LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
February 23, 2001
TO: Honorable Rodney Ellis, Chair, Senate Committee on Finance
FROM: John Keel, Director, Legislative Budget Board
IN RE: SJR6 by Duncan (Proposing a constitutional amendment to
exempt from ad valorem taxation tangible personal
property held at certain locations only temporarily for
assembling, manufacturing, processing, or other
commercial purposes.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SJR6, 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. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $0 *
* 2003 0 *
* 2004 (35,888,000) *
* 2005 (36,965,000) *
* 2006 (38,074,000) *
****************************************************
All Funds, Five-Year Impact:
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*Fiscal Probable Net Probable Probable Probable *
* Year Savings/(Cost) Revenue Revenue Revenue *
* from General Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to *
* Revenue Fund School Districts Cities Counties *
* 0001 *
* 2002 $0 $0 $0 $0 *
* 2003 0 (35,888,000) (7,613,000) (10,875,000) *
* 2004 (35,888,000) (1,077,000) (7,841,000) (11,201,000) *
* 2005 (36,965,000) (1,109,000) (8,076,000) (11,537,000) *
* 2006 (38,074,000) (1,142,000) (8,319,134) (11,883,000) *
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Fiscal Analysis
Currently, Article VIII, Section 1-j of the Texas Constitution and
Section 11.251 of the Tax Code provide for a "freeport exemption." This
exemption, which can be granted at the option of each city, county,
school district, or junior college district, exempts goods, wares, ores,
raw materials and other types of inventory that are brought into or
acquired in the state and transported out of the state within 175 days of
acquisition.
The proposed amendment would provide a similar exemption for property
acquired or imported into Texas, stored in the state at a location not
owned or under the control of the property owner, and transported to
another location, either inside or outside of the state within 270 days.
There would be no local option to continue taxing the property.
Methodology
The taxable value of personal property stored in Texas under the
resolution's definition of "goods in transit" was estimated using school
district information, data from the U.S. Bureau of the Census, historical
trends, and industry estimates. The estimated value losses for school
districts, cities, and counties were trended forward from 1997 through
2006. Projected tax rates were then applied to calculate the estimated
local levy losses. Special districts would also incur value and levy
losses; however, losses to special districts cannot be estimated because
of the lack of detailed data.
Section 403.302 of the Government Code requires the Comptroller to
conduct a property value study to determine the total taxable value for
each school district. Total taxable value is an element in the state's
school funding formula. The cost to the state was estimated by assuming
that the state would reimburse school districts for their total levy
losses after a one-year lag.
Once the static fiscal impact was calculated, the Comptroller's office
calculated a dynamic fiscal impact using a Texas-specific general
equilibrium model to distribute the savings that otherwise would have
been paid in taxes by businesses among the state's economic sectors.
The revenue feedback calculation was based on the historical
relationships between state tax revenues and associated economic
factors. The effects show up only with respect to the losses incurred
by the General Revenue Fund 0001. Based on the dynamic fiscal analyst,
the Comptroller's office has estimated a positive offset impact to
General Revenue beginning in 2002 at $0.7 million, growing to $3.6
million by 2006.
Local Government Impact
The tax revenue losses to local units of government are reflected in the
above tables.
Source Agencies: 307 Secretary of State, 304 Comptroller of Public
Accounts
LBB Staff: JK, SD, WP, BR