JJG C.S.H.B. 3083 75(R)BILL ANALYSIS ECONOMIC DEVELOPMENT C.S.H.B. 3083 By: Coleman 4-20-97 Committee Report (Substituted) BACKGROUND Tax increment financing is a tool that local governments can use to publicly finance needed structural improvements and enhanced infrastructure within a defined area. The cost of the improvements to the area is repaid by the contribution of future tax revenues by each taxing unit that levies taxes against the property. Specifically, each taxing unit can choose to dedicate all, a portion of, or none of the tax revenue that is attributable to the increase in property values due to the improvements within the area, which is known as a "reinvestment zone." A ten-step process governs the creation of a reinvestment zone for tax increment financing purposes. Public improvement districts use an assessment on property to provide financing for public improvements authorized under Sec. 371.003, Local Government Code. The process for creation of a public improvement district requires: a petition signed by owners of real property representing 50 percent of the appraised value of the proposed district and record owners of real property liable for the assessment who: constitute 50 percent of all record owners of property that is liable for assessment; or own real property that constitutes more than 50 percent of the area of the district; a feasibility report; a public hearing; an assessment plan; and an ordinance be adopted by the governing body of the municipality. PURPOSE To allow the governing body of a municipality with a population of 100,000 or more to create, without a petition, a public improvement district that includes all or any part of a reinvestment zone that is located in an enterprise zone; clarify and expand the powers of a municipality to carry out tax increment financing plans; add members to the board of directors of a reinvestment zone; allow revenue in the tax increment fund to be used to pay project costs, including the costs of low-income or moderate-income housing; clarify low-income or moderate-income housing provisions for reinvestment zones located in a county with a population of 2.1 million or more. 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 311.0031 of the Texas Tax Code ("Tax Code") to authorize a sponsoring municipality (with population of 100,000 or more) to create a public improvement district pursuant to the provisions of Chapter 372 of the Local Government Code, except petition provisions, in all or a part of a reinvestment zone located in an enterprise zone. SECTION 2.Amends Section 311.008 of the Tax Code to add that the zone may contract with "contractors, consultants, developers, and others" for the purposes of implementing the zone's project plan to clarify the authority of the zone to enter into such contracts and to pledge its revenues to secure such contracts. SECTION 3.Amends Section 311.009(a) to mandate that the Board of Directors for any tax increment zone include one representative from the respective state representative and state senator representing the zone, and the remaining board members would be appointed by the municipality which created the zone. SECTION 4.Amends Section 311.010(b) of the Tax code to clarify that a reinvestment zone may enter into agreements to use tax increment revenues to pay for project costs, including low-income or moderate-income housing. Provides that an agreement may be of any duration, but keeps the terms of an agreement with a neighborhood enterprise association to 10 years or less. SECTION 5.Amends Section 311.011(f), Tax Code, to expand the requirements of a project plan of a zone, designated under Sec. 311.005(a)(5) in a county with a population of 2.1 million or more, to include the use of one-third of the tax increment to provide moderate-income housing or to assist or stimulate the economic development of an eligible business activity. Assistance to an eligible business activity may be provided in a manner authorized by this chapter or Chapter 380, Local Government Code. The board or directors shall specify the manner in which low-income and moderateincome house will be provided. "eligible business activity" means a business activity of which at least 35 percent of the employees reside in the territory of an enterprise zone, and substantially all of which is performed in that enterprise zone. SECTION 6.Effective date. Changes to Sec. 311.009(a), Tax Code, applies to a reinvestment zone created before the effective date of this Act that is in existence on that date. SECTION 7.Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE SECTION 1 of CSHB 3083 amends Sec. 311.0031, Tax Code, to allow certain municipalities to create a public improvement district without a petition. SECTION 1 of HB 3083 amended Sec. 311.005, Tax Code, to add to the requirements for designating a reinvestment zone, and has been deleted from CSHB 3083. SECTION 2 of HB 3083 amended Sec. 311.009, Tax Code, to allow a governing body to add members to the board of directors of a reinvestment zone. The provision has been deleted in CSHB 3083 and SECTION 2 now expands the powers of a municipality involved in tax increment financing to include signing agreements with "contractors, consultants, developers, and other persons," and dedicating revenues from the tax increment fund in support of the agreements. Additionally, cities are given the authority to: acquire property in an enterprise zone; acquire or install works of art, security devices, or trees; or remediate conditions that contaminate land or buildings located in the zone. SECTION 3 of HB 3083 amended 311.010, Tax Code, to allow a board to create a non-profit corporation to help the board perform its duties. In CSHB 3083, the provision is eliminated, and SECTION 3 amends Sec. 311.009(a) to add members to the board of directors of reinvestment zones. SECTION 4 of HB 3083 amended Sec. 311.011(f), Tax Code, to mandate that project plans for zones in Harris County specify the manner in which tax increment revenues are dedicated and allocated for low-income housing. CSHB 3083 deletes the provision and SECTION 4 amends Sec. 311.010(b) to allow agreements to use tax increment revenues to pay for low-income and moderateincome housing, and allow agreements to under this subsection to be of any duration. SECTION 5 of HB 3083 contained the effective date. In CSHB 3083, Sec. 311.011(f) is amended to clarify the low-income housing requirements of zones in Harris County. Also adds eligible business activity as an eligible spending item for those zones. SECTION 6 of HB 3083 contained the emergency clause. In CSHB 3083, SECTION 6 contains the effective date and makes changes to Sec. 311.009(a) applicable to reinvestment zones created before the effective date that are in existence on that date. SECTION 7 of CSHB 3083 is added and contains the emergency clause.