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