LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session February 5, 2001 TO: Honorable Rene Oliveira, Chair, House Committee on Ways & Means FROM: John Keel, Director, Legislative Budget Board IN RE: HB256 by Gallego (Relating to the application of the sales tax to certain material used to restore a damaged residence in a disaster area.), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB256, As Introduced: negative impact of $(7,783,000) through the * * biennium ending August 31, 2003. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2002 $(3,840,000) * * 2003 (3,943,000) * * 2004 (4,052,000) * * 2005 (4,162,000) * * 2006 (4,270,000) * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Probable Probable Probable * * Year Revenue Revenue Revenue Revenue * * Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to * * General Revenue Cities Transit Counties/SPDs * * Fund Authorities * * 0001 * * 2002 $(3,840,000) $(693,000) $(268,000) $(82,000) * * 2003 (3,943,000) (712,000) (275,000) (84,000) * * 2004 (4,052,000) (732,000) (282,000) (87,000) * * 2005 (4,162,000) (751,000) (290,000) (89,000) * * 2006 (4,270,000) (771,000) (297,000) (91,000) * *************************************************************************** Fiscal Analysis The bill would amend Chapter 151 of the Tax Code to create a sales tax exemption for certain building materials used to restore residence homesteads in disaster areas, as declared by the Governor of Texas or the President of the United States. To qualify for the exemption, the building materials would have to be incorporated into a homestead residence damaged by a disaster in which the damage was not covered by a residential insurance policy and within 18 months after the date the area had been declared a disaster. The term "restore" would be defined to include the repair, restoration, remodeling, cleaning, or modification of an improvement of a residence homestead. The bill would take effect July 1, 2001, assuming that it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect October 1, 2001. Methodology Data on the number of homes damaged and destroyed by declared disasters and the cost of materials required to repair the damages from disasters were estimated based on data gathered from the U.S. Bureau of the Census and the Texas A&M University Real Estate Center. The estimated cost of materials to restore a residence was multiplied by the number of homes damaged or destroyed by declared disasters, multiplied by the state sales tax rate, adjusted for homes not covered by a residential insurance policy, projected through 2006 based on the consumer price index, and adjusted for effective date. The fiscal implications for units of local government were estimated proportionally. Note: This analysis assumes the number of homes damaged or destroyed by disasters in fiscal 2002-2006 would equal the average number damaged or destroyed annually from 1996 to 2000. It is also assumed that there would be no significant fiscal impact difference between an effective date of July 1, 2001 and an effective date of October 1, 2001. Local Government Impact Local units of government would have a corresponding fiscal impact from sales tax revenues, as indicated in the table above. Source Agencies: 304 Comptroller of Public Accounts LBB Staff: JK, SD, SM