LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session February 12, 2001 TO: Honorable Rene Oliveira, Chair, House Committee on Ways & Means FROM: John Keel, Director, Legislative Budget Board IN RE: HB1013 by McReynolds (Relating to the exemption of farm products from ad valorem taxation.), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB1013, As Introduced: impact of $0 through the biennium ending * * August 31, 2003. * * * * The bill would make no appropriation but could provide the legal * * basis for an appropriation of funds to implement the provisions of * * the bill. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2002 $0 * * 2003 0 * * 2004 (5,882,663) * * 2005 (6,396,349) * * 2006 (7,152,538) * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Probable Probable Probable * * Year Savings/(Cost) Revenue Revenue Revenue * * from General Gain/(Loss) Gain/(Loss) Gain/(Loss) * * Revenue Fund from School from Counties from Cities * * 0001 Districts * * 2002 $0 $0 $0 $0 * * 2003 0 (5,882,663) (1,583,794) (75,419) * * 2004 (5,882,663) (513,686) (1,722,094) (82,004) * * 2005 (6,396,349) (756,189) (1,925,683) (91,699) * * 2006 (7,152,538) (901,398) (2,168,367) (103,256) * *************************************************************************** Fiscal Analysis To be exempt under current law, harvested timber in the hands of the producer must be located on the land on which it was produced and owned by the person who owned the timber when it was standing. The bill would provide a property tax exemption for harvested timber after it left the land where it was produced. Property exempted under this bill is currently taxable as income-producing personal property. Methodology The fiscal impact of exempting timber after it left the land where it was produced was based on the 1997 Texas timber harvest of 675.9 million cubic feet having a delivered value of $1.01 billion. These amounts were extrapolated through fiscal year 2006 using the producers price index for lumber and a growth rate for production of 2 percent per year. The total taxable value under current law was then calculated through fiscal year 2006. The fiscal impact on property taxes was estimated under the assumption that 33 percent of the taxable value of timber would be subject to the exemption. Fiscal implications would exist for the state, school districts, and counties. Although the exemption would take effect January 1, 2002, school districts, counties and cities would not experience an impact until fiscal year 2003. The operation of the school funding formula would effectively shift most of the school district cost to the state after a one-year lag. Local Government Impact The impacts on units of local government are reflected in the above table. Source Agencies: 304 Comptroller of Public Accounts LBB Staff: JK, SD, WP, BR