipalities among the municipalities entitled to receive certain tax revenue derived from a hotel and convention center project and authorized to pledge certain tax revenue for the payment of obligations related to the project:

· a municipality with a population of 100,000 or more that is wholly located in, but is not the county seat of, a county with a population of one million or more in which all or part of a municipality with a population of one million or more is located and that is adjacent to a county with a population of 2.5 million or more;

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

· 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;

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

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

· a municipality that is intersected by both State Highways 71 and 95;

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

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

· 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;

· 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;

· a municipality with a population of at least 150,000 but less than 1,300,000 that is partially located in a county that contains a portion of Cedar Creek Reservoir;

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

· 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;

· a municipality that is the county seat of a county:

o with a population of one million or more;

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

o that is located adjacent to a county with a population of 2.5 million or more; and

· 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 U.S. Army installation.

C.S.H.B. 5012 revises the population-based brackets that trigger such an entitlement and authorization for certain municipalities as follows:

· with respect to a municipality that contains more than 75 percent of the population of a county with a population of 1.5 million or more, lowers that percentage to 70 percent;

· with respect to a municipality with a population of 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, increases the minimum municipal population to 175,000;

· with respect to a municipality with a population of 150,000 or more but less than one million that is located in one county with a population of 2.3 million or more, increases the minimum municipal and county populations to 250,000 and 2.5 million, respectively;

· with respect to a municipality with a population of 99,900 or more but less than 111,000 that is located in a county with a population of 135,000 or more, changes the description to a municipality with a population of at least 95,000 that is located in a county that is bisected by U.S. Highway 385 and has a population of not more than 170,000;

· with respect to 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, increases those population figures to 28,000; 31,000; 900,000; and 2.5 million, respectively;

· with respect to a municipality with a population of 45,000 or more that contains a portion of Cedar Hill State Park; is located in two counties, one of which has a population of two million or more and one of which has a population of 149,000 or more; and has adopted a capital improvement plan for the construction or expansion of a convention center facility, increases the minimum population for those two counties to 2.5 million and 190,000, respectively;

· with respect to a municipality with a population of less than 6,000 that is almost wholly located in a county with a population of 600,000 or more that is adjacent to a county with a population of two million or more; is partially located in a county with a population of 1.8 million or more that is adjacent to a county with a population of two million or more; has a visitor center and museum located in a 19th-century rock building in the municipality's downtown; and has a waterpark open to the public, increases those population figures to 10,000; 900,000; 2.5 million; 2.1 million; and 2.5 million, respectively;

· with respect to a municipality with a population of 56,000 or more that borders Lake Ray Hubbard and is located in two counties, one of which has a population of less than 80,000, increases those population figures to 60,000 and 110,000, respectively;

· with respect to a municipality with a population of 83,000 or more that borders Clear Lake and is primarily located in a county with a population of less than 300,000, increases those population figures to 110,000 and 355,000, respectively;

· with respect to a municipality with a population of 75,000 or more that is located wholly in one county with a population of 575,000 or more that is adjacent to a county with a population of four million or more and has adopted a capital improvement plan for the construction or expansion of a convention center facility, increases the minimum county population to 800,000;

· with respect to a municipality with a population of less than 75,000 that is located in three counties, at least one of which has a population of four million or more, decreases the maximum municipal population to 70,000;

· with respect to an eligible coastal municipality with a population of 3,000 or more but less than 5,000, decreases the minimum population to 2,900;

· with respect to a municipality with a population of 20,000 or more but less than 25,000 that contains a portion of Mustang Bayou and is wholly located in a county with a population of less than 500,000, changes the municipal population range to 25,000 or more but less than 30,000;

· with respect to 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, changes the population figures to 70,000; 115,000; 1.1 million; and 1.9 million, respectively;

· with respect to a municipality that is the county seat of a county that has a population of 115,000 or more, is adjacent to a county with a population of 1.8 million or more, and hosts an annual peach festival, increases the minimum population of that adjacent county to 2.1 million;

· with respect to a municipality that is the county seat of a county that has a population of 585,000 or more and is adjacent to a county with a population of four million or more, increases the minimum population of the county of which the municipality is the county seat to 800,000;

· with respect to a municipality with a population of less than 6,100 that is located in two counties, each of which has a population of 600,000 or more but less than two million and hosts an annual Cajun Festival, changes those population figures to 17,000 and 900,000, respectively;

· with respect to a municipality with a population of 4,000 or more that is located on an international border and is located not more than five miles from a state historic site that serves as a visitor center for a state park that contains 300,000 or more acres of land, decreases the minimum municipal population to 3,200;

· with respect to the municipality with a population of 28,000 or more in which is located a historic railroad depot and heritage center, changes the description so that it is a municipality with a population of 28,000 or more that is located in a county with a population of 240,000 or more in which is located a portion of the Blanco River and in which is located a historic railroad depot and heritage center; and

· with respect to a municipality with a population of more than 67,000 that is located in two counties with 90 percent of the municipality's territory located in a county with a population of at least 580,000, and the remaining territory located in a county with a population of at least four million, increases the minimum population of that primary county to 800,000.

C.S.H.B. 5012 requires the comptroller of public accounts to determine the following on the 20th anniversary of the date a hotel designated as a qualified hotel by a municipality that is the county seat of a county bordering the Gulf of Mexico and the United Mexican States, or by a municipality that is the county seat of a county through which the Brazos River flows and in which a national monument is located, is open for initial occupancy:

· the total amount of state tax revenue received from the qualified project in accordance with the entitlement extended to the municipality under the bill and, if applicable, in accordance with the additional entitlement for certain municipalities to receive revenue from a qualified establishment near the hotel or convention center facility during the period for which the municipality was entitled to receive the revenues; and

· the total amount of such tax revenue 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 revenue in accordance with the entitlements.

If the former amount exceeds the latter amount, the comptroller must promptly provide written notice to the municipality stating that the municipality must remit to the comptroller the difference between those two amounts. The bill 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. The first payment must be made not later than the 30th day after the date the municipality receives the notice from the comptroller and subsequent payments are due on the 20th day of each month until the total amount stated in the notice is paid. The bill requires the comptroller to prescribe the procedure a municipality must use to remit a payment and requires the comptroller to deposit the revenue received to the general revenue fund in the same manner as the comptroller deposits revenue received from the state hotel occupancy tax.

EFFECTIVE DATE

September 1, 2023.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 5012 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

Both the introduced and the substitute include additional municipalities among the municipalities entitled to receive certain tax revenue derived from a hotel and convention center project and authorized to pledge certain tax revenue for the payment of obligations related to the project. However, the substitute, as detailed below, omits certain of the municipalities included by the introduced, includes certain other municipalities not included by the introduced, and updates the description of one municipality included by the introduced:

· omits the following municipalities:

o a municipality that contains an intersection of Interstates 35E and 35W and at least two public universities;

o a municipality that with a population of 50,000 or more that contains a historical commercial district designated on the National Register of Historic Places and hosts an annual Grapefest event and is partially located in three counties all of which has a population of 900,000 or more; and

o a municipality with a population of 17,400 or more that has an institution of higher education designated as an historical black college and university and is located in a county with a population of 145,000 or more that is adjacent to a county with a population of 2.6 million or more;

· includes the following additional municipalities:

o 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;

o 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;

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

o 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;

o a municipality that is the county seat of a county:

§ with a population of one million or more;

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

§ that is located adjacent to a county with a population of 2.5 million or more; and

o 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 U.S. Army installation; and

· updates the description of the municipality that has a population of at least 150,000 and is partially located in a county that contains a portion of Cedar Creek Reservoir and has a population of at least 145,00054), so that the description is instead 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.

The substitute updates the population-based description of 20 municipalities currently included among the municipalities so entitled and so authorized, only one of which was included in the introduced. The description of that one municipality—a municipality with a population of 28,000 or more in which is located historic railroad depot and heritage center—was updated in the introduced to include a reference to the Balcones River, which the substitute changes to the Blanco River.

The substitute includes provisions absent from the introduced providing for the recapture of lost state tax revenue from certain municipalities.

The substitute omits the following provisions present in the introduced:

· a provision classifying an establishment engaged in activities described by North American Industry Classification System subsector code 713 as a "retail establishment" for purposes of provisions governing the imposition and collection of municipal hotel occupancy taxes;

· a provision authorizing a municipality that is intersected by both State Highways 71 and 95 to pledge or commit the revenue derived from the municipal hotel occupancy tax from a qualified hotel and certain other revenue to which the municipality is entitled for the payment of bonds or other obligations issued for a convention center facility that, at the time the bonds or other obligations were issued, was not a qualified convention center facility;

· a provision entitling a municipality with a population of 100,000 or more that is wholly located in, but is not the county seat of, a county with a population of one million or more in which all or part of a municipality with a population of one million or more is located and that is adjacent to a county with a population of 2.5 million or more to receive the sales and use tax and, if applicable, mixed beverage tax revenue derived from qualifying restaurants, bars, retail establishments located near the hotel or convention center facility;

· provisions temporarily entitling a municipality or nonprofit corporation acting on behalf of a municipality that received or was entitled to receive a rebate, refund, or payment of taxes at any time during the period beginning March 12, 2020, and ending January 1, 2021, relating to a hotel project or qualified hotel, convention center facility, or establishment, as applicable, to receive that revenue for an additional 24-month period immediately following the expiration of the applicable 10-year period; and

· provisions that do the following:

o define "project-associated infrastructure" for purposes of statutory provisions relating to the use of revenue from the municipal hotel occupancy tax to fund certain qualified projects;

o allow for the boundaries of certain project financing zones to extend beyond a three-mile radius of the center of such a project;

o revise current law authorizing certain municipalities to use municipal hotel occupancy tax revenue to fund such projects and to pledge revenue from a hotel located in a project financing zone for the payment of obligations issued or incurred to acquire, lease, construct, improve, enlarge, and equip a qualified convention center facility or multipurpose arena or venue;

o authorize an applicable local government corporation to act as a municipality for purposes of using revenue from the municipal hotel occupancy tax to fund such projects and establish that related actions a municipality must take by ordinance or order may be taken by order or resolution of the corporation; and

o due to the effect of the COVID-19 pandemic on hotel-associated revenues, automatically extend for two years the date on which a project financing zone expires if the zone was in existence on March 15, 2020, and was designated as such in or before 2019.