LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  May 21, 1997
         
         
      TO: Honorable James E. "Pete" Laney            IN RE:  House Bill No. 92, As Passed 2nd House
          Speaker of the House                Brimer/et al.
          House of Representatives
          Austin, Texas
         
         
         
         
         FROM:  John Keel, Director    
         
In response to your request for a Fiscal Note on HB92 ( Relating 
to the financing of sports and community venues and related 
infrastructure; authorizing the imposition of certain local 
taxes and the issuance of local bonds; providing penalties.) 
this office has detemined the following:
         
         Biennial Net Impact to General Revenue Funds by HB92-As Passed 2nd House
         
The probable net fiscal impact to General Revenue Related funds 
is zero.  The Comptroller must determine that implementation 
of the bill's provisions will not have a significant negative 
fiscal impact.
         

         
 
Fiscal Analysis
 
The bill would amend the Local Government Code by adding two 
additional chapters: sports and community venues, and sports 
and community venue districts.  The new chapters would authorize 
cities or counties (or a combination) to build venues, levy 
certain taxes, and issue bonds to finance the stadiums.

A 
venue would be defined as an arena, coliseum, stadium, or other 
type of facility that was used, or planned for use for one or 
more professional or amateur sports events, community events, 
or other sports events, including rodeos, livestock shows, agricultural 
expositions, promotional events, and other civic or charitable 
events, and for which a fee for admission was charged or planned 
to be charged.  Also included in the definition of "venue" would 
be convention centers, auditoriums, theaters, museums, aquariums, 
certain tourist development areas, or any other economic development 
projects authorized by other law. 

A venue project would 
be defined as a venue, and the related infrastructure, that 
was planned, acquired, established, developed, constructed, 
or renovated under the provisions of the bill.  Related infrastructure 
would include any store, restaurant, on-site hotel, parking 
or transportation facility, road, street, water or sewer, or 
other improvement, either on-site or off-site, that would relate 
to and enhance the use, value, or appeal of a venue, and any 
other expenditure that was reasonably necessary to construct, 
improve, renovate, or expand a venue.  A municipality or county 
could use the provisions of this bill for a venue project originated 
under other law, including Section 4B, Development Corporation 
Act of 1979 or Subchapter E, Chapter 451 of the Transportation 
Code.

The Sports and Community Venue chapter of the Local 
Government Code would apply to a municipality with a population 
of more than 1.2 million and to a county with a population of 
more than 2.2 million only if the municipality and county create 
a venue district under the Sports and Community Venue District 
chapter of the Local Government Code.  A county, however, with 
a population of over 2.8 million could not use taxes on real 
or personal property for the operation, maintenance, renovation, 
or repair of certain venues.  

Before calling an election 
on a resolution providing for the development or construction 
of a stadium, a municipality or county would obtain from the 
Comptroller a determination that the implementation of the resolution 
would not have a significant negative fiscal impact on the state. 
 Within 15 days of receipt of the resolution, the Comptroller 
would be required to perform an analysis to determine the fiscal 
impact on the state and to provide the municipality or county 
with a written notice of the results.  Upon a finding that implementation 
would result in a significant negative fiscal impact on state 
revenue, the written notice of results would include information 
on how to change the resolution so as to avoid the significant 
negative fiscal impact.  No response from the Comptroller would 
be considered to mean that there would be no significant negative 
fiscal impact on the state.  

If the Comptroller found that 
a resolution would have a significant negative fiscal impact 
on the state, a municipality or county could contest the finding 
by filing an appeal with the Comptroller.  Within 11 days of 
receipt of an appeal, the Comptroller would be required to reply 
with the results of a new analysis.  If it was again found that 
implementation would result in a significant negative fiscal 
impact on state revenue, the written notice of the results of 
the new analysis would include information on how to change 
the resolution so as to avoid the significant negative fiscal 
impact.  No response from the Comptroller would be considered 
to mean that there would be no significant negative fiscal impact 
on the state. 

If the Comptroller determined that a resolution 
would have no significant negative fiscal impact on the state, 
a municipality or county could call an election on the proposed 
venue project.  Voters would vote for or against the authorization 
of a venue project and the imposition of one or more local taxes 
to be used to finance the project.

Further, and very similar 
to the Comptroller's determination of state impact process, 
if a resolution contained a sales and use tax and that tax would 
reduce the tax rate of a rapid transit authority, the authority 
would perform an analysis to determine if a reduction in their 
tax rate would have a significant fiscal impact on the authority's 
ability to provide services or impair any existing contracts.

Once 
approved by a majority of the voters, a municipality or county 
could proceed with the planning, acquisition, establishment, 
development, construction, or renovation of a venue project. 
 A municipality or county would be authorized to contract with 
persons (both public and private), including a sports team, 
club, or organization, to do this.  Competitive bidding laws 
would not apply to venue projects.  No ad valorem taxes could 
be used by municipalities or counties to plan, acquire, establish, 
develop, construct, or renovate an approved venue project.

A 
municipality or county in which a venue project had been established 
would be required to establish a Venue Project Fund (fund). 
 Into the fund would be deposited the proceeds from any taxes 
levied under the provisions of this bill, proceeds from bonds 
sold to finance a venue, and any other monies required by law 
to be deposited into the fund.  Proceeds from the sale of luxury 
boxes, seat licenses, stadium rental payments, or concessions 
or parking could be deposited into the fund. 

Money in the 
fund could be used by a municipality or county to pay for the 
cost of developing or constructing a venue project; the principal, 
interest, and other costs of bonds issued; or the operation 
or maintenance of a venue project.  

The bill would state 
that a venue project would be owned, used, and held for public 
purposes by the municipality or county.  While a facility was 
owned by a local government it would not be subject to property 
taxation.  If the implementation of a resolution resulted in 
a loss of school property tax, the operator of the venue located 
on the affected property would pay to the school district an 
amount, annually, equal to the amount of school property taxes 
that otherwise would have been paid.  This provision, however, 
would not apply to a venue operator that was a political subdivision 
of this state.  

Several local option taxes would be authorized 
under the provisions of this bill:

A sales and use tax.  
A municipal sales tax would be governed by the Municipal Sales 
and Use Tax Act, except as inconsistent with the bill.  Similarly, 
a county sales tax would be governed by the County Sales and 
Use Tax Act, except as inconsistent with the bill.  The sections 
of both addressing a maximum local sales tax rate of 2 percent 
would apply. Imposition in a city or county where certain other 
sales taxes are levied--transit authority, crime control district, 
or industrial development (4A or 4B)--would be allowed, but, 
if necessary, the rate of one of these other entity sales taxes 
would be reduced so as to keep the total local rate less than 
or equal to 2 percent.   In a city or county, however, in a 
regional transportation authority (Chapter 452 of the Transportation 
Code) an election to enact this sales tax would be treated as 
an election to withdraw from the authority.  Similarly, in areas 
in a rapid transit authority created under Chapter 451 of the 
Transportation Code, an election to withdraw from the authority 
would be held before the imposition of this sales and use tax. 
 If withdrawal is not authorized, the sales tax could not be 
enacted. 


Municipalities and counties would be authorized 
to levy the tax at a variety of rates not exceeding 0.5 percent. 
 Revenue from the tax would be deposited into the new Venue 
Project Fund.  The tax would be abolished once all bonds issued 
to finance a venue project had been paid in full, or the necessary 
amount of money to do so had been set aside in a trust account.

A 
short-term motor vehicle rental tax.  Municipalities and counties 
would be authorized to levy a tax on the rental, of 30 days 
or less, of motor vehicles.  Motor vehicles would include passenger 
cars, vans, station wagons, sport utility vehicles, and trucks. 
 The tax would be imposed in increments of one-eighth of 1 percent, 
not to exceed 5 percent.  

The owner of the rental car would 
be required to collect the taxes due under this bill and remit 
them to the appropriate local government.  The tax could only 
be levied if bonds had been issued for a venue project, and 
it would cease to be imposed upon the retirement of that debt. 
 Revenue from the tax would be deposited into the new Venue 
Project Fund.

An admissions tax and a parking tax.  A tax 
on each ticket sold to an event at a sport venue project could 
be levied at a rate not to exceed 10 percent.  A tax on each 
motor vehicle parked in a facility of a sport venue project 
could be levied at an amount not to exceed $3 per vehicle.  
The owner of the project, or owner or lessee of the parking 
facility would be required to collect the tax and remit the 
revenue to the appropriate local government.  The tax could 
only be levied if bonds had been issued for a venue project, 
and it would cease to be imposed upon the retirement of that 
debt.  Revenue from the tax would be deposited into the new 
Venue Project Fund.

A hotel occupancy tax.  Certain municipalities 
or counties would be authorized to impose a tax on a person 
who paid for the use of a room that is in a hotel, that costs 
$2 or more each day, and that is ordinarily used for sleeping. 
 

Certain sections of the Municipal Hotel Occupancy Tax and 
the County Hotel Occupancy Tax chapters of the Tax Code would 
be applicable.  A tax rate not to exceed 2 percent would be 
authorized. The tax could only be levied if bonds had been issued 
for a venue project, and it would cease to be imposed upon the 
retirement of that debt.  Revenue from the tax would be deposited 
into the new Venue Project Fund.

A facility use tax.  A tax 
on each member of a major league professional sports team that 
played a professional sports game in a venue project would be 
authorized.  The tax rate could not exceed $5,000 per game. 
 The owner or lessee of the project would be required to collect 
the tax and remit the revenue to the appropriate local government. 
 The tax could only be levied if bonds had been issued for a 
venue project, and it would cease to be imposed upon the retirement 
of that debt.  Revenue from the tax would be deposited into 
the new Venue Project Fund.

Athletic events in certain municipalities. 
 Municipalities with a population in excess of 500,000 located 
in a county bordering the United Mexican States would be allowed 
to imposed a tax on the short-term rental of motor vehicles 
for the purpose of operating or paying costs associated with 
a post-season intercollegiate football bowl game.

Sports 
and Community Venue Districts--combinations of municipalities 
and counties--would be allowed by this bill.  The districts 
could consist of a county or municipality, two or more counties, 
two or more municipalities, or a combination of municipalities 
and a counties, and such districts would become a political 
subdivision of the state.  These districts would be able to 
do the same things as municipalities or counties with regard 
to venues and venue projects, subject to the same determination 
of fiscal impact on the state by the Comptroller and, if necessary, 
the local transit authority.  

The districts would be allowed 
to impose the same local option taxes discussed above and in 
the same manner.  A district would not be allowed to impose 
an ad valorem tax.  A district could use the provisions of this 
bill for a venue project originated under other law, including 
Section 4B, Development Corporation Act of 1979, or Subchapter 
E, Chapter 451 of the Transportation Code.  A district would 
have the right and power of eminent domain.   

The bill would 
amend the Development Corporation Act of 1979 to provide that 
cities that create or have created corporations under either 
Section 4A or 4B of that act would be allowed to submit a proposition 
to voters authorizing the use of 4A or 4B sales tax revenue 
for specific projects, including sports venues.

A municipality 
would be allowed to contribute or dedicate up to 25 percent 
of the sales tax revenue received by the municipality to pay 
for all or part of the costs of one or more venue projects in 
the municipality.  The contribution or dedication would be subject 
to voter approval.  A municipality dedicating sales tax in such 
a manner could direct the Comptroller to deposit the pledged 
revenue to a trust or account.  

The changes in law that 
would be made by the bill would not apply to the use of tax 
revenue pledged to secure bonds issued before the effective 
date of this bill.  Also, the bill would not affect the authority 
of a municipality that had created an industrial development 
corporation, before the effective date of this bill, to continue 
collecting any tax authorized for the benefit of the corporation, 
or to continue any project or projects, before that date.

Notwithstanding 
any other provision of the bill, an election to approve a project, 
approve financing for a project (other than a sales tax or a 
facility use tax), or to create a district would not be necessary 
if, at an election held before the effective date of this bill, 
voters of an affected county authorized the establishment of 
new or renovated stadiums for professional sports teams.   

Notwithstanding 
any other provision of the bill, a Comptroller fiscal analysis 
would not be required if, at election held before this bill 
takes effect, voters approved of the establishment of stadiums 
for professional sports teams.

The bill would take effect 
immediately upon enactment, assuming that it received the requisite 
two-thirds majority votes in both houses of the Legislature. 
 Otherwise, it would take effect 90 days after adjournment.
 
Methodolgy
 
The fiscal impact on the state and local governments would vary 
depending on which cities and counties would form authorities 
and, of those, what taxes the authorities would choose to enact 
under the provisions of this bill.  The fiscal impact on local 
governments would depend on the local option taxes that a locality 
chose to impose and that a majority of the local voters approved.

The 
fiscal impact on the state and on local governments in reduced 
property tax revenue would vary depending on which cities and 
counties enacted the provisions of the bill and converted taxable 
property to exempt "public-use" property.  Section 334.044 of 
the bill provides a property tax exemption for all approved 
sports venue projects owned, used, and held by a municipality 
or county.  The exemption is based on a provision that defines 
all such facilities as "public-use" property which is exempt 
from ad valorem taxation.  In addition, the bill would specifically 
exempt all leasehold or other possessory interest granted by 
the municipality or county while the municipality or county 
owns the project.
 
The bill would require an operator of 
an approved venue project to pay to a local school district 
an amount equal to the ad valorem taxes that would otherwise 
have been levied for the preceding year on the subject venue 
property, without including the value of any improvements.  
This would be payable to the district on January 1 of each year 
in which the project is in operation and in which the real property 
is exempt from ad valorem taxation.  This section does not apply 
if the operator of the project is a political subdivision of 
this state.  This section would have no effect on the calculation 
of state aid for public education.

Section 403.302, Government 
Code, requires the Comptroller to conduct a property value study 
to determine the total taxable value for each school district. 
 Total taxable value is an element in the state's school funding 
formula.  Passage of the bill could cause a reduction in a school 
district's taxable values reported to the Commissioner of Education 
by the Comptroller.

When calculating state aid for public 
education, the state must recognize the loss in local property 
value due to exemptions granted to qualified organizations within 
the school district.  Depending on a school district's wealth 
per student, this could result in an increased cost to state-funded 
public education.

The economic benefits of the type of developments 
authorized by the provisions of the bill should be positive 
over time. However, no estimate of the secondary economic benefits 
have been calculated. 

The bill provides that a vote on project 
approval, project financing (excepting a sales tax or a facilities 
use tax), or district creation would not be necessary if voters, 
prior to the effective date of this bill, approved the establishment 
of new or renovated stadiums for professional sports teams. 
 A referendum on stadium construction in Harris County was passed 
in November 1996.  

It is possible to provide examples of 
what the impact might be for a city in Texas if that city were 
to impose the local option sales tax at certain rates to finance 
a venue project pursuant to the provisions of the bill.  This 
analysis, provided here for illustrative purposes, assumes the 
imposition of a short-term motor vehicle rental tax and a hotel 
occupancy tax, by a joint City of Houston/Harris County Authority, 
each with an effective date of October 1, 1997.  This analysis 
further assumes rates of 5 percent for the short-term motor 
vehicle rental tax and 2 percent for the hotel occupancy tax.
The probable fiscal implications of implementing the provisions 
of the bill during each of the first five years following passage 
is estimated as follows:
 
Five Year Impact:
 
Fiscal Year Probable Revenue   
            Gain/(Loss) to a                                                                              
            City of                                                                                       
            Houston/Harris                                                                                
            County Authority                                                                              
            LOCAL                                                                                          
       1998       $19,713,000                                                                        
       1998        25,170,000                                                                        
       2000        26,784,000                                                                        
       2001        28,506,000                                                                        
       2002        30,342,000                                                                        
 
 
         Net Impact on General Revenue Related Funds:
 

 
              Fiscal Year      Probable Net Postive/(Negative)
                               General Revenue Related Funds
                                             Funds
               1998                   $0
               1999                    0
               2000                    0
               2001                    0
               2002                    0
 
Similar annual fiscal implications would continue as long as 
the provisions of the bill are in effect.
          
   Source:            Agencies:   304   Comptroller of Public Accounts
                                         304   Comptroller of Public Accounts
                                         
                      LBB Staff:   JK ,JD ,SM