1-1 By: Madla, et al. S.B. No. 226 1-2 (In the Senate - Filed January 16, 1997; January 22, 1997, 1-3 read first time and referred to Committee on Veteran Affairs and 1-4 Military Installations; April 11, 1997, reported adversely, with 1-5 favorable Committee Substitute by the following vote: Yeas 4, Nays 1-6 0; April 11, 1997, sent to printer.) 1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 226 By: Patterson 1-8 A BILL TO BE ENTITLED 1-9 AN ACT 1-10 relating to defense economic readjustment zones; authorizing the 1-11 issuance of bonds. 1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-13 SECTION 1. Subtitle G, Title 10, Government Code, is amended 1-14 by adding Chapter 2310 to read as follows: 1-15 CHAPTER 2310. DEFENSE ECONOMIC READJUSTMENT ZONE 1-16 SUBCHAPTER A. GENERAL PROVISIONS 1-17 Sec. 2310.001. DEFINITIONS. In this chapter: 1-18 (1) "Defense worker" means: 1-19 (A) an employee of the United States Department 1-20 of Defense, including a member of the armed forces and a government 1-21 civilian worker; 1-22 (B) an employee of a government agency or 1-23 private business, or an entity providing a department of defense 1-24 related function, who is employed on a defense facility; 1-25 (C) an employee of a business that provides 1-26 direct services or products to the department of defense and whose 1-27 job is directly dependent on defense expenditures; or 1-28 (D) an employee or private contractor employed 1-29 by the United States Department of Energy working on a defense or 1-30 department of energy facility in support of a department of defense 1-31 related project. 1-32 (2) "Defense worker job" means a department of defense 1-33 authorized permanent position or a position held or occupied by one 1-34 or more defense workers for more than 12 months. 1-35 (3) "Department" means the Texas Department of 1-36 Commerce. 1-37 (4) "Nominating body" means the governing body of a 1-38 municipality or county, or a combination of the governing bodies of 1-39 municipalities or counties, that nominates and applies for 1-40 designation of an area as a readjustment zone. 1-41 (5) "Qualified business" means a person certified as a 1-42 qualified business under Section 2310.302. 1-43 (6) "Qualified employee" means a person who: 1-44 (A) works for a qualified business; and 1-45 (B) performs at least 50 percent of the person's 1-46 service for the business in the readjustment zone. 1-47 (7) "Readjustment zone" means an area designated as a 1-48 defense economic readjustment zone under this chapter. 1-49 Sec. 2310.002. JURISDICTION OF MUNICIPALITY. For the 1-50 purposes of this chapter, territory in the extraterritorial 1-51 jurisdiction of a municipality is considered to be in the 1-52 jurisdiction of the municipality. 1-53 (Sections 2310.003-2310.050 reserved for expansion 1-54 SUBCHAPTER B. DEPARTMENT POWERS AND DUTIES RELATING TO ZONES 1-55 Sec. 2310.051. GENERAL POWERS AND DUTIES. (a) The 1-56 department shall administer and monitor the implementation of this 1-57 chapter. 1-58 (b) The department shall establish criteria and procedures 1-59 for designating a qualified area as a readjustment zone and for 1-60 designating a defense readjustment project. 1-61 (c) The department shall adopt rules necessary to carry out 1-62 the purposes of this chapter. 1-63 Sec. 2310.052. EVALUATION; REPORT. (a) The department 1-64 shall conduct a continuing evaluation of the programs of 2-1 readjustment zones. 2-2 (b) On or before December 1 of each year, the department 2-3 shall submit to the governor, the legislature, and the Legislative 2-4 Budget Board a report that: 2-5 (1) evaluates the effectiveness of the readjustment 2-6 zone program; 2-7 (2) describes the use of state and local incentives 2-8 under this chapter and their effect on revenue; and 2-9 (3) suggests legislation, as appropriate. 2-10 Sec. 2310.053. ASSISTANCE. (a) The department shall 2-11 assist: 2-12 (1) a qualified business in obtaining the benefits of 2-13 any state incentive or inducement program provided by law; 2-14 (2) the governing body of a readjustment zone in 2-15 obtaining assistance from another state agency, including job 2-16 training and technical assistance to qualified businesses in a 2-17 zone; and 2-18 (3) the governing body of a readjustment zone in 2-19 encouraging small business development. 2-20 (b) The department shall provide to persons desiring to 2-21 locate and engage in business in a readjustment zone information 2-22 and appropriate assistance relating to the required legal 2-23 authorization, including a state license, permit, certificate, 2-24 approval, registration, or charter, to engage in business in this 2-25 state. 2-26 (c) The department shall publicize existing tax incentives 2-27 and economic development programs in readjustment zones. 2-28 (d) On request the department shall offer to a unit of local 2-29 government having a readjustment zone within its jurisdiction 2-30 technical assistance relating to tax abatement and the development 2-31 of alternative revenue sources. 2-32 Sec. 2310.054. COORDINATION WITH OTHER GOVERNMENTAL 2-33 ENTITIES. (a) In cooperation with the appropriate units of local 2-34 government and other state agencies, the department shall 2-35 coordinate and streamline state business assistance programs and 2-36 permit or license application procedures for businesses in 2-37 readjustment zones. 2-38 (b) The department shall work with the responsible state and 2-39 federal agencies to coordinate readjustment zone programs with 2-40 other programs carried out in a readjustment zone, including 2-41 housing, community and economic development, small business, 2-42 banking, financial assistance, transportation, and employment 2-43 training programs. 2-44 (c) The department shall encourage other state agencies in 2-45 awarding grants, loans, or services to give priority to businesses 2-46 in readjustment zones. 2-47 (Sections 2310.055-2310.100 reserved for expansion 2-48 SUBCHAPTER C. DESIGNATION OF READJUSTMENT ZONE 2-49 Sec. 2310.101. CRITERIA FOR READJUSTMENT ZONE DESIGNATION. 2-50 (a) To be designated as a readjustment zone an area must: 2-51 (1) have a continuous boundary; 2-52 (2) be at least one square mile but not larger than 20 2-53 square miles, excluding lakes, waterways, and transportation 2-54 arteries, of the municipality, county, or combination of 2-55 municipalities or counties nominating the area as a readjustment 2-56 zone; 2-57 (3) be located in an adversely affected 2-58 defense-dependent community; 2-59 (4) have at least 50 percent of its area located in an 2-60 existing or former United States Department of Defense facility; 2-61 and 2-62 (5) be nominated as a readjustment zone by an 2-63 ordinance or order adopted by the nominating body. 2-64 (b) An area is not prohibited from being included in a 2-65 readjustment zone because the area is also included in an 2-66 enterprise zone designated under Chapter 2303. 2-67 Sec. 2310.102. ADVERSELY AFFECTED DEFENSE-DEPENDENT 2-68 COMMUNITY. A municipality or county is an adversely affected 2-69 defense-dependent community if the department determines that: 3-1 (1) the municipality or county requires assistance 3-2 because of: 3-3 (A) the proposed or actual establishment, 3-4 realignment, or closure of a defense facility; 3-5 (B) the cancellation or termination of a United 3-6 States Department of Defense contract or the failure of the 3-7 department of defense to proceed with an approved major weapon 3-8 system program; 3-9 (C) a publicly announced planned major reduction 3-10 in department of defense spending that would directly and adversely 3-11 affect the municipality or county; or 3-12 (D) the closure or a significant reduction of 3-13 the operations of a defense facility as the result of a merger, 3-14 acquisition, or consolidation of a defense contractor operating the 3-15 facility; and 3-16 (2) the municipality or county is expected to 3-17 experience, during the period between the beginning of the federal 3-18 fiscal year during which an event described by Subdivision (1) is 3-19 finally approved and the date that the event is to be substantially 3-20 completed, a direct loss of: 3-21 (A) 2,500 or more defense worker jobs in any 3-22 area of the municipality or county that is located in an urbanized 3-23 area of a metropolitan statistical area; 3-24 (B) 1,000 or more defense worker jobs in any 3-25 area of the municipality or county that is not located in an 3-26 urbanized area of a metropolitan statistical area; or 3-27 (C) one percent of the civilian jobs in the 3-28 municipality or county. 3-29 Sec. 2310.103. NOMINATION OF READJUSTMENT ZONE. (a) The 3-30 governing body of a municipality or county that is an adversely 3-31 affected defense-dependent community, individually or in 3-32 combination with other municipalities or counties that are 3-33 adversely affected defense-dependent communities, by ordinance or 3-34 order, as appropriate, may nominate as a readjustment zone an area 3-35 within its jurisdiction that meets the criteria under Section 3-36 2310.101. 3-37 (b) Unless the nominating body holds a public hearing before 3-38 adopting an ordinance or order under this section, the ordinance or 3-39 order is not valid. 3-40 (c) The governing body of a county may not nominate 3-41 territory in a municipality, including extraterritorial 3-42 jurisdiction of a municipality, to be included in a proposed 3-43 readjustment zone unless the governing body of the municipality 3-44 also nominates the territory and together with the county files a 3-45 joint application under Section 2310.105. 3-46 (d) The governing bodies of a combination of municipalities 3-47 or counties may not jointly nominate an area as a readjustment zone 3-48 unless the governing bodies have entered into a binding agreement 3-49 to administer the zone jointly. 3-50 Sec. 2310.104. NOMINATING ORDINANCE OR ORDER. (a) An 3-51 ordinance or order nominating an area as a readjustment zone must: 3-52 (1) describe precisely the area to be included in the 3-53 zone by a legal description or reference to roadways, lakes, 3-54 waterways, or municipal or county boundaries; 3-55 (2) state a finding that the area meets the 3-56 requirements of this chapter; 3-57 (3) summarize briefly the incentives, including tax 3-58 incentives, that, at the election of the nominating body, apply to 3-59 business enterprises in the area; and 3-60 (4) nominate the area as a readjustment zone. 3-61 (b) At least one of the incentives summarized under 3-62 Subsection (a)(3) must not be offered elsewhere within the 3-63 jurisdiction except within an enterprise zone designated under 3-64 Chapter 2303. 3-65 (c) This section does not prohibit a municipality or county 3-66 from extending additional incentives, including tax incentives, for 3-67 business enterprises in a readjustment zone by a separate ordinance 3-68 or order. 3-69 Sec. 2310.105. APPLICATION FOR DESIGNATION. (a) For an 4-1 area to be designated as a readjustment zone, the nominating body, 4-2 after nominating the area as a readjustment zone, must send to the 4-3 department a written application for designation of the area as a 4-4 readjustment zone. 4-5 (b) The application must include: 4-6 (1) a certified copy of the ordinance or order, as 4-7 appropriate, nominating the area as a readjustment zone; 4-8 (2) a map of the area showing existing streets and 4-9 highways; 4-10 (3) an analysis and appropriate supporting documents 4-11 and statistics demonstrating that the area qualifies for 4-12 designation as a readjustment zone; 4-13 (4) a statement that specifies each tax incentive, 4-14 grant, other financial incentive or benefit, or program to be 4-15 provided by the nominating body to business enterprises in the area 4-16 that is not to be provided throughout the governmental entity or 4-17 entities nominating the area as a readjustment zone; 4-18 (5) a statement of the economic development and 4-19 planning objectives for the area; 4-20 (6) an estimate of the economic impact of the 4-21 designation of the area as a readjustment zone on the revenues of 4-22 the governmental entity or entities nominating the area as a 4-23 readjustment zone, considering all the financial incentives and 4-24 benefits and the programs contemplated; 4-25 (7) a transcript or tape recording of all public 4-26 hearings on the proposed zone; 4-27 (8) if the application is a joint application, a 4-28 description and copy of the agreement between the applicants; 4-29 (9) the procedures for negotiating with residents, 4-30 community groups, and other entities affected by the designation of 4-31 the area as a readjustment zone and with qualified businesses in 4-32 the area; 4-33 (10) a description of the administrative authority, if 4-34 one is to be appointed for the readjustment zone under Section 4-35 2310.202; and 4-36 (11) any additional information the department 4-37 requires. 4-38 (c) Information required by Subsection (b) is for evaluation 4-39 purposes only. 4-40 Sec. 2310.106. REVIEW OF APPLICATION. (a) On receipt of an 4-41 application for the designation of a readjustment zone, the 4-42 department shall review the application to determine if the 4-43 nominated area qualifies for designation as a readjustment zone 4-44 under this chapter. 4-45 (b) The department shall allow an applicant to correct any 4-46 omission or clerical error in the application and to return the 4-47 application to the department on or before the 15th day after the 4-48 date on which the department receives the application. 4-49 Sec. 2310.107. DESIGNATION AGREEMENT. (a) If the 4-50 department determines that a nominated area for which a designation 4-51 application has been received satisfies the criteria under Section 4-52 2310.101, the department shall negotiate with the nominating body 4-53 for a designation agreement. 4-54 (b) A designation agreement must: 4-55 (1) designate the nominated area as a readjustment 4-56 zone; and 4-57 (2) designate the administrative authority, if one is 4-58 to be appointed for the zone under Section 2310.202, and describe 4-59 its functions and duties, which should include decision-making 4-60 authority and the authority to negotiate with affected entities. 4-61 (c) The department shall complete the negotiations and sign 4-62 the agreement not later than the 60th day after the date on which 4-63 the application is received unless the department extends that 4-64 period to the 90th day after the date on which the application was 4-65 received. 4-66 (d) If an agreement is not completed within the 60-day 4-67 period provided by Subsection (c), the department shall provide to 4-68 the nominating body the specific areas of concern and a final 4-69 proposal for the agreement. 5-1 (e) If the agreement is not executed before the 91st day 5-2 after the date on which the application was received, the 5-3 application is considered to be denied. 5-4 Sec. 2310.108. DENIAL OF APPLICATION; NOTICE. (a) The 5-5 department may deny an application for the designation of a 5-6 readjustment zone only if the department determines that the 5-7 nominated area does not satisfy the criteria under Section 5-8 2310.101. 5-9 (b) The department shall inform the nominating body of the 5-10 specific reasons for denial of an application, including denial 5-11 under Section 2310.107(e). 5-12 Sec. 2310.109. PERIOD OF DESIGNATION. An area may be 5-13 designated as a readjustment zone for a maximum of seven years. A 5-14 designation remains in effect until September 1 of the final year 5-15 of the designation. 5-16 Sec. 2310.110. AMENDING BOUNDARIES. (a) The nominating 5-17 body may amend the boundary of a readjustment zone by ordinance or 5-18 order, as appropriate, adopted after a public hearing on the issue. 5-19 (b) The amended boundary: 5-20 (1) must be continuous; 5-21 (2) may not exceed the original size requirement of 5-22 Section 2310.101; and 5-23 (3) may not exclude any area originally included 5-24 within the boundary of the zone as designated. 5-25 (c) The readjustment zone with the amended boundary must 5-26 continue to meet the location requirements of Section 5-27 2310.101(a)(4). 5-28 (d) A nominating body may not make more than one boundary 5-29 amendment annually for a readjustment zone. 5-30 (e) For each amendment of a readjustment zone boundary, the 5-31 nominating body shall pay the department a reasonable fee, in an 5-32 amount specified by the department, not to exceed $500. The 5-33 department may use fees collected under this subsection to 5-34 administer this chapter and for other purposes to advance this 5-35 chapter. 5-36 Sec. 2310.111. REMOVAL OF DESIGNATION. (a) The department 5-37 may remove the designation of an area as a readjustment zone if: 5-38 (1) the area no longer meets the criteria for 5-39 designation under this chapter or by department rule adopted under 5-40 this chapter; or 5-41 (2) the department determines that the governing body 5-42 of the readjustment zone has not complied with commitments made in 5-43 the ordinance or order nominating the area as a readjustment zone. 5-44 (b) The removal of a designation does not affect the 5-45 validity of a tax incentive or regulatory relief granted or accrued 5-46 before the removal. 5-47 (Sections 2310.112-2310.200 reserved for expansion 5-48 SUBCHAPTER D. ADMINISTRATION OF READJUSTMENT ZONES 5-49 Sec. 2310.201. ADMINISTRATION BY GOVERNING BODY. The 5-50 governing body of a readjustment zone is the governing body of the 5-51 municipality or county, or the governing bodies of the combination 5-52 of municipalities or counties, that applied to have the area 5-53 designated as a readjustment zone. 5-54 Sec. 2310.202. ADMINISTRATION BY ADMINISTRATIVE AUTHORITY. 5-55 (a) The governing body of a readjustment zone may delegate its 5-56 administrative duties to an administrative authority appointed by 5-57 the governing body. 5-58 (b) An administrative authority must: 5-59 (1) be composed of 3, 5, 7, 9, 11, or 15 members; 5-60 (2) be a viable and responsive body generally 5-61 representative of all public or private entities that have a stake 5-62 in the development of the zone; and 5-63 (3) if the readjustment zone includes private 5-64 residences, include: 5-65 (A) an elected official representing 5-66 readjustment zone residents and businesses; or 5-67 (B) at least two readjustment zone residents. 5-68 Sec. 2310.203. LIAISON. The governing body of a 5-69 readjustment zone shall designate a liaison to communicate and 6-1 negotiate with: 6-2 (1) the department; 6-3 (2) the administrative authority, if one exists; 6-4 (3) a defense readjustment project; and 6-5 (4) other entities in or affected by the readjustment 6-6 zone. 6-7 Sec. 2310.204. ANNUAL REPORT. (a) Not later than October 1 6-8 of each year, the governing body of a readjustment zone shall 6-9 submit to the department a report in the form required by the 6-10 department. 6-11 (b) The report must be approved by the readjustment zone's 6-12 administrative authority, if one exists. 6-13 (c) The report must include for the year preceding the date 6-14 of the report: 6-15 (1) a list of local incentives for community 6-16 development available in the zone; 6-17 (2) the use of local incentives for which the 6-18 governing body provided in the ordinance or order nominating the 6-19 readjustment zone and the effect of those incentives on revenue; 6-20 (3) the number of businesses assisted, located, and 6-21 retained in the zone since its designation due to the existence of 6-22 the readjustment zone; 6-23 (4) a summary of all industrial revenue bonds issued 6-24 to finance projects located in the zone; and 6-25 (5) a description of all efforts made to attain 6-26 revitalization goals for the zone. 6-27 (Sections 2310.205-2310.300 reserved for expansion 6-28 SUBCHAPTER E. QUALIFIED BUSINESSES AND DEFENSE 6-29 READJUSTMENT PROJECTS 6-30 Sec. 2310.301. DEFINITION. In this subchapter, "new 6-31 permanent job" means a new employment position created by a 6-32 qualified business as described by Section 2310.302 that: 6-33 (1) has provided at least 1,820 hours of employment a 6-34 year to a qualified employee; and 6-35 (2) is intended to exist during the period that the 6-36 qualified business is designated as a defense readjustment project 6-37 under Section 2310.306. 6-38 Sec. 2310.302. QUALIFIED BUSINESS. (a) A person is a 6-39 qualified business if the department, for the purpose of state 6-40 benefits under this chapter, or the governing body of a 6-41 readjustment zone, for the purpose of local benefits, certifies 6-42 that: 6-43 (1) the person is engaged in or has provided 6-44 substantial commitment to initiate the active conduct of a trade or 6-45 business in the readjustment zone; and 6-46 (2) at least 25 percent of the person's new employees 6-47 in the readjustment zone are: 6-48 (A) residents of the governing jurisdiction; 6-49 (B) economically disadvantaged individuals, as 6-50 defined by Section 2303.402(c); or 6-51 (C) dislocated defense workers. 6-52 (b) The governing body of a readjustment zone may certify a 6-53 franchise or subsidiary of a new or existing business as a 6-54 qualified business if the franchise or subsidiary: 6-55 (1) is located entirely in the readjustment zone; and 6-56 (2) maintains separate books and records of the 6-57 business activity conducted in the zone. 6-58 Sec. 2310.303. PROHIBITION ON QUALIFIED BUSINESS 6-59 CERTIFICATION. If the department determines that the governing 6-60 body of a readjustment zone is not complying with this chapter, the 6-61 department shall prohibit the certification of a qualified business 6-62 in the zone until the department determines that the governing body 6-63 is complying with this chapter. The department may not designate 6-64 more than two businesses in a single readjustment zone as defense 6-65 readjustment projects. 6-66 Sec. 2310.304. REQUEST FOR APPLICATION FOR DEFENSE 6-67 READJUSTMENT PROJECT DESIGNATION. A qualified business in a 6-68 readjustment zone may request that the governing body of the 6-69 readjustment zone apply to the department for designation of the 7-1 business as a defense readjustment project. The request must also 7-2 be made to the readjustment zone's administrative authority, if one 7-3 exists. 7-4 Sec. 2310.305. APPLICATION FOR DEFENSE READJUSTMENT PROJECT 7-5 DESIGNATION. (a) If the governing body of a readjustment zone or 7-6 the governing body and administrative authority of a readjustment 7-7 zone, as appropriate, approve a request made under Section 7-8 2310.304, the governing body may apply to the department for the 7-9 designation of the qualified business as a defense readjustment 7-10 project. 7-11 (b) An application must: 7-12 (1) describe the procedures and efforts of the 7-13 governmental entity or entities that applied to have the area 7-14 designated as a readjustment zone to facilitate and encourage 7-15 participation by and negotiation among affected entities in the 7-16 zone in which the qualified business is located; 7-17 (2) contain an economic analysis of the plans of the 7-18 qualified business for expansion, revitalization, or other activity 7-19 in the readjustment zone, including: 7-20 (A) the number of anticipated new permanent jobs 7-21 the business will create; 7-22 (B) the anticipated number of permanent jobs the 7-23 business will retain; 7-24 (C) the amount of investment to be made in the 7-25 zone; and 7-26 (D) other information the department requires; 7-27 and 7-28 (3) describe the local effort made by the governmental 7-29 entity or entities that applied to have the area designated as a 7-30 readjustment zone, the administrative authority, if one exists, the 7-31 qualified business, and other affected entities to develop and 7-32 revitalize the zone. 7-33 (c) For the purposes of this section, local effort to 7-34 develop and revitalize a readjustment zone is: 7-35 (1) the willingness of public entities in the zone to 7-36 provide services, incentives, and regulatory relief authorized by 7-37 this chapter and to negotiate with the qualified business for which 7-38 application is made and with other local groups or businesses to 7-39 achieve the public purposes of this chapter; and 7-40 (2) the effort of the qualified business and other 7-41 affected entities to cooperate in achieving those public purposes. 7-42 (d) Factors to be considered in evaluating the local effort 7-43 of a public entity include: 7-44 (1) tax abatement, deferral, refunds, or other tax 7-45 incentives; 7-46 (2) regulatory relief, including: 7-47 (A) zoning changes or variances; 7-48 (B) exemptions from unnecessary building code 7-49 requirements, impact fees, or inspection fees; and 7-50 (C) streamlined permitting; 7-51 (3) enhanced municipal services, including: 7-52 (A) improved police and fire protection; 7-53 (B) institution of community crime prevention 7-54 programs; and 7-55 (C) special public transportation routes or 7-56 reduced fares; 7-57 (4) improvements in community facilities, including: 7-58 (A) capital improvements in water and sewer 7-59 facilities; 7-60 (B) road repair; and 7-61 (C) creation or improvement of parks; 7-62 (5) improvements to housing, including: 7-63 (A) low-interest loans for housing 7-64 rehabilitation, improvement, or new construction; and 7-65 (B) transfer of abandoned housing to individuals 7-66 or community groups; 7-67 (6) business and industrial development services, 7-68 including: 7-69 (A) low-interest loans for business; 8-1 (B) use of surplus school buildings or other 8-2 underutilized publicly owned facilities as small business 8-3 incubators; 8-4 (C) provision of publicly owned land for 8-5 development purposes, including residential, commercial, or 8-6 industrial development; 8-7 (D) creation of special one-stop permitting and 8-8 problem resolution centers or ombudsmen; and 8-9 (E) promotion and marketing services; and 8-10 (7) job training and employment services, including: 8-11 (A) retraining programs; 8-12 (B) literacy and employment skills programs; 8-13 (C) vocational education; and 8-14 (D) customized job training. 8-15 (e) Factors to be considered in evaluating the local effort 8-16 of a private entity include: 8-17 (1) the willingness to negotiate or cooperate in the 8-18 redevelopment of vacated defense facilities and the creation of 8-19 high-skilled, high wage jobs; 8-20 (2) commitments to hire dislocated defense workers and 8-21 economically disadvantaged workers; 8-22 (3) commitments to hire minority workers and to 8-23 contract with minority-owned businesses; 8-24 (4) provision of technical and vocational job training 8-25 for residents of the nominating body's jurisdiction or economically 8-26 disadvantaged employees; 8-27 (5) provision of child care for employees; 8-28 (6) commitments to implement and contribute to a 8-29 tutoring or mentoring program for area students; 8-30 (7) prevention or reduction of juvenile crime; and 8-31 (8) the willingness to make contributions to the 8-32 well-being of the community, such as job training, or the donation 8-33 of land for parks or other public purposes. 8-34 Sec. 2310.306. DEFENSE READJUSTMENT PROJECT DESIGNATION. 8-35 (a) The department may designate a qualified business as a defense 8-36 readjustment project only if the department determines that: 8-37 (1) the business is a qualified business under Section 8-38 2310.302 that is located in or has made a substantial commitment to 8-39 locate in a defense readjustment zone; 8-40 (2) the governing body of the readjustment zone making 8-41 the application has demonstrated that a high level of cooperation 8-42 exists among public, private, and neighborhood entities in the 8-43 zone; and 8-44 (3) the designation will contribute significantly to 8-45 the achievement of the plans of the governing body making the 8-46 application for development and revitalization of the zone. 8-47 (b) The department shall designate qualified businesses as 8-48 defense readjustment projects on a competitive basis. The 8-49 department shall make its designation decisions using a weighted 8-50 scale in which: 8-51 (1) 50 percent of the evaluation is based on the 8-52 effect of the loss of defense expenditures and employment on the 8-53 community; 8-54 (2) 25 percent of the evaluation depends on the local 8-55 effort to achieve development and revitalization of the 8-56 readjustment zone; and 8-57 (3) 25 percent of the evaluation depends on the 8-58 evaluation criteria as determined by the department, which must 8-59 include: 8-60 (A) the level of cooperation and support the 8-61 project applicant commits to the revitalization goals of the zone; 8-62 and 8-63 (B) the type and wage level of the jobs to be 8-64 created or retained by the business. 8-65 (c) The department may remove a defense readjustment project 8-66 designation if it determines that the business is not complying 8-67 with a requirement for its designation. 8-68 Sec. 2310.307. ALLOCATION OF JOBS ELIGIBLE FOR TAX REFUND. 8-69 When the department designates a business as a defense readjustment 9-1 project, the department shall allocate to the project the maximum 9-2 number of new permanent jobs or retained jobs eligible to be 9-3 included in a computation of a tax refund for the project. The 9-4 number may not exceed 500 or a number equal to 110 percent of the 9-5 number of anticipated new permanent jobs or retained jobs specified 9-6 in the application for designation of the business as a defense 9-7 readjustment project under Section 2310.305, whichever is less. 9-8 Sec. 2310.308. DURATION OF CERTAIN DESIGNATIONS. The 9-9 department's designation of a qualified business as a defense 9-10 readjustment project is effective until the fifth anniversary of 9-11 the date on which the designation is made regardless of whether the 9-12 readjustment zone in which the project is located expires before 9-13 the fifth anniversary of the project. 9-14 (Sections 2310.309-2310.400 reserved for expansion 9-15 SUBCHAPTER F. READJUSTMENT ZONE BENEFITS 9-16 Sec. 2310.401. EXEMPTIONS FROM STATE REGULATION; SUSPENSION 9-17 OF LOCAL REGULATION. (a) A state agency may exempt from its 9-18 regulation a qualified business, qualified employee, or qualified 9-19 property in a readjustment zone if the exemption is consistent 9-20 with: 9-21 (1) the purposes of this chapter; and 9-22 (2) the protection and promotion of the general health 9-23 and welfare. 9-24 (b) A local government may suspend local regulation, 9-25 including an ordinance, rule, or standard, relating to zoning, 9-26 licensing, or building codes in a readjustment zone. 9-27 (c) An exemption from or suspension of regulation under this 9-28 section must be adopted in the same manner that the regulation was 9-29 adopted. 9-30 (d) The authorization provided by Subsection (a) or (b) does 9-31 not apply to regulation: 9-32 (1) that relates to: 9-33 (A) civil rights; 9-34 (B) equal employment; 9-35 (C) equal opportunity; 9-36 (D) fair housing rights; or 9-37 (E) preservation of historical sites or 9-38 historical artifacts; 9-39 (2) the relaxation of which is likely to harm the 9-40 public safety or public health, including environmental health; or 9-41 (3) that is specifically imposed by law. 9-42 (e) For the purposes of this section, property is classified 9-43 as qualified property if the property is: 9-44 (1) tangible personal property located in the 9-45 readjustment zone that was acquired from the federal government by 9-46 lease or deed or: 9-47 (A) acquired by a taxpayer not earlier than the 9-48 90th day before the date on which the area was designated as a 9-49 readjustment zone; and 9-50 (B) used predominantly by the taxpayer in the 9-51 active conduct of a trade or business; 9-52 (2) real property located in the readjustment zone 9-53 that was acquired from the federal government by lease or deed or: 9-54 (A) acquired by a taxpayer not earlier than the 9-55 90th day before the date on which the area was designated as a 9-56 readjustment zone and was used predominantly by the taxpayer in the 9-57 active conduct of a trade or business; or 9-58 (B) the principal residence of the taxpayer on 9-59 the date of the sale or exchange; or 9-60 (3) an interest in an entity that was certified as a 9-61 qualified business under Section 2310.302 for the entity's most 9-62 recent tax year ending before the date of the sale or exchange. 9-63 Sec. 2310.402. REVIEW OF STATE AGENCY RULES; REPORT. (a) A 9-64 state agency by rule may provide, when applicable, encouragements 9-65 and incentives to increase: 9-66 (1) the renovation, improvement, or new construction 9-67 of housing in readjustment zones; and 9-68 (2) the economic viability and profitability of 9-69 business and commerce in readjustment zones. 10-1 (b) The department shall disseminate the reports to the 10-2 governing bodies of readjustment zones and others as necessary to 10-3 advance the purposes of this chapter. 10-4 (c) To contribute to the implementation of this chapter, an 10-5 agency may waive, modify, provide exemptions to, or otherwise 10-6 minimize the adverse effects of the rules it administers on the 10-7 renovation, improvement, or new construction of housing in 10-8 readjustment zones or on the economic viability and profitability 10-9 of business and commerce in readjustment zones. 10-10 Sec. 2310.403. STATE PREFERENCES. (a) A state agency shall 10-11 give preference to the governing body of a readjustment zone or a 10-12 qualified business or qualified employee located in a readjustment 10-13 zone over other eligible applicants for grants, loans, or credit 10-14 enhancements that are administered by the state agency if: 10-15 (1) at least 50 percent of the grant, loan, or credit 10-16 enhancement will be spent for the direct benefit of the 10-17 readjustment zone; and 10-18 (2) the purpose of the grant, loan, or credit 10-19 enhancement is to: 10-20 (A) promote economic development in the 10-21 community; or 10-22 (B) construct, improve, extend, repair, or 10-23 maintain public facilities in the community. 10-24 (b) The comptroller may and is encouraged to deposit state 10-25 money in financial institutions located or doing business in 10-26 readjustment zones. 10-27 (c) A state agency may and is encouraged to contract with 10-28 businesses located in readjustment zones. 10-29 (d) The department or another state agency may give 10-30 preference to readjustment zones in granting economic development 10-31 money or other benefits. 10-32 Sec. 2310.404. STATE TAX REFUNDS AND DEDUCTION; REPORT. 10-33 (a) A defense readjustment project is eligible for: 10-34 (1) a refund of state taxes under Section 151.4291, 10-35 Tax Code; 10-36 (2) a deduction from taxable capital under Section 10-37 171.1016, Tax Code; and 10-38 (3) the exclusion of receipts from service performed 10-39 in a readjustment zone in the determination of gross receipts from 10-40 business done in this state under Sections 171.103 and 171.1032, 10-41 Tax Code. 10-42 (b) Not later than the 60th day after the last day of each 10-43 fiscal year, the comptroller shall report to the department the 10-44 statewide total of the tax refunds made under this section during 10-45 that fiscal year. 10-46 Sec. 2310.405. LOCAL SALES AND USE TAX REFUNDS. (a) To 10-47 encourage the development of areas designated as readjustment 10-48 zones, the governing body of a municipality through a program may 10-49 refund its local sales and use taxes paid by a qualified business 10-50 on: 10-51 (1) the purchase, lease, or rental of equipment or 10-52 machinery for use in a readjustment zone; 10-53 (2) the purchase of material for use in remodeling, 10-54 rehabilitating, or constructing a structure in a readjustment zone; 10-55 (3) labor for remodeling, rehabilitating, or 10-56 constructing a structure in a readjustment zone; and 10-57 (4) electricity and natural gas purchased and consumed 10-58 in the normal course of business in the readjustment zone. 10-59 (b) To promote the public health, safety, or welfare, the 10-60 governing body of a municipality or county through a program may 10-61 refund its local sales and use taxes paid by a qualified business 10-62 or qualified employee. 10-63 (c) The governing body of a municipality or county that is 10-64 the governing body of a readjustment zone may provide for the 10-65 partial or total refund of its local sales and use taxes paid by a 10-66 person making a taxable purchase, lease, or rental for development 10-67 or revitalization in the zone. 10-68 (d) A person eligible for a refund of local sales and use 10-69 taxes under this section shall pay the entire amount of state and 11-1 local sales and use taxes at the time the taxes would be due if an 11-2 agreement for the refund did not exist. 11-3 (e) An agreement to refund local sales and use taxes under 11-4 this section must: 11-5 (1) be written; 11-6 (2) contain an expiration date; and 11-7 (3) require that the person eligible for the refund 11-8 provide to the municipality or county making the refund the 11-9 documentation necessary to support a refund claim. 11-10 (f) The municipality or county shall make the refund 11-11 directly to the person eligible for the refund in the manner 11-12 provided by the agreement. 11-13 Sec. 2310.406. REDUCTION OR ELIMINATION OF LOCAL FEES OR 11-14 TAXES. (a) To promote the public health, safety, or welfare, the 11-15 governing body of a municipality or county through a program may 11-16 reduce or eliminate fees or taxes that it imposes on a qualified 11-17 business or qualified employee. 11-18 (b) This section does not apply to sales and use taxes or 11-19 property taxes. 11-20 Sec. 2310.407. TAX INCREMENT FINANCING AND ABATEMENT. 11-21 Designation of an area as a readjustment zone is also designation 11-22 of the area as a reinvestment zone for: 11-23 (1) tax increment financing under Chapter 311, Tax 11-24 Code; and 11-25 (2) tax abatement under Chapter 312, Tax Code. 11-26 Sec. 2310.408. DEVELOPMENT BONDS. To finance a project in a 11-27 readjustment zone, bonds may be issued under: 11-28 (1) the Act for Development of Employment, Industrial 11-29 and Health Resources of 1971 (Article 5190.1, Vernon's Texas Civil 11-30 Statutes); or 11-31 (2) the Development Corporation Act of 1979 (Article 11-32 5190.6, Vernon's Texas Civil Statutes). 11-33 Sec. 2310.409. OTHER LOCAL INCENTIVES. (a) The governing 11-34 body of a municipality or county that is the governing body of a 11-35 readjustment zone may: 11-36 (1) defer compliance in the zone with the subdivision 11-37 and development ordinances or rules, other than those relating to 11-38 streets and roads or sewer or water services, of the municipality 11-39 or county, as appropriate; 11-40 (2) give priority to the zone for the receipt of: 11-41 (A) community development block grant money; 11-42 (B) industrial revenue bonds; or 11-43 (C) funds received for job training; 11-44 (3) adopt and implement a plan for police protection 11-45 in the zone; 11-46 (4) amend the zoning ordinances of the municipality or 11-47 county, as appropriate, to promote economic development in the 11-48 zone; 11-49 (5) establish permitting preferences for businesses in 11-50 the zone; 11-51 (6) establish simplified, accelerated, or other 11-52 special permit procedures for businesses in the zone; 11-53 (7) waive development fees for projects in the zone; 11-54 (8) create a local readjustment zone fund for funding 11-55 bonds or other programs or activities to develop or revitalize the 11-56 zone; 11-57 (9) for qualified businesses in the zone, reduce rates 11-58 charged by: 11-59 (A) a utility owned by the municipality or 11-60 county, as appropriate; or 11-61 (B) a cooperative corporation or utility owned 11-62 by private investors, subject to the requirements of Subsection 11-63 (b); 11-64 (10) in issuing housing finance bonds, give priority 11-65 to persons or projects in the zone; 11-66 (11) in providing services, give priority to local 11-67 economic development, educational, job training, or transportation 11-68 programs that benefit the zone; or 11-69 (12) sell real property owned by the municipality or 12-1 county, as appropriate, and located in the readjustment zone in 12-2 accordance with Section 2310.410. 12-3 (b) A reduction in utility rates under Subsection (a)(9)(B) 12-4 is subject to the agreement of the affected utility and the 12-5 approval of the appropriate regulatory authority under the Public 12-6 Utility Regulatory Act of 1995 (Article 1446c-0, Vernon's Texas 12-7 Civil Statutes). The rates may be reduced up to but not more than 12-8 five percent below the lowest rate allowable for that customer 12-9 class. In making its determination under this section, the 12-10 regulatory authority shall consider revitalization goals for the 12-11 readjustment zone. In setting the rates of the utility the 12-12 appropriate regulatory authority shall allow the utility to recover 12-13 the amount of the reduction. 12-14 Sec. 2310.410. DISPOSITION OF PUBLIC PROPERTY IN 12-15 READJUSTMENT ZONE. (a) After an area is designated as a 12-16 readjustment zone, the state, a municipality, or a county that owns 12-17 a surplus building or vacant land in the zone may dispose of the 12-18 building or land by: 12-19 (1) selling the building or land at a public auction; 12-20 or 12-21 (2) establishing an urban homestead program described 12-22 by Subsection (c). 12-23 (b) A municipality or county may sell a surplus building or 12-24 vacant land in the readjustment zone at less than fair market value 12-25 if the governing body of the municipality or county by ordinance or 12-26 order, as appropriate, adopts criteria that specify the conditions 12-27 and circumstances under which the sale may occur and the public 12-28 purpose to be achieved by the sale. The building or land may be 12-29 sold to a buyer who is not the highest bidder if the criteria and 12-30 public purpose specified in the ordinance or order are satisfied. 12-31 A copy of the ordinance or order must be filed with the department 12-32 not later than the day on which the sale occurs. 12-33 (c) An urban homestead program must provide that: 12-34 (1) the state, municipality, or county is to sell to 12-35 an individual a residence or part of a residence that it owns for 12-36 an amount not to exceed $100; 12-37 (2) as a condition of the sale, the individual must 12-38 agree by covenant in the deed conveying the residence to live in 12-39 the residence for at least seven years and to renovate or remodel 12-40 the residence to meet the level of maintenance stated in an 12-41 agreement between the individual and the governmental entity; and 12-42 (3) after the individual satisfies the seven-year 12-43 residency and property improvement requirements of the agreement, 12-44 the governmental entity shall assign the residence to the 12-45 individual. 12-46 Sec. 2310.411. WAIVER OF PERFORMANCE BOND. A subcontractor 12-47 is not required to execute a performance bond under Chapter 2253 12-48 if: 12-49 (1) the construction, alteration, repair, or other 12-50 public work to be performed under the contract is entirely in a 12-51 readjustment zone; and 12-52 (2) the amount of the contract does not exceed 12-53 $200,000. 12-54 Sec. 2310.412. LIABILITY OF CONTRACTOR OR ARCHITECT. A 12-55 contractor or architect who constructs or rehabilitates a building 12-56 in a readjustment zone is liable for any structural defect in the 12-57 building only for the period ending on the 10th anniversary of the 12-58 date on which beneficial occupancy of the building begins after the 12-59 construction or rehabilitation, notwithstanding a statute of 12-60 limitations to the contrary. 12-61 SECTION 2. Subchapter I, Chapter 151, Tax Code, is amended 12-62 by adding Section 151.4291 to read as follows: 12-63 Sec. 151.4291. TAX REFUNDS FOR DEFENSE READJUSTMENT 12-64 PROJECTS. (a) A defense readjustment project is eligible for a 12-65 refund in the amount provided by this section of the taxes imposed 12-66 by this chapter on purchases of: 12-67 (1) equipment or machinery sold to a defense 12-68 readjustment project for use in a readjustment zone; 12-69 (2) building materials sold to a defense readjustment 13-1 project for use in remodeling, rehabilitating, or constructing a 13-2 structure in a readjustment zone; 13-3 (3) labor for remodeling, rehabilitating, or 13-4 constructing a structure by a defense readjustment project in a 13-5 readjustment zone; and 13-6 (4) electricity and natural gas purchased and consumed 13-7 in the normal course of business in the readjustment zone. 13-8 (b) Subject to the limitations provided by Subsection (c) of 13-9 this section, a defense readjustment project qualifies for a refund 13-10 of taxes under this section of $2,500 for each new permanent job or 13-11 job that has been retained by the defense readjustment project for 13-12 a qualified employee. 13-13 (c) The total amount of tax refund that a defense 13-14 readjustment project may apply for in a state fiscal year may not 13-15 exceed $250,000. If a defense readjustment project qualifies in a 13-16 state fiscal year for a refund of taxes in an amount in excess of 13-17 the limitation provided by this subsection, it may apply for a 13-18 refund of those taxes in a subsequent year, subject to the $250,000 13-19 limitation for each year. However, a defense readjustment project 13-20 may not apply for a refund under this section after the end of the 13-21 state fiscal year immediately following the state fiscal year in 13-22 which the defense readjustment project's designation as a defense 13-23 readjustment project expires or is removed. The total amount that 13-24 may be refunded to a defense readjustment project under this 13-25 section may not exceed the amount determined by multiplying 13-26 $250,000 by the number of state fiscal years during which the 13-27 defense readjustment project created one or more jobs for qualified 13-28 employees. 13-29 (d) To receive a refund under this section, a defense 13-30 readjustment project must apply to the comptroller for the refund. 13-31 The Texas Department of Commerce shall provide the comptroller with 13-32 the assistance that the comptroller requires in administering this 13-33 section. 13-34 (e) In this section: 13-35 (1) "Defense readjustment project" means a person 13-36 designated by the Texas Department of Commerce as a defense 13-37 readjustment project under Chapter 2310, Government Code. 13-38 (2) "Readjustment zone" and "qualified employee" have 13-39 the meanings assigned to those terms by Section 2310.001, 13-40 Government Code. 13-41 (3) "New permanent job" means a new employment 13-42 position created by a qualified business as described by Section 13-43 2310.302, Government Code, that: 13-44 (A) has provided at least 1,820 hours of 13-45 employment a year to a qualified employee; and 13-46 (B) is intended to exist during the period that 13-47 the qualified business is designated as a defense readjustment 13-48 project under Chapter 2310, Government Code. 13-49 (f) For the purposes of Subsection (a), items bought by a 13-50 project after the date it is designated as a project, or within 90 13-51 days before the date of designation, may be considered eligible for 13-52 a refund. 13-53 (g) The refund provided by this section is conditioned on 13-54 the defense readjustment project maintaining at least the same 13-55 level of employment of qualified employees as existed at the time 13-56 it qualified for a refund for a period of three years from that 13-57 date. The Texas Department of Commerce shall annually certify to 13-58 the comptroller and the Legislative Budget Board whether that level 13-59 of employment of qualified employees has been maintained. On the 13-60 Texas Department of Commerce certifying that such a level has not 13-61 been maintained, the comptroller shall assess that portion of the 13-62 refund attributable to any such decrease in employment, including 13-63 penalty and interest from the date of the refund. 13-64 (h) Notwithstanding Section 171.103 or 171.1032, a receipt 13-65 from a service performed by a defense readjustment project in a 13-66 readjustment zone is not a receipt from business done in this 13-67 state. 13-68 SECTION 3. Subchapter C, Chapter 171, Tax Code, is amended 13-69 by adding Section 171.1016 to read as follows: 14-1 Sec. 171.1016. REDUCTION OF TAXABLE CAPITAL FOR INVESTMENT 14-2 IN A READJUSTMENT ZONE. (a) A corporation that has been 14-3 designated as a defense readjustment project as provided by Chapter 14-4 2310, Government Code, may deduct either: 14-5 (1) from its apportioned taxable capital, 50 percent 14-6 of its capital investment in the readjustment zone in which the 14-7 defense readjustment project is located; or 14-8 (2) from its apportioned taxable earned surplus, five 14-9 percent of its capital investment in the readjustment zone in which 14-10 the defense readjustment project is located. The deduction may be 14-11 taken on each franchise tax report that is based on a corporation's 14-12 fiscal year during all or part of which the corporation is a 14-13 defense readjustment project. 14-14 (b) The deduction authorized by this section is limited to 14-15 the depreciated value of capital equipment or other investment that 14-16 qualifies for depreciation for federal income tax purposes and that 14-17 is placed in service in the zone after designation as a defense 14-18 readjustment project. The depreciated value must be computed by a 14-19 method which is otherwise acceptable for that corporation's 14-20 franchise tax report and must be computed for each report on which 14-21 it is taken by the same method of depreciation. 14-22 (c) To qualify for the deduction authorized by this section, 14-23 an investment must be used in the normal course of business in the 14-24 defense readjustment zone and must not be removed from the defense 14-25 readjustment zone, except for repair or maintenance. Qualifying 14-26 use and presence in the zone must occur during the accounting year 14-27 on which the report is based. 14-28 (d) The deduction authorized by this section may not be used 14-29 to reduce apportioned taxable capital or apportioned taxable earned 14-30 surplus below a zero value, and no carryover of unused deductions 14-31 to a later privileged period is allowed. 14-32 (e) A corporation may elect to make the deduction authorized 14-33 by this section either from apportioned taxable capital or 14-34 apportioned taxable earned surplus for each separate regular annual 14-35 period. An election for an initial period applies to the second 14-36 tax period and to the first regular annual period. 14-37 (f) In this section: 14-38 (1) "Defense readjustment project" means a person 14-39 designated by the Texas Department of Commerce as a defense 14-40 readjustment project under Chapter 2310, Government Code. 14-41 (2) "Readjustment zone" has the meaning assigned to 14-42 that term by Section 2310.001, Government Code. 14-43 (g) Only qualified businesses that have been certified as 14-44 eligible for a tax deduction under this section by the Texas 14-45 Department of Commerce to the comptroller and the Legislative 14-46 Budget Board are entitled to the tax deduction. 14-47 SECTION 4. The legislature intends that the implementation 14-48 of this Act not result in the removal of any property from the ad 14-49 valorem taxation of any taxing entity in which the property is 14-50 located. 14-51 SECTION 5. Before September 1, 2001, the Texas Department of 14-52 Commerce may not designate more than six defense economic 14-53 readjustment zones under Chapter 2310, Government Code, as added by 14-54 this Act. 14-55 SECTION 6. The importance of this legislation and the 14-56 crowded condition of the calendars in both houses create an 14-57 emergency and an imperative public necessity that the 14-58 constitutional rule requiring bills to be read on three several 14-59 days in each house be suspended, and this rule is hereby suspended, 14-60 and that this Act take effect and be in force from and after its 14-61 passage, and it is so enacted. 14-62 * * * * *