LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 74th Regular Session April 24, 1995 TO: Honorable Rene O. Oliveira, Chair IN RE: House Bill No. 1706 Committee on Economic Development By: Ramsay House of Representatives Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on House Bill No. 1706 (relating to the creation and operation of an industrial development corporation by a city) this office has determined the following: The bill would repeal Section 4A of the Development Corporation Act of 1979. The bill would amend Section 4B of the Development Corporation Act of 1979 by adding Section 4A eligibility requirements for cities to create industrial development corporations. The bill would amend Section 4B to limit corporation expenditures for promotional purposes to 25 percent of revenues, and would allow a corporation to contract with other existing private corporations to carry out programs. A Section 4A corporation created before the effective date of the bill would continue to exist as if it had been created under Section 4B. By January 1, 1996, a 4A corporation would be required to amend its articles of incorporation to state that it is governed by Section 4B, except 4A corporations would be allowed to continue projects and collect taxes authorized before the effective date of the bill under the provisions of Section 4A. The bill would allow a Section 4A corporation to dissolve, on approval by the corporation's governing board, by transferring its assets to a Section 4B corporation. Under Section 4B, cities may create only one industrial development corporation subject to a maximum tax rate of one-half of one percent. As a result, it is assumed that some cities with both 4A and 4B corporations may be required to abolish 4A corporations after existing 4A projects are completed. No significant fiscal implication to the state is anticipated. The fiscal implication to units of local government cannot be determined as the number of cities that would abolish 4A corporations and the sales and use taxes levied cannot be estimated. Source: Comptroller of Public Accounts, Department of Commerce LBB Staff: JK, SM, RR