SWB C.S.H.B. 1029 75(R)BILL ANALYSIS WAYS & MEANS C.S.H.B. 1029 By: Hawley 4-22-97 Committee Report (Substituted) BACKGROUND Currently, there are several examples of districts with specialized taxation powers including: reinvestment zones (county or city), municipal redevelopment districts, and county development districts, etc. These districts allow for special tax treatments that are not available outside the district. Some can offer property tax advantages, while others can offer sales taxes. Currently though, there are no provisions for the creation of municipal development districts. PURPOSE The bill will allow for the creation of Municipal Development Districts in cities having a population less than 10,000 and are located in more than two counties. In addition to the powers necessary to manage the districts, the districts will also have the powers of taxation (sales, but not property) and bond issuance, and the power to enter into contracts, purchase real estate, and adopt rules to govern their operations RULEMAKING AUTHORITY The bill grants rulemaking authority in Section 1 of the bill (Sec. 377.071, Local Government Code, as added by this Act.) to the municipal development districts that may be created under this Act. SECTION BY SECTION ANALYSIS SECTION 1.Amends Subtitle A, Title 12, Local Government Code (Municipal Planning and Development), by adding CHAPTER 377. MUNICIPAL DEVELOPMENT DISTRICTS. SUBCHAPTER A. GENERAL PROVISIONS Sec. 377.001. DEFINITIONS. Defines "Board," "District," and "Development Project." Sec. 377.002. APPLICATION. Provides that this chapter applies only to a municipality with a population of less than 10,000 that is located in more than two counties, at least one of which borders the Gulf of Mexico. SUBCHAPTER B. MUNICIPAL DEVELOPMENT DISTRICTS Sec. 377.021. CREATION. (a) Provides that an eligible municipality may call an election on the question of creating a municipal development district under this chapter to plan, acquire, establish, develop, construct, or renovate one more development projects in the district. (b) Provides that the order calling the election must define the boundaries of the district to include all or part of the boundaries of the municipality and be held within those boundaries. (c) Provides ballot language for an election held under this section. (d) Provides that the district is created if a majority of the registered voters of the proposed district favor creation of the district. (e) Provides that if the majority of voters do not favor creation of the district, another election on that question may not be held in the municipality before the first anniversary of the most recent election concerning creation of a district. (f) Provides that the Election Code governs elections held under this chapter. Sec. 377.022. POLITICAL SUBDIVISION; OPEN MEETINGS. (a) Provides that a district is a political subdivision of this state and of the municipality in which the district is located. (b) Provides that a district is subject to Chapter 551, Government Code (Open Meetings). SUBCHAPTER C. BOARD OF DIRECTORS Sec. 377.051. COMPOSITION AND APPOINTMENT OF BOARD (a) Provides that a district is governed by a board of at least four directors. (b) Provides that the board is appointed by the governing body of the municipality in which the district is located. (c) Provides that the directors serve staggered two-year terms. Provides that a director may be removed by the appointing municipality at any time without cause. (d) Outlines qualifications for serving as director. Sec. 377.052. COMPENSATION. Provides that a board member is not entitled to compensation, but is entitled to reimbursement for actual and necessary expenses. Sec. 377.053. MEETINGS. Provides that the board shall conduct its meetings in the municipality in which the district is located. Sec. 377.054. OFFICERS. Provides that the board shall designate from the members of the board a presiding officer, a secretary, and other officers the board considers necessary. SUBCHAPTER D. POWERS AND DUTIES. Sec. 377.071. GENERAL POWERS OF DISTRICT. (a) Provides that a district may: (1) perform any act necessary to the full exercise of the district's power; (2) accept a grant or loan from a department or agency of the United States; a department, agency, or political subdivision of this state; a public or private person; (3) acquire, sell, lease, convey, or otherwise dispose of property or an interest in property, including a development project, under term and conditions determined by the district; (4) employ necessary personnel; (5) adopt rules to govern the operation of the district and its employees and property. (b) Provides that a district may contract with a public or private person to: (1) plan, acquire, establish, develop, construct or renovate a development project; (2) perform any other act the district is authorized to perform under this chapter. (c) Provides that a district may not levy an ad valorem tax. Sec. 377.072. DEVELOPMENT PROJECT FUND. (a) Provides that a district shall establish by resolution a fund known as the development project fund. Provides that the district may establish separate accounts within the fund. (b) Provides that the district shall deposit in into the development project fund the proceeds from any sales and use tax imposed by the district; all revenue form the sale of bonds or other obligations by the district; any other money required by law to be deposited in the fund. (c) Provides that the district may use money in the development project fund only to: 1) pay the costs of planning, acquiring, establishing, developing, constructing, or renovating one or more development projects in the district; 2) pay the principal of, interest on, and other costs relating to bonds or other obligations issued by the district or to refund bonds or other obligations; 3) pay the costs of operating or maintaining one or more development projects during the planning, acquisition, establishment, development, construction, or renovation or while bonds or other obligations for the planning, acquisition, establishment, development, construction, or renovation are outstanding. Sec. 377.073. BONDS AND OTHER OBLIGATIONS. (a) Provides that a district may issue bonds, including revenue bonds and refunding bonds, or other obligations to pay the costs of a development project. (b) Provides that the bonds or other obligations and the proceedings authorizing the bonds or other obligations shall be submitted to the attorney general for review and approval as required by Article 3, chapter 5, Acts of the 70th Legislature, 2nd Called Session, 1987 (Article 717k-8, Vernon's Texas Civil Statues). (c) Provides that the bonds or other obligations must be payable from and secured by the revenues of the district. (d) Provides that the bonds or other obligations may mature serially or otherwise not more than 30 years from their date of issuance. (e) Provides that the bonds or other obligations are not a debt of and do not create a claim for a payment against the revenue or property of the district other than a development project for which the bonds are issued. Sec. 377.074. PUBLIC PURPOSE OF PROJECT. (a) Provides that the legislature finds for all constitutional and statutory purposes that a development project is owned, used, and held for public purposes by the district. (b) Provides that Section 25.07(a), Tax Code (Leasehold and Other Possessory Interests in Exempt Property), does not apply to a leasehold or other possessory interest granted by the district while the district owns the development project. (c) Provides that the development project is exempt form taxation under Section 11.11, Tax Code (Public Property), while the district owns the project. SUBCHAPTER E. SALES AND USE TAX Sec. 377.101. SALES AND USE TAX. (a) Provides that a district may, by order, impose a sales and use tax under this subchapter. (b) Provides that a district may impose a tax under this subchapter only if the tax is approved at an election held under Section 377.021. (c) Provides that a district may not adopt a sales and use tax under this subchapter if the adoption of the ax under this subchapter would result in a combined tax rate of all local sales and use taxes of more than two percent in a location in the district. Sec. 377.102. TAX CODE APPLICABLE. (a) Provides that Chapter 323, Tax Code (County Sales and Use Tax Act), governs the imposition, computation, administration, collection, and remittance of a tax authorized under this subchapter except as inconsistent with this subchapter. (b) Provides that Section 323.101(b), Tax Code, (Tax Authorized), does not apply to the tax authorized by this subchapter. Sec. 377.103. TAX RATE. Provides that the rate of a tax adopted under this subchapter must be one-eighth, one-fourth, three-eights, or one-half of one percent. Sec. 377.104. REPEAL OF RATE CHANGE. (a) Provides that a district that has adopted a sales and use tax under this subchapter may by order and subject to Section 377.101(c), change the rate of the tax or repeal the tax if the change or repeal is approved by a majority of the registered voters of that district voting at an election called and held for that purpose. (b) Provides that the tax may be changed under Subsection (a) in one or more increments of one-eighth of one percent to a maximum of one-half of one percent. (c) Provides ballot language for an election to change the tax. (d) Provides ballot language for an election to repeal the tax. Sec. 377.105. IMPOSITION OF TAX. (a) Provides that if the district adopts the tax, a tax is imposed on the receipts from the sale at retail of taxable items in the district at the rate approved at the election. (b) Provides that there is also imposed an excise tax on the use, storage, or other consumption in the district of tangible personal property purchased, leased, or rented form a retailer during the period that the tax is effective in the district. Provides that the rate of the excise tax is the same as the rate of the sales tax portion of the tax and is applied to the sale price of the tangible personal property. Sec. 377.1006. EFFECTIVE DATE OF TAX. Provides that, except as provided by Section 377.107, the adoption of the tax, the change of the tax rate, or the repeal of the tax takes effect on the first day of the first calendar quarter occurring after the expiration of the first complete quarter occurring after the date on which the comptroller receives a notice of the results of the election adopting, changing, or repealing the tax. Sec. 377.107. COLLECTION OF TAX TO PAY BONDS OR OTHER OBLIG ATIO NS. (a) Provides that if the district votes to repeal the sales and use tax under Section 377.104, and the district had issued bonds or incurred other obligations secured by the tax before the date of the election, the district shall continue to collect the tax until the bonds or other obligations are paid. (b) Provides that the district shall immediately notify the comptroller when the bonds or other obligations have been paid. (c) Provides that the repeal of the tax takes effect on the first dat of the first complete quarter occurring after the expiration of the first complete quarter occurring after the date on which the comptroller receives the notice under Subsection (b). Sec. 377.108. DEPOSIT OF TAX REVENUES. Provides that revenue form the tax imposed under this subchapter shall be deposited in the development project fund of the district imposing the tax. SECTION 2.Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE H.B. 1029 attempted to deal with the local sales tax rate cap by exempting particular portions of the state. C.S.H.B. 1029 deals with the local sales tax rate cap by allowing the creation of Municipal Development Districts.