LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
April 24, 1997
TO: Honorable Fred M. Bosse, Chair IN RE: House Bill No. 2363, Committee Report 1st House, Substituted
Committee on Land and Resource Management By: Hilbert
House
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on HB2363 ( Relating
to the provision of services in certain annexed areas.) this
office has detemined the following:
Biennial Net Impact to General Revenue Funds by HB2363-Committee Report 1st House, Substituted
No fiscal implication to the State is anticipated.
Neither the changes to public hearing requirements proposed
by the bill nor the costs to municipalities associated with
preparing more detailed service plans are expected to result
in significant fiscal impacts.
Requiring municipalities
to provide full municipal services to annexed areas within two
years would, in some cases, require a municipality to make capital
outlays within a shorter time frame than required by current
law, thereby increasing the amount of interest a municipality
would pay over the life of a capital improvements project.
In some cases, this shortened time frame would render certain
annexations unfeasible, since major capital improvement projects
often require more than two years of construction.
Municipalities
could see increased costs associated with providing services
equal to or better than those existing before annexation, depending
on the nature of services provided and the municipality's determination
of the necessity of such services. For example, if a municipality
which normally provides solid waste collection services only
once per week annexed an area with collections twice weekly,
the municipality would be required to make additional allocations
in the newly annexed area to maintain previous levels of service.
The
requirement that an annexation service plan provide for the
same services as provided before annexation by any entity could,
in some cases, result in significant negative fiscal implications,
depending on the type of service that would need to be provided.
In some cases, this could render certain annexations which
would otherwise yield net revenues to a municipality cost-prohibitive.
Likewise, the removal of the exceptions for providing fewer
or lower levels of service to areas with unique land uses, topography
and densities could increase the cost of annexing outlying areas,
since such areas would require the same services as any other
section of the municipality. For example, this could require
that a municipality provide a low-density residential area with
the same level of street lighting as provided in a municipality's
central business district. It could also require that water
and sewer service be provided to areas where, due to topography
or density, the provision of such services would be determined
to be cost-prohibitive.
The bill's requirement that an outside
engineer prepare a cost estimate for implementation of a municipality's
service plan could result in significant costs to a municipality,
depending on the detail and use of additional consultants such
a study would require for a particular area.
There could
be some costs associated with performance bonding requirements
to ensure the implementation of an annexation plan. This cost
would depend on the cost of infrastructure included in the plan.
The City of Corpus Christi estimates that the fee for such
a bond would cost 1.5 percent of costs covered by the performance
bond.
The cost associated with a municipality paying a service
provider whose property is condemned or rendered useless by
the municipality after annexation would depend on whether a
municipality chose to utilize all equipment and property of
such previous service providers, and the value of such property.
In cases where a municipality determined that substantial portion
of such property was not needed, the cost to municipalities
could be substantial.
There would be some cost associated
with mailing notice of intent to begin arbitration on the question
of service plan deficiency, if a municipality receives a petition
claiming the service plan is deficient, but the municipality
disagrees with the claim. Because it would require signatures
from only 10 percent of voters in an area to be annexed to validate
a petition on the question of service plan deficiency, it is
possible that a municipality would be required to submit the
question to an arbitration panel on a majority of annexation
proposals. This could add administrative costs to such annexations.
The
bill requires that: an account be created in the municipal
treasury for each area a municipality annexes; at least 50 percent
of property tax revenues collected from the annexed area be
deposited into such an account; and such funds be used only
for purposes which directly benefit the area. This would entail
additional accounting costs for municipalities, which would
increase with each additional annexation, since such accounts
would have to be maintained and administered indefinitely, even
for annexed areas which produce relatively insignificant amounts
of revenue from property taxes.
Any decision by an arbitration
panel ordering an area disannexed would have significant negative
fiscal implications to the municipality ordered to disannex,
since the bill would require such a municipality to pay $25,000
per day for each day the municipality is found to have failed
to perform its service plan obligations.
A municipality's
ability to expand its tax base through annexation could be severely
limited by this bill. The City of Austin anticipates that,
overall, this bill would have the effect of rendering any future
annexations cost-prohibitive.
Source: Agencies:
LBB Staff: JK ,BB ,TL