BILL ANALYSIS
S.B. 1642
By: Ratliff
Economic Development
4-12-95
Committee Report (Amended)
BACKGROUND
Section 4A of the Industrial Development Corporation Act was
created in 1989 to allow cities in counties of 500,000 or less to
vote to collect an additional sales tax to develop new industries
in their communities. Section 4B of the Act was created in 1991 to
allow cities in larger counties to undertake other types of
projects not authorized under Section 4A. During the 73rd
Legislature, H.B. 2297 was passed to allow 4A cities the
opportunity to create a 4B corporation in order to take advantage
of a broader list of projects. Some confusion now exists for cities
eligible to create both 4A and 4B corporations.
PURPOSE
As proposed, S.B. 1642 provides for industrial development
corporations created by certain cities and streamlines the process
for 4A cities intending to undertake 4B projects or vice versa.
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
other provisions of this Act. Provides that to the extent of
a conflict between this section and another provision of
this Act, this section prevails. Requires the articles of
incorporation of a corporation to state that the corporation
is governed by this section and may include within its name
any words and phrases specified by the eligibility.
Prohibits a city from creating more than one corporation
governed by this section.
(2) SPENDING FOR PROMOTION. Provides that a corporation
created under this section may spend no more than 10
percent of its revenues for promotional purposes and may
contract with other existing private corporations to carry
out industrial development programs consistent with the
purposes and duties provided by this Act.
(3) TRANSFER OF ASSETS FROM CORPORATION CREATED UNDER THIS
ACT. Authorizes a corporation created under this Act that
is not created under this section to transfer all of its
assets to a corporation governed by this section and
dissolve as provided by this Act, on approval of the
governing body of each unit and corporation involved.
(c) BOARD OF DIRECTORS AND GOVERNANCE. Provides that the
board of directors of a corporation consists of seven
directors who are appointed by the governing body of the
eligible city for two-year terms of office. Authorizes a
director to be removed by the governing body of the eligible
city at any time without cause. Requires each director to be
a resident of the eligible city. Requires at least three
directors to be persons who are not employees, officers, or
members of the governing body of the eligible city. Provides
that a majority of the entire membership of the board is a
quorum. Requires the board to conduct all meetings within
the boundaries of the eligible city. Requires the board to
appoint a president, a secretary, and other necessary
officers. Requires the corporation's registered agent to be
an individual resident of the state and the corporation's
registered office to be within the boundaries of the
eligible city. Provides that a corporation created before
September 1, 1995, that has a board of directors consisting
of five directors continues to have a five-member board
unless the governing body of the eligible city establishes
a seven-member board.
(d)(1) AUTHORITY TO LEVY SALES TAX. Authorizes the governing
body of an eligible city by ordinance to levy a sales and
use tax for the benefit of the corporation if the tax is
authorized by a majority of the qualified voters of the
eligible city voting at an election called and held for that
purpose. Provides that this election requirement is
satisfied and another election is not required if the voters
of the eligible city approved the levy and collection of an
additional one-half cent sales and use tax at an election
held before March 28, 1991, under an ordinance calling the
election that was published in a newspaper of general
circulation within the eligible city at least 14 days in
advance of the election and that stated that the election
was held in anticipation of the enactment of enabling and
implementing legislation without further elections.
(2) IMPOSITION AND RATE OF SALES TAX. Provides that 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.
Requires the rate of a tax adopted under this section to
be one-eighth, one-fourth, three-eighths, or one-half of
one percent. Prohibits the rate adopted from resulting in
a combined rate of all sales and use 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 also
imposed an excise tax on the 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 the 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
sales and use tax under this section and governs the
imposition, computation, administration, governance,
abolition, and use of the tax except as inconsistent with
this section. Provides that if an election is held under
this section at the same time an election is held to
impose or change the rate of the additional municipal
sales and use tax, the tax under this section takes
effect, at the option of the city and the imposition or
change in rate of the additional municipal sales and use
tax takes effect as provided by Section 321.102(b), Tax
Code. Provides that after the effective date of the taxes
imposed under this section, the adoption of a sales and
use tax or the attempted adoption of a sales and use tax
by the eligible city or any other taxing jurisdiction
having territory in the city does not impair the taxes
imposed under this section.
(e)(1) BALLOT PROPOSITION -- GENERAL. Sets forth the
language of the ballot required for voting on the tax under
this section.
(2) BALLOT PROPOSITION -- TIME LIMIT. Authorizes the city,
at an election called and held under Subsection (d) of
this section, to allow the voters to vote on a ballot
proposition that limits the length of time that a sales
and use tax may be imposed. Provides that if a city elects
to limit the period the sales and use tax may be imposed,
there shall be added language on the ballot proposition.
Requires the governing body of the city 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 sales and use tax imposed for a limited
period under this subsection expires on the date set by
the governing body or on an earlier date if the tax is
repealed by a majority of the voters voting in an election
held in the city. Provides that if an earlier abolition
election is held, Sections 321.102(a) and 321.402(b), Tax
Code, apply to the date of repeal. Provides that a tax
that is approved without a limit on its period of
imposition is effective until repealed by election.
Requires the governing body, before 90 days before the tax
is to expire, to send a notice to the comptroller stating
the expiration date of the tax. Requires revenue collected
after the expiration of the tax to be forwarded by the
state to the governing body to be used to pay current
bonded indebtedness of the municipality. Prohibits a
municipality that has imposed a tax under this section
from extending the period of the tax's imposition and from
reimposing the tax after its expiration date unless the
reimposition of the tax is approved by a majority of the
qualified voters of the city voting at an election called
and held for that purpose. Provides that if a city reduces
the rate of an additional sales and use tax under Chapter
321, Tax Code, to impose a tax under this section for a
limited period, and does not have an election to change
the rate of the additional sales and use tax before the
expiration date of the tax, on the expiration date of the
tax, the rate of the additional sales and use tax 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 a sales and use tax has been
imposed under this section to reduce or increase the tax
by majority vote of the qualified voters of the city
voting at an election called and held for that purpose in
the same manner as an election to impose the tax.
Authorizes the rate to be reduced in one or more
increments of one-eighth of one percent to a minimum of
one-eighth of one percent or increased in one or more
increments of one-eighth of one percent to a maximum of
one-half of one percent. Requires the governing body of
the city, on petition of 10 percent or more of the
registered voters of the city requesting an election on
the increase or decrease of the tax under this section, to
order an election on the issue. Requires the ballot to be
printed in the same manner as the ballot under Subdivision
(1) of this subsection.
(4) BALLOT PROPOSITION -- COMBINE WITH REDUCTION IN
PROPERTY TAX. Authorizes a city that is authorized by this
section to impose, reduce, increase, or abolish the tax
under this section to, at the same time and on the same
ballot, impose, reduce, increase, or abolish the
additional sales and use tax imposed under Section
321.101(b), Tax Code, if the city is authorized by Chapter
321, Tax Code, to impose, reduce, increase, or abolish the
additional sales and use tax. Requires the city, to do so,
to follow the procedures of Chapter 321, Tax Code, except
that in an election to impose, reduce, increase, or
abolish the tax under this section and the additional
sales and use tax the ballot shall contain certain
language.
(f)(1) DISSOLUTION OF CORPORATION. Requires the governing
body, by order of the city's governing body, or on petition
of 10 percent or more of the registered voters of the city
requesting an election on the dissolution of the
corporation, to order an election on the dissolution of the
corporation at the next available uniform election date that
is not less than 45 days after the order is issued or the
petition is filed. Requires the election to be conducted
according to the applicable provisions of the Election Code.
(2) BALLOT PROPOSITION FOR DISSOLUTION ELECTION. Sets
forth the language for the ballot for the election.
Requires the corporation, if a majority of voters voting
on the issue approve the dissolution, to continue
operation only as necessary to pay the principal of and
interest on its bonds and to meet obligations incurred
before the date of the election and, to the extent
practicable, to dispose of its assets and apply the
proceeds to satisfy those obligations. Provides that the
remaining assets of the corporation, when the last of the
obligations is satisfied, shall be transferred to the
city, and the corporation is dissolved. Prohibits a tax
imposed under this section 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 obligations is satisfied.
(g)(1) AUTHORIZED USE OF SALES TAX PROCEEDS. Requires the
eligible city, on receipt of the proceeds of the sales and
use tax imposed under this section from the comptroller, to
deliver the proceeds to the corporation. Authorizes tax
proceeds to be used to pay the costs of a project authorized
by this section.
(2) DEFINITION OF AUTHORIZED PROJECT. Defines "project."
(3) IMPROVEMENTS ANCILLARY TO PROJECT. Provides that a
project includes the cost of transportation facilities,
water supply facilities, sewage or solid waste disposal
facilities, air or water pollution control facilities, and
other improvements ancillary and directly beneficial to a
project. Prohibits a corporation from using revenues from
the sales tax authorized under this section for a project
the primary purpose of which is to provide transportation
facilities, water supply facilities, air or water
pollution control facilities, or other municipal
facilities for the benefit of the general public, except
as provided by Section 4B of this Act.
(4) PROJECT DEBT SERVICE COSTS. Provides that a project
includes any payments toward the principal of, interest
on, and other costs relating to bonds or other obligations
issued by the corporation to pay the costs of a project or
to refund bonds or other obligations issued to pay the
cost of 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 this section.
(5) AUTHORIZATION LIMITED TO SPECIFIC PROJECT. Authorizes
a city, at an election called or held under Subsection (d)
of this section, to allow the voters to vote on a ballot
proposition that limits the use of the sales and use tax
to a specific project authorized by this subsection. Sets
forth language for the ballot if a city elects to limit
the use to a specific project. Requires the corporation,
when the last of its obligations for the specific project
have been satisfied, to send a notice to the comptroller
stating that the sales and use tax imposed for the
specific project may not be collected after the last day
of the first calendar quarter beginning after the date of
notification. Prohibits a sales and use tax imposed for a
specific project from being collected after the last day
of the first calendar quarter beginning after the date of
notification to the comptroller. Requires revenue
collected after the obligations for the specific project
have been satisfied to be forwarded by the state to the
governing body to be used to pay current bonded
indebtedness of the municipality. Authorizes a corporation
that has been created to perform a specific project under
this subsection to remain in existence and perform other
projects approved by the voters of the city under an
election called and held under Subsection (d) of this
section.
(6) ASSUMPTION OF PREEXISTING DEBT. Prohibits a
corporation from assuming a debt or making any expenditure
to pay principal 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 of the eligible city. Requires the power
to be exercised in accordance with and subject to the laws
applicable to the eligible 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 of the city, 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 the purposes of Chapter 101A, Civil Practice and
Remedies Code, the corporation is a governmental unit and
its actions are governmental functions.
(j) OWNERSHIP OF PROJECTS UNDER TAX CODE. Provides that the
legislature finds for all constitutional and statutory
purposes that projects undertaken under this section are
owned, used, and held for public purposes for and on behalf
of the eligible city incorporating the corporation, and
Section 23(b) of this Act and Section 25.07(a), Tax Code, do
not apply to leasehold or other possessory interests granted
by the corporation during the period projects are owned by
the corporation on behalf of the eligible city. 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 a corporation under Section 4A of this Act to submit
to the voters of the city, at a separate election or at an
election held under another provision of this Act, a ballot
proposition that authorizes the corporation to use the sales
and use tax for a specific project or for a specific category
of projects that does not qualify under Section 4A of this Act
but qualifies under the expanded project definition in
Subsection (c) of this section.
(b) BALLOT PROPOSITION -- SPECIFIC PROJECT OR SPECIFIC
CATEGORY OF PROJECTS. Requires a project or category of
projects, in the election to authorize the use of the sales
or use tax for a specific project or for a specific category
of projects not authorized under Section 4A of this Act, to
be clearly described on the ballot so that the average voter
will be able to discern the limits that will control the
expenditure of the proceeds of the tax. Provides that if
maintenance and operating costs of an otherwise authorized
facility are to be paid from the sales or use tax, the
ballot language must clearly state that fact.
(c)(1) EXPANDED "PROJECT" DEFINITION. Defines "project" and
"category of projects."
(2) MUNICIPAL FACILITIES. Provides that municipal facility
projects are land, buildings, equipment, facilities, and
improvements found by the board of directors to be
required or suitable for certain uses.
(3) EXPANDED BUSINESS ENTERPRISES. Provides that expanded
business enterprise projects are land, buildings,
equipment, facilities, and improvements found by the board
of directors to promote or develop new or expanded
business enterprises.
(d) SPECIFIC PROJECT UNDER GENERAL AUTHORITY. Authorizes a
corporation, if the corporation 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 the first publishing notice of the
project the governing body of the city receives a petition
signed by more than 10 percent of the registered voters of
the city requesting that an election be held before that
specific project is undertaken. Authorizes the corporation,
if such petition is submitted, to undertake the project only
if the specific project is approved at a subsequent
election.
(e)(1) PREVIOUS ELECTION IN CERTAIN CITIES. Provides that an
election under Section 4A(d) of this Act is not required to
carry out a project under this section in a city that is
located in a county with a population in excess of 750,000
if a sales and use tax was approved under this section at an
election held before February 1, 1993.
(2) BOND REQUIREMENTS. Authorizes bonds or other
obligations, in a city to which Subdivision (1) of this
section applies, having a maturity not longer than 30
years and issued to pay the costs of projects of the types
authorized by this section to be payable from any source
of funds available to the corporation, including the
proceeds of a sales and use tax imposed under this
section. Prohibits the sum of the principal amount of
bonds and other obligations that by their terms are
payable in whole or in part from the sales and use tax
plus the amount of the costs of the projects, other than
interest on bonds and other obligations, for which payment
is made in cash directly from the proceeds of the tax from
exceeding $135 million. Provides that the bonds or other
obligations that by their terms are payable from the tax
from being paid in whole or part from property taxes
raised by the eligible city, are not a debt of the
eligible city, and do not give rise to a claim for payment
against the eligible city except as to sales and use tax
revenue held by a city and required under this section to
be paid over to the corporation.
(3) EXPIRATION OF SALES AND USE TAX. Prohibits a sales and
use tax imposed for a project under this section, in a
city to which Subdivision (1) of this subsection applies,
from being 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 the sales and use tax
under this section, 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 obligations. Deletes existing Sections 4A and
4B.
SECTION 2. INDUSTRIAL DEVELOPMENT SALES TAX ELECTION. Provides that
all acts and procedures of a municipality in calling and holding an
industrial sales tax election under authority of Section 4B,
Article 5190.6, V.T.C.S., on a nonuniform election date before
January 1, 1995, declaring the results thereof, and declaring the
purpose for which the sales tax proceeds authorized at such an
election may be used are validated as of the dates on which they
occurred.
SECTION 3. (a) Provides that a corporation created before the
effective date of this Act under Section 4A or 4B, Article 5190.6,
V.T.C.S. (Development Corporation Act of 1979), continues to exist
on and after the effective date of this Act as if the corporation
were created under Section 4A, Article 5190.6, V.T.C.S., as amended
by this Act. Authorizes the city that created the corporation to
continue to collect any tax authorized for the benefit of the
corporation before the effective date of this Act, and the
corporation may continue to undertake any project authorized for
the corporation before the effective date of this Act. Subjects the
tax and project to the same restriction applicable under Sections
4A and 4B as those sections existed immediately before the
effective date of this Act. Provides that a tax authorized for the
corporation or project undertaken by the corporation on or after
the effective date of this Act is governed by Sections 4A and 4B as
those sections are amended by this Act.
(b) Requires, before January 1, 1996, the articles of
incorporation of a corporation created before the effective
date of this Act under Section 4B, Article 5190.6, V.T.C.S.,
as it existed before amendment by this Act, to be amended to
state that the corporation is governed by Section 4A of that
Act.
SECTION 4. Emergency clause.
Effective date: upon passage.