LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session April 4, 1997 TO: Honorable David Sibley, Chair IN RE: Senate Bill No. 1557, Committee Report 1st House, Substituted Committee on Economic Development By: Sibley Senate Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on SB1557 ( Relating to certain contributions and tax abatement agreements of a school district for the support of reinvestment zones.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB1557-Committee Report 1st House, Substituted Impleming the provisions of the bill could result in a net POSITIVE impact to General Revenue Related Funds through the biennium ending August 31, 1999 to the entent that state would save money for the Foundation School Program. FISCAL ANALYSIS The bill would provide that tax increment financing agreements or tax abatement agreements approved before September 1, 1997 could not be amended on or after September 1, 1997 to increase a school district's payments. The bill would take effect September 1, 1997 and would only apply to a reinvestment zone or project plan created enlarged, or modified on or after that date. METHODOLOGY Section 403.302 of the Government Code allows school districts' taxable values computed for state funding purposes to be reduced for property values subject to tax increment financing agreements under Chapter 311 Tax Code. It does not allow districts' values to be reduced for property value lost to tax abatement agreements entered into after May 31, 1993 under Chapter 312 of the Tax Code. Removal of school districts from tax increment financing agreements would save money for the Foundation School Program. However, the amount of state savings cannot be estimated because it is not known how many school districts would enter into tax increment financing agreements after September 1, 1997, or the value of property that might be located in those reinvestment zones. For purposes of illustration, the amount of school district value in reinvestment zones was approximately $243 million in the 1996 tax year. This amount was deducted from the districts' values used for state funding purposes. The $243 million lost to reinvestment zones generated a levy loss to those school districts of approximately $3.4 million. To the extent that local school districts are restricted from entering tax abatement or tax increment financing agreements, local revenue could increase for those district's who do not receive state public education funding due to current funding formulars. Source: Agencies: LBB Staff: JK ,TH ,BR