LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session March 2, 2001 TO: Honorable Rene Oliveira, Chair, House Committee on Ways & Means FROM: John Keel, Director, Legislative Budget Board IN RE: HB445 by Goodman (Relating to the imposition by certain municipalities of a sales and use tax dedicated to street maintenance.), Committee Report 1st House, Substituted ************************************************************************** * No significant fiscal implication to the State is anticipated. * ************************************************************************** Local Government Impact The bill would add a new chapter in the Tax Code to create a municipal sales tax for street maintenance. Municipalities would be authorized to adopt a sales and use tax for street maintenance with the rate of 0.25 percent. A tax levied under the new chapter would have to be approved at an election held within the municipality. Revenue from such a tax could only be used to maintain and repair streets existing on the date of the election to adopt the tax. Unless the tax is reauthorized, it would expire on the fourth anniversary of its implementation or the first day of the first calendar quarter after the fourth anniversary. If an election to reauthorize the tax is not held prior to expiration or if the election is held and the reauthorization is not approved by the voters, the municipality would not be allowed to call an election for authorizing a new tax under the applicable section of the law until one year has passed. If the tax will expire, the municipality must notify the Comptroller of Public Accounts of the scheduled expiration and the Comptroller may delay the scheduled expiration date. Budget information was provided by the cities of Arlington, Bedford, Fort Worth, and Round Rock. Municipalities surveyed indicated that street repair and maintenance costs range from $12-$16 million. Municipalities with an average population of 300,000 estimate that they could collect an additional $4.5 million annually in revenue based upon the provisions in the bill. Smaller municipalities (population less than 50,000) estimate an annual revenue gain of $1 million. A municipality would not be able to adopt the tax if, as a result of the adoption of the tax, the combined rate of all sales and use taxes imposed by the municipality and other political subdivisions having territory in the municipality would exceed 2 percent at any location in the municipality. Many municipalities are disqualified from imposing additional sales and use tax based upon the limitations outlined in the Tax Code. For the municipalities that would be eligible to impose an additional sales tax, the revenue gain would vary. If the tax is not reauthorized, the municipality would lose the revenue that had been generated by the tax and would have to resume the cost of street maintenance and repair using other sources. The amount would vary by municipality, but would be significant. The bill would take effect immediately if it receives the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2001. Source Agencies: 304 Comptroller of Public Accounts LBB Staff: JK, DB, SD