LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 74th Regular Session April 4, 1995 TO: Honorable Tom Craddick, Chair IN RE: House Bill No. 2860 Committee on Ways & Means By: Grusendorf House of Representatives 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 in undeveloped areas contiguous to an airport of a municipality with a population exceeding 400,000; if they adopt specific guidelines, conduct hearings and make certain economic development findings. Further 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. The Comptroller estimated school district tax abatement growth based on the reported abatements 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 abatements from its pre-SB 7 rate because the reduced revenue from abated property is no longer offset by increased state funding. The bill would also create a situation where local school districts and taxpayers could make agreements to exchange land for abated taxes. 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, and could result in an increase in state education cost. 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, Central Education Agency - Administration LBB Staff: JK, BR, DF