77R13413 E                           
         By Coleman                                            H.B. No. 3532
         Substitute the following for H.B. No. 3532:
         By Heflin                                         C.S.H.B. No. 3532
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the creation of commercial and industrial development
 1-3     zones in certain populous counties; providing for taxes and the
 1-4     issuance of bonds.
 1-5           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-6           SECTION 1.  Subtitle B, Title 12, Local Government Code, is
 1-7     amended by adding Chapter 386 to read as follows:
 1-8          CHAPTER 386.  COMMERCIAL AND INDUSTRIAL DEVELOPMENT ZONES
 1-9                      SUBCHAPTER A.  GENERAL PROVISIONS
1-10           Sec. 386.001.  DEFINITIONS.  In this chapter:
1-11                 (1)  "Board" means a board of directors of a commercial
1-12     and industrial development zone.
1-13                 (2)  "Development zone" means an area designated as a
1-14     commercial and industrial development zone under this chapter.
1-15           Sec. 386.002.  JURISDICTION OF MUNICIPALITY.  For the
1-16     purposes of this chapter, territory in the extraterritorial
1-17     jurisdiction of a municipality is considered to be in the
1-18     jurisdiction of the municipality.
1-19              (Sections 386.003-386.030 reserved for expansion
1-20            SUBCHAPTER B.  CREATION OF COMMERCIAL AND INDUSTRIAL
1-21                              DEVELOPMENT ZONE
1-22           Sec. 386.031.  CRITERIA FOR DEVELOPMENT ZONE CREATION.
1-23     (a)  To be created as a development zone, an area must:
1-24                 (1)  have a continuous boundary;
 2-1                 (2)  be an area of pervasive poverty, unemployment, or
 2-2     economic distress;
 2-3                 (3)  be adjacent to major transportation nodes and
 2-4     thoroughfares that may be used for exporting products to major
 2-5     airports, railways, and ports; and
 2-6                 (4)  be designated as a development zone by an
 2-7     ordinance or order adopted by each creating body.
 2-8           (b)  A municipality may contain not more than three
 2-9     development zones within its jurisdiction.
2-10           (c)  A county may contain not more than three development
2-11     zones in its unincorporated areas.
2-12           (d)  Creation of a development zone in a municipality or
2-13     county does not affect the number of enterprise zones that may be
2-14     designated in the municipality or county under Chapter 2303,
2-15     Government Code.
2-16           Sec. 386.032.  AREA OF PERVASIVE POVERTY, UNEMPLOYMENT, OR
2-17     ECONOMIC DISTRESS.  An area is an area of pervasive poverty,
2-18     unemployment, or economic distress for the purposes of Section
2-19     386.031 if:
2-20                 (1)  the average rate of unemployment in the area
2-21     during the most recent 12-month period for which data are available
2-22     was at least 1-1/2 times the state average for that period;
2-23                 (2)  the area is a low-income poverty area;
2-24                 (3)  the area is in a jurisdiction or pocket of
2-25     poverty, according to the most recent certification available from
2-26     the United States Department of Housing and Urban Development; or
2-27                 (4)  at least 70 percent of the residents or households
 3-1     of the area have an income that is less than 80 percent of the
 3-2     median income of the residents or households of the locality or
 3-3     state, whichever is less.
 3-4           Sec. 386.033.  CREATION OF DEVELOPMENT ZONE.  (a)  A
 3-5     development zone is created to promote and encourage:
 3-6                 (1)  commercial development, including the development
 3-7     of businesses in the technology field;
 3-8                 (2)  workforce development;
 3-9                 (3)  the improvement of competitiveness in education;
3-10                 (4)  public and private sector partnerships; and
3-11                 (5)  the revitalization of neighborhoods.
3-12           (b)  The governing body of a municipality or county,
3-13     individually or in combination with other municipalities, by
3-14     ordinance or order may create as a development zone an area within
3-15     its jurisdiction that meets the criteria under Section 386.031.
3-16           (c)  Each creating body must hold a public hearing before
3-17     adopting an ordinance or order under this section.
3-18           (d)  The governing body of a county may not designate
3-19     territory in the jurisdiction of a municipality as part of a
3-20     proposed development zone unless the governing body of the
3-21     municipality also designates the territory.
3-22           (e)  A development zone created under this section is a:
3-23                 (1)  political subdivision of the state; and
3-24                 (2)  special district.
3-25           Sec. 386.034.  DESIGNATING ORDINANCE OR ORDER.  (a)  An
3-26     ordinance or order designating an area as a development zone must:
3-27                 (1)  describe precisely the area to be included in the
 4-1     zone by a legal description or by reference to roadways, lakes,
 4-2     waterways, or municipal or county boundaries;
 4-3                 (2)  state a finding that the area meets the
 4-4     requirements of this chapter;
 4-5                 (3)  summarize briefly the:
 4-6                       (A)  incentives, including tax incentives, that
 4-7     the designating body chooses to apply to businesses in the area; or
 4-8                       (B)  programs to be developed to affect
 4-9     businesses in the area; and
4-10                 (4)  designate the area as a development zone.
4-11           (b)  The incentives or programs summarized under Subsection
4-12     (a)(3) must include:
4-13                 (1)  an incentive that does not apply to all businesses
4-14     located in the jurisdiction of a governmental entity that
4-15     designated the area as a development zone;
4-16                 (2)  an incentive or program designed to improve the
4-17     skills of the local labor pool; and
4-18                 (3)  an incentive or program designed to address
4-19     infrastructure, housing, or other elements essential to improving
4-20     quality of life.
4-21           (c)  This section does not prohibit a municipality or county
4-22     from extending additional incentives, including tax incentives, to
4-23     business enterprises in a development zone by a separate ordinance
4-24     or order.
4-25           Sec. 386.035.  TAX INCREMENT.  A creating body may allow one
4-26     quarter of one percent of a local property tax increment to fund a
4-27     development zone, as provided by Chapter 311, Tax Code.  On
 5-1     adoption of an order or ordinance by each creating body, the fund
 5-2     may be used to pay salaries of employees of the board and
 5-3     administrative expenses of the development zone.
 5-4           Sec. 386.036.  AMENDING BOUNDARIES.  (a)  A creating body by
 5-5     ordinance or order may amend the boundary of a development zone
 5-6     after a public hearing on the issue.
 5-7           (b)  The amended boundary:
 5-8                 (1)  must be continuous;
 5-9                 (2)  may not exceed the original size requirement of
5-10     Section 386.031; and
5-11                 (3)  may not exclude any area originally included
5-12     within the boundary of the development zone.
5-13           (c)  The entire development zone with the amended boundary
5-14     must continue to meet the unemployment or economic distress
5-15     requirements of Section 386.031.
5-16           (d)  A creating body may not make more than one boundary
5-17     amendment for a development zone in a calendar year.
5-18           (e)  If more than one body created the development zone, each
5-19     body must agree on the amendment by ordinance or order.
5-20              (Sections 386.037-386.060 reserved for expansion
5-21                      SUBCHAPTER C.  BOARD OF DIRECTORS
5-22           Sec. 386.061.  BOARD OF  DIRECTORS.  (a)  A development zone
5-23     is governed by a board of nine directors who serve two-year terms,
5-24     appointed as follows:
5-25                 (1)  the governing body of the municipality, if any,
5-26     that includes the greatest part of the zone's territory shall
5-27     appoint four directors;
 6-1                 (2)  other municipalities, if any, any part of which
 6-2     are included in the zone's territory, jointly shall appoint one
 6-3     director;
 6-4                 (3)  the commissioners court of the county in which the
 6-5     zone is located shall appoint:
 6-6                       (A)  nine directors, if the zone contains no
 6-7     municipality; or
 6-8                       (B)  four directors, if the zone contains one or
 6-9     more municipalities; and
6-10                 (4)  if a development zone contains territory in only
6-11     one municipality, the municipality and the county in which the zone
6-12     is located jointly shall appoint one director.
6-13           (b)  The initial terms of directors may be staggered.
6-14           Sec. 386.062.  QUALIFICATIONS OF DIRECTORS.  To serve as a
6-15     director, a person must:
6-16                 (1)  be at least 21 years old; and
6-17                 (2)  be registered to vote in the county in which the
6-18     development zone is located.
6-19           Sec. 386.063.  DISQUALIFICATION OF DIRECTORS.  Section
6-20     49.052, Water Code, applies to directors of a development zone
6-21     created under this chapter as if the zone were a district governed
6-22     by that section.
6-23           Sec. 386.064.  BOARD VACANCIES.  A vacancy in the office of
6-24     director shall be filled by appointment by the entity that
6-25     appointed the vacating director.
6-26           Sec. 386.065.  REMOVAL OF DIRECTOR.  A majority of the board
6-27     may remove a director for misconduct or failure to carry out the
 7-1     director's duties.
 7-2           Sec. 386.066.  ORGANIZATION OF BOARD.  (a)  Except as
 7-3     provided by Subsection (b), after each appointment and
 7-4     qualification of directors by the appointing entities, the board
 7-5     shall organize by electing a president, a vice president, a
 7-6     secretary, and any other officers the board considers necessary.
 7-7           (b)  If a director is appointed under Section 386.061(a)(4),
 7-8     that director shall serve as board president.
 7-9           Sec. 386.067.  QUORUM; DIRECTOR'S DUTIES; MANAGEMENT OF ZONE.
7-10     Sections 49.053, 49.057, and 49.058, Water Code, apply to the board
7-11     of directors of a development zone created under this chapter as if
7-12     the zone were a district governed by those sections.
7-13           Sec. 386.068.  MEETINGS AND NOTICE.  (a)  The board shall
7-14     designate and establish a development zone office in the county.
7-15           (b)  The board may establish regular meetings to conduct
7-16     development zone business and may hold special meetings at other
7-17     times as the business of a zone requires.
7-18           (c)  Notice of the time, place, and purpose of any meeting of
7-19     the board shall be given by posting a notice containing that
7-20     information at a place convenient to the public within the
7-21     development zone.  A copy of the notice shall be furnished to the
7-22     clerk or clerks of the county in which the zone is located, who
7-23     shall post the notice on a bulletin board in the county courthouse
7-24     used for that purpose.
7-25           Sec. 386.069.  DIRECTOR'S COMPENSATION; BOND AND OATH OF
7-26     OFFICE.  Sections 375.067, 375.069, and 375.070 apply to directors
7-27     of a development zone created under this chapter as if the zone
 8-1     were a municipal management district.
 8-2              (Sections 386.070-386.100 reserved for expansion
 8-3                      SUBCHAPTER D.  POWERS AND DUTIES
 8-4           Sec. 386.101.  GENERAL POWERS.  (a)  A development zone may
 8-5     acquire and dispose of projects and has the powers, authority,
 8-6     rights, and duties that are necessary to permit the accomplishment
 8-7     of purposes for which the zone was created.
 8-8           (b)  A development zone may provide for general promotion of
 8-9     and tourist advertising regarding the zone and its vicinity and for
8-10     a marketing program to attract visitors.  The zone may conduct
8-11     those activities under contracts for professional services with
8-12     persons or organizations the zone selects.
8-13           (c)  A development zone may enter into a memorandum of
8-14     understanding with any state agency, including an institution of
8-15     higher education, to further the economic development of the zone.
8-16           (d)  To the extent not inconsistent with this chapter, a
8-17     development zone has the powers of:
8-18                 (1)  a municipal management district created under
8-19     Chapter 375; and
8-20                 (2)  a county commissioners court under Section
8-21     381.004.
8-22           Sec. 386.102.  DUTY TO EVALUATE AVAILABLE FINANCING OPTIONS.
8-23     The board shall evaluate all options available to the development
8-24     zone as alternatives to imposing a tax under Section 386.035,
8-25     including:
8-26                 (1)  regional grants from federal and state agencies;
8-27                 (2)  local money from a creating body;
 9-1                 (3)  money from charities;
 9-2                 (4)  sales taxes for economic development in the
 9-3     development zone;
 9-4                 (5)  use or impact fees on affected business entities;
 9-5                 (6)  incentives for business entities that may benefit
 9-6     from the development zone;
 9-7                 (7)  money provided by local governmental entities; and
 9-8                 (8)  in-kind contributions.
 9-9           Sec. 386.103.  LIMIT ON DEVELOPMENT ZONE POWERS; OTHER LAWS
9-10     SUPERSEDE.  (a)  For purposes of this section, "district or zone"
9-11     means:
9-12                 (1)  a federal enterprise zone;
9-13                 (2)  a state enterprise zone;
9-14                 (3)  a municipal management district; or
9-15                 (4)  any other special district, other than a
9-16     development zone.
9-17           (b)  This section applies only to a district or zone that
9-18     contains territory included in the development zone's territory.
9-19           (c)  The authority granted to a development zone under this
9-20     chapter is not intended to duplicate the authority granted to a
9-21     district or zone.
9-22           (d)  This chapter does not limit the authority or
9-23     jurisdiction of any district or zone.
9-24           (e)  To the extent the laws of this chapter conflict with the
9-25     laws of any other district or zone, the laws of the other district
9-26     or zone shall control over this chapter.
9-27           Sec. 386.104.  MONITORING.  (a)  The board shall monitor each
 10-1    person in a development zone that receives benefits available under
 10-2    this chapter.
 10-3          (b)  On the board's request, the Texas Workforce Commission
 10-4    or the comptroller's office shall provide to the board tax records
 10-5    of a person that receives benefits under this chapter.
 10-6          Sec. 386.105.  NEIGHBORHOOD REDEVELOPMENT ZONES.  (a)  The
 10-7    board may designate an area as a neighborhood redevelopment zone if
 10-8    the area is:
 10-9                (1)  adjacent to the development zone; and
10-10                (2)  eligible for inclusion in the development zone
10-11    under Sections 386.036(b) and (c).
10-12          (b)  A development zone may exercise the powers available to
10-13    it in an area designated by the board under Subsection (a).
10-14          Sec. 386.106.  SUITS. A development zone may, through its
10-15    directors, sue and be sued in this state in the name of the
10-16    development zone.  Service of process in a suit may be had by
10-17    serving a director.
10-18             (Sections 386.107-386.200 reserved for expansion
10-19                 SUBCHAPTER E.  GENERAL FISCAL PROVISIONS
10-20          Sec. 386.201.  EXPENDITURES.  A development zone's money may
10-21    be disbursed only by check, draft, order, or other instrument
10-22    signed by at least three directors.  The general manager,
10-23    treasurer, or other employee of the development zone, if authorized
10-24    by resolution of the board, may sign checks, drafts, orders, or
10-25    other instruments on any development zone operation account on
10-26    behalf of the board.
10-27          Sec. 386.202.  COMPETITIVE BIDDING; CONTRACT AWARD.
 11-1    Subchapter K, Chapter 375, applies to a development zone created
 11-2    under this chapter as if the zone were a municipal management
 11-3    district.
 11-4             (Sections 386.203-386.300 reserved for expansion
 11-5                        SUBCHAPTER F.  DISSOLUTION
 11-6          Sec. 386.301.  DISSOLUTION OF DEVELOPMENT ZONE BY CREATING
 11-7    BODY.  (a)  After a hearing, a creating body may dissolve a
 11-8    development zone if:
 11-9                (1)  the area no longer meets the criteria for
11-10    designation under this chapter;
11-11                (2)  the best interests of the creating body and the
11-12    owners of property and interests in property in the zone will be
11-13    served by dissolving the zone; and
11-14                (3)  each creating body agrees by ordinance or order on
11-15    the:
11-16                      (A)  proposition that the zone should be
11-17    dissolved;
11-18                      (B)  disposition of zone assets; and
11-19                      (C)  assumption of liabilities by the creating
11-20    bodies.
11-21          (b)  The dissolution of a development zone does not affect
11-22    the validity of a:
11-23                (1)  tax incentive or regulatory relief granted or
11-24    accrued before the removal; or
11-25                (2)  bond issued under this chapter.
11-26          Sec. 386.302.  DISSOLUTION BY BOARD REQUEST.  A board may
11-27    petition a creating body to dissolve the development zone under
 12-1    Section 386.301 if a majority of the board finds at any time:
 12-2                (1)  before the authorization of bonds or the final
 12-3    lending of its credit that the continuation of the development zone
 12-4    is impracticable or cannot be successfully and beneficially
 12-5    accomplished; or
 12-6                (2)  that all bonds of the development zone or other
 12-7    debts of the zone have been paid and the purposes of the zone have
 12-8    been accomplished.
 12-9          Sec. 386.303.  TAXES.  On dissolution of a development zone,
12-10    any taxes levied on behalf of the zone are abolished.
12-11          SECTION 2. Section 311.002(1), Tax Code, is amended to read
12-12    as follows:
12-13                (1)  "Project costs" means the expenditures made or
12-14    estimated to be made and monetary obligations incurred or estimated
12-15    to be incurred by the municipality or county establishing a
12-16    reinvestment zone that are listed in the project plan as costs of
12-17    public works or public improvements in the zone, plus other costs
12-18    incidental to those expenditures and obligations.  "Project costs"
12-19    include:
12-20                      (A)  capital costs, including the actual costs of
12-21    the acquisition and construction of public works, public
12-22    improvements, new buildings, structures, and fixtures;  the actual
12-23    costs of the acquisition, demolition, alteration, remodeling,
12-24    repair, or reconstruction of existing buildings, structures, and
12-25    fixtures; and the actual costs of the acquisition of land and
12-26    equipment and the clearing and grading of land;
12-27                      (B)  financing costs, including all interest paid
 13-1    to holders of evidences of indebtedness or other obligations issued
 13-2    to pay for project costs and any premium paid over the principal
 13-3    amount of the obligations because of the redemption of the
 13-4    obligations before maturity;
 13-5                      (C)  real property assembly costs;
 13-6                      (D)  professional service costs, including those
 13-7    incurred for architectural, planning, engineering, and legal advice
 13-8    and services;
 13-9                      (E)  imputed administrative costs, including
13-10    reasonable charges for the time spent by employees of the
13-11    municipality or county in connection with the implementation of a
13-12    project plan;
13-13                      (F)  relocation costs;
13-14                      (G)  organizational costs, including the costs of
13-15    conducting environmental impact studies or other studies, the cost
13-16    of publicizing the creation of the zone, and the cost of
13-17    implementing the project plan for the zone;
13-18                      (H)  interest before and during construction and
13-19    for one year after completion of construction, whether or not
13-20    capitalized;
13-21                      (I)  the cost of operating the reinvestment zone
13-22    and project facilities;
13-23                      (J)  the amount of any contributions made by the
13-24    municipality or county from general revenue for the implementation
13-25    of the project plan; and
13-26                      (K)  payments made at the discretion of the
13-27    governing body of the municipality or the commissioners court of
 14-1    the county that the municipality or county finds necessary or
 14-2    convenient to the creation of the zone or to the implementation of
 14-3    the project plans for the zone.
 14-4          SECTION 3. Chapter 311, Tax Code, is amended by adding
 14-5    Section 311.019 to read as follows:
 14-6          Sec. 311.019.  PROCEDURE FOR CREATING REINVESTMENT ZONE IN
 14-7    UNINCORPORATED AREA OF COUNTY. (a)  The commissioners court of a
 14-8    county may designate a contiguous geographic area in the
 14-9    unincorporated area of the county to be a reinvestment zone to
14-10    promote development or redevelopment of the area if the
14-11    commissioners court determines that development or redevelopment
14-12    would not occur solely through private investment in the reasonably
14-13    foreseeable future.
14-14          (b)  Before designating a reinvestment zone, the
14-15    commissioners court of the county must prepare a preliminary
14-16    reinvestment zone financing plan. On completion of the plan, a copy
14-17    of the plan must be sent to the governing body of each taxing unit
14-18    that levies taxes on real property in the proposed zone.
14-19          (c)  Before designating a reinvestment zone, the county must
14-20    hold a public hearing on the creation of the zone and its benefits
14-21    to the county and to the property in the proposed zone.  At the
14-22    hearing any interested person may speak for or against the creation
14-23    of the zone, its boundaries, or the concept of tax increment
14-24    financing.  Not later than the seventh day before the date of the
14-25    hearing, notice of the hearing must be published in a newspaper of
14-26    general circulation in the county.
14-27          (d)  A county must provide a reasonable opportunity for an
 15-1    owner of property to protest the inclusion of the owner's property
 15-2    in a proposed reinvestment zone.
 15-3          (e)  Not later than the 60th day before the date of the
 15-4    public hearing required by Subsection (c), the commissioners court
 15-5    of the county must notify in writing the governing body of each
 15-6    taxing unit that levies real property taxes in the proposed
 15-7    reinvestment zone that it intends to establish the zone.  The
 15-8    notice must contain a description of the proposed boundaries of the
 15-9    zone, the plans for the development or redevelopment zone, and an
15-10    estimate of the general impact of the proposed zone on property
15-11    values and tax revenues.  The notice may be given later than the
15-12    60th day before the date of the public hearing if the commissioners
15-13    court of each county and the governing body of each school district
15-14    that levies real property taxes in the proposed zone agree to waive
15-15    that requirement.
15-16          (f)  A taxing unit may request additional information from
15-17    the commissioners court of the county.  The commissioners court of
15-18    the county shall provide the information requested to the extent
15-19    practicable.  The commissioners court of the county shall make a
15-20    formal presentation to the governing body of each school district
15-21    that levies real property taxes in the proposed reinvestment zone.
15-22    The presentation must include a description of the proposed
15-23    boundaries of the zone, the plans for the development or
15-24    redevelopment of the zone, and an estimate of the general impact of
15-25    the proposed zone on property values and tax revenues.  The
15-26    commissioners court of the county shall notify each taxing unit
15-27    that levies real property taxes in the proposed zone of each
 16-1    presentation to be made to a school district under this subsection.
 16-2    Members of the governing body of each taxing unit that levies real
 16-3    property taxes in the proposed zone may attend a presentation under
 16-4    this subsection.  If the school districts involved agree, the
 16-5    commissioners court of the county may make a single presentation to
 16-6    more than one school district governing body.
 16-7          (g)  Not later than the 15th day after the date the notice
 16-8    required by Subsection (e) is given, each taxing unit that levies
 16-9    real property taxes in the proposed reinvestment zone shall
16-10    designate a representative to meet with the commissioners court of
16-11    the county to discuss the project plan and the reinvestment zone
16-12    financing plan and shall notify the commissioners court of the
16-13    county of its designation.  At any time after the 15th day after
16-14    the date the notice required by Subsection (e) has been given to
16-15    every taxing unit, the commissioners court of the county may call a
16-16    meeting of the representatives of the taxing units.  The
16-17    commissioners court of the county may  call as many meetings as it
16-18    considers necessary.  Each representative shall be notified of each
16-19    meeting in advance.  At the meetings the commissioners court of the
16-20    county and the representatives of the taxing units may discuss the
16-21    boundaries of the zone, development in the zone, the tax increment
16-22    that each taxing unit will contribute to the tax increment fund,
16-23    the retention by a taxing unit of a portion of its tax increment as
16-24    permitted by Section 311.013, the exclusion of particular parcels
16-25    of property from the zone, the board of directors of the zone, and
16-26    tax collection for the zone.  On the motion of the commissioners
16-27    court of the county calling the meeting, any other matter relevant
 17-1    to the proposed reinvestment zone may be discussed.
 17-2          SECTION 4. Subchapter D, Chapter 431, Transportation Code, is
 17-3    amended by adding Sections 431.110 and 431.111 to read as follows:
 17-4          Sec. 431.110.  CONFLICT OF INTEREST IN CONTRACT. Chapter 171,
 17-5    Local Government Code, applies to the award of a contract by a
 17-6    local government corporation.
 17-7          Sec. 431.111.  ANNUAL REPORT TO COMPTROLLER. (a)  Not later
 17-8    than February 1 of each year, the board of a local government
 17-9    corporation shall submit to the comptroller a report in the form
17-10    required by the comptroller. The form for the report may not exceed
17-11    one page in length.
17-12          (b)  The report must include:
17-13                (1)  a statement of the corporation's purpose;
17-14                (2)  a statement of the corporation's total revenues
17-15    and expenditures during the preceding fiscal year; and
17-16                (3)  a summary of the corporation's activities during
17-17    the preceding fiscal year, including any bonds issued and capital
17-18    projects undertaken.
17-19          (c)  The board shall submit a copy of the report to the local
17-20    government that created the corporation.
17-21          SECTION 5.  This Act takes effect immediately if it receives
17-22    a vote of two-thirds of all the members elected to each house, as
17-23    provided by Section 39, Article III, Texas Constitution.  If this
17-24    Act does not receive the vote necessary for immediate effect, this
17-25    Act takes effect September 1, 2001.