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
  
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*  No significant fiscal implication to the State is anticipated.        *
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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