LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
May 1, 1997
TO: Honorable Kim Brimer, Chair IN RE: House Bill No. 92, Committee Report 1st House, Substituted
Committee on Business & Industry By: Brimer/et al.
House
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on HB92 ( Relating
to the financing of sports venues 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-Committee Report 1st House, Substituted FN Revision 2
The probable net impact to General Revenue Related funds is
zero. The Comptroller must determine that implementation of
the provisions of the bill 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 is 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 is 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.
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 have to 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 either an appeal, the Comptroller would
be required to reply with the results of a new analysis. If
it is 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.
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 an approved venue project. 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. In addition, the deposit
of proceeds from the sale of luxury boxes, seat licenses, stadium
rental payments, or concessions or parking would be allowed.
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
states 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.
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 10 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.
A hotel occupancy
tax. A municipality or county 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
5 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.
An
admissions tax and a parking tax. A tax on each person admitted
to an event at a sport venue project could be levied at a rate
not to exceed $2 per person. A tax on each motor vehicle parked
in a facility of a sport venue project could be levied at an
amount not to exceed $1 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 facility
use tax. A tax on each member of a major league professional
sports team that plays 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.
Sports and
Community Venue Districts--combinations of municipalities and
counties--would be allowed by this bill. The districts could
consist of two or more counties, two or more municipalities,
or a municipality and a county, 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.
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.
The bill would amend the Development Corporation Act
of 1979 to provide that Section 4A of that act could not be
used to undertake a project like a venue project. Section 4B
could be used, but only if the athletic facility did not qualify
as a venue.
A municipality that created a district would
be allowed to contribute or dedicate, to the district, sales
tax revenue received by the municipality and generated, paid,
or collected by any or all businesses operating in a venue project.
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 venue
project, to approve a method of financing a venue project (other
than a sales and use tax), or to create a sports and community
venue district in a specific city or county would not be necessary
if the voters of that county had authorized the establishment
and operation of stadiums for professional sports teams before
the effective date of this bill. On October 1, 1997, there
would be imposed a short-term motor vehicle rental tax and a
hotel occupancy tax in such a district as described above.
A Comptroller fiscal analysis would not be required in such
an instance.
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.
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.
Local Option Tax:
Houston
Dallas San Antonio
Sales Tax
@ 1/2 cent $106,956,000
$69,498,000 $42,986,000
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 taxes. In addition, the bill specifically exempts 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, as follows.
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.
As a referendum on stadium construction
was passed in November 1996, this analysis assumes that a City
of Houston/Harris County Authority would impose a short-term
motor vehicle rental tax and a hotel occupancy tax to go into
effect on October 1, 1997, as per Section 7(b) of the bill.
This analysis 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
on a joint City of Houston/Harris County authority 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:
The probable fiscal implication to General Revenue related funds
during each of the first five years is estimated as zero.
Fiscal Year Probable Net Postive/(Negative)
General Revenue Related Funds
Funds
1998 $0
1999 0
2000 0
2001 0
2002 0
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. Similar annual fiscal implications of the
bill would continue as long as the provisions of the bill are
in effect.
Source: Agencies: 304 Comptroller of Public Accounts
LBB Staff: JK ,TH ,BR ,SM