LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 76th Regular Session March 30, 1999 TO: Honorable Gary Walker, Chair, House Committee on Land & Resource Management FROM: John Keel, Director, Legislative Budget Board IN RE: HB 1200 by Crabb (Relating to the disannexation of certain areas annexed on or after December 1, 1996, by certain municipalities.), As Introduced ************************************************************************** * No significant fiscal implication to the State is anticipated. * ************************************************************************** Local Government Impact Fiscal Analysis The bill would apply to municipalities with populations over 450,000. It would allow areas annexed on or after December 1, 1996 to petition for an election to disannex such areas from an affected municipality. If the majority of voters would vote for disannexation, the tract in question would be disannexed. The bill also would require an arbitration panel to determine whether the municipality or a reestablished district would be entitled to compensation from the other. The bill could result in a loss of revenues to municipalities that would lose territory as a result of voters petitioning and approving disannexations. The loss would depend on the amount of property tax revenues, sales and use tax revenues, and other fee revenue collected in areas that would be disannexed. There could be some costs to municipalities associated with a disannexation election, since a municipality would be required to pay the costs of a disannexation election. The election cost would depend on the population of the tract considering disannexation. Based on a recent survey of local governments, it is estimated that the median cost of a local election is approximately $.52 per resident. There also could be some costs or revenues to either a municipality or a district, such as a municipal utility district, depending on the decision of an arbitration panel as to whether one entity would be required to compensate the other upon disannexation. The bill would likely limit a municipality's ability to expand its tax base through annexation, since any annexation without the support of the majority of voters in the area could be reversed as a result of the bill's enactment. No significant fiscal implications to counties is anticipated. Methodology It is expected that the bill would only apply to the cities of Houston, San Antonio, El Paso and Austin, since Dallas is substantially land-locked and has not completed any major annexations since December 31, 1996. Each of the affected cities was contacted and asked to estimate the fiscal implications of the bill. Only Austin, Houston and San Antonio were able to provide such estimates for this analysis. Fiscal Impact The City of Austin estimates that the bill could result in a loss of property tax revenue of $10.1 million per year, based on a total loss of taxable property value of $2.0 billion (or 6.1 percent of the total current taxable value in the City of Austin) and a 99 percent collection rate. This estimate is based on the assumption that all of the municipal utility districts that have been annexed since December 1, 1996 would vote to disannex upon passage of the bill. If fewer areas would vote to disannex, the revenue loss could be less. The City of Houston estimates that if the Kingwood area would vote to be disannexed the city would lose revenues of approximately $6 million per year. The City of San Antonio estimates that the bill could result in a negative fiscal impact of $6.2 million per year. Some of the revenue loses incurred by municipalities upon disannexation could be offset by decreased costs since municipal services would no longer be provided in disannexed areas. Source Agencies: LBB Staff: JK, DE, TL