LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session February 19, 2001 TO: Honorable Frank Madla, Chair, Senate Committee on Intergovernmental Relations FROM: John Keel, Director, Legislative Budget Board IN RE: SB243 by Harris (Relating to financing capital improvements and facility expansions through the assessment of impact fees; providing a civil penalty.), As Introduced ************************************************************************** * No significant fiscal implication to the State is anticipated. * ************************************************************************** Local Government Impact FISCAL ANALYSIS The bill would change the methodology for determining the maximum impact fee a city can charge to include calculation of a credit or discount. The bill would require a city to project the total amount of ad valorem tax and utility service revenue that would be generated by new development that would be used to pay for facilities contained in the capital improvements plan. This amount would be subtracted from the total projected cost of the capital improvements plan prior to calculating the maximum fee. Alternatively, the bill would permit a city to reduce the total cost of the capital improvements plan by 50 percent. The bill would also amend public hearing and reporting requirements. The bill would take effect on September 1, 2001. METHODOLOGY According to a working group formed by the Texas Municipal League, costs to cities should be minimal. Their preliminary estimate indicates a 35 percent reduction in the maximum fee may result from the requirement, with no loss of impact fee revenue anticipated by local governments. They indicate that some cities relying on impact fees may not lose revenue under the bill because ad valorem tax and utility service charges generated by existing and future development would be used to build new facilities to serve growth, and impact fees could possibly offset a portion of the cost. Although the Texas Comptroller of Public Accounts indicates that any fiscal impact to cities should be offset by additional eligible projects, and streamlined administrative and adoption procedures that would result in savings, other cities indicate that the provisions of the bill would have a negative fiscal impact. The fiscal impact could range from no impact for cities not currently charging an impact fee or charging less than allowable, to a significant revenue loss for a city that charges impact fees and currently collects those fees from an area in which the city does not issue building permits but provides services for which impact fees can be charged. The cities of Austin and Laredo both indicate the provisions of the bill would cause significant revenue losses. Austin estimates it would lose $3.7 million or more each year. Laredo estimates incurring a revenue loss of $22.5 million. Source Agencies: 302 Office of the Attorney General, 580 Texas Water Development Board, 304 Comptroller of Public Accounts LBB Staff: JK, DB, BR