JKM H.B. 1525 75(R) BILL ANALYSIS ECONOMIC DEVELOPMENT H.B. 1525 By: Oliveira 3-19-97 Committee Report (Unamended) BACKGROUND In 1989, the Legislature allowed municipalities, with voter approval, to collect up to 1/2 cent in sales taxes to fund economic development efforts by adding Section 4A to the Development Corporation Act of 1979. Section 4A limited the types of projects that could be funded with sales tax revenue. Between 1989 and 1991, 31 cities adopted the 4A sales tax for economic development. In 1991, Section 4B was added to the to the Development Corporation Act, and certain cities, with voter approval, could use up to a 1/2 cent sales tax to fund a wide range of civic and commercial projects. Only 73 communities were originally eligible for the 4B tax. 4B cities can fund any project a 4A city can, plus a wide variety of other projects. The popularity of Section 4B sales tax led the Texas Legislature in 1993 to broaden its availability to any city that was eligible to adopt a Section 4A sales tax. Ninety-one cities, however, passed the more restrictive 4A sales tax prior to becoming eligible for the 4B tax. Because spending restrictions under Section 4A are more restrictive than under 4B, many of these communities feel they are at a competitive disadvantage with 4B cities. The House Economic Development Committee studied the issue during the 74th legislative interim and recommended that legislation be passed that would allow 4A cities to undertake projects currently exclusive to 4B cities, if voters approved the project. The committee felt that because voters approved the sales tax for limited spending purposes under 4A provision, that the voters must approve spending for new purposes. PURPOSE To allow cities which have passed a 4A economic development sales tax to undertake projects currently exclusive to cities which have passed a 4B sales tax, if the voters of the city approve. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1.Amends Section 4A, Development Corporation Act of 1979 (Article 5190.6, V.T.C.S.) by adding Subsection (s). Subsection (s)(1) allows a city that has passed a 4A sales tax to submit to the voters, at an election held on a uniform election date or an election held under another provision of this Act, a proposition authorizing the economic development corporation to use sales and use taxes for a project or category of projects that does not qualify under Section 4A but does qualify under Section 4B. Approval of a project does not prohibit a city from asking for approval of another project to be funded from the same sales and use tax. Subsection (s)(2) states the ballot must clearly describe the project or category of projects so that voters will be able to discern the limits of the project or category of projects authorized by the proposition. In cases where the maintenance and operating costs of a project are to be paid from sales or use taxes, the ballot language must clearly state that fact. Subsection (s)(3) requires a public hearing to inform the city's residents of the cost and impact of the project or category of projects before an election may be held. Subsection (s)(4) states that if a majority of voters do not approve a project or category of projects, another election on the same project or category of projects may not be held within one year. SECTION 2.Emergency clause.