BILL ANALYSIS
C.S.H.B. 2065
By: Oliveira
April 19, 1995
Committee Report (Substituted)
BACKGROUND
The 70th Legislature adopted the Texas Enterprise Zone Act which
allows the Department of Commerce to designate economically
distressed areas, nominated by cities or counties, as state
enterprise zones. The Department, along with the Comptroller of
Public Accounts, administers state incentives offered to businesses
locating or expanding in enterprise zones. Currently, there are
156 enterprise zones designated throughout the State. State
incentives are reauthorized by the Legislature each regular
session. The 73rd Legislature adopted five bills relating to
enterprise zones. The Legislature passed legislation to codify the
Texas Enterprise Zone Act, Article 5190.7 into Chapter 2303, Texas
Government Code. The Legislature also adopted S.B. 405, which
reauthorized the Department of Commerce to offer state incentives
to businesses in enterprise zones, and S.B. 1051, H.B. 1872, and
H.B. 2282 which expanded the purposes of enterprise zones.
PURPOSE
The purpose of this bill is to allow the State to continue to offer
incentives to businesses locating or expanding in enterprise zones.
The bill reauthorizes the Department of Commerce to administer
these incentives and has conforming amendments relating to the
codification of the Enterprise Zone Act to the Government Code.
The bill also seeks to establish guidelines to limit program access
and simplify program requirements.
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. Subsection (a) codifies Section 25, Chapter 986, Acts
of the 73rd Legislature, to the Government Code, by adding and
amending the following:
Sec. 2303.0525. COST-BENEFIT ANALYSIS. (a) The Department of
Commerce shall prepare a cost-benefit analysis on the
enterprise zone program each even-numbered year.
(b) The department shall submit the analysis to the
state auditor for review and comment.
(c) The state auditor shall submit the analysis, before
the regular session, to the governor, lieutenant
governor, and the speaker of the house of
representatives.
(b) Repeals Section 25, Chapter 986, Acts of the 73rd Legislature.
SECTION 2. Amends and adds to Section 2303.102, Government Code,
as follows:
(1) the average rate of employment in the area was at least
one and one-half times the state average;
(2) the area had a population loss of at least 12 percent
during a six-year period or at least 4 percent during a three-year period;
(v) the area has had a substantial increase in the
number of individuals younger than 18 arrested due
to criminal activity.
(b) Labor force and population data are considered current if they
are the most recently published estimates or the application is
received by the department before the 61st day after the data is
published.
SECTION 3. Amends Section 2303.109(b), Government Code, by
allowing federal empowerment zones or enterprise communities to be
state enterprise zones without further qualification.
SECTION 4. Amends Section 2303.205(c), Government Code, by
modifying enterprise zone reporting requirements to reflect the
number of businesses assisted located or retained in the zone due
to the existence of the zone, to summarize bonds issued to finance
projects, and to include a description of rehabilitation efforts.
SECTION 5. Amends Subchapter C, Chapter 2303, Government Code, by
adding Section 2303.112, which adds provisions so that state
enterprise zones designated as federal enterprise zones or
empowerment communities do not reduce the number of state zones a
jurisdiction may have.
SECTION 6. Subsection (a) codifies Sections 26 and 27, Chapter
986; Sections 1-3, Chapter 974; and Sections 5 and 8, Chapter 231,
Acts of the 73rd Legislature by adding and amending as follows:
CHAPTER F. QUALIFIED BUSINESSES AND ENTERPRISE PROJECTS
Sec. 2303.401. DEFINITION. Defines "new permanent job."
Sec. 2303.402. QUALIFIED BUSINESS. Clarifies language in the
definition of an economically disadvantaged individual for
those who are entering the workplace after being confined in
facility operated by the Texas Department of Criminal Justice
or under contract with the Texas Department of Criminal
Justice. And adds to the definition an individual who has been
released by the Texas Youth Commission and is on parole, if
state law provides for such a person to be on parole.
Sec. 2303.403. PROHIBITION ON QUALIFIED BUSINESS
CERTIFICATION. Redesignates Sec. 2303.402. Provides that the
department may not designated more than 65 businesses as
enterprise projects during any biennium.
Sec. 2303.404. REQUEST FOR APPLICATION FOR ENTERPRISE
DESIGNATION. (a) A qualified business in an enterprise zone
may request a governing body to ask the department to
designate the business as an enterprise project. The request
may be made to the enterprise zone's administrative authority,
if one exist.
(b) Specifies the qualification a zone must meet in
order to request a projects designation.
Sec. 2303.405. APPLICATION FOR ENTERPRISE PROJECT DESIGNATION.
(a) Provides if the governing body of an enterprise zone
approve a request, the governing body may apply to the
department for the designation of the qualified business as an
enterprise project.
(b) Provides for how an applicant must apply with the
department to request enterprise zone designation.
(c) Defines, for purpose of this Section, local effort
to develop and revitalize an enterprise zone.
(d) Provides for factors to be considered in evaluating
the local effort of a public entity.
(e) Provides for factors to be considered in evaluating
the local effort of a private entity.
Sec. 2303.406. ENTERPRISE PROJECT DESIGNATION. (a) Provides
for factors to be used by the department to designate a
business as an enterprise project.
(b) Provides for factors to be used by the department
to designate a qualified businesses as enterprise
projects on a competitive basis.
(c) Designates the effective period on an enterprise
project.
(d) Provides for the removal of an enterprise project
by the department.
Sec. 2303.407. ALLOCATION OF JOBS ELIGIBLE FOR TAX REFUND.
Provides for the department to allocate the maximum number of
new or retained jobs to be included in a computation of a tax
refund for the project. Also, specifies specific numbers to
be used by the department in their allocations.
Sec. 2303.408. DURATION OF CERTAIN DESIGNATIONS. Redesignates
Sec. 2303.403. Provides that the department's designation of
a qualified business as an enterprise project is effective
until the fifth anniversary of the date of the designation,
regardless of whether the enterprise zone expires before the
project.
(b) Repeals Sections 26 and 27, Chapter 986, and Sections 1-3,
Chapter 974, Acts of the 73rd Legislature.
SECTION 7. Amends Section 2303.505(a), Government Code, to allow
for a refund by a municipality of local sales and use taxes and by
a qualified business for labor for remodeling or rehabilitating a
structure and electricity and natural gas purchased for use in an
enterprise zone to an enterprise project.
SECTION 8. Amends Section 2303.511(b), Government Code, by adding
provisions so that rates may be reduces beyond the lowest rate
offered to any customer in the zone, and provides for an appeals
process if rates are not reduced.
SECTION 9. Amends Section 2303.514, Government Code, by removing
the waiver of performance bonds on prime contractors on contracts
of $200,000 or less for public works projects in an enterprise
zone. Gives subcontractors a waiver of performance bond on
contracts of $200,000 or less.
SECTION 10. Amends Section 2303.003(3), Government Code, by adding
sports facility to the definition of "enterprise zone".
SECTION 11. Amends Chapter 2303, Government Code, by adding
Subchapter H as follows:
SUBCHAPTER H. QUALIFIED SPORTS FACILITY PROJECTS
Sec. 2303.601. Defines "local government," qualified sports
facility project," "sports authority," "sports facility," and
"sports facility enterprise zone."
Sec. 2303.601. DESIGNATION OF SPORTS FACILITY ENTERPRISE ZONE.
(a) Designates a sports facility enterprise zone.
(b) Provides that a local government that designates an area
as a reinvestment zone they can also designate the area as a
sports facility enterprise zone without further hearing or
procedural requirements other than what is required in the tax
code.
(c) Provides that the governing body of a sports facility
enterprise zone in which a qualified sports facility project
is located may apply for designation as a sports facility
enterprise zone. The department shall designate the sports
facility enterprise zone if the department or the governing
body certifies that the zone was created in accordance with
this subchapter and the Tax Code.
(d) Provides so that a sports facility enterprise zone does
not reduce the number of enterprise zones the department may
designate.
Sec. 2303.603. QUALIFIED SPORTS FACILITY PROJECT. (a)
Designates for a person as a qualified business, an enterprise
project, and a qualified sports facility.
(b) Requires a sports facility projects to meet the same
criteria of a qualified business and enterprise project.
(c) Requires a sports facility enterprise zone in which a
qualified sports facility project is located to meet the
requirement of this chapter.
(d) Provides for determining the number of enterprise projects
that the department may approve, and that the department may
not consider new permanent jobs or retained jobs created by a
qualified sports facility project.
SECTION 12. Amends Section 151.429(a), Tax Code, to allow for the
refund of sales taxes paid on labor for remodeling or
rehabilitating a structure and electricity and natural gas
purchased for use in an enterprise zone to an enterprise project.
SECTION 13. Amends Section 312.203, Tax Code, so that reinvestment
zones in enterprise zones be designated for the same period as the
state enterprise zone.
SECTION 14. Amends Section 312.204, Tax Code, by adding Subsection
(f) which provides that tax abatement agreements in enterprise
zones that are also in reinvestment zones are not required to
contain identical terms.
SECTION 15. Amends Section 312.206, Tax Code, by adding Subsection
(e) which provides that property tax abatements may be executed
within 90 days of the jurisdiction agreeing. Also states that the
abatement agreements offered by entities may vary only in term of
the portion of the property that is to be exempt.
SECTION 16. Amends Section 2(10), Development Corporation Act of
1979, so that in addition, in blighted or economically depressed
areas, development areas, federally designated empowerment zones
and enterprise communities designated under Section 1391, Internal
Revenue Code of 1986, or federally assisted new communities located
within a home-rule city or a federally assisted new communities
located within a home-rule city or a federally designated
economically depressed county of less than 50,000 persons according
to the last federal decennial census, a project may include the
land, buildings, equipment, facilities, and improvements (one or
more) found by the board of directors to be required or suitable
for the promotion of commercial development and expansion and in
furtherance of the public purposes of this Act, or for use by
commercial enterprises, all as defined in the rules of the
department, irrespective of whether in existence or required to be
acquired or constructed thereafter.
SECTION 17. Amends Section 21, Development Corporation Act of 1979,
so that unites may issue bonds to finance projects in federal
designated empowerment zones and enterprise communities or
enterprise zones designated under the Texas Enterprise Zone Act, to
promote and develop new and expanded business enterprises.
SECTION 18. Provides for an enterprise project designated under
Chapter 2303, Government Code, after August 31, 1995, may not
receive tax refunds until September 1, 1997, and that not more than
$8 million in sales and use tax may be refunded to the projects
designated during this FY 96-97 biennium.
SECTION 19. Effective date of September 1, 1995.
SECTION 20. Emergency Clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
The original bill only allowed two enterprise zones to be
designated in an area located in the jurisdiction of the governing
body of the municipality or county nominating the area as an
enterprise zone. The substitute does not address this section so
as to allow the law to remain at 3 designated enterprise zones.
The original bill changed unemployment and population loss criteria
to qualify for a enterprise zone, and adds for enterprise zone
creation based on gang activity if the attorney general certifies
the area. The substitute leaves the unemployment and population
loss criteria as proposed in the original bill, but removes
attorney general certification and inserts a substantial increase
in the number of juvenile arrest as a secondary criteria for zone
approval. The substitute adds "exception to limit on designation"
which provides that an enterprise zone designated as a federal
enterprise zone, federal empowerment zone, or federal enterprise
community located in a municipality or county does not reduce the
number of enterprise zones that they can designate in that
municipality or county.
The substitute adds to the qualification of an "economically
disadvantaged individual" an individual who has been released by
the Texas Youth Commission and is on parole, if state law provides
for such a person to be on parole. The substitute adds to the
factors considered in evaluating the local efforts of a private
entity provision by adding provisions of technical and vocational
job training for enterprise zone residents or economically
disadvantaged employees; provision of child care for employees;
commitments to implement and contribute to a tutoring or mentoring
programs for area students; and prevention or reeducation of
juvenile crime activity.
The original bill designated the weight scale used in designation
of a qualified business as enterprise projects as (1) 33-1/3
percent on the economic distress of the enterprise zone in which
the project is located; (2) 33-1/2 percent on the local effort to
achieve development and revitalization of the enterprise zone; and
(3) 33-1/3 percent of the evaluation criteria as determined by the
department. The substitute changes the weight scale for approving
a project as (1) 50 percent depends on the economic distress of the
enterprise zone were the proposed project is located and the area
within the enterprise zone where the projects is located. (2) 25
percent depends on the local effort to achieve development and
revitalization of the enterprise zone; and (3) 25 percent depends
on the evaluation as determined by the department which must
include the level of cooperation and support the applicant commits
to the revitalization goals of the zone and the type and wage lives
of the jobs to be created or retained by the business.
The original bill encouraged a municipality and allowed the state
to refund its local sales and use taxes to a qualified business on
electricity and natural gas purchased for use in the enterprise
zone. The substitute changes the language so that a qualified
business may receive a local sales and use tax refund on
electricity and natural gas purchased and consumed in the normal
course of business in the enterprise zone. The substitute adds
provisions so that rates may be reduced beyond the lowest rate
offered to any customer in the zone, and provides for an appeals
process if rates are not reduced.
The original bill removed "qualified hotel project" from the Texas
Enterprise Zone Act. The substitute does not address this section
so as to allow "qualified hotel project" to remain in the Texas
Enterprise Zone Act. The substitute adds changes to the waiver of
performance bond so as to require a prime contractor, but not a
subcontractor, to execute a performance bond. The substitute adds
a sports facility to the definition of "enterprise zone".
The substitute adds Subchapter H to the Government Code which
addressees qualified sports facility projects. The substitute adds
that tax abatement agreements in enterprise zones that are also in
reinvestment zones are not required to contain identical terms.
Also adds that property tax abatements may be executed within 90
days of the jurisdiction agreeing. It states that the abatement
agreements offered by entities may vary only in term of the portion
of the property that is to be exempt. The substitute removes from
the original the sections that repealed sections of the Tax Code.
The substitute also removes the section that repeals certain
sections in Chapter 231, Acts of the 73rd Legislature, 1993.
SUMMARY OF COMMITTEE ACTION
H.B. 2065 was considered by the committee in a public hearing on
April 3, 1995. Testifying on the bill was Dan Wattles,
representing the Texas Department of Commerce and Karin Richmond,
representing herself, and Owens, Corning Fiberglas, and CITGO.
Testifying in favor of the bill was Dane Harris, representing the
Texas Association of Business and Chambers of Commerce; Gerald E.
Galernik, representing Owens-Corning; Curtis Cleveland,
representing himself and the Texas Economic Development Council;
and Claudia Mora, representing herself and the City of San Antonio
Economic Development. No one testified against the bill. H.B.
2065 was referred to the subcommittee on enterprise zones; a
subcommittee consisting of Representatives Yarbrough (Chair), Davis
and Shields. H.B. 2065 was considered by the subcommittee in a
work session on April 6, 1995. No action was taken in
subcommittee. After being recalled from subcommittee, H.B. 2065
was considered by the committee in a public hearing on April 10,
1995. The committee considered a complete substitute to H.B. 2065.
One amendment was offered to the substitute. The amendment was
adopted without objection. The substitute as amended was adopted
without objection. H.B. 2065 was reported favorably as
substituted, with the recommendation that it do pass and be
printed, by a record vote of 9 ayes, 0 nays, 0 pnv, 0 absent.