LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session May 4, 2001 TO: Honorable Frank Madla, Chair, Senate Committee on Intergovernmental Relations 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 2nd House, Substituted ************************************************************************** * No significant fiscal implication to the State is anticipated. * ************************************************************************** The bill would add a new chapter in the Tax Code to create a municipal sales tax with the rate of 0.25 percent for street maintenance. 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. 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. The adoption of a tax authorized by this chapter would take effect on the first day of the first calendar quarter occurring after the expiration of the first complete calendar quarter occurring after the date on which the Comptroller received notice of the election results. The sales and use tax would expire on the fourth anniversary of the date the tax originally took effect unless reauthorized by approval through an election held prior to that date. If an election on reauthorization is not held prior to the expiration date or if the election is held and the voters do not favor reauthorization, a municipality could not call an election on the question of authorizing a new tax before the first anniversary of the date on which the previous tax expired. The bill would take effect immediately upon enactment, assuming that it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2001. Local Government Impact 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. The municipalities would continue to experience this revenue gain to help pay expenses for street repair and maintenance for the four-year period in which the sales and use tax would be in effect. Source Agencies: 304 Comptroller of Public Accounts LBB Staff: JK, DB