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