LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 74th Regular Session April 3, 1995 TO: Honorable Irma Rangel, Chair IN RE: House Bill No. 2747 Committee on Higher Education By: Holzheauser House of Representatives Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on House Bill No. 2747 (Relating to the issuance of tuition revenue bonds for the University of Houston-Victoria) this office has determined the following: The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. The bill would authorize the University of Houston System on behalf of the University of Houston - Victoria to issue up to $9 million of revenue bonds for the acquisition, purchase, construction, renovation, and equipping of building facilities, roads, land, and infrastructure. These bonds would be payable from pledged revenues, including student tuition. These bonds would not be general obligations of the State; however, the issuance of these bonds would have fiscal implications for the State. Although tuition income is pledged against the bonds, historically the Legislature has appropriated general revenue to reimburse institutions of higher education for tuition used to pay the debt service. It is assumed that the Legislature would continue this policy. It is assumed that $9 million of tax-exempt bonds would be issued in November 1995 with final maturity in 2016. It is estimated that annual debt service reimbursement costs of $870,000 would continue for 20 years until the bonds matured. Furthermore, it is assumed that additional costs would be incurred for maintaining the additional physical facilities. It is estimated that the additional cost to the State would be $218,700 each year beginning in 1998. Currently, the University of Houston-Victoria receives legislative appropriations for lease of facilities. With the issuance of these bonds, there would no longer be the need for the lease appropriations. This would be a savings to the State of $793,636 per year beginning in 1998. The amounts shown in the table below are the net cost to the State for the debt service on the bonds, the physical plant operating costs, and the lease of facilities savings. However, the University of Houston System estimates that the amount of the bonds issued will be adjusted to assure that the annual cost of debt service payments plus additional physical plant operating costs does not exceed the current appropriation for lease of facilities at the University of Houston-Victoria, thus potentially making this revenue neutral for the State. The probable fiscal implication of implementing the provisions of the bill during each of the first five years following passage is estimated as follows: Fiscal Probable Cost Out Year of General Revenue Fund 001 1996 $393,750 1997 867,500 1998 296,814 1999 289,939 2000 291,939 Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. No fiscal implication to units of local government is anticipated. Source: Texas Public Finance Authority, Bond Review Board, Higher Education Coordinating Board, University of Houston System Administration LBB Staff: JK, LS, WRR