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.