LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session March 13, 1997 TO: Honorable Kenneth Armbrister, Chair IN RE: Senate Bill No. 935 Committee on State Affairs By: Madla Senate Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on SB935 ( Relating to the financing of community venues and related infrastructure in certain municipalities or counties; authorizing the imposition of certain local taxes and the issuance of local bonds; providing penalties.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB935-As Introduced Implementing the provisions of the bill could result in a negative fiscal impact to the State under the various possible scenarios. The bill would amend the Local Government Code by adding two additional chapters relating to community venues and community venue districts. The new chapters would authorize cities or counties (or a combination) to build community venues, to levy certain taxes, and to issue bonds to finance the facilities. A "community venue" would be defined as an arena, coliseum, stadium, or other type of facility for which a fee for admission to community, athletic, and promotional events, including rodeos, livestock shows, agricultural expositions, and other civic, charitable, or promotional events, is charged or is planned to be charged. The first new chapter, relating to community venues, would only apply to a county with a population of less than 1.5 million and a municipality located in such a county. A "community venue project" would be defined as a community venue and the related infrastructure that was planned, acquired, established, developed, constructed, or renovated under the provisions of the bill. Related infrastructure would include any store, restaurant, concession, parking or transportation facility, road, street, water or sewer, or other improvement, either on-site or off-site--that related to and enhances the use, value, or appeal of a community venue, and any other expenditure that was reasonably necessary to construct, improve, renovate, or expand a community venue. A municipality or county could use the provisions of this bill for a community venue project constructed under other law, including Section 4B of the Development Corporation Act of 1979 or Subchapter E, Chapter 451 of the Transportation Code. Before calling an election on a resolution providing for the development or construction of a stadium, a municipality or county would be required to obtain from the Comptroller a determination that the implementation of the resolution would not have a negative fiscal impact on the state. Within 15 days of receipt of the resolution, the Comptroller would be required to perform an analysis to determine the fiscal impact on the state and to provide the municipality or county with a written notice of the results. No response from the Comptroller would be considered to mean that there would be no negative fiscal impact on the state. If the Comptroller found that a resolution would have a negative fiscal impact on the state, a municipality or county could contest the finding by filing an appeal with the Comptroller, or by asking the Comptroller to provide information on how to change the resolution to avoid the negative fiscal impact. Within 11 days of receipt of either an appeal or request for assistance, the Comptroller would be required to reply with either the results of a new analysis or with the assistance that had been requested. If the new analysis also found a negative fiscal impact on state revenue, the Comptroller would include information on how to change the resolution so as to avoid a negative fiscal impact. No response from the Comptroller would be considered to mean that there would be no negative fiscal impact on the state. If the Comptroller determined that a resolution would have no negative fiscal impact on the state, a municipality or county could call an election on the proposed community venue project. Once approved by a majority of the voters, a municipality or county could proceed with the planning, acquisition, establishment, development, construction, or renovation of a community venue project. The bill would state that a community venue project would be owned, used, and held for public purposes by the municipality or county. While a facility was owned by a local government it would not be subject to property taxation. Several local-option taxes would be authorized by this bill: A short-term motor vehicle rental tax. Municipalities and counties would be authorized to levy a tax on the rental, of 30 days or less, of motor vehicles. The tax would be levied in increments of one-eighth of one percent, not to exceed a maximum rate of 10 percent. An admissions tax and a parking tax. A tax on each person admitted to an event at a community venue project could be levied at a rate not to exceed $1 per person. A tax on each motor vehicle parked in a facility of a community venue project could be levied at an amount not to exceed $0.50 per vehicle. The second new chapter, would allow the creation of "community venue districts." These districts would be combinations of municipalities and counties. The provisions of this chapter would only apply to: a county with a population of less than 1.5 million; a municipality located in such a county; a county adjacent to such a county; and a municipality located in a county adjacent to a county with a population of less than 1.5 million. The districts could consist of two or more counties, two or more municipalities, or one or more municipality and one or more county. Such districts would become a political subdivision of the state. These districts would operate in the same manner as municipalities or counties with regard to community venues and community venue projects, subject to the same determination of fiscal impact on the state by the Comptroller. The districts would be allowed to impose the same local option taxes discussed above and in the same manner. A district would not be allowed to impose an ad valorem tax. A district could use the provisions of this bill for a community venue project originated under other law, including Section 4B of the Development Corporation Act of 1979 or Subchapter E, Chapter 451 of the Transportation Code. The bill would state that the a community venue project would be owned, used, and held for public purposes by the district. While a facility was owned by a district it would not be subject to property taxation. 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. 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. Fiscal Impact The fiscal impact on the state and on local governments would vary depending on which cities, counties, or districts would choose to form community venue projects and/or districts, and, of those, what taxes would be enacted under the provisions of this bill. The bill would likely have a negative fiscal impact on the state under the various scenarios possible under the bill. Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. Source: Agencies: 304 Comptroller of Public Accounts LBB Staff: JK ,JD ,SM