LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 22, 2001
TO: Honorable James E. "Pete" Laney, Speaker of the House,
House of Representatives
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB1200 by Brimer (Relating to the enactment of the Texas
Economic Development Act, authorizing certain ad valorem
tax incentives for economic development, including
authorizing school districts to provide tax relief for
certain corporations and limited liability companies
that make large investments that create jobs in this
state, to authorizing the imposition of certain impact
fees, and to continuing the Property Redevelopment and
Tax Abatement Act.), As Passed 2nd House
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB1200, As Passed 2nd House: impact of $0 through the biennium *
* ending August 31, 2003. *
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The bill would create the Texas Economic Development Act and authorize
certain property tax incentives, including a limitation on the appraised
value of certain property and tax credits for certain taxes paid.
Further, the bill would extend the expiration date of the Property
Redevelopment and Tax Abatement Act from September 1, 2001 to September
1, 2007.
The provisions of the bill concerning property value limitations and
school tax credits would expire December 31, 2005.
General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $0 *
* 2003 0 *
* 2004 591,000 *
* 2005 1,470,000 *
* 2006 6,295,000 *
****************************************************
All Funds, Five-Year Impact:
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*Fiscal Probable Revenue Gain/(Loss) to Probable Revenue Gain/(Loss) to *
* Year General Revenue Fund School Districts *
* 0001 *
* 2002 $0 $0 *
* 2003 0 0 *
* 2004 591,000 0 *
* 2005 1,470,000 0 *
* 2006 6,295,000 (100,688,000) *
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Fiscal Analysis
The state cost under the Foundation School Program (FSP) would increase
by an estimated $117 million, less $13.7 million in revenue feedback
effects, in fiscal 2007. Annual growth in values subject to the property
tax reductions and school tax credits provided by the bill would
increase state FSP payments by an estimated $504.8 million, less $51.6
million in revenue feedback effects, by fiscal 2011. School districts
would experience similar fiscal implications through 2009. However,
there would be no fiscal impact to school districts after 2009, net of
state reimbursements, because of the December 31, 2005 sunset date and
state reimbursements under the Foundation School Program.
The minimum requirement for qualification would be an investment in new
buildings and improvements and associated capital equipment between $20
million and $100 million depending on the taxable value of the host
school district and the creation of at least 25 new jobs.
However, the bill would also provide for a minimum investment of between
$1 million and $30 million depending on the taxable value of industrial
property in the host district for certain school districts located
either in (1) a strategic investment area as defined by Section 171.721
of the Tax Code, or (2) in counties with a population of less than
50,000 that are not located in a metropolitan statistical area, and in
which the population remained the same, decreased, or increased not more
than 3 percent per annum between the 1990 and 2000 census. In such
areas, the bill would require the creation of at least 10 jobs.
Methodology
The Comptroller's estimated fiscal impact on school districts is the sum
of the revenue losses from the property value limitation provision and
the proposed school tax credits.
The revenue loss from the property value limitation was computed for each
year as the product of the appraised value of qualifying investments
(limited to the manufacturing, research and development, and renewable
energy electric generation industries) exceeding the threshold, as
defined in the bill, and the estimated average maintenance and operations
school tax rate in that year. The amount of appraised value exceeding
the threshold was computed by multiplying the estimated total Texas
annual investment by the share of qualified investments projected to
exceed the investment threshold. The resulting amount was adjusted by
the percentage of investment by corporations and for differences in
capital investment and appraised values.
Total Texas annual capital investment was estimated using data on new
capital investments by Texas mining, manufacturing, and utility
industries provided by the U. S. Bureau of the Census. For other
industries, new investment was estimated using data from the Census
Bureau's annual U. S. capital expenditures survey. The data were
apportioned to Texas using Texas' share of gross state product for each
industry. The future growth rate of capital investment was provided by
Wharton Econometric Forecasting Associates. The share of total Texas
investment exceeding the investment threshold was estimated from data
provided by the Texas Department of Economic Development on business
expansions in Texas during the last half of the 1990s.
The fiscal impact of the proposed school tax credits was estimated using
the same methodology, except the credit amounts were spread over a
seven-year period beginning in the fourth year after an investment would
be made. Under the current school finance system, it is assumed that the
state would reimburse school districts for their losses for the property
value limitation after a one-year lag; the state would reimburse school
districts for their losses associated with the tax credits in the same
year.
Once the static fiscal impact was estimated, the dynamic fiscal impact
was calculated using a Texas-specific general equilibrium model to
distribute among the state's economic sectors the savings that otherwise
would have been paid in taxes by businesses. The revenue feedback
calculation was based on the historical relationship between state tax
revenues and associated economic factors.
Local Government Impact
The impact on local school districts is reflected in the above tables.
The fiscal impact to cities and counties from imposing impact fees would
depend on the number of projects and the cost to cities and counties of
providing improvements, and is therefore not reflected in the above
tables.
Source Agencies: 304 Comptroller of Public Accounts
LBB Staff: JK, SD, WP, BR