BILL ANALYSIS
C.S.H.B. 788
By: Brimer (Ratliff)
Economic Development
05-18-95
Senate Committee Report (Substituted)
BACKGROUND
The 72nd Legislature passed S.B. 376 authorizing cities to enact an
economic development sales tax to be used for capital improvements
to entertainment and sports complexes. In order for a city to be
eligible for this provision, it must not have a mass transit system
and the current combined sales tax rate must be 7.25 percent or
less.
PURPOSE
As proposed, C.S.H.B. 788 authorizes certain eligible cities to
levy a sales and use tax for industrial development; authorizes an
eligible city to start a corporation to participate in projects to
promote industrial development.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Sections 4A and 4B, Article 5190.6, V.T.C.S.
(Development Corporation Act of 1979), as follows:
Sec. 4A. AUTHORIZATION TO LEVY SALES TAX FOR INDUSTRIAL
DEVELOPMENT. (a) ELIGIBLE CITY. Defines "eligible city."
(b)(1) CREATION OF CORPORATION. Authorizes an eligible city
to create a corporation under this Act governed by this
section. Provides that the corporation has the powers and
is subject to the limitations of a corporation created under
the provisions of this Act. Provides that this section
prevails in a conflict with another provision of this Act.
Requires the articles of incorporation to state that the
corporation is governed by this section and may include in
its name any words and phrases specified by the city.
(2) SPENDING FOR PROMOTION. Authorizes a corporation to
spend no more than 10 percent of its revenues for
promotional purposes. Authorizes a corporation to
contract with other private corporations to carry out
industrial development programs consistent with purposes
and duties provided in this article.
(3) TRANSFER OF ASSETS FROM CORPORATION CREATED UNDER THIS
ACT. Authorizes a corporation created under this Act, but
not this section, to transfer all of its assets to a
corporation governed by this section and dissolve as
provided by this Act on the approval of the governing body
of each unit and corporation involved.
(c) BOARD OF DIRECTORS AND GOVERNANCE. Provides that the
seven-member board of directors (board) is appointed by the
governing body of the city (governing body) for two-year
terms of office. Authorizes a director to be removed by the
governing body at any time without cause. Requires each
director to be a resident of or own real property in the
city. Requires three directors to not be employees,
officers, or members of the governing body. Provides that
a majority of the entire board membership is a quorum.
Requires the board to conduct meetings within the city's
boundaries. Requires the board to appoint officers of the
corporation that the governing body considers necessary.
Requires the corporation's registered agent to be a resident
of the state. Requires the corporation's registered office
to be in the city's boundaries. Provides that a corporation
created before September 1, 1995, that has a five-member
board continues to have a five-member board unless the
governing body establishes a seven-member board.
(d)(1) AUTHORITY TO LEVY SALES TAX. Authorizes the
governing body to levy a sales and use tax (tax) to benefit
the corporation if the tax is authorized by a majority of
the city's qualified voters in an election held for that
purpose. Provides that this election requirement is
satisfied and another election is not required if the voters
approved the levy and collection of an additional one-half
cent tax at an election held before the effective date of
this section.
(2) IMPOSITION AND RATE OF SALES TAX. Provides that if a
city adopts the tax, a tax is imposed on the receipts from
the sale at retail of taxable items within the city at a
rate approved at the election. Sets forth the required
rates of a tax adopted under this section. Prohibits the
adopted rate from resulting in a combined rate of all
taxes imposed by the city and other political subdivisions
having territory in the city that exceeds two percent.
Provides that an election adopting a rate that exceeds the
limit on the combined rate has no effect. Provides that
there is an imposed excise tax on use, storage, or other
consumption within the city of taxable items purchased,
leased, or rented from a retailer during the period that
the tax is effective within the city. Provides that the
rate of the excise tax is the same as the rate of the
sales tax portion of the tax and is applied to sales price
of the taxable items.
(3) APPLICATION OF CHAPTER 321, TAX CODE. Provides that
Chapter 321, Tax Code (Municipal Sales and Use Tax Act),
governs an election to authorize the imposition of the tax
and governs the imposition, computation, administration,
governance, abolition, and use of the tax. Provides that
if an election held under this section is held at the same
time an election is held to impose or change the rate of
the additional municipal tax, the tax under this section
takes effect as provided by Section 321.102(a) or (b), Tax
Code, at the option of the city, and the imposition or
change in rate of the additional municipal tax takes
effect as provided by Section 321.102(b), Tax Code.
Provides that after the effective date of taxes imposed
under this section, the adoption or attempted adoption of
a tax by the city or any other taxing jurisdiction having
territory in the city does not impair taxes imposed under
this section.
(e)(1) BALLOT PROPOSITION--GENERAL. Sets forth the required
format of the ballot to be used for an election to adopt the
tax under this section.
(2) BALLOT PROPOSITION--TIME LIMIT. Authorizes the city,
at an election called under Subsection (d), to allow the
voters to vote on a ballot proposition that limits the
length of time that a tax may be imposed. Provides a
statement required to be placed at the end of a ballot
proposition if the city elects to limit the period the tax
may be imposed. Requires the governing body to set the
expiration date of the proposed tax to occur on the
appropriate anniversary of the effective date of the tax.
Provides that a tax imposed for a limited period expires
in the date set by the governing body or on an earlier
date if repealed by a majority of the voters in an
election. Provides that a tax approved without a limit on
its imposition period is effective until repealed by
election. Requires the governing body, before the 90th
day before the expiration of the tax, to send a notice to
the comptroller stating the expiration date of the tax.
Requires revenue collected from the tax after its
expiration to be forwarded by the state to the governing
body to be used to pay current bonded indebtedness of the
city. Prohibits a city that has a tax from extending the
period of the tax's imposition and from reimposing the tax
after its expiration unless reimposition is approved by a
majority of the qualified voters of the city at an
election held for that purpose. Provides that if a city
reduces the rate of an additional tax under Chapter 321,
Tax Code, to impose a tax under this subsection, and does
not have an election to change the rate of the additional
tax before the expiration of the tax under this section,
the rate of the additional tax under Section 321.101, Tax
Code, returns without an election, to its previous rate in
effect when the tax imposed under this section was
adopted.
(3) BALLOT PROPOSITION--REDUCE OR INCREASE TAX RATE.
Authorizes a city in which the tax has been imposed under
this section to reduce or increase the tax by a majority
vote of the qualified voters of the city in an election
for that purpose. Sets forth increments by which the rate
may be reduced or increased. Requires the governing body
to order an election on petition of at least 10 percent of
the registered voters of the city requesting an election
on the increase or decrease of the tax. Requires the
ballot to be printed in the same manner as the one in
Subdivision (1).
(4) BALLOT PROPOSITION--COMBINE WITH REDUCTION IN PROPERTY
TAX. Authorizes a city that is authorized by this section
to impose, reduce, increase, or abolish (amend) the tax,
at the same time and on the same ballot, to amend an
additional tax imposed under Section 321.102(b), Tax Code,
if the city is authorized to amend the tax. Requires the
city follow certain procedures except that in an election
to amend the tax under this section and the additional tax
ballot shall be printed in a certain manner.
(f)(1) DISSOLUTION OF CORPORATION. Requires the governing
body, by its order or a petition of at least 10 percent of
the voters requesting for dissolution of the corporation, to
order an election on dissolution of the corporation at the
next available uniform election date that is not less than
45 days after the order is issued or petition is filed.
Requires the election to be conducted according to the
Election Code.
(2) BALLOT PROPOSITION FOR DISSOLUTION ELECTION. Requires
the election ballot to be printed in a certain manner to
provide for voting for or against the proposition.
Requires the corporation to continue operations to pay the
principal of and interest on its bonds and to meet
obligation incurred before the election if a majority of
the voters approve dissolution. Requires the corporation
to dispose of its assets and apply the proceeds to satisfy
those obligations if the voters approve dissolution.
Requires any remaining assets of the corporation, when the
obligations are satisfied, to be transferred to the city,
and the corporation is dissolved. Prohibits a tax from
being collected after the last day of the first calendar
quarter beginning after notification to the comptroller by
the corporation that the last of its obligation is
satisfied.
(g)(1) AUTHORIZED USE OF SALES TAX PROCEEDS. Requires the
city to deliver proceeds of the tax from the comptroller to
the corporation. Authorizes tax proceeds to be used to pay
the costs of the project authorized by this section and the
administrative costs of the corporation.
(2) DEFINITION OF AUTHORIZED PROJECT. Defines "project."
(3) IMPROVEMENTS ANCILLARY TO PROJECT. Sets forth costs
and other ancillary improvements included in a project.
Prohibits a corporation from using revenues from the sales
tax for a project with the primary purpose of providing
certain facilities for the benefit of the general public.
(4) PROJECT DEBT SERVICE COSTS. Sets forth payments
included in a project. Prohibits the bonds or any
instrument related to the bonds from giving a bondholder
a right to demand payment from tax proceeds in excess of
those collected from the tax imposed by the section.
(5) AUTHORIZATION LIMITED TO SPECIFIC PROJECT. Authorizes
the city to allow the voters to vote at an election on a
ballot proposition that limits the use of the tax to a
specific project authorized by this subsection. Sets
forth the form of the ballot. Requires a corporation,
when the last of the obligations and projects have been
satisfied, to send notice to the comptroller stating that
the tax imposed for a specific project may not be
collected after a certain time. Prohibits a tax imposed
for a specific project from being collected after a
certain time. Requires revenue collected after the
obligations for a specific project has been satisfied to
be forwarded by the state to the governing body to be used
to pay certain bonded indebtedness of the municipality.
Authorizes a corporation created to perform a specific
project to remain in existence and perform other projects
approved by the voters of a city under an election held
under Subsection (d).
(6) Prohibits a corporation from assuming a debt or making
any expenditure to pay the principal of or interest on a
debt if the debt existed before the date the city created
the corporation.
(h) EMINENT DOMAIN. Authorizes a corporation to exercise
the power of eminent domain only on approval of the action
by the governing body. Requires the power to be governed in
accordance with and subject to the laws applicable to the
city.
(i) GOVERNMENTAL IMMUNITY UNDER TORT CLAIMS ACT. Provides
that the corporation, a director of the corporation, the
city creating the corporation, a member of the governing
body, or an employee of the corporation or city is not
liable for damages arising from the performance of a
governmental function of the corporation or city. Provides
that for purposes of Chapter 101, Civil Practice and
Remedies Code (Texas Tort Claims Act), the corporation is a
governmental unit and its actions are governmental units.
(j) OWNERSHIP OF PROJECTS UNDER TAX CODE. Sets firth
findings of the legislature regarding the status of
projects. Provides that projects are exempt from taxation
under Section 11.11, Tax Code, for that period.
(k) SECTION 24 APPLICABILITY. Provides that Section 24 of
this Act does not apply to a corporation under this section.
Sec. 4B. AUTHORIZATION TO LEVY SALES TAX FOR OTHER THAN
INDUSTRIAL DEVELOPMENT. (a) ELECTION. Authorizes a city that
creates or has created a corporation to submit to the voters
of the city, at a separate election or an election held under
another provision of this Act, including one to initially
authorize the collection of a tax, a ballot that authorizes
the corporation to use the tax, including amounts previously
authorized to be collected, for a specific category of
projects that does not qualify under Section 4A but qualifies
under the expanded project definition in Subsection (c).
Provides that prior arrival of a specific project approved at
an election or completion of a specific project approved at an
election does not prohibit a city from seeking voter approval
of an additional project or category of projects to be funded
from the same tax.
(b) BALLOT PROPOSITION--SPECIFIC PROJECT OR SPECIFIC
CATEGORY OF PROJECTS. Sets forth the required contents of
the ballot to be used in an election to authorize the use of
a tax for a specific project or specific category of
projects.
(c)(1) EXPANDED "PROJECT" DEFINITION. Defines "project" and
"specific category of projects."
(2) MUNICIPALITY FACILITIES. Describes municipal facility
projects.
(3) EXPANDED BUSINESS ENTERPRISES. Describes expanded
business enterprise projects.
(d) SPECIFIC PROJECT UNDER GENERAL AUTHORITY. Authorizes a
corporation, if it has previously held an election
authorizing a category of projects, to undertake a project
of the general type described by the category unless within
60 days after first publishing notice of the project, the
governing body receives a petition signed by more than 10
percent of the registered voters of the city requesting an
election be held before that specific project is undertaken.
Authorizes the corporation to undertake the project only if
the specific project is approved at a subsequent election
after the petition is submitted.
(e)(1) PREVIOUS ELECTION IN CERTAIN CITIES. Provides that
an election under Section 4A(d) is not required to carry out
a project in a city that is located in a county with a
population in excess of 750,000 if a tax was approved at an
election held before February 1, 1993.
(2) BOND REQUIREMENTS. Authorizes bonds or other
obligations, in a city to which Subdivision (1) applies,
having a maturity of no longer than 30 years and issued to
pay the costs of the projects to be made payable from any
source of funds available to the corporation, including
proceeds from tax. Prohibits the sum of bonds or other
obligations payable by the tax plus the amount of the
costs of the projects, from exceeding $135 million.
Provides that bonds or other obligations that are payable
from the tax may not be paid in whole or in part from
taxes raised by the city, are not a city debt, and do not
give rise to the claim for payment against the city except
as to tax revenue held by a city and required to be paid
over to the corporation.
(3) EXPIRATION OF SALES AND USE TAX. Prohibits a tax
imposed for a project from being collected after a certain
time after notifying the comptroller that all bonds or
other obligations of the corporation that are payable from
the proceeds of the tax have been paid in full or the full
amounts have been set aside in a trust account dedicated
to the payment of the bonds and other obligations.
Deletes existing Sections 4A and 4B relating to industrial
development corporations created by certain cities.
SECTION 2. (a) Provides that a corporation existing before the
effective date of this Act continues to exist after the effective
date of this Act. Authorizes a city that created a corporation to
continue to collect any taxes authorized before the effective date
of this Act. Authorizes the corporation to continue to undertake
any projects or categories of projects authorized before the
effective date of this Act. Provides that a tax for the
corporation authorized on or after the effective date of this Act
or a project not previously authorized by the voters is governed by
Sections 4A and 4B as amended by this Act.
(b) Provides that on January 1, 1996, a corporation created
before the effective date of this Act under Section 4B,
Article 5190.6, V.T.C.S., is governed by Section 4A, Article
5190.6, V.T.C.S., as amended by this Act.
SECTION 3. Provides that all acts and procedures of a city in
calling and holding an industrial development sales tax election
before the effective date of this Act are validated as of the dates
on which they occurred.
SECTION 4. Emergency clause.
Effective date: upon passage.