LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  March 10, 1997
         
         
      TO: Honorable Tom Craddick, Chair            IN RE:  House Bill No. 846
          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-As Introduced
         
The fiscal impact to 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.  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 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.  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. 

METHODOLOGY
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.
          

LOCAL
There would be an undetermined loss to local governments 
that currently tax property under lease-purchase agreements, 
depending on the incidence of these types of purchase arrangements.
          
   Source:            Agencies:   304   Comptroller of Public Accounts
                                         
                      LBB Staff:   JK ,RR ,BR