Austin, Texas

                           FISCAL NOTE
                       74th Regular Session

                          April 19, 1995

 TO:     Honorable Tom Craddick, Chair          IN RE: Committee Substitute
         Committee on Ways & Means                            forHouse Bill
         House of Representatives               No. 2860
         Austin, Texas

FROM: John Keel, Director

In response to your request for a Fiscal Note on House Bill No.
2860 (Relating to the power of certain school districts to grant
tax abatements.) this office has determined the following:

The bill would repeal the section in Chapter 312, Tax Code, that
sunsets the Property Redevelopment and Tax Abatement Act. 
Passage of this bill would reenact the language in Chapter 312,
without the sunset provision.

The bill would also enable school districts with wealth below the
equalized wealth level (currently $280,000 per pupil) to
designate reinvestment zones if they adopt specific guidelines,
conduct hearings and make certain economic development findings.

To qualify as a reinvestment zone the property would have to:
be  in undeveloped area contiguous to an airport;
be in a municipality with a population exceeding 400,000;  and
be in a municipal utility district.

The school district could abate taxes on real property in the
zone by agreement with the property owner, if the owner agrees to
donate to the school district real property in an amount and at a
location acceptable to the district.  The abatement would not
take effect until the donation is made and would be restricted to
land that has been prepared for construction of a school
building.  In these situations the land subject to an exchange
would be removed from the tax rolls, as public use property, and    

could lower property wealth reported by the Comptroller to the
Commissioner of Education.  This could result in an increase in 
state education cost, however the impact cannot be determined..

The Comptroller's Property Tax Division has estimated the impact
of the repeal of the sunset provisions of Chapter 312, Tax Code. 
This estimate incorporates school district tax abatement growth
since the passage of SB 7 (which added a provision prohibiting
the Comptroller from deducting abated value from market value if
the abatement was granted after May 31, 1993).  This abatement
change reduced the growth in school district abatements from its
pre-SB 7 rate because the reduced revenue from abated property is
no longer offset by increased state funding.

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  Loss to School    Loss  to Counties   Loss  to Cities   
             Year     Districts                                             
          1996            $2,700,000         $22,350,000          $3,857,000
          1997             2,700,000          27,451,000           4,737,000
          1998             2,700,000          31,966,000           5,516,000
          1999             2,700,000          34,371,000           5,931,000
          2000             2,700,000          34,795,000           6,004,000
       Similar annual fiscal implications would continue as long as the
provisions of the bill are in effect.

The fiscal implication to  the State cannot be determined.

Source:   Comptroller of Public Accounts
          LBB Staff: JK, BR, DF