1-1 By: Sibley S.B. No. 746
1-2 (In the Senate - Filed February 25, 1997; March 3, 1997, read
1-3 first time and referred to Committee on Economic Development;
1-4 April 7, 1997, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 9, Nays 0; April 7, 1997,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 746 By: Sibley
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to property tax increment financing and property tax
1-11 abatements.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Section 11.43, Tax Code, is amended by adding
1-14 Subsection (j) to read as follows:
1-15 (j) An application for an exemption under Section 11.28 must
1-16 include:
1-17 (1) a copy of the certification of the governing body
1-18 of the taxing unit issued for the tax year under Section
1-19 312.211(d); and
1-20 (2) any notice under Section 312.205(a)(8) that the
1-21 agreement has been modified under that subsection.
1-22 SECTION 2. Subsection (c), Section 11.45, Tax Code, is
1-23 amended to read as follows:
1-24 (c) The chief appraiser shall determine the validity of each
1-25 application for exemption filed with him before he submits the
1-26 appraisal records for review and determination of protests as
1-27 provided by Chapter 41 [of this code]. The chief appraiser shall
1-28 rely on a certification issued under Section 312.211(d) for the
1-29 accuracy of the facts stated in the certification.
1-30 SECTION 3. Subsection (a), Section 111.301, Tax Code, is
1-31 amended to read as follows:
1-32 (a) An eligible person is entitled to a refund of state
1-33 sales and use taxes imposed under Chapter 151 and state franchise
1-34 taxes imposed under Chapter 171 paid in a calendar year for which
1-35 the person paid ad valorem taxes to a school district on property
1-36 that in that year is:
1-37 (1) located in a reinvestment zone established under
1-38 Chapter 312;
1-39 (2) exempt in whole or in part from the payment of ad
1-40 valorem taxes imposed by a municipality or a county under a tax
1-41 abatement agreement entered into with the municipality under
1-42 Section 312.204 or the county under Section 312.402 [Chapter 312];
1-43 and
1-44 (3) not subject to a tax abatement agreement entered
1-45 into by the school district.
1-46 SECTION 4. Subsection (b), Section 311.016, Tax Code, is
1-47 amended to read as follows:
1-48 (b) A copy of a report made under this section shall be sent
1-49 to the comptroller. The comptroller may require a municipality to
1-50 provide a summary of the report, together with any additional
1-51 information the comptroller determines necessary, on a form
1-52 prescribed by the comptroller [attorney general].
1-53 SECTION 5. Subsection (a), Section 312.004, Tax Code, is
1-54 amended to read as follows:
1-55 (a) The commissioners court of a county that enters into a
1-56 tax abatement agreement for a county may enter into a tax abatement
1-57 agreement applicable to the same property on behalf of a taxing
1-58 unit other than the county if [If] by statute the ad valorem tax
1-59 rate of the other [a] taxing unit [other than a county] is approved
1-60 by the commissioners court [of a county] or the [if a]
1-61 commissioners court is expressly required by statute to levy the ad
1-62 valorem taxes of the other [a] taxing unit. The tax abatement
1-63 agreement entered into on behalf of the other taxing unit is not
1-64 required to contain the same terms as the tax abatement agreement
2-1 entered into on behalf of the county [other than a county, a tax
2-2 abatement agreement executed by the commissioners court for county
2-3 taxes also applies to the taxation by the taxing unit of the
2-4 property subject to the agreement, if that property is otherwise
2-5 taxable by the taxing unit].
2-6 SECTION 6. Section 312.005, Tax Code, is amended to read as
2-7 follows:
2-8 Sec. 312.005. STATE ADMINISTRATION. (a) The comptroller
2-9 [Texas Department of Commerce] shall maintain a central registry of
2-10 reinvestment zones designated under this chapter and of ad valorem
2-11 tax abatement agreements executed under this chapter.
2-12 (b) Each taxing unit that designates a reinvestment zone or
2-13 executes a tax abatement agreement under this chapter shall deliver
2-14 to the [department and to the] comptroller before April 1 of the
2-15 year following the year in which the zone is designated or the
2-16 agreement is executed a report providing the following information:
2-17 (1) for a reinvestment zone, [a general description of
2-18 the zone, including its size, the types of property located in it,
2-19 its duration, and] the guidelines and criteria established for the
2-20 [reinvestment] zone under Section 312.002, including subsequent
2-21 amendments and modifications of the guidelines or criteria; and
2-22 (2) for a tax abatement agreement:
2-23 (A) a copy of the [each tax abatement]
2-24 agreement;
2-25 (B) the name of each party to the agreement;
2-26 (C) a statement of whether the agreement applies
2-27 to real property, tangible personal property, or both;
2-28 (D) the portion of the value of the property
2-29 that is exempt from taxation in each year covered by the agreement;
2-30 (E) the appraised value of the property before
2-31 the agreement takes effect;
2-32 (F) an estimate of any loss in ad valorem tax
2-33 revenue from the property during the term of the agreement;
2-34 (G) a statement of whether the business
2-35 conducted on the property is new or existing;
2-36 (H) the standard industrial classification, if
2-37 applicable, of the business conducted on the property;
2-38 (I) an estimate of the number of any jobs to be
2-39 created or retained by the business conducted on the property
2-40 during the term of the agreement;
2-41 (J) an estimate of the payroll of any jobs
2-42 described by Paragraph (I);
2-43 (K) an estimate of the timing of creation of any
2-44 jobs described by Paragraph (I);
2-45 (L) an estimate of the amount of any capital to
2-46 be invested by the property owner in the property during the term
2-47 of the agreement;
2-48 (M) an estimate of the timing of any capital
2-49 investments described by Paragraph (L);
2-50 (N) a copy of the analysis of costs and benefits
2-51 required by Section 312.2035; and
2-52 (O) any other information required by the
2-53 comptroller.
2-54 (c) A taxing unit that executes a tax abatement agreement
2-55 but does not comply with Subsection (b)(2) may not enter into
2-56 another tax abatement agreement until the taxing unit complies with
2-57 that subsection [to which the taxing unit is a party; and]
2-58 [(3) any other information required by the comptroller
2-59 to administer Subchapter F, Chapter 111].
2-60 (d) [(b)] The comptroller and the Texas Department of
2-61 Commerce [department] may provide assistance to a taxing unit on
2-62 request of its governing body or the presiding officer of its
2-63 governing body relating to the administration of this chapter,
2-64 including the designation of reinvestment zones, the adoption of
2-65 tax abatement guidelines, and the execution of tax abatement
2-66 agreements.
2-67 (e) On or before November 1 of each even-numbered year, the
2-68 comptroller shall:
2-69 (1) prepare a comprehensive report on the use of tax
3-1 abatements in encouraging economic development in this state; and
3-2 (2) deliver a copy of the report to:
3-3 (A) the governor, lieutenant governor, and
3-4 speaker of the house of representatives; and
3-5 (B) a taxing unit on request.
3-6 SECTION 7. Subchapter A, Chapter 312, Tax Code, is amended
3-7 by adding Section 312.007 to read as follows:
3-8 Sec. 312.007. PROPERTY TAX ABATEMENT ADVISORY COMMITTEE.
3-9 (a) The Property Tax Abatement Advisory Committee is created.
3-10 (b) The committee is composed of five members who are
3-11 designated by the executive director of the Texas Department of
3-12 Commerce and reflect the diverse population of the state. Two
3-13 members must be municipal or county officials, and the three other
3-14 members must be economic development practitioners.
3-15 (c) The committee shall elect a presiding officer from among
3-16 its members.
3-17 (d) The committee shall meet at least twice a year and may
3-18 meet at other times at the call of the presiding officer. The
3-19 committee is subject to Chapter 551, Government Code.
3-20 (e) The committee may adopt rules for the committee's
3-21 internal procedures.
3-22 (f) Members of the committee are not entitled to
3-23 compensation for service on the committee.
3-24 (g) The department shall provide staff support for the
3-25 committee.
3-26 (h) Not later than September 1, 1998, the committee shall
3-27 deliver to the governor, lieutenant governor, speaker of the house
3-28 of representatives, executive director of the department, and
3-29 comptroller a report containing model:
3-30 (1) guidelines and criteria for tax abatement;
3-31 (2) tax abatement proposal forms for submission by
3-32 property owners to taxing units;
3-33 (3) tax abatement agreements, including:
3-34 (A) performance standards; and
3-35 (B) provisions for recapturing property tax
3-36 revenue under Section 312.205(a)(7) and for the payment of
3-37 penalties and interest under Section 312.205(b)(4); and
3-38 (4) analyses of costs and benefits under Section
3-39 312.2035.
3-40 (i) In preparing the report required by Subsection (h), the
3-41 committee shall consider the diverse characteristics and economic
3-42 development goals of communities throughout the state.
3-43 (j) The department shall furnish to a taxing unit on request
3-44 a copy of the report.
3-45 (k) This section expires and the committee is abolished
3-46 September 1, 1998.
3-47 SECTION 8. Subchapter B, Chapter 312, Tax Code, is amended
3-48 by adding Sections 312.2035 and 312.2045 to read as follows:
3-49 Sec. 312.2035. ANALYSIS OF COSTS AND BENEFITS. (a) A
3-50 municipality must perform an analysis of the costs and benefits of
3-51 a proposed tax abatement agreement before the municipality may
3-52 enter into the agreement under this subchapter.
3-53 (b) The costs examined must include:
3-54 (1) an estimate of any loss in ad valorem tax revenue
3-55 from the property covered by the agreement during the term of the
3-56 agreement;
3-57 (2) the impact of the agreement on the municipality's
3-58 ability to provide services; and
3-59 (3) any other cost the municipality determines to be
3-60 significant.
3-61 (c) The benefits examined must include:
3-62 (1) an estimate of the number of any jobs to be
3-63 created or retained by the property owner in the reinvestment zone
3-64 during the term of the agreement;
3-65 (2) an estimate of the payroll of any jobs described
3-66 by Subdivision (1);
3-67 (3) an estimate of the timing of creation of any jobs
3-68 described by Subdivision (1);
3-69 (4) an estimate of the amount of any capital
4-1 investments to be made by the property owner in the reinvestment
4-2 zone during the term of the agreement;
4-3 (5) an estimate of the timing of any capital
4-4 investments described by Subdivision (4);
4-5 (6) an estimate of any increase in local sales tax
4-6 revenue to be generated by the property owner in the reinvestment
4-7 zone during the term of the agreement; and
4-8 (7) any other benefit the municipality determines to
4-9 be significant.
4-10 (d) A municipality may not enter into a tax abatement
4-11 agreement for which the analysis shows that the costs exceed the
4-12 benefits.
4-13 Sec. 312.2045. NOTICE OF TAX ABATEMENT AGREEMENT. (a) A
4-14 municipality that enters into a tax abatement agreement shall
4-15 either, at the option of the municipality:
4-16 (1) publish notice of the agreement not later than the
4-17 seventh day after the date the agreement is entered into in a
4-18 newspaper that is published daily in each county in which the
4-19 municipality is located; or
4-20 (2) post notice of the agreement not later than the
4-21 seventh day after the date the agreement is entered into at each
4-22 place where the governing body of a municipality is required by
4-23 Chapter 551, Government Code, to post notice of its meetings.
4-24 (b) The notice must include:
4-25 (1) the name of each party to the tax abatement
4-26 agreement;
4-27 (2) the portion of the value of the property that is
4-28 exempt from taxation in each year covered by the agreement; and
4-29 (3) a summary of the analysis of costs and benefits
4-30 required by Section 312.2035.
4-31 SECTION 9. Section 312.205, Tax Code, is amended to read as
4-32 follows:
4-33 Sec. 312.205. SPECIFIC TERMS OF TAX ABATEMENT AGREEMENT.
4-34 (a) An agreement made under Section 312.204 must:
4-35 (1) list the kind, number, and location of all
4-36 proposed improvements of the property to which the agreement
4-37 applies;
4-38 (2) provide access to and authorize inspection of the
4-39 property by municipal employees to ensure that the improvements or
4-40 repairs are made according to the specifications and conditions of
4-41 the agreement;
4-42 (3) limit the uses of the property consistent with the
4-43 general purpose of encouraging development or redevelopment of the
4-44 zone during the period that property tax exemptions are in effect;
4-45 (4) contain each term agreed to by the property owner,
4-46 including:
4-47 (A) an estimate of the number of any jobs to be
4-48 created or retained by the property owner in the reinvestment zone
4-49 during the term of the agreement;
4-50 (B) an estimate of the timing of creation of any
4-51 jobs described by Paragraph (A);
4-52 (C) an estimate of the payroll of any jobs
4-53 described by Paragraph (A);
4-54 (D) an estimate of the amount of any capital
4-55 investments to be made by the property owner in the reinvestment
4-56 zone during the term of the agreement; and
4-57 (E) an estimate of the timing of any capital
4-58 investments described by Paragraph (D);
4-59 (5) require the property owner to certify before
4-60 February 1 of each year to the governing body of each taxing unit
4-61 whether the owner is in compliance with each applicable term of the
4-62 agreement and, if not, state the reason for the noncompliance;
4-63 (6) state any circumstances under which the property
4-64 owner may be excused by the governing body of the municipality for
4-65 failing to comply with the agreement;
4-66 (7) provide for recapture by the governing body of the
4-67 municipality of all or part of the [recapturing] property tax
4-68 revenue lost as a result of the agreement if the owner of the
4-69 property fails to make the improvements or repairs as provided by
5-1 the agreement or fails to comply with any performance standard
5-2 contained in the agreement; and
5-3 (8) [(5) contain each term agreed to by the owner of
5-4 the property;]
5-5 [(6) require the owner of the property to certify
5-6 annually to the governing body of each taxing unit that the owner
5-7 is in compliance with each applicable term of the agreement; and]
5-8 [(7)] provide for cancellation or modification of the
5-9 agreement by [that] the governing body of the municipality [may
5-10 cancel or modify the agreement] if the property owner fails to
5-11 comply with the agreement and for written notice of the
5-12 cancellation or modification.
5-13 (b) An agreement made under Section 312.204 may include[, at
5-14 the option of the governing body of the municipality,] provisions
5-15 for:
5-16 (1) the use to be made by the property owner of local
5-17 suppliers during the term of the agreement;
5-18 (2) health benefits and child care during the term of
5-19 the agreement for employees of the property owner who work at the
5-20 property covered by the agreement;
5-21 (3) the percentage of any jobs to be created under
5-22 Subsection (a)(4)(A) to be given to economically disadvantaged
5-23 individuals as defined by Section 2303.402, Government Code;
5-24 (4) payment of a penalty in a specified amount and
5-25 interest at a specified rate if the municipality is entitled to
5-26 recapture lost property tax revenue under Subsection (a)(7);
5-27 (5) improvements or repairs by the municipality to
5-28 streets, sidewalks, and utility services or facilities associated
5-29 with the property, except that the agreement may not provide for
5-30 lower charges or rates than are made for other services or
5-31 properties of a similar character;
5-32 (6) [(2) an economic feasibility study, including a
5-33 detailed list of estimated improvement costs, a description of the
5-34 methods of financing all estimated costs, and the time when related
5-35 costs or monetary obligations are to be incurred;]
5-36 [(3)] a map showing existing uses and conditions of
5-37 real property in the reinvestment zone;
5-38 (7) [(4)] a map showing proposed improvements and uses
5-39 in the reinvestment zone; and
5-40 (8) [(5)] proposed changes of zoning ordinances, the
5-41 master plan, the map, building codes, and city ordinances.
5-42 SECTION 10. Subsection (a), Section 312.206, Tax Code, is
5-43 amended to read as follows:
5-44 (a) If property taxes on property located in the taxing
5-45 jurisdiction of a municipality are abated under an agreement made
5-46 under Section 312.204, the governing body of each other taxing unit
5-47 eligible to enter into tax abatement agreements under Section
5-48 312.002 in which the property is located may execute a written tax
5-49 abatement agreement with the owner of the property not later than
5-50 the 90th day after the date the municipal agreement is executed.
5-51 The agreement is not required to [must] contain terms identical to
5-52 those contained in the agreement with the municipality [providing
5-53 for the portion of the property that is to be exempt from taxation
5-54 under the agreement, the duration of the agreement, and the
5-55 provisions included in the agreement under Section 312.205, even if
5-56 the value of the property at the time the agreement is executed is
5-57 not the same as its value when the municipal agreement was executed
5-58 and even if improvements or repairs have been made to the property
5-59 since the municipal agreement was executed]. If the governing body
5-60 of the taxing unit by official action at any time before the
5-61 execution of the municipal agreement expresses an intent to [enter
5-62 into an agreement with the owner of property under this subsection
5-63 or to] be bound by the terms of the municipal agreement if the
5-64 municipality enters into an agreement under Section 312.204 with
5-65 the owner relating to the property, the terms of the municipal
5-66 agreement regarding the share of the property to be exempt in each
5-67 year of the municipal agreement apply to the taxation of the
5-68 property by the taxing unit. Sections 312.2035, 312.2045, and
5-69 312.205 apply to a taxing unit that enters into a tax abatement
6-1 agreement under this section [If the taxing unit that expressed its
6-2 intent to enter into an agreement or to be bound by the municipal
6-3 agreement is a county, those terms of the municipal agreement also
6-4 apply to the taxation of the property by a taxing unit in the
6-5 county to which a county tax abatement agreement would apply under
6-6 Section 312.004].
6-7 SECTION 11. Subchapter B, Chapter 312, Tax Code, is amended
6-8 by adding Sections 312.211 and 312.212 to read as follows:
6-9 Sec. 312.211. CERTIFICATION OF COMPLIANCE. (a) The
6-10 governing body of a taxing unit that is a party to a tax abatement
6-11 agreement shall, before March 1 of each year, determine in the
6-12 manner provided by law for official action of the governing body
6-13 whether each property owner receiving a tax abatement under the
6-14 agreement is in compliance with each term of the agreement and, if
6-15 not, whether the noncompliance is excused.
6-16 (b) The governing body shall consider any certification
6-17 furnished by the property owner under Section 312.205(a)(5). The
6-18 governing body may require the property owner to present additional
6-19 evidence the governing body considers necessary to make the
6-20 determination. The burden of proof is on the property owner to
6-21 show that the property owner is in compliance with each term of the
6-22 agreement.
6-23 (c) Each property owner who is a party to the tax abatement
6-24 agreement is entitled to a hearing and to present evidence before
6-25 the governing body of the taxing unit in person or by a
6-26 representative on the issue of compliance with the terms of the
6-27 agreement.
6-28 (d) The governing body shall certify in writing to the
6-29 property owner whether the owner is in compliance with each term of
6-30 the tax abatement agreement and, if not, whether the noncompliance
6-31 is excused.
6-32 Sec. 312.212. ACTION BY TAXING UNIT ON NONCOMPLIANCE.
6-33 (a) Except as provided by Subsection (b), if a property owner
6-34 fails to comply with a tax abatement agreement, the governing body
6-35 of the taxing unit shall:
6-36 (1) recapture all or part of the property tax revenue
6-37 lost as a result of the agreement as provided by Section
6-38 312.205(a)(7); and
6-39 (2) cancel or modify the agreement and give written
6-40 notice of the cancellation or modification as provided by Section
6-41 312.205(a)(8).
6-42 (b) The governing body of the taxing unit may excuse the
6-43 property owner's failure to comply with the agreement under a
6-44 circumstance stated in the tax abatement agreement as provided by
6-45 Section 312.205(a)(6).
6-46 SECTION 12. Subsections (a), (c), and (e), Section 312.402,
6-47 Tax Code, are amended to read as follows:
6-48 (a) The commissioners court may execute a tax abatement
6-49 agreement with the owner of taxable real property located in a
6-50 reinvestment zone designated under this subchapter. [The
6-51 execution, duration, and other terms of an agreement made under
6-52 this section are governed by the provisions of] Sections
6-53 312.2035-312.205 apply [312.204 and 312.205 applicable] to [a
6-54 municipality. Section 312.2041 applies to] an agreement made by a
6-55 county under this section in the same manner as those sections
6-56 apply [it applies] to an agreement made by a municipality [under
6-57 Section 312.204].
6-58 (c) If [on or after September 1, 1989,] property subject to
6-59 an agreement with a county under this section is annexed by a
6-60 municipality during the existence of the agreement, the terms of
6-61 the county agreement regarding the share of the property to be
6-62 exempt in each year of the agreement apply to the taxation of the
6-63 property by the municipality if before the annexation the governing
6-64 body of the municipality by official action expresses an intent to
6-65 [enter into an agreement with the owner of the property to abate
6-66 taxes on the property if it is annexed or to] be bound by the terms
6-67 of the county agreement after annexation[, even if that official
6-68 action of the governing body of the municipality expressing that
6-69 intent occurs before September 1, 1989].
7-1 (e) An agreement made under this section by a county or
7-2 other taxing unit is subject to certification and may be canceled,
7-3 modified, or terminated in the same manner and subject to the same
7-4 limitations as provided by Sections [Section] 312.208, 312.211, and
7-5 312.212 for an agreement made under Subchapter B.
7-6 SECTION 13. (a) The comptroller and the Texas Department of
7-7 Commerce shall coordinate the transfer of the administration of the
7-8 central registry of reinvestment zones and of ad valorem tax
7-9 abatement agreements consistent with this Act. The transfer of
7-10 administration from the Texas Department of Commerce to the
7-11 comptroller shall occur as soon as practicable on or after the
7-12 effective date of this Act.
7-13 (b) The transfer required by Subsection (a) of this section
7-14 includes files and related materials used by the Texas Department
7-15 of Commerce.
7-16 SECTION 14. As soon as practicable on or after the effective
7-17 date of this Act, the attorney general shall transfer to the
7-18 comptroller the copies of the reports by governing bodies of
7-19 municipalities on the status of reinvestment zones consistent with
7-20 this Act.
7-21 SECTION 15. The executive director of the Texas Department
7-22 of Commerce shall designate the members of the Property Tax
7-23 Abatement Advisory Committee as soon as practicable on or after the
7-24 effective date of this Act.
7-25 SECTION 16. (a) Except as provided by Subsection (b) of
7-26 this section, this Act applies only to a tax abatement agreement
7-27 entered into on or after the effective date of this Act. A tax
7-28 abatement agreement entered into before the effective date of this
7-29 Act is governed by the law as it existed immediately before the
7-30 effective date of this Act, and that law is continued in effect for
7-31 that purpose.
7-32 (b) Subsection (c), Section 11.45, and Subsection (e),
7-33 Section 312.402, Tax Code, as amended by this Act, and Subsection
7-34 (j), Section 11.43, and Sections 312.211, and 312.212, Tax Code, as
7-35 added by this Act, apply to a tax abatement agreement entered into
7-36 before, on, or after the effective date of this Act.
7-37 (c) This Act applies only to ad valorem taxes imposed on or
7-38 after January 1, 1998.
7-39 SECTION 17. This Act takes effect September 1, 1997.
7-40 SECTION 18. The importance of this legislation and the
7-41 crowded condition of the calendars in both houses create an
7-42 emergency and an imperative public necessity that the
7-43 constitutional rule requiring bills to be read on three several
7-44 days in each house be suspended, and this rule is hereby suspended.
7-45 * * * * *