LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 74th Regular Session May 27, 1995 TO Honorable Bob Bullock Honorable Pete Laney : Lieutenant Governor Speaker of the House Senate Chamber House of Representatives Austin, Texas Austin, Texas IN RE: Conference Committee Report for Senate Bill No. 345 FROM: John Keel, Director In response to your request for a Fiscal Note on Senate Bill No. 345 (Relating to tax abatement, reinvestment zones, and the refund of certain taxes by the comptroller to reimburse certain taxes paid on property in a reinvestment zone; and to the creation of development districts in certain counties.) 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 amend Chapter 111, Tax Code, by requiring the Comptroller to issue a refund of state sales and franchise tax payments paid by a taxpayer when presented with an application for refund. The application would specify the amount of school taxes paid on property abated by a county or a municipality that would not have been paid if the school district had abated the property under an agreement with terms identical to those in the county or municipality's abatement agreement. The total amount of tax refunds would be capped at $10,000,000 per fiscal year. To be eligible for the refund the property owner must have established a new business (or expanded or modernized an existing business) and must have increased the business's payroll by $3,000,000 or increased the appraised value of the business's property by $4,000,000 since an initial base year beginning on or after January 1, 1996. In addition, no refund would be made if the person makes a payment in lieu of taxes to a municipality or county during the period of a tax abatement agreement between the person and the municipality or county. The refund would be limited to the net amount of state franchise and sales taxes paid into general revenue during the calendar year or the total school property tax paid for that year. The refund would be limited to 5 years or the term of the abatement, whichever is less. The bill would amend Chapter 312, Tax Code, by requiring an abatement agreement to provide for criteria, specific agreed terms and conditions, cancellation or modification if the terms are not met, and an annual report from the property owner to the taxing unit certifying that the terms were met. The bill would also require each taxing unit to provide the abatement criteria, a copy of the abatement agreement and any amendments or modifications to the Comptroller, and the Texas Department of Commerce. The bill would amend the section in Chapter 312, Tax Code, that sunsets the Property Redevelopment and Tax Abatement Act, by extending the sunset date to 2001. The Comptroller has estimated the impact of the above provisions of this bill as follows: 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 of Probable Probable Revenue Probable Revenue Change in Year General Revenue Administrative Cost Loss to Counties Loss to Cities Number of State Fund 001 Out of General Employees from Revenue Fund 001 FY 1995 1996 $0 $0 $23,350,000 $3,857,000 0.0 1997 0 0 27,451,000 4,737,000 0.0 1998 0 218,624 31,966,000 5,516,000 4.5 1999 10,000,000 177,884 34,371,000 5,931,000 4.5 2000 10,000,000 177,884 34,795,000 6,004,000 4.5 Similar annual fiscal implications would continue as long as the above provisions of the bill are in effect. In addition, the bill would establish the "County Development District Act." The act would authorize the creation of development districts in certain counties to provide incentives for the location and development of projects to attract visitors and tourists. No significant fiscal implication to the state is anticipate due to this provision. The fiscal implication to units of local government cannot be estimated as the number of counties that would choose to create development districts cannot be determined. Source: Comptroller of Public Accounts LBB Staff: JK, BR, DF