LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session February 23, 1997 TO: Honorable Eddie Lucio, Jr., Chair IN RE: Senate Bill No. 236, Committee Report 1st House Committee on Intergovernmental Relations By: Lindsay Senate Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on SB236 ( Relating to the right of voters in a municipality to participate in municipal elections.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB236-Committee Report 1st House No fiscal implication to the State is anticipated. This bill would prohibit a municipality from holding certain municipal elections and imposing taxes in a newly annexed area for 120 days after the annexation is approved, or until Voting Rights Act clearance is received from the United States Department of Justice. The extent to which this bill would have fiscal impact on local governments would depend on the timing of annexations and the amount of tax to be collected in a newly annexed area. Since property taxes are generally assessed on January 1 of each year, and areas not assessed on that day are not subject to property tax until the following year, some cities would opt only to annex in the first eight months of the year and only at least 120 days before a scheduled election. Consequently, such cities would not be able to collect sales and occupancy tax revenues during the initial period (until the voters in the area are certified) in the first year of the annexation, and could therefore lose roughly 25 percent to 33 percent of annual sales and occupancy tax revenues generated in the newly annexed area. Annexations that are approved in the last four calendar months of any given year could result in the loss of municipal property tax revenues to the municipality for the upcoming year. Whereas a municipality that annexed in November would, under current law, be able to collect property taxes in the following calendar year, this bill would not allow such taxes to be imposed for one more calendar year. Based on data from an annexation of approximately 50,000 residents completed by the City of Houston in December 1996, the City of Houston estimates that it would lose revenues of $9.3 million in the first year following annexation as a result of this bill's enactment, plus an additional loss of $746,000 in sales tax revenues. An annexation this size that did not affect the following year's property taxes could result in lost revenues of $746,000 in the year of the annexation. It is expected that other cities would experience similar impacts in annexations of comparable size. Source: Agencies: 304 Comptroller of Public Accounts LBB Staff: JK ,TL