LEGISLATIVE BUDGET BOARD
                          Austin, Texas

                           FISCAL NOTE
                       74th Regular Session

                           May 9, 1995



 TO:     Honorable David Sibley, Chair          IN RE:  Senate BillNo. 1696
         Committee on Economic Development              By: Bivins
         Senate
         Austin, Texas






FROM: John Keel, Director

In response to your request for a Fiscal Note on Senate Bill No.
1696 (relating to the creation of economic development districts
in certain counties; authorizing certain taxes) this office has
determined the following:

The bill would amend the Commissioners' Courts chapter of the
Civil Statutes by adding an article which would authorize the
creation of economic development districts in certain counties to
provide incentives for the location and development of projects
to attract visitors and tourists.

Counties with a population of not more than 400,000 could create
an economic development district upon petition of the landowners
in a county.  The bill would specify the contents of the
petition, including a description of the district boundaries. 
Creation of a district would be subject to voter approval.  A
district could issue bonds to pay all or part of the cost of any
project authorized by the bill.  The bonds would be payable from
district funds, including taxes, license fees, grants, donations
or other district revenues.

A district would receive a payment of 100 percent of the
incremental tax proceeds collected by taxing entities within the
district during the first twenty years following the creation of
the district.  The term "taxing entity" would include the state,
a municipality, a county, or other political subdivision, but
would not include a school district.  The term "tax proceeds"
would include hotel occupancy taxes and sales and use taxes
collected from individuals or entities within the boundaries of
the district.  The term "incremental tax proceeds" would mean the    




amount of the tax proceeds collected by a taxing entity in a 
fiscal year that exceeds the amount of tax proceeds collected by
the entity during the last fiscal year before the district was
created.

The provision of the bill specifying that the sales tax adopted
by a district would not count toward the limitation imposed by
Chapter 323 of the Tax Code appears to allow eligible counties to
exceed the maximum combined local sales tax rate of 2 percent for
city, county and other political subdivisions in the county
provided under Section 323.101(d) of the Tax Code.

The fiscal impact on the state and units of local government
cannot be estimated as the number of counties that would choose
to create economic development districts cannot be determined. 
If, however, every eligible county were to create a county-sized
district, and began receiving the state's incremental tax
proceeds on September 1, 1996, the first year revenue loss to the
state sales and use tax (fiscal year 1997) would be approximately
$400 million.





Source:   Comptroller of Public Accounts
          LBB Staff: JK, SM, RR