LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
March 3, 1997
TO: Honorable Kim Brimer, Chair IN RE: House Bill No. 92
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 related infrastructure;
authorizing the imposition of certain local taxes and the issue
of local bonds; providing penalties.) this office has detemined
the following:
Biennial Net Impact to General Revenue Funds by HB92-As Introduced
Implementing the provisions of the bill could result in negative
fiscal impacts under the various scenarios possible.
Similar annual fiscal implications The bill would amend the
Local Government Code by adding two additional chapters--sports
venues and sports venue districts. The new chapters would authorize
cities or counties (or a combination) to build sports venues,
levy certain taxes, and issue bonds to finance the stadiums.
A
sports venue would be defined as an arena, coliseum, stadium,
or other type of facility that is primarily used, or planned
to be used, for one or more professional or amateur athletic
events and for which a fee for admission is charged, or planned
to be charged. The use of a sports venue for events not related
to athletics, however, would not be prohibited.
A sports
venue project would be defined as a venue--and the related infrastructure--that
is planned, acquired, established, developed, constructed, or
renovated under the provisions of the bill. Related infrastructure
would include any store, restaurant, parking or transportation
facility, road, street, water or sewer, or other improvement--either
on-site or off-site--that relates to and enhances the use, value,
or appeal of a sports venue, and any other expenditure that
is reasonably necessary to construct, improve, renovate, or
expand a sports venue. A municipality or county could use the
provisions of for a sports venue project originated under other
law, including Section 4B, Development Corporation Act of 1979,
if all bonds issued under other law had been paid in full or
the necessary amount of money to do so had been set aside in
a trust account.
Before calling an election on a resolution
providing for the development or construction of a stadium,
a municipality or county would have to obtain from the Comptroller
a determination that the implementation of the resolution would
not have a 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 provide the municipality or county with a written
notice of the results. No response from the Comptroller would
be considered to mean that there would be no negative fiscal
impact on the state.
If the Comptroller found that a resolution
would have a negative fiscal impact on the state, a municipality
or county could contest the finding by filing an appeal with
the Comptroller, or by asking the Comptroller to provide information
on how to change the resolution to avoid the negative fiscal
impact. Within 11 days of receipt of either an appeal or request
for assistance, the Comptroller would be required to reply with
either the results of a new analysis or with the assistance
that had been requested. No response from the Comptroller would
be considered to mean that there would be no negative fiscal
impact on the state.
If the Comptroller determined that
a resolution would have no negative fiscal impact on the state,
a municipality or county could call an election on the proposed
sports venue project. Voters would vote for or against the
authorization of a sports 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 sports 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. If a municipality or county
contracted with a sports team, the local government could not
be a party to subsequent contracts between the team and another
person relating to the project. The competitive bidding laws
would not apply to a contract between a team and another person.
A
municipality or county in which a sports venue project had been
established would be required to establish a sports venue project
fund. Into the fund would be deposited the proceeds from any
taxes levied under the provisions of the bill, proceeds from
bonds sold to finance a sports 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 sports venue project;
the principal, interest, and other costs of bonds issued; or
the operation or maintenance of a sports venue project.
The
bill states that a sports 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.
Several local option taxes
would be authorized under the provisions of the 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 not apply.
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 sports venue project fund. The tax would
be abolished once all bonds issued to finance a sports 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 could not be computed on a percentage basis; it would be
imposed at a given rate per day. The tax rate could not exceed
$2 per day. The owner of the rental car would be required to
collect the taxes due under the bill and remit them to the appropriate
local government, the tax could only be levied if bonds had
been issued for a sports venue project, and it would cease to
be imposed upon the retirement of that debt. Revenue from the
tax would be deposited into the sports venue project fund.
A
hotel occupancy tax. A municipality or county would be authorized
to impose a tax on a person who pays 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 per day would be authorized. The tax could only be levied
if bonds had been issued for a sports venue project, and would
cease to be imposed upon the retirement of that debt. Revenue
from the tax would be deposited into the sports 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 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 sports venue project, and it would cease to
be imposed upon the retirement of that debt. Revenue from the
tax would be deposited into the sports venue project fund.
Sports
venue districts--combinations of municipalities and counties--would
be allowed by the 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 sports venues
and sports 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 the bill for a sports venue project originated under other
law, including Section 4B, Development Corporation Act of 1979,
if all bonds issued under other law had been paid in full or
the necessary amount of money to do so had been set aside in
a trust account.
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 sports venue project.
Section 4B could be used, but only if the athletic facility
did not qualify as a sports venue.
The changes in law which
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 the bill. Also, the bill would not affect the authority
of a municipality that had created an industrial development
corporation, before the effective date of the bill, to continue
collecting any tax authorized for the benefit of the corporation,
or to continue any project or projects, before that date.
Methodology
If
taxes such as those authorized by the bill were to be enacted
by a city, county, or a district, the state might well experience
adverse fiscal effects. For example, if Dallas were to impose
a $5 per day hotel occupancy tax, under the provisions of the
bill, the state of Texas could expect a loss to the state hotel
occupancy tax of approximately $1.5 million per year. This
estimate assumes that hotels would pass all of the tax to consumers,
resulting in higher room prices. The loss to the state would
be due to a combination of lower hotel (and motel) room sales
and increased consumer preference for less expensive rooms than
currently rented.
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 certain taxes
at certain rates to finance a sports venue project pursuant
to the provisions of the bill. The following estimates are
for state fiscal year 1999.
Local Option Tax
Houston
Dallas San Antonio
Sales Tax @ 1/2
cent $106,956,000
$69,498,000 $42,986,000
Motor Vehicle
Rental Tax $5,056,000
$10,716,000 $2,320,000
@
$2 per day
Hotel Occupancy Tax
$33,012,000 $23,270,000
$19,566,000
@ $5 per day
Note: Sales tax
and hotel occupancy tax figures are for the cities of Houston,
Dallas, and San Antonio. The motor vehicle rental estimates
are for the Houston-Galveston-Brazoria CMSA, the Dallas-Ft.
Worth CMSA, and the San Antonio MSA.
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.
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
fiscal impact on the state would depend on the number and amount
of local taxable property removed from the local tax rolls due
to being converted to public-use property, but it is possible
to provide a hypothetical example of such an impact. In a hypothetical
school district that qualifies for both tier-one and tier-two
state aid for public education, it would cost the state one
dollar for each dollar of local school district property tax
revenue loss due to the provisions of the bill. In such a hypothetical
school district in which, for example, $100 million of taxable
property would be converted to public-use property, the probable
cost to General Revenue-related funds during each fiscal year
that the property remained off the local tax rolls would be
$1.5 million, based on a tax rate of $1.50 per $100 of valuation.
Fiscal
Impact
The fiscal impact on the state and on local governments
would vary depending on which cities and counties enacted taxes
under the provisions of the bill.
The fiscal impact on the
state would likely be negative under many scenarios possible
under the bill.
The probable 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 ,SM