LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 76th Regular Session March 28, 1999 TO: Honorable Teel Bivins, Chair, Senate Committee on Education FROM: John Keel, Director, Legislative Budget Board IN RE: SB1061 by Bivins (Relating to the ad valorem taxation of a certain leasehold or other possessory interest in real property constituting a certain project of an industrial development corporation), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * SB1061, As Introduced: positive impact of $4,500,000 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 4,500,000 * * 2002 9,000,000 * * 2003 13,500,000 * * 2004 18,000,000 * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Probable Probable Probable * * Year Savings/(Cost) Revenue Revenue Revenue * * from General Gain/(Loss) Gain/(Loss) Gain/(Loss) * * Revenue Fund from School from Cities from Counties * * 0001 Districts * * 2000 $0 $4,500,000 $1,800,000 $1,050,000 * * 2001 4,500,000 4,500,000 3,600,000 2,100,000 * * 2002 9,000,000 4,500,000 5,400,000 3,150,000 * * 2003 13,500,000 4,500,000 7,200,000 4,200,000 * * 2004 18,000,000 4,500,000 9,000,000 5,250,000 * *************************************************************************** Fiscal Analysis The bill would amend the (Development Corporation Act of 1979), to provide that a leasehold or other possessory interest in exempt property owned by a corporation formed under the Development Corporation Act would be taxable under Section 25.07 of the Tax Code. The bill would take effect September 1, 1999 and only would apply to leaseholds entered into on or after the effective date. Methodology Current law specifically provides that leaseholds or other possessor interests in property owned by a corporation formed under the Development Corporation Act are not listed on property tax rolls in name of the lessee. This bill provides that such leaseholds and possessory interests are taxable. Passage of this bill could result in an increase in appraisal roll values and property tax levies for some taxing units. Based on historical development values in 4B development, it is estimated that $300 million in new property would be added to the appraisal tax rolls annually. Statewide average tax rates, by taxing unit were then applied to the increase valuations to develop the estimated gain of tax revenue by local taxing unit. 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 gain to the state was estimated by assuming that the state would save the amount of total levy gain received by school districts, after a one-year lag. Local Government Impact The estimated amount of tax levy gain to units of local government is reflected in the above table. Source Agencies: LBB Staff: JK, CT, BR