LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session April 18, 1997 TO: Honorable Tom Craddick, Chair IN RE: House Bill No. 846, Committee Report 1st House, Substituted Committee on Ways & Means By: King House Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on HB846 ( Relating to the exemption from ad valorem taxation of public property.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by HB846-Committee Report 1st House, Substituted 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. FISCAL ANALYSIS The bill would amend Section 11.11 of the Tax Code to provide that, for property tax purposes, property is owned by the state or a political subdivision of the state if it is subject to a lease-purchase agreement containing a provision that legal title passes to the state or to a political subdivision at the end of the lease term. This status would expire if the state or political subdivision did not exercise their right to acquire legal title to the property within 30 days after the lease expires. Current law provides a property tax exemption only for property owned by the state or a political subdivision of the state and used for a public purpose. The bill would take effect January 1, 1998. LOCAL There would be a tax revenue loss to local governments that currently tax property under lease-purchase agreements, depending on the incidence of these types of purchase arrangements. Source: Agencies: LBB Staff: JK ,RR ,BR