By Coleman H.B. No. 3271
77R9372 CLG-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of state subsidies granted for economic
1-3 development purposes.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Chapter 481, Government Code, is amended by adding
1-6 Subchapter Q to read as follows:
1-7 SUBCHAPTER Q. PUBLIC SUBSIDY PERFORMANCE
1-8 AND ACCOUNTABILITY
1-9 Sec. 481.221. SHORT TITLE. This subchapter may be cited as
1-10 the Public Subsidy Performance and Accountability Act.
1-11 Sec. 481.222. DEFINITIONS. In this subchapter:
1-12 (1) "Benefit date" means the date on which the
1-13 recipient receives the subsidy, except that:
1-14 (A) if the subsidy involves the purchase, lease,
1-15 or donation of physical equipment, the benefit date is the date on
1-16 which the recipient places the equipment into service; or
1-17 (B) if the subsidy is for an improvement made to
1-18 property, the benefit date is the earlier of:
1-19 (i) the date on which the last improvement
1-20 to the property is made; or
1-21 (ii) the date on which the recipient
1-22 occupies the property, and if more than one recipient occupies the
1-23 property, a grantor may assign a separate benefit date for each
1-24 recipient based on when the recipient first occupies the property.
2-1 (2) "Grantor" means a state agency that grants a
2-2 subsidy.
2-3 (3) "Local governmental entity" means a county,
2-4 municipality, or other political subdivision of this state and a
2-5 municipally created economic development corporation, including a
2-6 development corporation organized under the Development Corporation
2-7 Act of 1979 (Article 5190.6, Vernon's Texas Civil Statutes).
2-8 (4) "Nonprofit organization" means a private,
2-9 nonprofit, tax-exempt organization described by Section 501(c)(3),
2-10 Internal Revenue Code of 1986, as amended, that has at least 100
2-11 full-time employees.
2-12 (5) "Public subsidy" or "subsidy" means financial
2-13 assistance in the form of a grant, loan at a rate below the
2-14 commercial rate, tax abatement, tax increment financing,
2-15 contribution of property, tax reduction, or infrastructure, or a
2-16 preferential use of a government facility, that is provided to a
2-17 business or nonprofit organization for economic development
2-18 purposes. The term does not include:
2-19 (A) financial assistance that is generally
2-20 available to all businesses or to a general class of similar
2-21 businesses;
2-22 (B) federal assistance until the assistance has
2-23 been repaid to and reinvested by the state or local government;
2-24 (C) a public improvement made to property owned
2-25 by the state or a local government that serves a public purpose and
2-26 does not primarily benefit a single business or defined group of
2-27 businesses when the improvement is made;
3-1 (D) redevelopment property polluted by a
3-2 hazardous substance as defined by Section 361.003, Health and
3-3 Safety Code, or contaminant as defined by Section 361.401, Health
3-4 and Safety Code;
3-5 (E) assistance the sole purpose of which is to
3-6 provide job readiness and training services;
3-7 (F) assistance for housing, pollution control or
3-8 abatement, or energy conservation;
3-9 (G) workers' compensation and unemployment
3-10 compensation;
3-11 (H) a benefit derived from regulation;
3-12 (I) an indirect benefit derived from assistance
3-13 provided to an educational institution;
3-14 (J) bonds issued to refund outstanding bonds;
3-15 (K) bonds issued for the benefit of an
3-16 organization described by Section 501(c)(3), Internal Revenue Code
3-17 of 1986, as amended;
3-18 (L) assistance for a collaboration between an
3-19 institution of higher education as defined by Section 61.003,
3-20 Education Code, and a business;
3-21 (M) redevelopment if the recipient's investment
3-22 in the purchase of the site and in-site preparation is 70 percent
3-23 or more of the assessor's current year's estimated market value;
3-24 and
3-25 (N) federal loan funds provided through the
3-26 United States Department of Commerce, Economic Development
3-27 Administration.
4-1 (6) "Recipient" means a business entity or nonprofit
4-2 organization that receives a subsidy from a grantor.
4-3 Sec. 481.223. APPLICABILITY OF SUBCHAPTER TO CERTAIN
4-4 SUBSIDIES. (a) Except as otherwise provided by this subchapter,
4-5 this subchapter applies only to a public subsidy of more than
4-6 $25,000.
4-7 (b) This subchapter does not apply to a subsidy in the form
4-8 of a loan of $75,000 or less.
4-9 Sec. 481.224. APPLICABILITY OF SUBCHAPTER TO LOCAL
4-10 GOVERNMENTAL ENTITIES. (a) A local governmental entity that is
4-11 authorized to grant a public subsidy may adopt criteria regarding
4-12 the awarding of a public subsidy and may enter into a subsidy
4-13 agreement to the same extent and in the same manner as a state
4-14 agency under this subchapter.
4-15 (b) A local governmental entity and recipient that enter
4-16 into a subsidy agreement under this section are subject to the same
4-17 reporting requirements as a state agency and recipient of a public
4-18 subsidy granted by a state agency under this subchapter.
4-19 Sec. 481.225. GRANTING OF SUBSIDY; PUBLIC PURPOSE. A state
4-20 agency may not grant a public subsidy unless the agency:
4-21 (1) has adopted criteria for issuance of the subsidy;
4-22 and
4-23 (2) enters into a subsidy agreement with an eligible
4-24 recipient that meets the requirements of Section 481.227.
4-25 Sec. 481.226. CRITERIA FOR GRANTING SUBSIDY. (a) A state
4-26 agency, after a public hearing, shall adopt eligibility and other
4-27 criteria for granting a subsidy.
5-1 (b) The criteria adopted by the agency must:
5-2 (1) be standard for all recipients and may not be
5-3 adopted on a case-by-case basis;
5-4 (2) set specific minimum requirements that a business
5-5 or nonprofit organization must meet to be eligible to receive a
5-6 subsidy; and
5-7 (3) include a floor for the wages to be paid for any
5-8 jobs created with the subsidy.
5-9 (c) The requirement of Subsection (b)(3) must be stated as a
5-10 specific dollar amount or a formula that will generate a specific
5-11 dollar amount.
5-12 (d) The state agency shall submit a copy of the criteria to
5-13 the department for review and comment.
5-14 (e) A state agency may modify the criteria adopted by the
5-15 agency under this section by documenting the applicable
5-16 modification and submitting a copy of the report to the department
5-17 for review and comment not later than the 30th day after the date
5-18 on which the modification is made.
5-19 Sec. 481.227. DUTY OF GRANTOR TO DETERMINE ELIGIBILITY.
5-20 Before a grantor enters into a public subsidy agreement, the
5-21 grantor shall contact the department to determine whether the
5-22 proposed recipient is eligible to receive a subsidy.
5-23 Sec. 481.228. SUBSIDY AGREEMENT. (a) As a condition of
5-24 receiving the subsidy, an eligible recipient must enter into a
5-25 subsidy agreement with the grantor that meets the requirements of
5-26 this section.
5-27 (b) The subsidy agreement must:
6-1 (1) describe the subsidy, including the amount and
6-2 type of subsidy, and the type of district if the subsidy is tax
6-3 increment financing;
6-4 (2) state the purpose for the subsidy;
6-5 (3) describe the project to be developed or performed
6-6 with the subsidy and the project site;
6-7 (4) contain measurable, specific, and tangible goals
6-8 for the subsidy, including:
6-9 (A) the schedule for accomplishing the goals;
6-10 (B) goals for the number of jobs to be created
6-11 by the recipient with the subsidy, which may include separate goals
6-12 for:
6-13 (i) the number of part-time or full-time
6-14 jobs; or
6-15 (ii) in cases in which job loss is
6-16 imminent and demonstrable, goals for the number of jobs retained;
6-17 and
6-18 (C) wage goals for the jobs created or retained;
6-19 (5) describe the financial obligation of the recipient
6-20 if the goals described in Subdivision (4) are not met in accordance
6-21 with Section 481.231;
6-22 (6) require the recipient to continue the recipient's
6-23 operations in the municipality in which the subsidy is to be used
6-24 for at least five years after the benefit date;
6-25 (7) state the name and address of the parent
6-26 corporation of the recipient, if any; and
6-27 (8) list any other form of financial assistance
7-1 provided to the recipient by other grantors or local governmental
7-2 entities for the project.
7-3 (c) The goals specified in Subsections (a)(4)(B) and (C)
7-4 must be attained not later than the second anniversary of the
7-5 benefit date.
7-6 (d) If, after a public hearing, the grantor determines that
7-7 the creation or retention of jobs is not a goal of the subsidy
7-8 agreement, the wage and job goals may be set at zero.
7-9 Notwithstanding Subsection (a)(6), a recipient may move its
7-10 operations without violating the terms of the subsidy agreement if
7-11 the grantor, after a public hearing, approves the recipient's
7-12 request to move its operations.
7-13 (e) A subsidy in the form of a grant must be structured as a
7-14 forgivable loan. An agreement for a subsidy in a form other than a
7-15 grant must state:
7-16 (1) the fair market value of the subsidy to the
7-17 recipient, including the value of conveying property at less than a
7-18 fair market price; or
7-19 (2) whether the recipient is receiving an in-kind
7-20 benefit.
7-21 (f) If a subsidy benefits more than one recipient, the
7-22 grantor must assign a portion of the subsidy to each recipient that
7-23 signs a subsidy agreement. The proportion of the benefits assessed
7-24 to each recipient must reflect a reasonable estimate of the
7-25 recipient's share of the total benefits of the project.
7-26 (g) The grantor and each recipient must sign the subsidy
7-27 agreement. The subsidy agreement may provide for an informal
8-1 dispute resolution process that provides for adjudication by an
8-2 appropriate disinterested person in a regional office of the
8-3 department.
8-4 Sec. 481.229. EXTENSION OF TIME TO MEET AGREED GOALS. (a) A
8-5 grantor, after a public hearing, may extend up to one year the
8-6 period for meeting job and wage goals under the subsidy agreement.
8-7 (b) A grantor may extend the period for meeting goals other
8-8 than job and wage goals. The grantor shall:
8-9 (1) prepare and maintain a written record of any
8-10 extension granted under this subsection that includes the reason
8-11 for the extension; and
8-12 (2) forward a copy of a record maintained under this
8-13 subsection with the annual report required under Section 481.237.
8-14 Sec. 481.230. PUBLIC NOTICE AND HEARING BEFORE GRANTING
8-15 LARGE SUBSIDY. (a) Notwithstanding Section 552.131, as added by
8-16 Chapter 1319, Acts of the 76th Legislature, Regular Session, 1999:
8-17 (1) a state agency shall publish notice and hold a
8-18 public hearing before granting a subsidy of more than $500,000; and
8-19 (2) a local governmental entity may publish notice and
8-20 hold a public hearing before granting a subsidy of more than
8-21 $100,000.
8-22 (b) Public notice and a hearing to grant a subsidy under
8-23 this section is not required if notice and hearing is otherwise
8-24 required by law.
8-25 (c) A state agency shall publish notice of the hearing
8-26 required under this section in the Texas Register and shall hold
8-27 the hearing in Austin. A local governmental entity that holds a
9-1 hearing under this section shall publish notice of the hearing in a
9-2 newspaper of general circulation in the community in which the
9-3 hearing is to be held at least 10 days before the date of the
9-4 hearing.
9-5 (d) The notice must:
9-6 (1) include the date, time, and place of the hearing;
9-7 and
9-8 (2) identify the location at which information about
9-9 the subsidy, including a summary of the terms of the subsidy
9-10 agreement, is available.
9-11 (e) A grantor shall:
9-12 (1) make printed copies of information on the subsidy
9-13 available on request to members of the public; and
9-14 (2) to the extent possible, make the information
9-15 available through the Internet.
9-16 Sec. 481.231. FAILURE TO MEET GOALS AND OBLIGATIONS UNDER
9-17 SUBSIDY AGREEMENT. (a) A subsidy agreement entered into under
9-18 Section 481.228 must contain a provision requiring a recipient who
9-19 fails to meet the goals specified in the agreement to, at a
9-20 minimum, repay the amount of the subsidy with interest. The
9-21 repayment may be prorated to reflect a partial fulfillment of
9-22 goals.
9-23 (b) On making a determination that a recipient has failed to
9-24 meet a deadline specified in the subsidy agreement or has otherwise
9-25 violated the terms of the subsidy agreement or any extensions or
9-26 modifications made to the agreement, the grantor shall immediately
9-27 send notice of the failure to the recipient and demand repayment of
10-1 the subsidy. The notice must be sent by registered mail, return
10-2 receipt requested.
10-3 Sec. 481.232. PROHIBITION ON RECEIPT OF SUBSIDY. A recipient
10-4 that fails to meet the terms of a subsidy agreement may not receive
10-5 a subsidy from a grantor before:
10-6 (1) five years after the date on which the grantor
10-7 made its determination regarding the failure; or
10-8 (2) the date on which the recipient satisfies its
10-9 repayment obligation under the terms of the subsidy agreement.
10-10 Sec. 481.233. PROGRESS REPORT REQUIRED BY RECIPIENT. (a) A
10-11 grantor must monitor the progress of the recipient in achieving the
10-12 goals as stated in the subsidy agreement.
10-13 (b) For each subsidy received, a recipient shall submit, not
10-14 later than March 1 of each year, a progress report containing the
10-15 information compiled during the previous year regarding the
10-16 attainment of each of the stated goals. The recipient shall submit
10-17 the report to the department.
10-18 (c) The information required under this section must be
10-19 submitted on a form and in the manner prescribed by the department.
10-20 Sec. 481.234. CONTENTS OF PROGRESS REPORT. A progress report
10-21 must include:
10-22 (1) the type, public purpose, and amount of subsidy
10-23 and type of district if the subsidy is tax increment financing;
10-24 (2) the number of any new jobs to be created because
10-25 of the subsidy for which the starting wage is:
10-26 (A) less than $8 an hour;
10-27 (B) at least $8 but less than $20 an hour; and
11-1 (C) at least $20 an hour;
11-2 (3) the sum of the hourly wages and cost of health
11-3 insurance provided by the employer with respect to the wages;
11-4 (4) the date job and wage goals were or will be met;
11-5 (5) a statement of goals identified in the subsidy
11-6 agreement and the recipient's progress toward attainment of those
11-7 goals;
11-8 (6) the principal office of the recipient before
11-9 receiving a subsidy if the recipient changed its principal office
11-10 after receiving the subsidy;
11-11 (7) if applicable, any reasons why the recipient did
11-12 not complete the project at the site disclosed in the subsidy
11-13 agreement if the recipient moves its operations to another site;
11-14 (8) the name and address of the parent corporation of
11-15 the recipient, if any;
11-16 (9) a list of all financial assistance by all grantors
11-17 or local governmental entities for the project; and
11-18 (10) any other information that may be requested by
11-19 the department.
11-20 Sec. 481.235. FILING OF PROGRESS REPORT. (a) A recipient
11-21 shall file the report required by Section 481.233 not later than
11-22 March 1 of each year.
11-23 (b) In addition to the reporting period prescribed by
11-24 Subsection (a), the recipient must submit a report under Section
11-25 481.233 not later than the 30th day after the date of the deadline
11-26 for attaining the job and wage goals specified in the subsidy
11-27 agreement.
12-1 (c) The recipient shall submit the report until the second
12-2 anniversary of the later of:
12-3 (1) the benefit date; or
12-4 (2) the date on which the goals are met.
12-5 (d) Notwithstanding Subsection (c), a recipient that has not
12-6 met the goals stated in the subsidy agreement shall submit the
12-7 report required under this section until the subsidy is repaid.
12-8 Sec. 481.236. FAILURE TO FILE REPORT. (a) If a recipient
12-9 fails to file a report under Section 481.233, the grantor shall
12-10 send a written reminder to the recipient not later than the seventh
12-11 day after the date on which the report is due.
12-12 (b) If the recipient fails to file a report before the 14th
12-13 day after the date a reminder letter sent under Subsection (a) is
12-14 postmarked, the recipient is liable to the grantor for a penalty of
12-15 $100 for each day the report is not filed.
12-16 (c) The penalty under this section may not exceed $1,000.
12-17 Sec. 481.237. REPORT BY GRANTOR TO DEPARTMENT. (a) Not
12-18 later than April 1 of each year, each state agency that has awarded
12-19 a public subsidy shall file a report with the department regarding
12-20 the subsidy.
12-21 (b) The department shall adopt procedures regarding the
12-22 reporting requirements of this section and shall provide
12-23 information on those requirements to each appropriate state agency.
12-24 (c) The report must include:
12-25 (1) a list of recipients that did not complete the
12-26 report required under Section 481.233; and
12-27 (2) a list of recipients that have not met their job
13-1 and wage goals within the past two years and any action being taken
13-2 by the grantor to:
13-3 (A) bring those recipients into compliance; or
13-4 (B) recoup the subsidy.
13-5 (d) The department shall send a written reminder to each
13-6 grantor that does not submit a report within the time prescribed by
13-7 this section. A grantor for whom the department has not received a
13-8 required report by June 1 of the same year the report is due is
13-9 prohibited from granting a subsidy until it files the report with
13-10 the department.
13-11 Sec. 481.238. SUBSIDY COMPILATION AND SUMMARY REPORT BY
13-12 DEPARTMENT. (a) Not later than July 1 of each year, the department
13-13 shall submit to the legislature a report summarizing the results of
13-14 the reports required under Sections 481.233 and 481.237 for the
13-15 previous calendar year. The summary report must include for each
13-16 grantor:
13-17 (1) the total amount of subsidies awarded in each
13-18 development region of the state, as defined by department rule;
13-19 (2) the distribution of subsidy amounts by size of the
13-20 subsidy;
13-21 (3) the distribution of subsidy amounts by month,
13-22 quarter, and year;
13-23 (4) the distribution of subsidy amounts by type;
13-24 (5) the percentage of recipients that met the goals
13-25 specified in the subsidy agreement;
13-26 (6) the percentage of recipients that did not meet the
13-27 goals specified in the subsidy agreement by the second anniversary
14-1 of the benefit date;
14-2 (7) the total amount of subsidies issued to recipients
14-3 that did not meet the goals specified in the subsidy agreement by
14-4 the second anniversary of the benefit date;
14-5 (8) the percentage of recipients that did not meet the
14-6 goals specified in the subsidy agreement and have not satisfied
14-7 their repayment obligations;
14-8 (9) the name of each recipient that failed to meet the
14-9 terms of its subsidy agreement in the previous five years and has
14-10 not satisfied its repayment obligation;
14-11 (10) the number of part-time and full-time jobs
14-12 created because of the subsidy for which the starting wage is:
14-13 (A) less than $8 an hour;
14-14 (B) at least $8 but less than $20 an hour; and
14-15 (C) at least $20 an hour; and
14-16 (11) the benefits paid for jobs created because of the
14-17 subsidy for which the starting wage is:
14-18 (A) less than $8 an hour;
14-19 (B) at least $8 but less than $20 an hour; and
14-20 (C) at least $20 an hour.
14-21 (b) The department shall coordinate information provided to
14-22 the department under this subchapter in a manner that allows a
14-23 person to make a useful comparison among grantors and across
14-24 different periods.
14-25 (c) The department may include any other information in the
14-26 report as necessary to evaluate subsidies.
14-27 Sec. 481.239. REPORT MADE AVAILABLE TO PUBLIC. The
15-1 department shall make available to the public all reports submitted
15-2 to the department under Section 481.237 and the summary report
15-3 submitted by the department under Section 481.238.
15-4 Sec. 481.240. SUBSIDY CRITERIA COMPILATION REPORT BY
15-5 DEPARTMENT. Not later than August 1 of each year, the department
15-6 shall publish a compilation of grantors' criteria policies adopted
15-7 in the previous calendar year.
15-8 SECTION 2. This Act takes effect September 1, 2001.