BILL ANALYSIS S.B. 1696 By: Bivins (Smithee) May 17, 1995 Committee Report (Unamended) BACKGROUND The State of Texas has recognized the need for governmental incentives to further the economic development of the state. In 1987, the legislature passed enabling legislation that would authorize governmental activities designed to promote economic development. In November of that year, the voters of Texas agreed with the legislature's intent. Legislative efforts to develop and diversify the economy have been largely directed at providing cities with the authority to undertake economic development activities. As the state continues its growth and urbanization, economic development powers similar to the powers already granted to cities are needed by counties to enhance opportunities for their citizenry. PURPOSE As proposed, S.B. 1696 authorizes certain counties of the state to designate certain political subdivisions as county development districts with the power to use limited local sales and use taxes and hotel occupancy taxes for economic development purposes. 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 Title 44, V.T.C.S., by adding Art. 2372d-9, as follows: Art. 2370d-11 COUNTY ECONOMIC DEVELOPMENT DISTRICTS ARTICLE I. GENERAL PROVISIONS Sec. 1.01. SHORT TITLE: County Economic Development District Act. Sec. 1.02. LEGISLATIVE INTENT. Sets forth the intent of the legislature in relation to the creation of economic development districts. Sec. 1.03. LEGISLATIVE FINDINGS. Sets forth the findings of the legislature in relation to the creation of economic development districts. Sec. 1.04. DEFINITIONS. Defines "district", "board," "director," "commissioners court," "county," "project," "cost," and "bonds." Sec. 1.05. COUNTIES AUTHORIZED TO CREATE DISTRICTS. Authorizes the commissioners court in a county with a population of not more than 400,000, upon petition of the owners of land in a proposed county, to commence the creation of a county development district. Subjects the creation of the district to a confirmation election held as provided by Article 2 of this Act. ARTICLE 2. CREATION OF DISTRICTS Sec. 2.01. PETITION OF LANDOWNERS. Requires, to create a district, a petition requesting creation to be filed with the county commissioners court of the county in which all of the land in the proposed district is located. Sec. 2.02. CONTENTS OF PETITION. Sets forth the required contents of the petition. Sec. 2.03. HEARING ON PETITION. Requires the commissioners court, no later than 60 days after a petition is received, to fix a date, time, and place at which the petition shall be heard and to issue notice of the hearing. Requires the notice to inform all persons of their right to appear and present evidence and testify for or against the creation of the district. Sec. 2.04. NOTICE OF HEARING. Requires notice of a hearing, at least 30 days before the date set for the hearing, to be mailed to the developer who signed the petition and the landowner of all the land in the district and to be published in a newspaper with general circulation in the county in which the proposed district is located. Sec. 2.05. HEARING. Requires the commissioners court, at the hearing, to examine the petition to ascertain its sufficiency, and any person interested may appear before the commission to offer testimony on the sufficiency of the petition and whether or not the district should be created. Sec. 2.06. GRANTING OR REFUSING PETITION. (a) Requires the commissioners court, if it is found that the petition conforms to the requirements of Section 2.02 of this Act and that the creation of the district and the proposed project is feasible and necessary and would serve the public purpose of attracting visitors and tourists to the county, to so find and enter an order creating the district. (b) Requires the commissioners court, if the commissioner court finds that the petition does not conform to the requirements of Section 2.02 of this Act or that the creation of the district and the proposed project is not feasible and necessary and would not serve the public purpose of attracting visitors and tourists to the county, to so find by its order and deny the petition. Sec. 2.07. TEMPORARY DIRECTORS; VACANCY IN OFFICE. Requires the commissioners court, if the commissioners court grants the petition, to appoint to serve as temporary directors of the district five persons who are qualified under this Act to serve as directors. Requires a vacancy in the office of temporary director to be filled by appointment by the commissioners court. Sec. 2.08. QUALIFICATION OF TEMPORARY DIRECTORS. Requires the temporary director to execute a bond in accordance with the provisions of Section 3.14 of this Act and to take an oath of office, and the board shall meet and organize. Sec. 2.09. CONFIRMATION AND SALES AND USE TAX ELECTION. Requires the temporary board of directors to conduct an election within the boundaries of the district to confirm the creation of the district and authorize a sales and use tax in conformity with this Act. Sec. 2.10. ELECTION ORDER. Sets forth the required provisions of an order calling an election under Section 2.09 of this Act. Sec. 2.11. NOTICE. Requires the temporary directors to give notice of the confirmation and sales and use tax election by publishing a substantial copy of the election order in a newspaper with general circulation in the county in which the proposed district is located once a week for two consecutive weeks. Requires the first publication to appear at least 14 days before the date set for the election. Sec. 2.12. CONDUCT OF ELECTION. (a) Requires the election to be held in accordance with the provisions of the Election Code, to the extent not inconsistent with this Act. (b) Sets forth the required language of the proposition. Sec. 2.13. RESULTS OF ELECTION. (a) Requires the presiding judge, after the confirmation and sales and use tax election, to make returns of the result to the temporary board of directors. Requires the temporary board of directors to canvass the returns and declare the results. (b) Requires the temporary board, if a majority of the votes cast in the election favor the creation of the district and the adoption of the sales and use tax, to declare that the district is created and to declare the amount of the local sales and use tax adopted and enter the result on its minutes. Requires the temporary board, if a majority of the votes are against the creation of the district and the adoption of the sales and use tax, to declare that the proposition to create the district was defeated and enter the result in its minutes. (c) Requires a certified copy of the minute order declaring that the district is created and the local sales and use tax adopted and including the rate of the sales and use tax, or declaring that the proposition to create the district was defeated, to be sent to the commissioners court, the comptroller, and any taxing entity by certified or registered mail. Sets forth the information required to be in such order. ARTICLE 3. DISTRICT ADMINISTRATION Sec. 3.01. BOARD OF DIRECTORS. (a) Provides that a district is governed by a board of five directors (board) appointed by the county commissioners of the county in which the district is located. Requires the temporary directors appointed under Section 2.07 of this Act to become permanent directors of the district, provided that the creation of the district is confirmed at the confirmation election. (b) Provides that directors serve staggered four-year terms that expire September 1. Requires the temporary directors, following confirmation of the district at the election, to draw lots to determine: (1) the two directors to serve terms that expire on September 1 of the second year following creation of the district; and (2) the three directors to serve terms that expire on September 1 of the fourth year following creation of the district. Sec. 3.02. QUALIFICATIONS FOR DIRECTORS. Requires a person, to be qualified to serve as a director, to be at least 21 years old, a resident citizen of the state of Texas, and a qualified voter within the county in which the district is located. Sec. 3.03. PERSONS DISQUALIFIED FROM SERVING. Provides that Section 50.026, Water Code, relating to disqualification of directors, shall apply to directors of districts created under this Act. Sec. 3.04. VACANCIES ON THE BOARD. Requires a vacancy in the office of director to be filled by appointment of the commissioners court. Sec. 3.05. REMOVAL OF DIRECTOR. Authorizes the governing body of the commissioners court, after notice and hearing, to remove a director for misconduct or failure to carry out the director's duties on petition by a majority of the remaining directors. Sec. 3.06. ORGANIZATION OF BOARD. Requires the directors, after each appointment of directors by the commissioners court, and after they have qualified by taking the proper oath, to organize by electing a president, vice president, secretary, and other necessary officers. Sec. 3.07. QUORUM; OFFICERS' DUTIES; MANAGEMENT OF DISTRICT. Provides that Sections 54.107, 54.108, 54.111, 54.118, Water Code, relating to quorum, officers' duties, and management of district, shall govern the board of directors of a district created under this Act. Sec. 3.08. MEETINGS AND NOTICE. (a) Requires the board to designate and establish a district office in the county. (b) Authorizes the board to establish regular meetings to conduct district business and to hold special meetings at other times as the business of a district requires. (c) Requires notice of the time, place, and purpose of any meeting of the board to be given by posting at a place convenient to the public within the district. Requires a copy of the notice to be furnished to the clerks of the county in which the district is located, who shall post them on a bulletin board in the county courthouse used for such purpose. (d) Requires the provisions of Chapter 551, Government Code, to be applicable to meetings of the board of directors. Authorizes an interested person to attend any meeting of the board. Sec. 3.09. DIRECTOR'S COMPENSATION; BOND AND OATH OF OFFICE. Provides that a director is not entitled to receive compensation for service on the board. Provides that Sections 375.070, and 375.069, Local Government Code, shall apply to directors of a district created under this Act. Sec. 3.10. GOVERNMENTAL AGENCY; SUITS. (a) Authorizes a district, when created and confirmed, to sue and be sued, through its directors, in any and all courts of this state in the name of the district. Authorizes service of process in any suit to be had by serving any two directors. (b) Provides that a district is a governmental agency, a body politic and corporate, and a political subdivision of the state. Provides that Section 357.004, Local Government Code, shall apply to a district created under this Act. ARTICLE 4. POWERS AND DUTIES Sec. 4.01. POWERS. (a) Requires a district to have the power to acquire and dispose of projects and to have all of the other powers, authority, rights, and duties which will permit accomplishment of the purposes for which the district was created. (b) Requires the district to have the power to provide for general promotion and tourist advertising of the district and its vicinity and to conduct a marketing program to attract visitors, any of which may be conducted by the district pursuant to contracts for professional services with persons or organizations selected by district. (c) Requires the district to have the powers of a municipal management district created under Chapter 375, Local Government Code, to the extent not inconsistent with this Act. Sec. 4.02. COMPETITIVE BIDDING; CONTRACT AWARD. Provides that Sections 375.221 and 375.223, Local Government Code, shall apply to a district created under this Act. Prohibits a contract between the district and a governmental entity or nonprofit corporation created under Article 5190.6, V.T.C.S., as amended, from being subject to the competitive bidding requirement of this Act. Sec. 4.03. EMINENT DOMAIN. Authorizes a district not located within the corporate limits of a municipality to exercise the power of eminent domain to acquire land or interests in land within the district deemed necessary be the board of directors of the district for the purpose of providing water and sewer services to an authorized project. Requires the right of eminent domain to be exercised in the manner provided in Title 52, V.T.C.S., as amended. ARTICLE 5. GENERAL FISCAL PROVISIONS Sec. 5.01. EXPENDITURES. Authorizes a district's money to be disbursed only by check, draft, order, or other instrument which shall be signed by at least three directors. Authorizes the general manager, treasurer, other employee of the district when authorized by resolution of the board to sign checks, drafts, orders, or other instruments on any district operation account and these need not be signed by anyone else. Sec. 5.02. PURPOSES FOR BORROWING MONEY. Authorizes the district to borrow money for any corporate purpose or combination or corporate purposes. Sec. 5.03. REPAYMENT OF ORGANIZATIONAL EXPENSES. Provides that the district's directors are authorized to pay all costs and expenses necessarily incurred in the creation and organization of a district, the cost of investigation and making plans, the cost of the engineer's report, project designer fees, legal fees, and other incidental expenses, and to reimburse any person for money advanced for these purposes. Authorizes these payments to be made from money obtained from the issuance of notes or the sale of bonds first issued by the district or out of other revenues of the district. ARTICLE 6. ISSUANCE OF BONDS Sec. 6.01. ISSUANCE OF BONDS. Authorizes the district to issue bonds for the purpose of defraying all or part of the cost of any project as provided in this Act. Provides that Sections 375.201 through 375.208, Local Government Code, shall apply to a district created under this Act to the extent not inconsistent with this Act. Sec. 6.02. MANNER OF REPAYMENT OF BONDS. Authorizes the board to provide for the payment of principal of an interest and redemption price on bonds from taxes; by pledging all or any part of the designated revenues, license fees, or other compensation from a project or any part thereof, including revenues and receipts derived by the district from the lease or sale of the project, or by pledging all or any part of any grant, donation, revenues, or income received or to be received from any public or private source; or a combination of such sources. Sec. 6.03. USE OF BOND PROCEEDS. Authorizes the district to use bond proceeds to pay interest on the bonds during and after the period of the acquisition or construction of a project, to pay administrative and operating expenses, to create a reserve fund for the payment of principal and interest on the bonds, and to pay all expenses incurred and to be incurred in the issuance, sale, and delivery of the bonds. ARTICLE 7. TAXES Sec. 7.01. SALES AND USE TAX. (a) Authorizes a district to levy a sales and use tax for the benefit of the district if authorized by a majority of the qualified voters of the district voting at an election called and held for that purpose. Provides that the sales and use tax, if adopted, does not count toward the limitation imposed by Chapter 323, Tax Code (County Sales and Use Tax Act) on any sales and use tax that has been levied by the county. (b) Provides that if a district adopts the tax, there is imposed a tax on the receipts from the sale at retail of taxable items within the district at a rate of up to one-half of one percent. Defines "taxable items." Provides that there is also imposed an excise tax on the use, storage, or other consumption within the district of taxable items purchased, leased, or rented from a retailer during the period that the tax is effective within the district. Provides that the rate of the excise tax is the same as the rate of the sales tax portion of the tax applied to the sales price of the taxable items and is included in the sales tax. (c) Provides that Chapter 323, Tax Code, to the extent not inconsistent with this Act, governs the imposition, computation, administration, and governance, of the tax under this section, except that Sections 323.101(b), (e), 323.209, 323.401-406, and 323.505, do not apply. Provides that Chapter 323, Tax Code, does not apply to the use and allocation of revenues under this Act. Requires the district's name, in applying the procedures under Chapter 323, Tax Code, to be substituted for "the county" and "board of directors" is substituted for "commissioners court." (d) Provides that the permissible rates for local sales and use tax levied under this Act are one-fourth of one percent; three-eights of one percent; and one-half of one percent. (e) Authorizes the board by order to decrease or abolish the local sales and use tax rate or to call an election to increase, decrease, or abolish the local sales and use tax rate. (f) Sets forth the language of the proposition. Provides that the increase or decrease in the tax rate is effective if it is approved by a majority of the votes cast. Requires the board, in calling and holding the election, to use the procedures for the confirmation and tax election set forth in Article 2 of this Act. (g) Authorizes taxes collected under this section to be used only for the purposes for which the district was created, and the district may pledge the revenue derived from the taxes imposed under this section to the payment of bonds issued by the district. (h) A county development district may adopt a tax under this section only if the combined rate of all local sales and use taxes imposes by political subdivisions in the district will not exceed two percent. If the overlapping local sales and use taxes in the area within the district will exceed two percent, then the district's sales and use tax rate shall automatically be reduced to a rate will produce a two percent rate. If a district's rate is reduced in this manner, the municipality shall make payments to the district equal to the amounts that would have been collected by the district had the municipality not levied or increased its sales and use tax or annexed the area within the district, less amounts that the district collects following the city's levy of or increase in its sales and use tax or annexation of the area within the district. Sets up procedure for collection. ARTICLE 8. ADDING AND EXCLUDING TERRITORY; CONSOLIDATING AND DISSOLVING DISTRICTS Sec. 8.01. ADDING AND EXCLUDING LAND FROM THE DISTRICT. (a) Authorizes the board, before issuing bonds, upon its own motion or upon request of a landowner in the district, to petition the county commissioner for the addition of land to or exclusion of land from the district. (b) Requires the commissioners court, if the commissioners court unanimously determines from the evidence that the best interests of the persons and property in the district will be served by adding or excluding land, to enter the appropriate findings and order in its record adding or excluding land. Sec. 8.02. DISSOLUTION OF DISTRICT. (a) Authorizes a district to be dissolved only as provided by this section. (b) Sets forth findings under which the board of directors may petition the commissioners court to dissolve the district. (c) Requires the commissioners court, upon receipt of a petition from the board for dissolution of the district, to hold a hearing as provided in Article 2 of this Act. (d) Requires the commissioners court, if the commissioners court unanimously determines from the evidence that the best interests of the county and the owners of property and interests in property within the district will be served by dissolving the district, to enter the appropriate findings and order in its records dissolving the district. Requires the commissioners court, otherwise, to enter its order providing that the district has not been dissolved. Requires funds and property of the district, upon dissolution of the district, to be transferred to the commissioners court. Sec. 8.03. DISSOLUTION OF DISTRICT UPON AGREEMENT WITH MUNICIPALITY. Allows for the municipality to acquire all of the assets and obligations of the district if all of the territory within the district is located within or annexed by the municipality. SECTION 2. Amends Chapter 352, Tax Code, by adding Section 352.107, as follows: Sec. 352.107. HOTEL TAX AUTHORIZED FOR COUNTY DEVELOPMENT DISTRICTS. Authorizes a commissioners court of a county with a population of less than 400,000 to impose a hotel occupancy tax not to exceed seven percent on a person who pays for the use or possession of a room in a hotel ordinarily used for sleeping that is located within the boundaries of the county development district created under Article 2370d-11, V.T.C.S., and that is not located within the corporate limits of a municipality, subject to the limitations set forth in Sections 352.002(b) and (c), Tax Code. Provides that taxes collected by a county under this section shall be remitted to the county development district no later than 10 days after the county receives such funds and may be used by the district for the purposes for which sales and use tax proceeds may be used by the district. SECTION 3. Emergency clause. Effective date: upon passage. SUMMARY OF COMMITTEE ACTION SB 1696 was considered by the Committee on State Affairs in a formal meeting on May 16, 1995. The Chair laid out SB 1696. The bill was reported favorably without amendment, with the recommendation that it do pass and be printed, by a record vote of: 11 ayes; 0 nays; 0 pnv; and 4 absent.