BILL ANALYSIS


Economic Development Committee
C.S.H.B. 1706
By: Ramsay
May 2, 1995
Committee Report (Substituted)


BACKGROUND

The Development Corporation Act of 1979 authorized municipalities
to issue industrial revenue bonds for the purpose of economic
development.  In 1989, the Act was amended to allow municipalities
with less than 50,000 population, with voter approval, to levy up
to a one-half cent sales tax to be used for narrowly-defined
industrial development projects only.  The Act was amended again in
1991 to allow municipalities in counties with more than 750,000
population, with voter approval, to levy up to a one-half cent
sales tax to be used for a broad range of economic development
projects.  In 1993, the Act was amended yet again to allow
municipalities with less than 50,000 population to undertake the
same broad range of projects available to larger cities.  The
result is an Act that contains a number of oversights and omissions
that need to be addressed.

PURPOSE

The purpose is to simplify Section 4B of the Development
Corporation Act of 1979 by removing confusing population
requirements and allowing any municipality not participating in a
mass, metropolitan, or regional transit authority to form an
economic development corporation under section 4B of the Act.  It
will also allow these corporations to spend corporate revenues for
promotional purposes, enter into contracts with private
corporations, and remain in existence after bond obligations have
been satisfied.  

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.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 4B, Development Corporation Act of 1979
(Article 5190.6, Vernon's Texas Civil Statute), as amended by
Chapters 1022 and 1031, Acts of the 73rd Legislature, Regular
Session, 1993, as follows:

     Sec. 4B. (a)(1) Amends the definition of "eligible city" to
     mean a city that is not at the time it creates a corporation,
     and has not previously been, included within the boundaries of
     an authority under:

           (A) Chapter 141, Acts of the 63rd Legislature, Regular
           Session, 1973;

           (B) Chapter 683, Acts of the 66th Legislature, 1979; or

           (C) Article 1118z, Revised Statutes.

     Redesignates (a-1) as (b).

     Redesignates (a-2) as (c).

     (d) Adds that a created corporation may spend corporate
     revenues for promotional purpose.  Allows for contracts with
     private corporations to fulfill industrial development
     programs allowed for in this Act.

     Redesignates (b-h) to (e-l).

     (i) Deletes all the section.

     Redesignates (j-n) to (m-q).

Section 2. Expires Section 1 of this Act September 1, 1997.

Section 3. Emergency clause.

COMPARISON OF ORIGINAL TO SUBSTITUTE

The original bill added to the definition of an eligible city to
mean a city that is located in a county with a population of
500,000 or less according to the most recent federal decennial
census; or that has a population of less than 50,000 according to
the most recent federal decennial census and that is located in two
or more counties, one of which has a population of 500,000 or
greater according to the most recent federal decennial census; is
located within the territorial limits but has not elected to become
a part of a metropolitan rapid transit authority that has a
principal city with a population less than 1.2 million or more than
750,000 according to the most recent federal decennial census, with
such authority being created January 1, 1980.  The substitute
change the definition of an eligible city to mean a city that is
not at the time it creates a corporation, and has not previously
been, included within the boundaries of an authority under Chapter
141, Acts of the 63rd Legislature, Regular Session, 1973; Chapter
683, Acts of the 66th Legislature, 1979; or Article 11182, Revised
Statutes.  The substitute deletes all other definitions for
eligible city.

The original bill added that a corporation created may spend no
more than 25 percent of the corporate revenues for promotional
purposes and may contract with other existing private corporations
to carry out industrial development programs consistent with the
purposes and duties as set out in this bill.  The substitute
changes it so that a corporation created may spend corporate
revenues for promotional purposes and may contract with other
existing private corporations to carry out industrial development
programs consistent with the purposes and duties as set out by this
bill.  The substitute adds that each director must be a resident of
or owner of real property located in the eligible city.  The
original bill deleted that the rate of a tax adopted must be one
eighth, one fourth, three eighths, or one half of one percent; the
ballot proposition at the election held to adopt the tax must
specify the rate of the tax to be adopted; a corporation that holds
an election to reduce a tax imposed under Section 4A of this Act
may in a separate proposition on the same ballot adopt a tax; if an
eligible city adopts the tax, a tax is imposed on the receipts from
the sale at retail of taxable items within the eligible city at the
rate approved at the election; there is also imposed an excise tax
on the use, storage, or other consumption within the eligible city
of tangible personal property purchased, leased, or rented from a
retailer during the period that the tax is effective within the
eligible city; and the rate of the excise tax is the same as the
rate of the sales tax portion of the tax and is applied to the sale
price of the tangible personal property.  The substitute replaces
this section and leaves it as it currently is in the law.  The
original bill added on approval of the governing body of each unit
and corporation involved, a corporation created under this Act that
is not created under this section may transfer all of its assets to
a corporation governed by this section and dissolve as provided by
this Act.  The substitute removed this language from being added to
the bill.

The substitutes deletes that a sales and use tax that is imposed
may not be collected after the last day of the first calendar
quarter occurring after notification to the comptroller by the
corporation that all bonds or other obligations of the corporation
that are payable in whole or in part from the proceeds of sales and
use tax, including any refunding bonds or other obligations, have
been paid in full or the full amount of money, exclusive of
guaranteed interest, necessary to pay in full the bonds and other
obligations has been set aside in a trust account dedicated to the
payment of the bonds and other obligation.


The original bill repealed Section 4A of the Development
Corporation Act of 1979.  Defined the guidelines for a Section 4A
Corporation that was created before the effective date of the
original bill to continue as a Section 4B Corporation with all the
powers and duties of a 4B Corporation. Explained that a Section 4A
Corporation that was created as a Section 4A Corporation before the
effective date of the original bill would continue to collect any
taxes and undertake any project authorized for the 4A Corporation
created.  All restriction applicable to 4A taxes and project would
have remained the same.  Further, any tax or project that begins on
or after the original bill took effect was governed by Section 4B. 
Any taxes authorized as a Section 4A Corporation could only be used
to fund a Section 4B Corporation project if there are no
restrictions on the tax to conflict with the funding of the project
and the project is allowed by Section 4B.  The original bill
allowed before January 1, 1996 all articles of incorporation of a
corporation created under Section 4A must be amended to state that
the corporation is governed by Section 4B with the exception of
Subsection (b) of this section; and the Board of Directors of a
Section 4A Corporation shall be conformed to Section 4B Corporation
Board of Director specifications.  The substitute removes and does
not address this addition of the original bill

SUMMARY OF COMMITTEE ACTION

H.B. 1706 was considered by the committee in a public hearing on
April 24, 1995.  The committee considered a complete substitute for
H.B. 1706.  Testifying in favor of the bill was Joe Hewman,
representing the Texas Economic Development Council.  H.B. 1706 was
left pending in committee.  H.B. 1706 was reconsidered by the
committee in a formal meeting on April 27, 1995.  One amendment was
offered to the substitute.  The one amendment was adopted without
objection.  The substitute as amended was adopted without
objection.  H.B. 1706 was reported favorably as substituted, with
the recommendation that it do pass and be printed, by a record vote
of 7 ayes, 0 nays, 0 pnv, 2 absent.