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.