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