By: Madla, et al. S.B. No. 226 A BILL TO BE ENTITLED AN ACT 1-1 relating to defense economic readjustment zones; authorizing the 1-2 issuance of bonds. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Subtitle G, Title 10, Government Code, is amended 1-5 by adding Chapter 2310 to read as follows: 1-6 CHAPTER 2310. DEFENSE ECONOMIC READJUSTMENT ZONE 1-7 SUBCHAPTER A. GENERAL PROVISIONS 1-8 Sec. 2310.001. DEFINITIONS. In this chapter: 1-9 (1) "Defense worker" means: 1-10 (A) an employee of the United States Department 1-11 of Defense, including a member of the armed forces and a government 1-12 civilian worker; 1-13 (B) an employee of a government agency or 1-14 private business, or an entity providing a department of defense 1-15 related function, who is employed on a defense facility; 1-16 (C) an employee of a business that provides 1-17 direct services or products to the department of defense and whose 1-18 job is directly dependent on defense expenditures; or 1-19 (D) an employee or private contractor employed 1-20 by the United States Department of Energy working on a defense or 1-21 department of energy facility in support of a department of defense 1-22 related project. 1-23 (2) "Defense worker job" means a department of defense 1-24 authorized permanent position or a position held or occupied by one 2-1 or more defense workers for more than 12 months. 2-2 (3) "Department" means the Texas Department of 2-3 Commerce. 2-4 (4) "Nominating body" means the governing body of a 2-5 municipality or county, or a combination of the governing bodies of 2-6 municipalities or counties, that nominates and applies for 2-7 designation of an area as a readjustment zone. 2-8 (5) "Qualified business" means a person certified as a 2-9 qualified business under Section 2310.302. 2-10 (6) "Qualified employee" means a person who: 2-11 (A) works for a qualified business; and 2-12 (B) performs at least 50 percent of the person's 2-13 service for the business in the readjustment zone. 2-14 (7) "Readjustment zone" means an area designated as a 2-15 defense economic readjustment zone under this chapter. 2-16 Sec. 2310.002. JURISDICTION OF MUNICIPALITY. For the 2-17 purposes of this chapter, territory in the extraterritorial 2-18 jurisdiction of a municipality is considered to be in the 2-19 jurisdiction of the municipality. 2-20 (Sections 2310.003-2310.050 reserved for expansion 2-21 SUBCHAPTER B. DEPARTMENT POWERS AND DUTIES RELATING TO ZONES 2-22 Sec. 2310.051. GENERAL POWERS AND DUTIES. (a) The 2-23 department shall administer and monitor the implementation of this 2-24 chapter. 2-25 (b) The department shall establish criteria and procedures 2-26 for designating a qualified area as a readjustment zone and for 2-27 designating a defense readjustment project. 3-1 (c) The department shall adopt rules necessary to carry out 3-2 the purposes of this chapter. 3-3 Sec. 2310.052. EVALUATION; REPORT. (a) The department 3-4 shall conduct a continuing evaluation of the programs of 3-5 readjustment zones. 3-6 (b) On or before December 1 of each year, the department 3-7 shall submit to the governor, the legislature, and the Legislative 3-8 Budget Board a report that: 3-9 (1) evaluates the effectiveness of the readjustment 3-10 zone program; 3-11 (2) describes the use of state and local incentives 3-12 under this chapter and their effect on revenue; and 3-13 (3) suggests legislation, as appropriate. 3-14 Sec. 2310.053. ASSISTANCE. (a) The department shall 3-15 assist: 3-16 (1) a qualified business in obtaining the benefits of 3-17 any state incentive or inducement program provided by law; 3-18 (2) the governing body of a readjustment zone in 3-19 obtaining assistance from another state agency, including job 3-20 training and technical assistance to qualified businesses in a 3-21 zone; and 3-22 (3) the governing body of a readjustment zone in 3-23 encouraging small business development. 3-24 (b) The department shall provide to persons desiring to 3-25 locate and engage in business in a readjustment zone information 3-26 and appropriate assistance relating to the required legal 3-27 authorization, including a state license, permit, certificate, 4-1 approval, registration, or charter, to engage in business in this 4-2 state. 4-3 (c) The department shall publicize existing tax incentives 4-4 and economic development programs in readjustment zones. 4-5 (d) On request the department shall offer to a unit of local 4-6 government having a readjustment zone within its jurisdiction 4-7 technical assistance relating to tax abatement and the development 4-8 of alternative revenue sources. 4-9 Sec. 2310.054. COORDINATION WITH OTHER GOVERNMENTAL 4-10 ENTITIES. (a) In cooperation with the appropriate units of local 4-11 government and other state agencies, the department shall 4-12 coordinate and streamline state business assistance programs and 4-13 permit or license application procedures for businesses in 4-14 readjustment zones. 4-15 (b) The department shall work with the responsible state and 4-16 federal agencies to coordinate readjustment zone programs with 4-17 other programs carried out in a readjustment zone, including 4-18 housing, community and economic development, small business, 4-19 banking, financial assistance, transportation, and employment 4-20 training programs. 4-21 (c) The department shall encourage other state agencies in 4-22 awarding grants, loans, or services to give priority to businesses 4-23 in readjustment zones. 4-24 (Sections 2310.055-2310.100 reserved for expansion 4-25 SUBCHAPTER C. DESIGNATION OF READJUSTMENT ZONE 4-26 Sec. 2310.101. CRITERIA FOR READJUSTMENT ZONE DESIGNATION. 4-27 (a) To be designated as a readjustment zone an area must: 5-1 (1) have a continuous boundary; 5-2 (2) be at least one square mile but not larger than 20 5-3 square miles, excluding lakes, waterways, and transportation 5-4 arteries, of the municipality, county, or combination of 5-5 municipalities or counties nominating the area as a readjustment 5-6 zone; 5-7 (3) be located in an adversely affected 5-8 defense-dependent community; 5-9 (4) have at least 50 percent of its area located in an 5-10 existing or former United States Department of Defense facility; 5-11 and 5-12 (5) be nominated as a readjustment zone by an 5-13 ordinance or order adopted by the nominating body. 5-14 (b) An area is not prohibited from being included in a 5-15 readjustment zone because the area is also included in an 5-16 enterprise zone designated under Chapter 2303. 5-17 Sec. 2310.102. ADVERSELY AFFECTED DEFENSE-DEPENDENT 5-18 COMMUNITY. A municipality or county is an adversely affected 5-19 defense-dependent community if the department determines that: 5-20 (1) the municipality or county requires assistance 5-21 because of: 5-22 (A) the proposed or actual establishment, 5-23 realignment, or closure of a defense facility; 5-24 (B) the cancellation or termination of a United 5-25 States Department of Defense contract or the failure of the 5-26 department of defense to proceed with an approved major weapon 5-27 system program; 6-1 (C) a publicly announced planned major reduction 6-2 in department of defense spending that would directly and adversely 6-3 affect the municipality or county; or 6-4 (D) the closure or a significant reduction of 6-5 the operations of a defense facility as the result of a merger, 6-6 acquisition, or consolidation of a defense contractor operating the 6-7 facility; and 6-8 (2) the municipality or county is expected to 6-9 experience, during the period between the beginning of the federal 6-10 fiscal year during which an event described by Subdivision (1) is 6-11 finally approved and the date that the event is to be substantially 6-12 completed, a direct loss of: 6-13 (A) 2,500 or more defense worker jobs in any 6-14 area of the municipality or county that is located in an urbanized 6-15 area of a metropolitan statistical area; 6-16 (B) 1,000 or more defense worker jobs in any 6-17 area of the municipality or county that is not located in an 6-18 urbanized area of a metropolitan statistical area; or 6-19 (C) one percent of the civilian jobs in the 6-20 municipality or county. 6-21 Sec. 2310.103. NOMINATION OF READJUSTMENT ZONE. (a) The 6-22 governing body of a municipality or county that is an adversely 6-23 affected defense-dependent community, individually or in 6-24 combination with other municipalities or counties that are 6-25 adversely affected defense-dependent communities, by ordinance or 6-26 order, as appropriate, may nominate as a readjustment zone an area 6-27 within its jurisdiction that meets the criteria under Section 7-1 2310.101. 7-2 (b) Unless the nominating body holds a public hearing before 7-3 adopting an ordinance or order under this section, the ordinance or 7-4 order is not valid. 7-5 (c) The governing body of a county may not nominate 7-6 territory in a municipality, including extraterritorial 7-7 jurisdiction of a municipality, to be included in a proposed 7-8 readjustment zone unless the governing body of the municipality 7-9 also nominates the territory and together with the county files a 7-10 joint application under Section 2310.105. 7-11 (d) The governing bodies of a combination of municipalities 7-12 or counties may not jointly nominate an area as a readjustment zone 7-13 unless the governing bodies have entered into a binding agreement 7-14 to administer the zone jointly. 7-15 Sec. 2310.104. NOMINATING ORDINANCE OR ORDER. (a) An 7-16 ordinance or order nominating an area as a readjustment zone must: 7-17 (1) describe precisely the area to be included in the 7-18 zone by a legal description or reference to roadways, lakes, 7-19 waterways, or municipal or county boundaries; 7-20 (2) state a finding that the area meets the 7-21 requirements of this chapter; 7-22 (3) summarize briefly the incentives, including tax 7-23 incentives, that, at the election of the nominating body, apply to 7-24 business enterprises in the area; and 7-25 (4) nominate the area as a readjustment zone. 7-26 (b) At least one of the incentives summarized under 7-27 Subsection (a)(3) must not be offered elsewhere within the 8-1 jurisdiction except within an enterprise zone designated under 8-2 Chapter 2303. 8-3 (c) This section does not prohibit a municipality or county 8-4 from extending additional incentives, including tax incentives, for 8-5 business enterprises in a readjustment zone by a separate ordinance 8-6 or order. 8-7 Sec. 2310.105. APPLICATION FOR DESIGNATION. (a) For an 8-8 area to be designated as a readjustment zone, the nominating body, 8-9 after nominating the area as a readjustment zone, must send to the 8-10 department a written application for designation of the area as a 8-11 readjustment zone. 8-12 (b) The application must include: 8-13 (1) a certified copy of the ordinance or order, as 8-14 appropriate, nominating the area as a readjustment zone; 8-15 (2) a map of the area showing existing streets and 8-16 highways; 8-17 (3) an analysis and appropriate supporting documents 8-18 and statistics demonstrating that the area qualifies for 8-19 designation as a readjustment zone; 8-20 (4) a statement that specifies each tax incentive, 8-21 grant, other financial incentive or benefit, or program to be 8-22 provided by the nominating body to business enterprises in the area 8-23 that is not to be provided throughout the governmental entity or 8-24 entities nominating the area as a readjustment zone; 8-25 (5) a statement of the economic development and 8-26 planning objectives for the area; 8-27 (6) an estimate of the economic impact of the 9-1 designation of the area as a readjustment zone on the revenues of 9-2 the governmental entity or entities nominating the area as a 9-3 readjustment zone, considering all the financial incentives and 9-4 benefits and the programs contemplated; 9-5 (7) a transcript or tape recording of all public 9-6 hearings on the proposed zone; 9-7 (8) if the application is a joint application, a 9-8 description and copy of the agreement between the applicants; 9-9 (9) the procedures for negotiating with residents, 9-10 community groups, and other entities affected by the designation of 9-11 the area as a readjustment zone and with qualified businesses in 9-12 the area; 9-13 (10) a description of the administrative authority, if 9-14 one is to be appointed for the readjustment zone under Section 9-15 2310.202; and 9-16 (11) any additional information the department 9-17 requires. 9-18 (c) Information required by Subsection (b) is for evaluation 9-19 purposes only. 9-20 Sec. 2310.106. REVIEW OF APPLICATION. (a) On receipt of an 9-21 application for the designation of a readjustment zone, the 9-22 department shall review the application to determine if the 9-23 nominated area qualifies for designation as a readjustment zone 9-24 under this chapter. 9-25 (b) The department shall allow an applicant to correct any 9-26 omission or clerical error in the application and to return the 9-27 application to the department on or before the 15th day after the 10-1 date on which the department receives the application. 10-2 Sec. 2310.107. DESIGNATION AGREEMENT. (a) If the 10-3 department determines that a nominated area for which a designation 10-4 application has been received satisfies the criteria under Section 10-5 2310.101, the department shall negotiate with the nominating body 10-6 for a designation agreement. 10-7 (b) A designation agreement must: 10-8 (1) designate the nominated area as a readjustment 10-9 zone; and 10-10 (2) designate the administrative authority, if one is 10-11 to be appointed for the zone under Section 2310.202, and describe 10-12 its functions and duties, which should include decision-making 10-13 authority and the authority to negotiate with affected entities. 10-14 (c) The department shall complete the negotiations and sign 10-15 the agreement not later than the 60th day after the date on which 10-16 the application is received unless the department extends that 10-17 period to the 90th day after the date on which the application was 10-18 received. 10-19 (d) If an agreement is not completed within the 60-day 10-20 period provided by Subsection (c), the department shall provide to 10-21 the nominating body the specific areas of concern and a final 10-22 proposal for the agreement. 10-23 (e) If the agreement is not executed before the 91st day 10-24 after the date on which the application was received, the 10-25 application is considered to be denied. 10-26 Sec. 2310.108. DENIAL OF APPLICATION; NOTICE. (a) The 10-27 department may deny an application for the designation of a 11-1 readjustment zone only if the department determines that the 11-2 nominated area does not satisfy the criteria under Section 11-3 2310.101. 11-4 (b) The department shall inform the nominating body of the 11-5 specific reasons for denial of an application, including denial 11-6 under Section 2310.107(e). 11-7 Sec. 2310.109. PERIOD OF DESIGNATION. An area may be 11-8 designated as a readjustment zone for a maximum of seven years. A 11-9 designation remains in effect until September 1 of the final year 11-10 of the designation. 11-11 Sec. 2310.110. AMENDING BOUNDARIES. (a) The nominating 11-12 body may amend the boundary of a readjustment zone by ordinance or 11-13 order, as appropriate, adopted after a public hearing on the issue. 11-14 (b) The amended boundary: 11-15 (1) must be continuous; 11-16 (2) may not exceed the original size requirement of 11-17 Section 2310.101; and 11-18 (3) may not exclude any area originally included 11-19 within the boundary of the zone as designated. 11-20 (c) The readjustment zone with the amended boundary must 11-21 continue to meet the location requirements of Section 11-22 2310.101(a)(4). 11-23 (d) A nominating body may not make more than one boundary 11-24 amendment annually for a readjustment zone. 11-25 (e) For each amendment of a readjustment zone boundary, the 11-26 nominating body shall pay the department a reasonable fee, in an 11-27 amount specified by the department, not to exceed $500. The 12-1 department may use fees collected under this subsection to 12-2 administer this chapter and for other purposes to advance this 12-3 chapter. 12-4 Sec. 2310.111. REMOVAL OF DESIGNATION. (a) The department 12-5 may remove the designation of an area as a readjustment zone if: 12-6 (1) the area no longer meets the criteria for 12-7 designation under this chapter or by department rule adopted under 12-8 this chapter; or 12-9 (2) the department determines that the governing body 12-10 of the readjustment zone has not complied with commitments made in 12-11 the ordinance or order nominating the area as a readjustment zone. 12-12 (b) The removal of a designation does not affect the 12-13 validity of a tax incentive or regulatory relief granted or accrued 12-14 before the removal. 12-15 (Sections 2310.112-2310.200 reserved for expansion 12-16 SUBCHAPTER D. ADMINISTRATION OF READJUSTMENT ZONES 12-17 Sec. 2310.201. ADMINISTRATION BY GOVERNING BODY. The 12-18 governing body of a readjustment zone is the governing body of the 12-19 municipality or county, or the governing bodies of the combination 12-20 of municipalities or counties, that applied to have the area 12-21 designated as a readjustment zone. 12-22 Sec. 2310.202. ADMINISTRATION BY ADMINISTRATIVE AUTHORITY. 12-23 (a) The governing body of a readjustment zone may delegate its 12-24 administrative duties to an administrative authority appointed by 12-25 the governing body. 12-26 (b) An administrative authority must: 12-27 (1) be composed of 3, 5, 7, 9, 11, or 15 members; 13-1 (2) be a viable and responsive body generally 13-2 representative of all public or private entities that have a stake 13-3 in the development of the zone; and 13-4 (3) if the readjustment zone includes private 13-5 residences, include: 13-6 (A) an elected official representing 13-7 readjustment zone residents and businesses; or 13-8 (B) at least two readjustment zone residents. 13-9 Sec. 2310.203. LIAISON. The governing body of a 13-10 readjustment zone shall designate a liaison to communicate and 13-11 negotiate with: 13-12 (1) the department; 13-13 (2) the administrative authority, if one exists; 13-14 (3) a defense readjustment project; and 13-15 (4) other entities in or affected by the readjustment 13-16 zone. 13-17 Sec. 2310.204. ANNUAL REPORT. (a) Not later than October 1 13-18 of each year, the governing body of a readjustment zone shall 13-19 submit to the department a report in the form required by the 13-20 department. 13-21 (b) The report must be approved by the readjustment zone's 13-22 administrative authority, if one exists. 13-23 (c) The report must include for the year preceding the date 13-24 of the report: 13-25 (1) a list of local incentives for community 13-26 development available in the zone; 13-27 (2) the use of local incentives for which the 14-1 governing body provided in the ordinance or order nominating the 14-2 readjustment zone and the effect of those incentives on revenue; 14-3 (3) the number of businesses assisted, located, and 14-4 retained in the zone since its designation due to the existence of 14-5 the readjustment zone; 14-6 (4) a summary of all industrial revenue bonds issued 14-7 to finance projects located in the zone; and 14-8 (5) a description of all efforts made to attain 14-9 revitalization goals for the zone. 14-10 (Sections 2310.205-2310.300 reserved for expansion 14-11 SUBCHAPTER E. QUALIFIED BUSINESSES AND DEFENSE 14-12 READJUSTMENT PROJECTS 14-13 Sec. 2310.301. DEFINITION. In this subchapter, "new 14-14 permanent job" means a new employment position created by a 14-15 qualified business as described by Section 2310.302 that: 14-16 (1) has provided at least 1,820 hours of employment a 14-17 year to a qualified employee; and 14-18 (2) is intended to exist during the period that the 14-19 qualified business is designated as a defense readjustment project 14-20 under Section 2310.306. 14-21 Sec. 2310.302. QUALIFIED BUSINESS. (a) A person is a 14-22 qualified business if the department, for the purpose of state 14-23 benefits under this chapter, or the governing body of a 14-24 readjustment zone, for the purpose of local benefits, certifies 14-25 that: 14-26 (1) the person is engaged in or has provided 14-27 substantial commitment to initiate the active conduct of a trade or 15-1 business in the readjustment zone; and 15-2 (2) at least 25 percent of the person's new employees 15-3 in the readjustment zone are: 15-4 (A) residents of the governing jurisdiction; 15-5 (B) economically disadvantaged individuals, as 15-6 defined by Section 2303.402(c); or 15-7 (C) dislocated defense workers. 15-8 (b) The governing body of a readjustment zone may certify a 15-9 franchise or subsidiary of a new or existing business as a 15-10 qualified business if the franchise or subsidiary: 15-11 (1) is located entirely in the readjustment zone; and 15-12 (2) maintains separate books and records of the 15-13 business activity conducted in the zone. 15-14 Sec. 2310.303. PROHIBITION ON QUALIFIED BUSINESS 15-15 CERTIFICATION. If the department determines that the governing 15-16 body of a readjustment zone is not complying with this chapter, the 15-17 department shall prohibit the certification of a qualified business 15-18 in the zone until the department determines that the governing body 15-19 is complying with this chapter. The department may not designate 15-20 more than two businesses in a single readjustment zone as defense 15-21 readjustment projects. 15-22 Sec. 2310.304. REQUEST FOR APPLICATION FOR DEFENSE 15-23 READJUSTMENT PROJECT DESIGNATION. A qualified business in a 15-24 readjustment zone may request that the governing body of the 15-25 readjustment zone apply to the department for designation of the 15-26 business as a defense readjustment project. The request must also 15-27 be made to the readjustment zone's administrative authority, if one 16-1 exists. 16-2 Sec. 2310.305. APPLICATION FOR DEFENSE READJUSTMENT PROJECT 16-3 DESIGNATION. (a) If the governing body of a readjustment zone or 16-4 the governing body and administrative authority of a readjustment 16-5 zone, as appropriate, approve a request made under Section 16-6 2310.304, the governing body may apply to the department for the 16-7 designation of the qualified business as a defense readjustment 16-8 project. 16-9 (b) An application must: 16-10 (1) describe the procedures and efforts of the 16-11 governmental entity or entities that applied to have the area 16-12 designated as a readjustment zone to facilitate and encourage 16-13 participation by and negotiation among affected entities in the 16-14 zone in which the qualified business is located; 16-15 (2) contain an economic analysis of the plans of the 16-16 qualified business for expansion, revitalization, or other activity 16-17 in the readjustment zone, including: 16-18 (A) the number of anticipated new permanent jobs 16-19 the business will create; 16-20 (B) the anticipated number of permanent jobs the 16-21 business will retain; 16-22 (C) the amount of investment to be made in the 16-23 zone; and 16-24 (D) other information the department requires; 16-25 and 16-26 (3) describe the local effort made by the governmental 16-27 entity or entities that applied to have the area designated as a 17-1 readjustment zone, the administrative authority, if one exists, the 17-2 qualified business, and other affected entities to develop and 17-3 revitalize the zone. 17-4 (c) For the purposes of this section, local effort to 17-5 develop and revitalize a readjustment zone is: 17-6 (1) the willingness of public entities in the zone to 17-7 provide services, incentives, and regulatory relief authorized by 17-8 this chapter and to negotiate with the qualified business for which 17-9 application is made and with other local groups or businesses to 17-10 achieve the public purposes of this chapter; and 17-11 (2) the effort of the qualified business and other 17-12 affected entities to cooperate in achieving those public purposes. 17-13 (d) Factors to be considered in evaluating the local effort 17-14 of a public entity include: 17-15 (1) tax abatement, deferral, refunds, or other tax 17-16 incentives; 17-17 (2) regulatory relief, including: 17-18 (A) zoning changes or variances; 17-19 (B) exemptions from unnecessary building code 17-20 requirements, impact fees, or inspection fees; and 17-21 (C) streamlined permitting; 17-22 (3) enhanced municipal services, including: 17-23 (A) improved police and fire protection; 17-24 (B) institution of community crime prevention 17-25 programs; and 17-26 (C) special public transportation routes or 17-27 reduced fares; 18-1 (4) improvements in community facilities, including: 18-2 (A) capital improvements in water and sewer 18-3 facilities; 18-4 (B) road repair; and 18-5 (C) creation or improvement of parks; 18-6 (5) improvements to housing, including: 18-7 (A) low-interest loans for housing 18-8 rehabilitation, improvement, or new construction; and 18-9 (B) transfer of abandoned housing to individuals 18-10 or community groups; 18-11 (6) business and industrial development services, 18-12 including: 18-13 (A) low-interest loans for business; 18-14 (B) use of surplus school buildings or other 18-15 underutilized publicly owned facilities as small business 18-16 incubators; 18-17 (C) provision of publicly owned land for 18-18 development purposes, including residential, commercial, or 18-19 industrial development; 18-20 (D) creation of special one-stop permitting and 18-21 problem resolution centers or ombudsmen; and 18-22 (E) promotion and marketing services; and 18-23 (7) job training and employment services, including: 18-24 (A) retraining programs; 18-25 (B) literacy and employment skills programs; 18-26 (C) vocational education; and 18-27 (D) customized job training. 19-1 (e) Factors to be considered in evaluating the local effort 19-2 of a private entity include: 19-3 (1) the willingness to negotiate or cooperate in the 19-4 redevelopment of vacated defense facilities and the creation of 19-5 high-skilled, high wage jobs; 19-6 (2) commitments to hire dislocated defense workers and 19-7 economically disadvantaged workers; 19-8 (3) commitments to hire minority workers and to 19-9 contract with minority-owned businesses; 19-10 (4) provision of technical and vocational job training 19-11 for residents of the nominating body's jurisdiction or economically 19-12 disadvantaged employees; 19-13 (5) provision of child care for employees; 19-14 (6) commitments to implement and contribute to a 19-15 tutoring or mentoring program for area students; 19-16 (7) prevention or reduction of juvenile crime; and 19-17 (8) the willingness to make contributions to the 19-18 well-being of the community, such as job training, or the donation 19-19 of land for parks or other public purposes. 19-20 Sec. 2310.306. DEFENSE READJUSTMENT PROJECT DESIGNATION. 19-21 (a) The department may designate a qualified business as a defense 19-22 readjustment project only if the department determines that: 19-23 (1) the business is a qualified business under Section 19-24 2310.302 that is located in or has made a substantial commitment to 19-25 locate in a defense readjustment zone; 19-26 (2) the governing body of the readjustment zone making 19-27 the application has demonstrated that a high level of cooperation 20-1 exists among public, private, and neighborhood entities in the 20-2 zone; and 20-3 (3) the designation will contribute significantly to 20-4 the achievement of the plans of the governing body making the 20-5 application for development and revitalization of the zone. 20-6 (b) The department shall designate qualified businesses as 20-7 defense readjustment projects on a competitive basis. The 20-8 department shall make its designation decisions using a weighted 20-9 scale in which: 20-10 (1) 50 percent of the evaluation is based on the 20-11 effect of the loss of defense expenditures and employment on the 20-12 community; 20-13 (2) 25 percent of the evaluation depends on the local 20-14 effort to achieve development and revitalization of the 20-15 readjustment zone; and 20-16 (3) 25 percent of the evaluation depends on the 20-17 evaluation criteria as determined by the department, which must 20-18 include: 20-19 (A) the level of cooperation and support the 20-20 project applicant commits to the revitalization goals of the zone; 20-21 and 20-22 (B) the type and wage level of the jobs to be 20-23 created or retained by the business. 20-24 (c) The department may remove a defense readjustment project 20-25 designation if it determines that the business is not complying 20-26 with a requirement for its designation. 20-27 Sec. 2310.307. ALLOCATION OF JOBS ELIGIBLE FOR TAX REFUND. 21-1 When the department designates a business as a defense readjustment 21-2 project, the department shall allocate to the project the maximum 21-3 number of new permanent jobs or retained jobs eligible to be 21-4 included in a computation of a tax refund for the project. The 21-5 number may not exceed 500 or a number equal to 110 percent of the 21-6 number of anticipated new permanent jobs or retained jobs specified 21-7 in the application for designation of the business as a defense 21-8 readjustment project under Section 2310.305, whichever is less. 21-9 Sec. 2310.308. DURATION OF CERTAIN DESIGNATIONS. The 21-10 department's designation of a qualified business as a defense 21-11 readjustment project is effective until the fifth anniversary of 21-12 the date on which the designation is made regardless of whether the 21-13 readjustment zone in which the project is located expires before 21-14 the fifth anniversary of the project. 21-15 (Sections 2310.309-2310.400 reserved for expansion 21-16 SUBCHAPTER F. READJUSTMENT ZONE BENEFITS 21-17 Sec. 2310.401. EXEMPTIONS FROM STATE REGULATION; SUSPENSION 21-18 OF LOCAL REGULATION. (a) A state agency may exempt from its 21-19 regulation a qualified business, qualified employee, or qualified 21-20 property in a readjustment zone if the exemption is consistent 21-21 with: 21-22 (1) the purposes of this chapter; and 21-23 (2) the protection and promotion of the general health 21-24 and welfare. 21-25 (b) A local government may suspend local regulation, 21-26 including an ordinance, rule, or standard, relating to zoning, 21-27 licensing, or building codes in a readjustment zone. 22-1 (c) An exemption from or suspension of regulation under this 22-2 section must be adopted in the same manner that the regulation was 22-3 adopted. 22-4 (d) The authorization provided by Subsection (a) or (b) does 22-5 not apply to regulation: 22-6 (1) that relates to: 22-7 (A) civil rights; 22-8 (B) equal employment; 22-9 (C) equal opportunity; 22-10 (D) fair housing rights; or 22-11 (E) preservation of historical sites or 22-12 historical artifacts; 22-13 (2) the relaxation of which is likely to harm the 22-14 public safety or public health, including environmental health; or 22-15 (3) that is specifically imposed by law. 22-16 (e) For the purposes of this section, property is classified 22-17 as qualified property if the property is: 22-18 (1) tangible personal property located in the 22-19 readjustment zone that was acquired from the federal government by 22-20 lease or deed or: 22-21 (A) acquired by a taxpayer not earlier than the 22-22 90th day before the date on which the area was designated as a 22-23 readjustment zone; and 22-24 (B) used predominantly by the taxpayer in the 22-25 active conduct of a trade or business; 22-26 (2) real property located in the readjustment zone 22-27 that was acquired from the federal government by lease or deed or: 23-1 (A) acquired by a taxpayer not earlier than the 23-2 90th day before the date on which the area was designated as a 23-3 readjustment zone and was used predominantly by the taxpayer in the 23-4 active conduct of a trade or business; or 23-5 (B) the principal residence of the taxpayer on 23-6 the date of the sale or exchange; or 23-7 (3) an interest in an entity that was certified as a 23-8 qualified business under Section 2310.302 for the entity's most 23-9 recent tax year ending before the date of the sale or exchange. 23-10 Sec. 2310.402. REVIEW OF STATE AGENCY RULES; REPORT. (a) A 23-11 state agency by rule may provide, when applicable, encouragements 23-12 and incentives to increase: 23-13 (1) the renovation, improvement, or new construction 23-14 of housing in readjustment zones; and 23-15 (2) the economic viability and profitability of 23-16 business and commerce in readjustment zones. 23-17 (b) The department shall disseminate the reports to the 23-18 governing bodies of readjustment zones and others as necessary to 23-19 advance the purposes of this chapter. 23-20 (c) To contribute to the implementation of this chapter, an 23-21 agency may waive, modify, provide exemptions to, or otherwise 23-22 minimize the adverse effects of the rules it administers on the 23-23 renovation, improvement, or new construction of housing in 23-24 readjustment zones or on the economic viability and profitability 23-25 of business and commerce in readjustment zones. 23-26 Sec. 2310.403. STATE PREFERENCES. (a) A state agency shall 23-27 give preference to the governing body of a readjustment zone or a 24-1 qualified business or qualified employee located in a readjustment 24-2 zone over other eligible applicants for grants, loans, or credit 24-3 enhancements that are administered by the state agency if: 24-4 (1) at least 50 percent of the grant, loan, or credit 24-5 enhancement will be spent for the direct benefit of the 24-6 readjustment zone; and 24-7 (2) the purpose of the grant, loan, or credit 24-8 enhancement is to: 24-9 (A) promote economic development in the 24-10 community; or 24-11 (B) construct, improve, extend, repair, or 24-12 maintain public facilities in the community. 24-13 (b) The comptroller may and is encouraged to deposit state 24-14 money in financial institutions located or doing business in 24-15 readjustment zones. 24-16 (c) A state agency may and is encouraged to contract with 24-17 businesses located in readjustment zones. 24-18 (d) The department or another state agency may give 24-19 preference to readjustment zones in granting economic development 24-20 money or other benefits. 24-21 Sec. 2310.404. STATE TAX REFUNDS AND DEDUCTION; REPORT. 24-22 (a) A defense readjustment project is eligible for: 24-23 (1) a refund of state taxes under Section 151.4291, 24-24 Tax Code; 24-25 (2) a deduction from taxable capital under Section 24-26 171.1016, Tax Code; and 24-27 (3) the exclusion of receipts from service performed 25-1 in a readjustment zone in the determination of gross receipts from 25-2 business done in this state under Sections 171.103 and 171.1032, 25-3 Tax Code. 25-4 (b) Not later than the 60th day after the last day of each 25-5 fiscal year, the comptroller shall report to the department the 25-6 statewide total of the tax refunds made under this section during 25-7 that fiscal year. 25-8 Sec. 2310.405. LOCAL SALES AND USE TAX REFUNDS. (a) To 25-9 encourage the development of areas designated as readjustment 25-10 zones, the governing body of a municipality through a program may 25-11 refund its local sales and use taxes paid by a qualified business 25-12 on: 25-13 (1) the purchase, lease, or rental of equipment or 25-14 machinery for use in a readjustment zone; 25-15 (2) the purchase of material for use in remodeling, 25-16 rehabilitating, or constructing a structure in a readjustment zone; 25-17 (3) labor for remodeling, rehabilitating, or 25-18 constructing a structure in a readjustment zone; and 25-19 (4) electricity and natural gas purchased and consumed 25-20 in the normal course of business in the readjustment zone. 25-21 (b) To promote the public health, safety, or welfare, the 25-22 governing body of a municipality or county through a program may 25-23 refund its local sales and use taxes paid by a qualified business 25-24 or qualified employee. 25-25 (c) The governing body of a municipality or county that is 25-26 the governing body of a readjustment zone may provide for the 25-27 partial or total refund of its local sales and use taxes paid by a 26-1 person making a taxable purchase, lease, or rental for development 26-2 or revitalization in the zone. 26-3 (d) A person eligible for a refund of local sales and use 26-4 taxes under this section shall pay the entire amount of state and 26-5 local sales and use taxes at the time the taxes would be due if an 26-6 agreement for the refund did not exist. 26-7 (e) An agreement to refund local sales and use taxes under 26-8 this section must: 26-9 (1) be written; 26-10 (2) contain an expiration date; and 26-11 (3) require that the person eligible for the refund 26-12 provide to the municipality or county making the refund the 26-13 documentation necessary to support a refund claim. 26-14 (f) The municipality or county shall make the refund 26-15 directly to the person eligible for the refund in the manner 26-16 provided by the agreement. 26-17 Sec. 2310.406. REDUCTION OR ELIMINATION OF LOCAL FEES OR 26-18 TAXES. (a) To promote the public health, safety, or welfare, the 26-19 governing body of a municipality or county through a program may 26-20 reduce or eliminate fees or taxes that it imposes on a qualified 26-21 business or qualified employee. 26-22 (b) This section does not apply to sales and use taxes or 26-23 property taxes. 26-24 Sec. 2310.407. TAX INCREMENT FINANCING AND ABATEMENT. 26-25 Designation of an area as a readjustment zone is also designation 26-26 of the area as a reinvestment zone for: 26-27 (1) tax increment financing under Chapter 311, Tax 27-1 Code; and 27-2 (2) tax abatement under Chapter 312, Tax Code. 27-3 Sec. 2310.408. DEVELOPMENT BONDS. To finance a project in a 27-4 readjustment zone, bonds may be issued under: 27-5 (1) the Act for Development of Employment, Industrial 27-6 and Health Resources of 1971 (Article 5190.1, Vernon's Texas Civil 27-7 Statutes); or 27-8 (2) the Development Corporation Act of 1979 (Article 27-9 5190.6, Vernon's Texas Civil Statutes). 27-10 Sec. 2310.409. OTHER LOCAL INCENTIVES. (a) The governing 27-11 body of a municipality or county that is the governing body of a 27-12 readjustment zone may: 27-13 (1) defer compliance in the zone with the subdivision 27-14 and development ordinances or rules, other than those relating to 27-15 streets and roads or sewer or water services, of the municipality 27-16 or county, as appropriate; 27-17 (2) give priority to the zone for the receipt of: 27-18 (A) community development block grant money; 27-19 (B) industrial revenue bonds; or 27-20 (C) funds received for job training; 27-21 (3) adopt and implement a plan for police protection 27-22 in the zone; 27-23 (4) amend the zoning ordinances of the municipality or 27-24 county, as appropriate, to promote economic development in the 27-25 zone; 27-26 (5) establish permitting preferences for businesses in 27-27 the zone; 28-1 (6) establish simplified, accelerated, or other 28-2 special permit procedures for businesses in the zone; 28-3 (7) waive development fees for projects in the zone; 28-4 (8) create a local readjustment zone fund for funding 28-5 bonds or other programs or activities to develop or revitalize the 28-6 zone; 28-7 (9) for qualified businesses in the zone, reduce rates 28-8 charged by: 28-9 (A) a utility owned by the municipality or 28-10 county, as appropriate; or 28-11 (B) a cooperative corporation or utility owned 28-12 by private investors, subject to the requirements of Subsection 28-13 (b); 28-14 (10) in issuing housing finance bonds, give priority 28-15 to persons or projects in the zone; 28-16 (11) in providing services, give priority to local 28-17 economic development, educational, job training, or transportation 28-18 programs that benefit the zone; or 28-19 (12) sell real property owned by the municipality or 28-20 county, as appropriate, and located in the readjustment zone in 28-21 accordance with Section 2310.410. 28-22 (b) A reduction in utility rates under Subsection (a)(9)(B) 28-23 is subject to the agreement of the affected utility and the 28-24 approval of the appropriate regulatory authority under the Public 28-25 Utility Regulatory Act of 1995 (Article 1446c-0, Vernon's Texas 28-26 Civil Statutes). The rates may be reduced up to but not more than 28-27 five percent below the lowest rate allowable for that customer 29-1 class. In making its determination under this section, the 29-2 regulatory authority shall consider revitalization goals for the 29-3 readjustment zone. In setting the rates of the utility the 29-4 appropriate regulatory authority shall allow the utility to recover 29-5 the amount of the reduction. 29-6 Sec. 2310.410. DISPOSITION OF PUBLIC PROPERTY IN 29-7 READJUSTMENT ZONE. (a) After an area is designated as a 29-8 readjustment zone, the state, a municipality, or a county that owns 29-9 a surplus building or vacant land in the zone may dispose of the 29-10 building or land by: 29-11 (1) selling the building or land at a public auction; 29-12 or 29-13 (2) establishing an urban homestead program described 29-14 by Subsection (c). 29-15 (b) A municipality or county may sell a surplus building or 29-16 vacant land in the readjustment zone at less than fair market value 29-17 if the governing body of the municipality or county by ordinance or 29-18 order, as appropriate, adopts criteria that specify the conditions 29-19 and circumstances under which the sale may occur and the public 29-20 purpose to be achieved by the sale. The building or land may be 29-21 sold to a buyer who is not the highest bidder if the criteria and 29-22 public purpose specified in the ordinance or order are satisfied. 29-23 A copy of the ordinance or order must be filed with the department 29-24 not later than the day on which the sale occurs. 29-25 (c) An urban homestead program must provide that: 29-26 (1) the state, municipality, or county is to sell to 29-27 an individual a residence or part of a residence that it owns for 30-1 an amount not to exceed $100; 30-2 (2) as a condition of the sale, the individual must 30-3 agree by covenant in the deed conveying the residence to live in 30-4 the residence for at least seven years and to renovate or remodel 30-5 the residence to meet the level of maintenance stated in an 30-6 agreement between the individual and the governmental entity; and 30-7 (3) after the individual satisfies the seven-year 30-8 residency and property improvement requirements of the agreement, 30-9 the governmental entity shall assign the residence to the 30-10 individual. 30-11 Sec. 2310.411. WAIVER OF PERFORMANCE BOND. A subcontractor 30-12 is not required to execute a performance bond under Chapter 2253 30-13 if: 30-14 (1) the construction, alteration, repair, or other 30-15 public work to be performed under the contract is entirely in a 30-16 readjustment zone; and 30-17 (2) the amount of the contract does not exceed 30-18 $200,000. 30-19 Sec. 2310.412. LIABILITY OF CONTRACTOR OR ARCHITECT. A 30-20 contractor or architect who constructs or rehabilitates a building 30-21 in a readjustment zone is liable for any structural defect in the 30-22 building only for the period ending on the 10th anniversary of the 30-23 date on which beneficial occupancy of the building begins after the 30-24 construction or rehabilitation, notwithstanding a statute of 30-25 limitations to the contrary. 30-26 SECTION 2. Subchapter I, Chapter 151, Tax Code, is amended 30-27 by adding Section 151.4291 to read as follows: 31-1 Sec. 151.4291. TAX REFUNDS FOR DEFENSE READJUSTMENT 31-2 PROJECTS. (a) A defense readjustment project is eligible for a 31-3 refund in the amount provided by this section of the taxes imposed 31-4 by this chapter on purchases of: 31-5 (1) equipment or machinery sold to a defense 31-6 readjustment project for use in a readjustment zone; 31-7 (2) building materials sold to a defense readjustment 31-8 project for use in remodeling, rehabilitating, or constructing a 31-9 structure in a readjustment zone; 31-10 (3) labor for remodeling, rehabilitating, or 31-11 constructing a structure by a defense readjustment project in a 31-12 readjustment zone; and 31-13 (4) electricity and natural gas purchased and consumed 31-14 in the normal course of business in the readjustment zone. 31-15 (b) Subject to the limitations provided by Subsection (c) of 31-16 this section, a defense readjustment project qualifies for a refund 31-17 of taxes under this section of $2,500 for each new permanent job or 31-18 job that has been retained by the defense readjustment project for 31-19 a qualified employee. 31-20 (c) The total amount of tax refund that a defense 31-21 readjustment project may apply for in a state fiscal year may not 31-22 exceed $250,000. If a defense readjustment project qualifies in a 31-23 state fiscal year for a refund of taxes in an amount in excess of 31-24 the limitation provided by this subsection, it may apply for a 31-25 refund of those taxes in a subsequent year, subject to the $250,000 31-26 limitation for each year. However, a defense readjustment project 31-27 may not apply for a refund under this section after the end of the 32-1 state fiscal year immediately following the state fiscal year in 32-2 which the defense readjustment project's designation as a defense 32-3 readjustment project expires or is removed. The total amount that 32-4 may be refunded to a defense readjustment project under this 32-5 section may not exceed the amount determined by multiplying 32-6 $250,000 by the number of state fiscal years during which the 32-7 defense readjustment project created one or more jobs for qualified 32-8 employees. 32-9 (d) To receive a refund under this section, a defense 32-10 readjustment project must apply to the comptroller for the refund. 32-11 The Texas Department of Commerce shall provide the comptroller with 32-12 the assistance that the comptroller requires in administering this 32-13 section. 32-14 (e) In this section: 32-15 (1) "Defense readjustment project" means a person 32-16 designated by the Texas Department of Commerce as a defense 32-17 readjustment project under Chapter 2310, Government Code. 32-18 (2) "Readjustment zone" and "qualified employee" have 32-19 the meanings assigned to those terms by Section 2310.001, 32-20 Government Code. 32-21 (3) "New permanent job" means a new employment 32-22 position created by a qualified business as described by Section 32-23 2310.302, Government Code, that: 32-24 (A) has provided at least 1,820 hours of 32-25 employment a year to a qualified employee; and 32-26 (B) is intended to exist during the period that 32-27 the qualified business is designated as a defense readjustment 33-1 project under Chapter 2310, Government Code. 33-2 (f) For the purposes of Subsection (a), items bought by a 33-3 project after the date it is designated as a project, or within 90 33-4 days before the date of designation, may be considered eligible for 33-5 a refund. 33-6 (g) The refund provided by this section is conditioned on 33-7 the defense readjustment project maintaining at least the same 33-8 level of employment of qualified employees as existed at the time 33-9 it qualified for a refund for a period of three years from that 33-10 date. The Texas Department of Commerce shall annually certify to 33-11 the comptroller and the Legislative Budget Board whether that level 33-12 of employment of qualified employees has been maintained. On the 33-13 Texas Department of Commerce certifying that such a level has not 33-14 been maintained, the comptroller shall assess that portion of the 33-15 refund attributable to any such decrease in employment, including 33-16 penalty and interest from the date of the refund. 33-17 (h) Notwithstanding Section 171.103 or 171.1032, a receipt 33-18 from a service performed by a defense readjustment project in a 33-19 readjustment zone is not a receipt from business done in this 33-20 state. 33-21 SECTION 3. Subchapter C, Chapter 171, Tax Code, is amended 33-22 by adding Section 171.1016 to read as follows: 33-23 Sec. 171.1016. REDUCTION OF TAXABLE CAPITAL FOR INVESTMENT 33-24 IN A READJUSTMENT ZONE. (a) A corporation that has been 33-25 designated as a defense readjustment project as provided by Chapter 33-26 2310, Government Code, may deduct either: 33-27 (1) from its apportioned taxable capital, 50 percent 34-1 of its capital investment in the readjustment zone in which the 34-2 defense readjustment project is located; or 34-3 (2) from its apportioned taxable earned surplus, five 34-4 percent of its capital investment in the readjustment zone in which 34-5 the defense readjustment project is located. The deduction may be 34-6 taken on each franchise tax report that is based on a corporation's 34-7 fiscal year during all or part of which the corporation is a 34-8 defense readjustment project. 34-9 (b) The deduction authorized by this section is limited to 34-10 the depreciated value of capital equipment or other investment that 34-11 qualifies for depreciation for federal income tax purposes and that 34-12 is placed in service in the zone after designation as a defense 34-13 readjustment project. The depreciated value must be computed by a 34-14 method which is otherwise acceptable for that corporation's 34-15 franchise tax report and must be computed for each report on which 34-16 it is taken by the same method of depreciation. 34-17 (c) To qualify for the deduction authorized by this section, 34-18 an investment must be used in the normal course of business in the 34-19 defense readjustment zone and must not be removed from the defense 34-20 readjustment zone, except for repair or maintenance. Qualifying 34-21 use and presence in the zone must occur during the accounting year 34-22 on which the report is based. 34-23 (d) The deduction authorized by this section may not be used 34-24 to reduce apportioned taxable capital or apportioned taxable earned 34-25 surplus below a zero value, and no carryover of unused deductions 34-26 to a later privileged period is allowed. 34-27 (e) A corporation may elect to make the deduction authorized 35-1 by this section either from apportioned taxable capital or 35-2 apportioned taxable earned surplus for each separate regular annual 35-3 period. An election for an initial period applies to the second 35-4 tax period and to the first regular annual period. 35-5 (f) In this section: 35-6 (1) "Defense readjustment project" means a person 35-7 designated by the Texas Department of Commerce as a defense 35-8 readjustment project under Chapter 2310, Government Code. 35-9 (2) "Readjustment zone" has the meaning assigned to 35-10 that term by Section 2310.001, Government Code. 35-11 (g) Only qualified businesses that have been certified as 35-12 eligible for a tax deduction under this section by the Texas 35-13 Department of Commerce to the comptroller and the Legislative 35-14 Budget Board are entitled to the tax deduction. 35-15 SECTION 4. The legislature intends that the implementation 35-16 of this Act not result in the removal of any property from the ad 35-17 valorem taxation of any taxing entity in which the property is 35-18 located. 35-19 SECTION 5. Before September 1, 2001, the Texas Department of 35-20 Commerce may not designate more than six defense economic 35-21 readjustment zones under Chapter 2310, Government Code, as added by 35-22 this Act. 35-23 SECTION 6. The importance of this legislation and the 35-24 crowded condition of the calendars in both houses create an 35-25 emergency and an imperative public necessity that the 35-26 constitutional rule requiring bills to be read on three several 35-27 days in each house be suspended, and this rule is hereby suspended, 36-1 and that this Act take effect and be in force from and after its 36-2 passage, and it is so enacted.