LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 76th Regular Session
  
                                May 6, 1999
  
  
          TO:  Honorable Rene Oliveira, Chair, House Committee on Ways &
               Means
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HJR39 by Craddick (proposing a constitutional amendment
               to exempt from ad valorem taxation certain tangible
               personal property held temporarily at certain locations
               for assembling, manufacturing, processing, or other
               commercial purposes), Committee Report 1st House,
               Substituted
  
**************************************************************************
*  No significant fiscal implication to the State is anticipated,        *
*  other than the cost of publication. The cost to the state for         *
*  publication of the resolution is $76,352.                             *
*                                                                        *
*  Passage of this constitutional amendment could cause a decrease in    *
*  school district taxable values, resulting in an increase in state     *
*  public education cost.                                                *
**************************************************************************
  

Fiscal Analysis

The resolution would propose a constitutional amendment to provide for a
new exemption for "goods in transit."

The exemption would be granted by all taxing units unless, before April
1, 2000, the governing body of a county, school district, junior college
district, or city proposes by official action to tax goods in transit.
The voters of the county, school district, junior college district, or
city would then have to approve the taxation of goods in transit at an
election held on November 7, 2000.  A taxing unit voting to tax goods in
transit could subsequently exempt the property through the same governing
body and voter approval process.

The proposed constitutional amendment would be submitted to voters at an
election to be held November 2, 1999.


Methodology

Currently, Article VIII, Section 1-j of the Texas Constitution and
Section 11.251 of the Tax Code provide for a "freeport exemption."  This
exemption, which can be granted at the option of each city, county,
school district, or junior college district, exempts goods, wares, ores,
raw materials, and other types of inventory that are brought into or
acquired in the state and transported out of the state within 180 days of
acquisition.

The amendment would provide a similar exemption for property acquired or
imported into Texas, stored at a location in the state not owned or under
the control of the property owner, and transported to another location
within 270 days of acquisition.  There would a local option procedure to
continue taxing the property.

The proposed new exemption could cause revenue loss to cities, counties,
school districts, and junior college districts exempting goods in
transit.

Section 403.302 of the 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.  The state could reimburse school districts for
their levy losses for this exemption, after a one-year lag.

Any difference in property value studies would have a fiscal consequence
to the state in terms of the cost of the Foundation School Program.  As
a general rule, a decrease of $1 billion in property valuation would
change state aid requirements by about $14 million each year.
  
Source Agencies:   304   Comptroller of Public Accounts
LBB Staff:         JK, BB, BR