LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 74th Regular Session April 4, 1995 TO: Honorable Tom Craddick, Chair IN RE: House Bill No. 3155 Committee on Ways & Means By: Coleman House of Representatives Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on House Bill No. 3155 (Relating to tax credits for real property contributed to institutions of higher education.) this office has determined the following: The bill allows a state university to acquire real estate, which would otherwise not be acquired due to insufficient funding sources, in exchange for a state sales or franchise tax credit granted to the property owner by the Higher Education Coordinating Board. The bill allows a university to seek approval from the Higher Education Coordinating Board to obtain the desired real estate. The board could approve the acquisition if the real estate were included in the university's master plan as a desired acquisition, if the real estate were fairly priced, and if the university otherwise lacked sufficient funds to purchase the property. Upon board approval, the comptroller would be required to grant the property owner a franchise or sales tax credit. The credit would be taken in equal increments over five years (20 percent of the total credit per year) and could be carried over up to 10 years. To the extent that real property previously taxed by local jurisdictions becomes the property of a state institution of higher learning and, thus, tax exempt; local property tax rolls and tax payments would be reduced. The loss of local property taxation would result in an adverse effect upon local educational financing. The revenue estimates were developed by the Comptroller's Office and reflect the minimum amount of expected cost to the state. Actual revenue losses could be dramatically greater. 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 Revenue Administrative Year Loss from General Cost to the Revenue Fund 001 Comptroller's Office from General Revenue Fund 001 1996 $5,459,000 $83,322 1997 5,459,000 1998 5,459,000 1999 5,459,000 2000 5,459,000 Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. The fiscal implication to units of local government cannot be determined. Source: Comptroller of Public Accounts LBB Staff: JK, CT, DF