LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session May 9, 2001 TO: Honorable Steven Wolens, Chair, House Committee on State Affairs FROM: John Keel, Director, Legislative Budget Board IN RE: SB1783 by Sibley (Relating to enhanced availability of advanced telecommunications service.), Committee Report 2nd House, Substituted ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * SB1783, Committee Report 2nd House, Substituted: negative impact * * of $(10,715,000) 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 $(4,387,000) * * 2003 (6,328,000) * * 2004 5,313,000 * * 2005 11,834,000 * * 2006 0 * **************************************************** All Funds, Five-Year Impact: ************************************************************************** *Fiscal Probable Revenue Probable Revenue Probable Revenue * * Year Gain/(Loss) from Gain/(Loss) from Gain/(Loss) from All * * General Revenue Fund Telecommunications Local Units of * * 0001 Infrastructure Fund Government * * 0345 * * 2002 $(4,387,000) $(76,570,000) $(761,000) * * 2003 (6,328,000) (101,256,000) (1,317,000) * * 2004 5,313,000 85,003,000 1,106,000 * * 2005 11,834,000 189,340,000 2,464,000 * * 2006 0 0 0 * ************************************************************************** Fiscal Analysis The bill would modify the Utilities Code and other statutes to ensure that all Texans in urban and rural areas have access to advanced services that are appropriate to their needs at reasonably comparable prices, terms, and quality. The bill would require all applicable companies receiving a bona fide retail request to provide advanced services, notify the community within 30 days of the request whether the company intends to 1) provide the services, 2) make arrangements with a third party to provide the services, or 3) not provide the services. A company that intends to provide the services must do so within 150 days after notifying the community of its intention. A company may charge a higher price for an advanced service provided under a bona fide request only if the higher price is necessary to recover costs relating to population density, distance or terrain. However, the higher price may not exceed a reasonable price set by the Public Utility Commission (PUC) or 140 percent of the price in the company's exchange with the greatest number of access lines. A company may require each person who signed the bona fide request to commit to receiving service for one year. If a company notifies the community it does not intend to provide advanced services, and the PUC determines no other provider is offering advanced services, the community may 1) provide advanced services itself, or 2) enter into a business arrangement with a third party for the services. The bill would authorize rural communities to seek funds for the deployment of advanced services through the following means: 1) projects identified in the Development Corporation Act of 1979 (4A /4B projects), 2) Telecommunications Infrastructure Fund (TIF) 0345 grants for community technology centers, 3) community development block grants, 4) Texas Agricultural Finance Authority financing, or 5) other business incentives available. The bill would allow the TIF board to use funds in the qualifying entities account for infrastructure and related costs for the provision of community technology centers or advanced services to rural areas. It would further require that the TIF board give priority to a project that will establish or enhance the provision of advanced services to rural areas. The bill would decrease the TIF assessment rate from 1.25 percent to 0.76 percent of the taxable telecommunications receipts of telecommunications utilities and commercial mobile service providers beginning September 1, 2001. The bill would eliminate the statutory cap of $1.5 billion on the TIF fund, at which time the assessment would end, allowing the fund to continue until its sunset date of September 1, 2005. Under current law, the assessment is project to end in fiscal 2004. The bill would require the PUC to submit a report on the deployment of advanced services in the state to the Legislature by January 15, 2003. The bill would take effect September 1, 2001. Methodology The fiscal implications of reducing the TIF rate to 0.76 percent were estimated using current TIF revenue projections. The fiscal 2002 estimate reflects a September 1, 2001 effective date. According to Comptroller estimates, the bill would affect state and local sales tax collections negatively in fiscal years 2002 and 2003, but create a positive revenue due to the elimination of the fund cap. The effect on sales taxes is because the TIF assessment is included in the sales price of telecommunications services and therefore subject to state and local sales tax. The effect on state sales taxes deposited to the General Revenue Fund 0001 was estimated by applying the state sales tax rate of 6.25 percent to the estimated fiscal impact on the TIF and adjusting for a September 1, 2001 effective date. Local Government Impact The fiscal impact to local tax revenues were calculated proportionally to the effects on state tax revenues. Any fiscal impact to units of local government that would become eligible to receive grants and loans from the TIF Board under the bill would depend upon the number and amount of grants and loans that might be awarded to deploy advanced services. Any fiscal impact to cities and counties would depend upon the number of rural advanced services projects and the number of cities and counties that would adopt or increase such a tax. Source Agencies: 475 Office of Public Utility Counsel, 473 Public Utility Commission of Texas, 304 Comptroller of Public Accounts, 367 Telecommunications Infrastructure Fund Board LBB Staff: JK, RB, RT, KM