LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  March 11, 1997
         
         
      TO: Honorable David Sibley, Chair            IN RE:  Senate Bill No. 293
          Committee on Economic Development                              By: Carona
          Senate
          Austin, Texas
         
         
         
         
         FROM:  John Keel, Director    
         
In response to your request for a Fiscal Note on SB293 ( Relating 
to the authority of a municipality to create an industrial development 
corporation and to levy a sales and use tax to carry out the 
projects of the corporation.) this office has detemined the 
following:
         
         Biennial Net Impact to General Revenue Funds by SB293-As Introduced   FN Revision 1
         
Implementing the provisions of the bill could result in negative 
fiscal impacts under the various scenarios possible.
         

         
 
The bill would amend the Development Corporation Act of 1979. 
 Under current law, Section 4B defines an eligible city as a 
city in a county with a population of more than 1,100,000, in 
which there are more than 40 incorporated cities, and where, 
in no area, does the combined state and local sales tax rate 
exceed 7.75 percent.  This definition of an eligible city is 
due to expire on September 1, 1997.  The bill would remove the 
expiration date provision.  

The bill would change the definition 
of an eligible city by reducing the number of required incorporated 
municipalities from 40 to 29. 

Note:  This bill would become 
effective immediately upon enactment, assuming that it received 
the requisite two-thirds majority votes in both houses of the 
Legislature.  Otherwise, it would become effective 90 days after 
adjournment.

Methodology

This bill could apply to those 
cities in four counties--Harris, Dallas, Bexar, and Tarrant--that 
do not have a total combined state and local sales tax rate 
exceeding 7.75 percent.  

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," 
 as allowed under Section 4B.
 
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 enacted taxes under the provisions of the bill.

The 
fiscal impact on the state would likely be negative under many 
scenarios possible under the bill.

The probable fiscal implications 
of the bill would continue as long as the provisions of the 
bill are in effect.
          
   Source:            Agencies:   304   Comptroller of Public Accounts
                                         
                      LBB Staff:   JK ,TH ,SM ,BR ,TL