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