TO:	Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM:	Jerry McGinty, Director, Legislative Budget Board
IN RE:	HB5012 by Clardy (relating to the authority of certain municipalities to use certain tax revenue for hotel and convention center projects and other qualified projects.), Committee Report 1st House, Substituted

General Revenue-Related Funds, Five- Year Impact:

All Funds, Five-Year Impact:

Fiscal Analysis

The bill would amend Sections 351.152(5)-(7), (11), (13), (16)-(19), (21)-(23), (26), (31), (36), (38), (40), (42), and (45) of the Tax Code to update population brackets for municipalities authorized to receive certain tax revenue derived from a hotel and convention center project and to pledge certain revenue for the payment of obligations related to the project.

The bill would add Sections 351.152(46)-(60): (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); (52) a municipality that is the county seat of a county: (A) through which the Brazos River flows; and (B) in which a national monument is located; (53) a municipality with a population of 45,000 or more that: (A) is not the county seat of a county; (B) is located in a single county; and (C) 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 (C) that is located adjacent to a county with a population of 2.5 million or more; (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; and (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.

The bill would add Section 351.161 to recapture lost state tax revenue in the event the total amount of state tax revenue received by the municipality from the state in the first 10 years entitlement exceeds the amount of revenue received by the state from the same sources over the following ten years. Section 351.161 only applies to a municipality described by Section 351.152(46) or (52).

Methodology

Populations for Sections 351.152(5)-(7), (11), (13), (16)-(19), (21)-(23), (26), (31), (36), (38), (40), (42), and (45) of the Tax Code would be updated for these currently authorized cities.  This analysis assumes each amended subsection would continue to refer to the same, currently authorized, city.

Sections 351.152 (46)-(60) would authorize the following cities: (46) Allen; (47) Brownsville; (48) Seguin; (49) Mansfield; (50) Beaumont; (51) Bastrop; (52) Waco; (53) Little Elm; (54) Denton; (55) Grapevine; (56) Mesquite; (57) Terrell; (58) McKinney; (59) Kauffman; and (60) Temple.

The cities would be eligible to receive funds described in Section 351.156 which provides, in relevant part, that a municipality to which Section 351.152 applies is entitled to receive from the qualified hotel and each restaurant, bar, and retail establishment located in or connected to the hotel or the related qualified convention center facility, the state sales and use tax and the state hotel occupancy tax. Section 351.158 would entitle the cities to receive the revenue until the tenth anniversary of the date the qualified hotel to which the entitlement relates is open for initial occupancy.

The recapture of lost state tax revenue provision would require the cities of Brownsville and Waco to reimburse the state, at some point in time after the 20th anniversary of initial entitlement, any tax payments that are not sustained after the initial entitlement period of 10 years.

The estimate is based on a projected opening date of September 1, 2026 (fiscal 2027) for each project, a comparison and review of revenues paid to the owners of extant qualified hotel projects, and estimated attributes of such prospective hotels. The estimates assume the authorizations are sought for use, and represent projected entitlements to state revenue should the projects occur. However, many authorizations previously enacted remain unutilized, as project development may prove infeasible even with the assurance of state subsidy.

Local Government Impact