LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 76th Regular Session
  
                              April 22, 1999
  
  
          TO:  Honorable J.E. "Buster" Brown, Chair, Senate Committee on
               Natural Resources
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  SB 977 by Ratliff (relating to exemptions from ad valorem
               and sales and use taxation of certain timber and certain
               items used in timber operations and the valuation of
               certain timber land for ad valorem tax purposes),
               Committee Report 1st House, as amended
  
**************************************************************************
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  SB977, Committee Report 1st House, as amended:  positive impact of    *
*  $0 through the biennium ending August 31, 2001.                       *
*                                                                        *
*  The bill would make no appropriation but could provide the legal      *
*  basis for an appropriation of funds to implement the provisions of    *
*  the bill.                                                             *
**************************************************************************
  
General Revenue-Related Funds, Five-Year Impact:
  
          ****************************************************
          *  Fiscal Year  Probable Net Positive/(Negative)   *
          *               Impact to General Revenue Related  *
          *                             Funds                *
          *       2000                                   $0  *
          *       2001                                    0  *
          *       2002                         (15,342,000)  *
          *       2003                         (17,538,000)  *
          *       2004                         (20,644,000)  *
          ****************************************************
  
All Funds, Five-Year Impact:
  
***************************************************************************
*Fiscal      Probable        Probable        Probable        Probable     *
* Year    Savings/(Cost)     Revenue         Revenue         Revenue      *
*           to General    Gain/(Loss) to  Gain/(Loss) to  Gain/(Loss) to  *
*          Revenue Fund  School Districts     Cities         Counties     *
*              0001                                                       *
*  2000                $0              $0              $0              $0 *
*  2001                 0     (8,796,000)               0     (2,932,000) *
*  2002      (15,342,000)       (709,000)       (813,000)     (3,266,000) *
*  2003      (17,538,000)       (745,000)     (1,129,000)     (3,553,000) *
*  2004      (20,644,000)       (785,000)     (1,478,000)     (3,856,000) *
***************************************************************************
  
         *****************************************************
         * Fiscal Year     Probable Revenue Gain/(Loss) to    *
         *                       Transit Authorities          *
         *      2000                                       $0 *
         *      2001                                        0 *
         *      2002                                 (64,000) *
         *      2003                                 (89,000) *
         *      2004                                (116,000) *
         *****************************************************
  
Fiscal Analysis
  
The bill would provide for tax exclusions and exemptions by amending the
property tax, sales tax, and motor vehicle sales tax chapters of the Tax
Code.
  
  
Methodology
  
The fiscal impact of the exemption for standing timber and timber in the
hands of the producer cannot be determined.  Current property tax policy
treats standing timber as part of the land; as such, it is not separately
taxed.  It is assumed that no change in current practice is intended
and, therefore, no cost has been attached to the exemption for standing
timber.  Further, it is unknown how much harvested timber remains in the
hands of a producer for any significant time, so the cost of this
exemption is unknown.

The fiscal impact of exempting implements of husbandry (timber) was taken
from a previous study prepared for the Texas Forestry Association.  The
fiscal implications of the 50 percent exemption for timber in aesthetic
management zones, critical wildlife habitat zones, or streamside
management zones were developed from reported school district timber
values for 1998 (assuming that 15 percent of the timber value is included
in one or more of the applicable zones), reduced by 50 percent, and
extrapolated through the forecast period.

The fiscal impact of the 10-year 50 percent exemption for timber in newly
harvested areas was estimated under the assumptions that 75 percent of
the value of timber (timber not in an applicable zone) would be subject
to the exemption, that timber is harvested once every 25 years and
accumulating the cost by one-twenty-fifth per year.

Fiscal implications would exist for the state, school districts, and
counties.  The implications for cities and special districts would not
be significant.  Although the property tax sections would take effect
January 1, 2000, school districts and counties would not experience an
impact until fiscal 2001.  The operation of the school funding formula
would shift the school district cost to the state after a one-year lag.
  
  
Local Government Impact
  
The fiscal impact to units of local government is reflected in the above
table.
  
  
Source Agencies:   304   Comptroller of Public Accounts
LBB Staff:         JK, DE, BR