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