LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  March 14, 1997
         
         
      TO: Honorable Rene Oliveira, Chair            IN RE:  House Bill No. 2162
          Committee on Economic Development                              By: Oliveira
          House
          Austin, Texas
         
         
         
         
         FROM:  John Keel, Director    
         
In response to your request for a Fiscal Note on HB2162 ( Relating 
to the administration and financing of certain industrial development 
corporations.) this office has detemined the following:
         
         Biennial Net Impact to General Revenue Funds by HB2162-As Introduced
         
The bill would make no appropriation but could provide the legal 
basis for an appropriation of funds to implement the provisions 
of the bill.

The bill would amend the Development Corporation 
Act of 1979 (act) to provide additional flexibility to municipalities 
with industrial development corporations. 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.
         
METHODOLOGY

The fiscal impact on the state and on local governments 
in reduced property tax revenue would vary depending on which 
cities enacted the provisions of the bill and converted taxable 
property to exempt "public-use property."  Article 5190.6, Development 
Corporation Act, Section 4B. (k) provides a property tax exemption 
for all approved projects owned, used and held by an eligible 
municipality.  The exemption is based on a provision that defines 
all such projects as "public-use property" which is exempt from 
ad valorem taxes.
 
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.
          
   Source:            Agencies:   
                                         304   Comptroller of Public Accounts
                                         465   Department of Commerce
                      LBB Staff:   JK ,TH