C.S.H.B. 1233 78(R)    BILL ANALYSIS


C.S.H.B. 1233
By: Solomons
Economic Development
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

The Texas Department of Economic Development (department) was created in
1997 by the 75th Legislature by abolishing the Texas Department of
Commerce, transferring its functions, and establishing a governing board
to oversee the new agency.  The department has three primary missions:
marketing Texas as a business location and tourist destination; providing
financial, location, and export assistance to Texas businesses and
communities; and serving as a central source of economic development
information.  

The department is subject to the Sunset Act and will be abolished on
September 1, 2003, unless continued by the legislature.  CSHB 1233
abolishes the department and transfers its primary economic development
functions to an economic development and tourism office within the office
of the governor and other statutory modifications that are contained in
this legislation.  The bill also creates the Texas Economic Development
Bank, under the direction of the Texas Economic Development and Tourism
Office, and restructures the state Enterprise Zone Program to enhance
existing incentive programs to help encourage job creation and retention
opportunities. 

RULEMAKING AUTHORITY

Rulemaking authority previously granted to the governing board or the
policy board of the Texas Department of Economic Development is
transferred to the executive director of the Texas Economic Development
and Tourism Office in SECTION 1.08 (Section 481.005, Government Code),
SECTION 1.15 (Section 481.012, Government Code), SECTION 1.30 (Section
481.075, Government Code), SECTION 1.42 (Section 481.174, Government
Code), SECTION 1.44 (Section 481.193, Government Code), and SECTION 1.55
(Section 481.406, Government Code) of this bill. 

Rulemaking authority previously granted to the Texas Department of
Economic Development is transferred to the executive director of the Texas
Economic Development and Tourism Office in SECTION 1.30 (Section 481.075,
Government Code) of this bill. 

Rulemaking authority previously granted to the Texas Department of
Economic Development is transferred to the Texas Economic Development and
Tourism Office in SECTION 1.17 (Section 481.021, Government Code), SECTION
1.64, and SECTION 3.02 (Section 2303.051, Government Code), of this bill. 

Rulemaking authority previously granted to the Texas Department of
Economic Development is transferred to the permit office of the Texas
Economic Development and Tourism Office in SECTION 1.33 (Section 481.123,
Government Code) and SECTION 1.34 (Section 481.124, Government Code) of
this bill. 

Rulemaking authority previously granted to the Product Development and
Small Business Incubator Board under Subchapter P, Chapter 403, Government
Code, is transferred to the Product Development and Small Business
Incubator Board established under Subchapter D, Chapter 489, Government
Code in SECTION 2.02 (Section 489.210 and 489.213, Government Code) of
this bill. 

Rulemaking authority is expressly granted to the Texas Economic
Development Office in SECTION 2.01 (Section 489.002, Government Code) of
this bill. 

ANALYSIS
 CSHB 1233 amends the Government Code to abolish the Texas Department of
Economic Development and transfer its functions to the newly-created Texas
Economic Development and Tourism Office in the office of the governor.  It
also amends the Government Code to restructure the state Enterprise Zone
Program, and adds  new sections to create the aerospace and aviation
office and the Texas economic development bank within the office of the
governor. 

CSHB 1233 amends the Government Code to change the name of the Texas
Department of Economic Development to the Texas Economic Development and
Tourism Office (office).  

CSHB 1233 amends the Government Code, to add definitions of "Bank" to mean
the Texas Economic Development Bank, "Industry cluster" to mean a
concentration of businesses and industries in a geographic region, and
"Office" to mean the Texas Economic Development and Tourism Office.  

CSHB 1233 amends the Government Code to replace the Texas Department of
Economic Development with the Texas Economic Development and Tourism
Office.  Establishes the Texas Economic Development and Tourism Office as
an office within the office of the governor. 

CSHB 1233 amends the Government Code to make the Texas Economic
Development and Tourism Office subject to Chapter 325 (Texas Sunset Act),
and abolishes the office, unless continued by the legislature, in 2015. 

CSHB 1233 amends the Government Code to update standard language developed
by the Sunset Commission prohibiting the executive director, high-level
employees, and spouses from serving as an officer or employee of a related
Texas trade association. 

CSHB 1233 amends the Government Code to add standard language developed by
the Sunset Commission requiring the office to develop a policy that
encourages the use of negotiated rulemaking and alternative dispute
resolution. 

CSHB 1233 amends the Government Code to make a conforming change to refer
to the executive director, rather than the governing board, which is being
abolished in this bill. 

CSHB 1233 amends the Government Code to require the governor to appoint
the executive director of the office, who serves at the pleasure and under
the direction of the governor and requires the executive director to
direct the activities of the office. 

CSHB 1233 amends the Government Code to make conforming changes to clarify
the Office of Defense Affairs is an office within the Texas Economic
Development and Tourism Office. 

CSHB 1233 amends the Government Code to require the office to establish
and maintain an aerospace and aviation office to encourage economic
development by fostering the growth and development of aerospace and
aviation industries in Texas, to hire a director for the aerospace office,
and to set forth the requirements of the aerospace office.  

CSHB 1233 amends the Government Code to require the executive director to
designate an individual as the small business advocate. Sets eligibility
requirements for designation. Requires the small business advocate to
serve as the focal point for assisting small and historically
underutilized businesses by performing certain functions; provide
assistance to these businesses; and perform research, studies, and
analyses of matters affecting these businesses. 

CSHB 1233 amends the Government Code to make conforming changes to clarify
the financial transactions of the office are subject to audit by the state
auditor or a private auditing firm. Requires the state auditor to inform
the executive director when a financial audit of the office is not
included in the audit plan for the state for a fiscal year and requires
the executive director to ensure that the department is audited during
those fiscal years. 

CSHB 1233 amends the Government Code to make conforming changes that
require the executive director of the office, rather than the department,
to employ personnel necessary for the performance  of office functions.
Specifies that the equal employment opportunity officer and the internal
auditor of the office of the governor shall serve the same functions for
the office. Requires the internal auditor to report directly to the
governor, rather than the governing board.  Updates standard language
developed by the Sunset Commission requiring the executive director to
provide information to  employees relating to the qualifications and
responsibilities of employment and to the State Employee Incentive
Program. 

CSHB 1233 amends the Government Code to make conforming changes to require
an annual fiscal report for all funds received and disbursed by the
office, rather than the department. 

CSHB 1233 amends the Government Code to add standard language developed by
the Sunset Commission to require the office to maintain information on
written complaints and notify the parties about policies for and the
status of complaints. 

CSHB 1233 amends the Government Code to make conforming changes to apply
the general powers and duties to the office, rather than the department. 

CSHB 1233 amends the Government Code to make conforming changes to
authorize the office, rather than the department, to carry out general
powers and duties. Removes the provision that authorizes the office to sue
and be sued. 

CSHB 1233 amends the Government Code to require the office to market and
promote the state as a premier business location and tourist destination;
facilitate the location, expansion, and retention of domestic and
international business investment to the state; promote and administer
business and community economic development programs and services in the
state, including business incentives programs; provide to businesses and
communities in the state assistance with exporting products and services
to international markets; serve as a central source of economic research
and information; and establish a statewide strategy for industry clusters. 

CSHB 1233 amends the Government Code to make conforming changes to require
the office, rather than the department, to perform administrative duties. 

CSHB 1233 amends the Government Code to require the governor to appoint
the board of directors of the Texas Economic Development Corporation.
Authorizes the governor, or the governor's designee, and the executive
director of the office, to serve as nonvoting, ex officio members of the
board. 

CSHB 1233 amends the Government Code to make conforming changes to
establish the office, rather than the department, as the agency of this
state responsible for administering the Empowerment Zone and Enterprise
Community grant program in this state. Requires the bank to cooperate with
federal and local agencies to administer the grant program. 

CSHB 1233 amends the Government Code to add standard Sunset language
requiring the office to make effective use of technology in its delivery
of services and provision of information to the public. 

CSHB 1233 amends the Government Code to make conforming changes that
require the office, rather than the department, to maintain offices in
foreign countries. 

CSHB 1233 amends the Government Code to make conforming changes that
require the office, rather than the department, to recover the cost of
providing technical assistance, management training services, and other
services, to businesses and communities. 

CSHB 1233 amends the Government Code to require the office to work with
industry associations and organizations to identify regional and statewide
industry clusters; authorize activities of the office in identifying
industry clusters; require the office to identify targeted sectors within
industry clusters; require the office to work with targeted sectors and
other organizations and institutions to strengthen the competitiveness of
industry clusters; authorize activities of the office to assist in the
development of targeted sectors; require the office to evaluate certain
factors on a continuing basis;  and require the office to use information
gathered  in each region to meet certain goals. Requires the office to
coordinate state efforts to attract, develop, or retain technology
industries in this state in certain specified sectors. Requires the office
to recommend actions to the governor to promote economic development in
advanced technology; identify and assess specific economic development
opportunities; and engage in outreach to advanced technology industries. 

CSHB 1233 amends the Government Code to make conforming changes that
require the office, rather than the department, to carry out powers and
duties related to international trade. 

CSHB 1233 amends the Government Code to make conforming changes that
ensure certain information collected by the office, rather than the
department, is confidential unless the parties consent to disclosure of
the information. 

CSHB 1233 amends the Government Code to make conforming changes that
require the office, rather than the department, to carry out business
recruitment functions. Removes the requirement to focus business
recruitment, expansion, and retention efforts on industry sectors with the
highest potential for creating high-wage, high-skill jobs. 

CSHB 1233 amends the Government Code to make conforming changes to allow
the office, rather than the department, to carry out the powers and duties
relating to financing. 

CSHB 1233 amends the Government Code to make conforming changes to require
the executive director, rather than the department, to adopt rules to
determine which users may participate in the office's business incentives
programs.  

CSHB 1233 amends the Government Code to make conforming changes to define
the permit office as the office's business permit office, rather than the
department's business permit office. 

CSHB 1233 amends the Government Code to make conforming changes to
establish the business permit office as an office within the Texas
Economic Development and Tourism Office, rather than the department. 

CSHB 1233 amends the Government Code to make conforming changes to clarify
references to the office to mean the permit office within the Texas
Economic Development and Tourism Office. 

CSHB 1233 amends the Government Code to make conforming changes to require
the office, rather than the department, to establish the Texas Business
and Community Economic Development Clearinghouse. 

CSHB 1233 amends the Government Code to make conforming changes to require
the office, rather than the department, to conduct state tourism
activities and to designate the office as the sole state governmental
entity responsible for out-of-state tourism marketing and promotion
efforts.  Requires the office to enter into a memorandum of understanding
with the Parks and Wildlife Department, the Texas Department of
Transportation, the Texas Historical Commission, and the Texas Commission
on the Arts to direct the efforts of these agencies in all matters
relating to tourism and sets forth the items required to be included in
the memorandum of understanding. 

CSHB 1233 amends the Government Code to make conforming changes to require
the executive director, rather than the governing board, to adopt rules to
implement the sale of tourism advertisements. 

CSHB 1233 amends the Government Code to add the definition of
"medium-sized business" to mean a corporation, partnership, sole
proprietorship, or other legal entity that is domiciled in Texas or has at
least 51 percent of its employees in Texas; is formed to make a profit;
and employs 100 or more but fewer than 500 full-time employees. 

CSHB 1233 amends the Government Code to make conforming changes to require
the bank, rather than the department, to establish a linked deposit
program and to require the executive director, rather than the policy
board, to adopt rules for the program. Authorizes the bank, through the
linked  deposit program to encourage commercial lending for the
development of medium-sized businesses. Requires the executive director to
approve or deny each linked deposit loan application instead of making a
recommendation to the comptroller. Requires the comptroller to place the
linked deposit no later than the 10th business day after the date on which
the agreement between the lending institution and the bank is executed.
Requires the lending institution to notify the bank, rather than the
comptroller, if the borrower defaults on the loan and authorizes the
comptroller, at the direction of the bank, to then withdraw the linked
deposit. Requires the comptroller, at the direction of the bank, to
withdraw the linked deposits from a lending institution that ceases to be
a state depository. 

CSHB 1233 amends the Government Code to require the bank to authorize the
comptroller to place a linked deposit, after the executive director's
approval, rather than the comptroller's acceptance of the application, and
after the lending institution originates a loan to an eligible borrower.
Specifies the bank, rather than the comptroller, is  not required to
maintain the deposit unless the bank approves a new loan application,
rather than the comptroller accepting it. Requires, rather than
authorizes, the comptroller to place a time deposit and requires the
comptroller to do so at the direction of the bank.  

CSHB 1233 amends the Government Code to make conforming changes to require
the office, rather than the department, to receive compliance reports and
to monitor compliance with the linked deposit program. 

CSHB 1233 amends the Government Code to make conforming changes to require
the bank, rather than the department, to promote the linked deposit
program, and to require the office, rather than the department, to prepare
a marketing report each odd-numbered year on the bank's efforts in
promoting the program. 

CSHB 1233 amends the Government Code to require the office to submit to
the comptroller a quarterly report regarding the linked deposit program.
Specifies that the financial transaction of a linked deposit are subject
to audit by the state auditor. 

CSHB 1233 amends the Government Code to make conforming changes to require
the office, rather than the department, to carry out research and data
services. 

CSHB 1233 amends the Government Code to make conforming changes to have
the office, rather than the department, serve as a one-stop center for
business-related information, obtain information from other state agencies
and organizations, create a web site to publish the information, and
charge an access fee for the information. 

CSHB 1233 amends the Government Code to make conforming changes to
establish a reserve account for the capital access program on the approval
of the bank, rather than the department. 

CSHB 1233 amends the Government Code to remove the provision that requires
investment earnings and fees charged under this subchapter to be deposited
in the fund. Also makes conforming changes to require money may be
appropriated only to the bank, rather than the department, for the capital
access program. 

CSHB 1233 amends the Government Code to make conforming changes to give
the bank, rather than the department, the powers necessary to carry out
the capital access program.              

CSHB 1233 amends the Government Code to make conforming changes to require
the bank, rather than the department, to establish and administer the
capital access program. 

CSHB 1233 amends the Government Code to make conforming changes to require
the executive director, rather than the policy board, to adopt rules
related to the implementation of the capital access program. 

CSHB 1233 amends the Government Code to make conforming changes to
prohibit the bank, rather than the department, from determining the
recipient, amount, or interest rate of a capital access loan. Removes the
provision that prohibits loans under this Subchapter from being eligible
to be enrolled,  if the loan is for refinancing existing loans not
originally under this subchapter. Authorizes the bank, rather than the
department, with no recourse to the bank or to the loan loss reserve
correspondent to the loan, to determine the conditions under which a loan
may be sold on the secondary market. 

CSHB 1233 amends the Government Code, to make conforming changes requiring
the bank, rather than the department, to approve reserve accounts and
oversee loans made through the capital access program. Adds a requirement
that the institution certify that the borrower is financing an enterprise
project, if applicable. If the borrower is financing an enterprise
project, or is a medium-sized business, authorizes the bank to deposit 200
percent of the total amount into the reserve account . Requires a
participating financial institution to obtain approval from the bank to
withdraw funds from the reserve account. 

CSHB 1233 amends the Government Code to make conforming changes to set
limitations on the amounts the bank, rather than the department, deposits
in the reserve account. If the borrower is financing an enterprise project
or a small or medium-sized business or non-profit organization, limits the
amount to eight percent of the loan amount. 

CSHB 1233 amends the Government Code to make conforming changes to
establish the state's rights with respect to the reserve account
administered by the bank, rather than the department. Authorizes the bank
to withdraw the total amount of an institution's reserve account, if the
financial institution fails to submit a report or document requested by
the bank within the time or manner prescribed. 

CSHB 1233 amends the Government Code to make conforming changes to have
the bank, rather than the department, receive annual reports from
financial institutions participating in the capital access program. 

CSHB 1233 amends the Government Code to make conforming changes to require
the office, rather than the department, to submit an annual status report
on the capital access program to the legislature. 

CSHB 1233 amends the Government Code to make conforming changes to
authorize the bank, rather than the department, to accept gifts, grants,
and donations for the capital access program. 

CSHB 1233 abolishes the Texas Department of Economic Development and the
offices of the members of the governing board of the department serving on
the effective date of this bill. Actions taken by the department or its
governing board before the effective date are not affected by the
abolishment. 

CSHB 1233 provides that on the effective date of the bill, the
department's rules, standards, or forms; proceedings; money, contracts,
lease rights, and obligations; property; and funds transfer to the Texas
Economic Development and Tourism Office. Provides that any reference to
the Texas Department of Economic Development or its governing board means
the Texas Economic Development and Tourism Office. 

CSHB 1233 provides that on the effective date the bill, the executive
director of the Texas Department of Economic Development does not
automatically become the executive director of the office and requires a
person, to become the executive director of the office, to apply for the
position and be approved by the governor.  Provides that an employee of
the Texas Department of Economic Development does not automatically become
an employee of the office and requires the person, to become an employee
of the office, to apply for a position and be approved by the governor or
the executive director of the office. 

CSHB 1233 provides that a function or activity performed by the department
is transferred to the office. 

CSHB 1233 requires the department and the office to establish a transition
plan for the transfer described in SECTION 1.64. Requires the plan to
include a reasonable timetable for the effective reconstruction of the
department's mission, strategies, performance measures, functions, and
staff,  as they relate to key economic development clusters in this state. 

CSHB 1233  transfers the functions performed by the Texas Aerospace
Commission to the aerospace and aviation office within the Texas Economic
Development and Tourism Office; provides that the executive director of
the Texas Aerospace Commission becomes the director of the aerospace and
aviation office; and authorizes the governor to determine the manner in
which employees of the Texas Aerospace Commission, if any, are transferred
to the aerospace and aviation office. 

CSHB 1233 amends the Government Code to add Chapter 489, relating to the
establishment, operation, and funding of the Texas Economic Development
Bank.  The bill defines "Bank" as the Texas Economic Development Bank,
"Fund" as the Texas Economic Development Bank Fund, and "Office" as the
Texas Economic Development and Tourism Office.  

CSHB 1233 requires the office to adopt rules to carry out the purposes of
the chapter.  

CSHB 1233 requires the office to establish the Economic Development Bank
for the purpose of providing globally competitive, cost effective state
incentives to expanding businesses operating in this state, and ensuring
that communities and businesses in this state have access to capital for
economic development purposes. Requires that the bank's effectiveness be
measured in terms of jobs created and retained, and the total amount of
non-state funds leveraged as a result of the bank's efforts. 

CSHB 1233 requires the bank to offer a variety of financial and tax
incentives to expanding or relocating businesses, and serve as a single
source of information regarding those incentives for businesses and
communities in the state. 

CSHB 1233 requires the bank to charge fees to the beneficiaries of its
services as the bank determines necessary.  Allows the bank to use fees to
fund the administration of the bank's programs. 

CSHB 1233 allows the bank to allocate its resources as necessary to meet
the level of demand experienced by each program or service. 

CSHB 1233 provides that the economic development bank fund is a dedicated
account in the general revenue fund that includes any amount appropriated
for the bank, Capital Access Fund No. 5035, Texas Leverage Fund No. 851,
other investment earnings, and fees charged under this chapter. 

CSHB 1233 requires the Texas Economic Development Office (office) to make,
execute and deliver contracts, invest money; impose and collect fees; and
issue bonds for economic development projects. 

CSHB 1233 requires the office to report annually to the legislature on the
activities of the bank. 

CSHB 1233 provides that the bank shall perform, but is not limited to the
duties and functions of the following programs: the Texas Small Business
Industrial Development Corporation, the capital access program, the Texas
leverage fund program, the linked deposit program, the enterprise zone
program, the industrial revenue bond program, the defense economic
readjustment zone program, the federal Empowerment Zone and  Enterprise
Community grant program, and the renewal community program. 

CSHB 1233 provides that the state and state officers or employees are not
liable for grants, loans or other transactions under the direction of the
bank, except as specifically provided by law. 

CSHB 1233 allows the office to accept gifts, grants, and donations for the
bank. 

CSHB 1233 defines "Board" as the Product Development and Small Business
Incubator Board"; "Financing" as a loan, loan guarantee, or other equity
investment from the product fund to a person for use in the development
and production of a product in this state or from the small business fund
for developing small business in this state; "Office" to include the
designee of the office; "Product"  includes an invention, device,
technique, or process; "Product Fund" as the Texas product development
fund; "program" as the product development program or small business
incubator program; and "small business fund" as the Texas small business
incubator fund program. 

CSHB 1233 transfers the Product Development and Small Business Incubator
Board to the office. Provides that the bank administers the programs, the
product fund, and the small business fund rather than the Product
Development and Small Business Incubator Board.  

CSHB 1233 changes the composition of the Product Development and Small
Business Incubator Board by removing the comptroller and adding one member
who has significant business leadership experience in technology,
particularly experience with the transfer of research results into
commercial applications. Provides requirements for board composition and
terms, training, grounds for removal, open meetings, staffing, and
compliance with federal program and facility accessibility requirements. 

CSHB 1233 transfers rule making authority and the authority to issue
general obligation bonds from the comptroller to the bank. 

CSHB 1233 transfers the Texas product development fund and small business
incubator fund from the comptroller to the bank. Provides these funds are
revolving funds composed of bonds issued under this subchapter, financing
applications fees, loan repayments, guarantee fees, royalty receipts,
dividend income, money appropriated by the legislature, and amounts
received by the state from federal grants or other sources. Provides that
financing may be made only for a product or small business approved by the
bank.  Provides preferences for certain products and small businesses.
Requires the board to adopt rules governing the financing. Authorizes the
board to appoint an advisory committee. Limits the amount of financing for
a single recipient to 10 percent or less of the total amount of the bonds
issued. Provides for an application process for financing and
confidentiality requirements. Requires operation and administration
expenses of the program to be paid out of fees collected or revenue
generated. 

CSHB 1233 provides that on the effective date of the bill, the
comptroller's rules, standards, or forms; proceedings; money, contracts,
lease rights, and obligations; property; and funds relating to the small
business incubator program, Texas Small Business Incubator Fund, and the
Texas Product Development Fund transfer to the Texas Economic Development
and Tourism Office or the Texas Economic Development Bank. 

CSHB 1233 requires the governor to appoint new members to the Product
Development and Small Business Incubator Board as soon as possible on or
after the effective date of the bill and provides a timetable for the
staggered appointment of Board members. Allows the current members to
serve until replaced. 

CSHB 1233  provides that on the effective date of the bill, unobligated or
unexpended funds in the Capital Access Fund and the Texas Leverage Fund
transfer to the Economic Development Bank Fund. 

CSHB 1233 amends the Government Code to add the definitions "Bank" to mean
the Texas Economic Development Bank; "Block Group" to have the meaning
assigned by the Bureau of the Census of the U.S. Department of Commerce;
"governing body of an enterprise zone" to mean the governing body of a
municipality or county in which an enterprise zone is located; "Office" to
mean the Texas Economic Development and Tourism Office; and "qualified
business site" to mean the specific business site of an enterprise
project. Also amends the definition of  "nominating body" to mean the
governing body that nominates an enterprise project. 

CSHB 1233 amends the Government Code, to require the bank to compile data
identifying the Block Groups in this state that qualify for enterprise
zone designation, and to update the information as soon as practicable
following the release of the latest federal census.  Requires the bank to
establish criteria and procedures for designating an project or activity
of a qualified business as an enterprise project, and makes a conforming
change to require the office rather than the department to adopt rules to
carry the purposes of this chapter. 
 
CSHB 1233 makes a conforming change to require the bank rather than the
department to conduct a continuing evaluation of the enterprise zone
program and a biennial review of local incentives, and to submit a report
to the governor, legislature and legislative budget board on the
effectiveness of the program and the use of state and local incentives and
their effect on revenue.  Changes the date on which the bank shall submit
this report from December 15 to January 1 of each year. 

CSHB 1233 requires the bank to assist a unit of local government in
obtaining status as a federal zone designation that furthers the purpose
of this chapter, a nominating body in obtaining assistance from other
state agencies, and in developing small business incubators. Makes
conforming changes to require the bank rather than the department to
provide other assistance to businesses and communities as required by the
chapter. Makes conforming changes to require the bank rather than the
department to coordinate with other state agencies. 

CSHB 1233 amends the Government Code to remove the current criteria for
designation as an enterprise zone and establish new criteria to qualify
for enterprise zone designation. Requires that in order to qualify for
enterprise zone designation that an area must be a Block Group in which at
least 20 percent of the residents have incomes at or below 100 percent of
the federal poverty level; or be an area designated as a renewal
community, federal empowerment zone, or federal enterprise community. 

CSHB 1233 amends the Government Code to specify that an enterprise zone
designation shall remain in effect as long as the area continues to meet
the requirements for designation. Adds renewal communities to the federal
programs whose period of designation is limited by federal law. 

CSHB 1233 amends the Government Code to eliminate the provision that a
combination of municipal and county governing bodies may administer an
enterprise zone. Grants administrative authority to the municipality or
county that has jurisdiction over the area designated as an enterprise
zone. 

CSHB 1233 amends the Government Code to require that the nominating body
designate a liaison to oversee enterprise projects it has nominated, and
to communicate and negotiate with the bank or office and other entities in
an enterprise zone or affected by an enterprise zone project, including a
qualified business, within the jurisdiction of the nominating governmental
entity. 

CSHB 1233 amends the Government Code to require that the nominating body
report to the bank no later than October 1 of each year on the enterprise
projects in its jurisdiction, rather than on the enterprise zone, and that
the report shall include a list of local incentives, the number of
businesses assisted, and a summary of all industrial revenue bonds issued
to finance enterprise projects in the jurisdiction of the nominating
governmental entity. 

CSHB 1233 amends the Government Code to add to the definitions of "new
permanent job" and "retained job" the provision that the position be
intended to exist at the qualified business for at least three years after
the date on which a state benefit is received and authorized by this
chapter, rather than during the period that the business is designated as
an enterprise project. Clarifies that a retained job is one that existed
before designation of the business's project or activity.  

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather the department, and nominating body of a project rather
than governing body of a zone, in certifying a qualified business for the
purpose of receiving local incentives. Expands eligibility for
certification to businesses that are located in the state if 35 percent of
the business's new employees are residents of an enterprise zone or are
economically disadvantaged, in addition to the current eligibility for
businesses located in an enterprise zone if 25 percent of the business's
new employees are residents of an enterprise zone or are economically
disadvantaged. 

CSHB 1233 amends the Government Code to require the bank to prohibit
certification of a qualified business if the nominating body is not
complying with this chapter. Allows a qualified business to request that
the governing body of a municipality or county in which the business is
located apply to the bank for designation of a project or activity of the
business as an enterprise project. Adds provisions that an enterprise
project must be for an expansion or relocation from out-of-state, an
expansion, renovation or new construction, or other property to be
undertaken by a qualified business; and a predetermined designation period
approved by the bank, with beginning and end dates for each proposed
project or activity.  Eliminates current language referring to enterprise
zone criteria. Limits the designation period for an enterprise project to
five years. Requires that if the enterprise project designation is for a
franchise, separate books and records be kept. 

CSHB 1233 amends the Government Code to allow the governing body to apply
to the bank for designation of the qualified business as an enterprise
project only after it has submitted to the bank the order or ordinance and
other information that complies with the requirements of Sections
2303.4051 and 2303.4052.   

CSHB 1233 requires an application to contain an economic analysis of the
plans of the qualified business with regard to the enterprise project; the
number of permanent jobs the project will create and retain during the
designation period; the amount of investment to be made by the project;
and a complete description of the local effort made by the nominating
body, the qualified business, and other affected entities to develop and
revitalize the jurisdiction of the governmental entity nominating the
project; and if the nominating body is applying for a double or triple
jumbo enterprise project, as defined by Section 2303.407, an indication of
which of those types of designation is being sought.   

CSHB 1233 makes conforming changes to refer to the municipality or county
rather than the enterprise zone with regards to local efforts to
revitalize the jurisdiction of nominating body.   

CSHB 1233 allows a nominating body to submit an application for a project
or activity that during the application process loses its eligibility for
designation as an enterprise project solely because the project or
activity is no longer located in an enterprise zone if the bank receives
the application no later than the 30th day after the date on which the
bank makes the updated Block Group data used to make the eligibility
determination available. 

CSHB 1233 amends the Government Code to establish the information that a
governing body must include in an order or ordinance that enables the
governing body to nominate a qualified business for designation as an
enterprise project and the information that the nominating body must
submit to the bank. 

CSHB 1233 amends the Government Code to allow the bank to designate a
project or activity of a business as an enterprise project only if the
bank receives all of the information required by Section 2303.4052 and
determines that the business is a qualified business in an enterprise zone
or at a qualified business site; the nominating body demonstrates a high
level of cooperation among public, private, and neighborhood entities
within the jurisdiction of the governmental entity nominating the project
or activity; the designation will contribute significantly to the plans of
the nominating body for development and revitalization of the area in
which the project will be located; and if the business is seeking job
retention benefits that in addition to current requirements the business
facility is both adding a new business line or products and deleting or
decreasing an existing line or product, and the designation will prevent
the facility's net production capacity from decreasing.  

CSHB 1233 specifies that Section 2303.406 (b) does not apply to qualified
businesses located in a federally designated zone, which will receive
priority designation in allocating the number of enterprise projects
allowed statewide per biennium as provided by Section 2303.403.  

CSHB 1233 makes conforming changes to require the bank rather than the
department to designate enterprise projects on a competitive basis.
Eliminates the requirement that the bank establish a minimum scoring
threshold that must be met by the qualified business. Maintains the
requirement that the bank make its designation on a weighted scale.  

CSHB 1233 amends the Government Code to amend the weighted scale by
reducing from 50 to 40 percent of the evaluation based on the economic
distress of the Block Group rather than the enterprise zone and the area
within the enterprise zone where the project is located; makes a
conforming change to refer to the block group in which the a proposed
project is located rather than the enterprise zone; and increases from 25
to 35 percent of the evaluation based on the evaluation  criteria as
determined by the bank.  The evaluation criteria must include the level of
cooperation and support of the project applicant commits to the
revitalization goals of all of the enterprise zone block groups within the
jurisdiction of the nominating body; and other existing criteria.   

CSHB 1233 amends the Government Code to add provisions that allow the
office to designate multiple concurrent enterprise projects to a qualified
business during any biennium; that an approved designation as double jumbo
project, as defined by Section 2303.407, counts as two project
designations against both the nominating body in terms of the maximum
number of projects that municipality or county may have based on
population and the number of enterprise projects allowed statewide during
the biennium; that a triple jumbo project, as defined by Section 2303.407,
counts as three project designations against both the nominating body in
terms of the maximum number of projects that municipality or county may
have based on population and the number of enterprise projects allowed
statewide during the biennium. 

CSHB 1233 amends the Government Code as amended by Article 1, Chapter
1134, Acts of the 77th Legislature, Regular Session, 2001, to require the
bank to allocate to an enterprise project the maximum number of new
permanent jobs or retained jobs based on the amount of capital investment
made in the project and the refund per job with a maximum refund to be
included in a computation of a tax refund for the project. Eliminates the
provision that the number may not exceed 250 or a number equal to 110
percent of the number of anticipated new permanent jobs or retained jobs
specified in the application for designation of the business as an
enterprise project, whichever is less, and adds provisions that specify
the amount of refund based on a combination capital investment and jobs
created or retained. 

CSHB 1233 amends the Government Code as amended by Article 2, Chapter
1134, Acts of the 77th Legislature, Regular Session, 2001, to require the
bank to allocate to an enterprise project for the maximum number of new
permanent jobs or retained jobs based on the amount of capital investment
made in the project and the refund per job with a maximum refund to be
included in a computation of a tax refund for the project. Eliminates the
provision that the number may not exceed 625 or a number equal to 110
percent of the number of anticipated new permanent jobs or retained jobs
specified in the application for designation of the business as an
enterprise project, whichever is less, and adds provisions that specify
the amount of refund based on a combination capital investment and jobs
created or retained. 

CSHB 1233 amends the Government Code to establish the maximum tax benefits
for double jumbo and triple jumbo enterprise projects, and to establish
requirements for an enterprise project to claim state benefits. Limits the
benefits that a double jumbo enterprise project is eligible for to
$500,000 per fiscal year and benefits that a triple jumbo enterprise
project is eligible for to $750,000 per fiscal year. Requires a person to
submit a claim to the comptroller for a state benefit as prescribed under
this chapter and Chapters 151 and 171, Tax Code, not later than 18 months
after the date on which the term of the enterprise project designation
expires. 

CSHB 1233 amends the Government Code to specify that the bank's
designation of the project or activity of a qualified business as an
enterprise project is effective until the period approved by the bank
under Section 2303.404 regardless of whether the enterprise zone in which
the project is located, if any, fails to qualify as an enterprise zone
before the expiration of the project. 

CSHB 1233 amends the Government Code to delete reference to neighborhood
enterprise associations with regards to state agency exemptions from
regulation.  

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to review of program
rules and dissemination of reports, and preference given to enterprise
zones in granting economic development money or other benefits. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the office instead of the department. 

CSHB 1233 amends the Government Code, as amended by Article 1, Chapter
1134, Acts of the 77th Legislature, Regular Session, 2001, to require that
at the time of receipt of any tax benefit available  as result of
participating in the enterprise zone program, including sales tax and
franchise tax benefits, three percent of the amount of the tax benefit
shall be transferred to the Bank Fund to defray the cost of administering
this chapter; and the comptroller to report to the bank the statewide
total of actual jobs created and retained, and the tax refunds and credits
made under this section during that fiscal year. 

CSHB 1233 amends the Government Code to require that at the time of
receipt of any tax benefit available as result of participating in the
enterprise zone program, including sales tax and franchise tax benefits,
three percent of the amount of the tax benefit shall be transferred to the
Bank Fund to defray the cost of administering this chapter; and requires
the comptroller to report to the bank the statewide total of actual jobs
created and retained, and the tax refunds and credits made under this
section during that fiscal year. 

CSHB 1233 amends the Government Code to eliminate the allowance that a
government entity that owns property in an enterprise zone may dispose of
the property by selling it to a neighborhood enterprise association; and
makes a conforming change to refer to the bank rather than the department
with regards to filing requirements related to the sale of government
property in an enterprise zone for less than market value. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to the monitoring of
qualified business or enterprise project commitments. Adds requirements
that the nominating body conduct an audit of the qualified business to
determine whether the business or project has followed through on its
commitments and submit the results of the audit to the comptroller. Allows
a qualified business to obtain a state benefit upon completion of an audit
performed by the comptroller that certifies hiring commitments and
eligible purchases made on behalf of a qualified business. 

CSHB 1233 amends the Government Code is amended by adding Section
2303.517, to require that a qualified business submit to the bank a
certified report of the actual number of jobs created or retained and the
capital investment made at or committed to the qualified business site
before it can receive a state benefit. 

CSHB 1233 amends the Government Code to add definitions of "Bank" to mean
the Texas Economic Development Bank and "Office" to mean the Texas
Economic Development and Tourism Office to the Defense Economic
Readjustment Zone (DERZ) program. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank and office rather than the department with regards to the
general powers and duties of the DERZ program. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank and office with regards to evaluating the DERZ program and
reporting to the governor, legislature and legislative budget board. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank and rather than the department with regards to providing
assistance to businesses located in a defensedependent community. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to coordinating with
other state entities. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to adversely affected
defense-dependent communities. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to application for
designation as a DERZ. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to the review of
applications for designation as a DERZ. 
 
CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to negotiating an
agreement with the nominating body for designation as a DERZ. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to denial of
application for designation as a DERZ. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to amending the
boundaries of a DERZ. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to removing the
designation of a DERZ. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to the requirement
that the governing body of a defense-dependent community designate a
liaison. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to reporting
requirements by the governing body of a DERZ. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to the criteria for a
qualified business to become eligible to receive state benefits under this
chapter. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to prohibiting a
qualified business from receiving benefits and requests for application
for defense readjustment project designation. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to application process
for designation as a defense readjustment project designation. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to the criteria for
defense readjustment project designation, the allocation of jobs eligible
for tax refunds, and the duration of designation as a project. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to dissemination of
reports to the governing bodies of DERZ. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the office and the bank rather than the department with regards to
giving preference to DERZ in granting economic development money or other
benefits. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to requiring the
comptroller to report on the total statewide tax refunds or credits made
under this section during that fiscal year. 

CSHB 1233 amends the Government Code to make conforming changes to refer
to the bank rather than the department with regards to requiring the
comptroller to report on the total statewide tax refunds or credits made
under this section during that fiscal year. 
 
CSHB 1233 amends the Government Code to make conforming changes to refer
to the office and the bank rather than the department with regards to
requiring the governing body of a DERZ to report on the sale of surplus
property at less than fair market value. 

CSHB 1233 amends the Government Code to allow the bank to monitor a
defense readjustment project to determine whether and to what extent the
project followed through on any commitments made by it or on its behalf
under this chapter. Makes conforming changes to refer to the bank rather
than the department with regards to the criteria for making this
determination. 
 
CSHB 1233 amends the Tax Code to provide a refund for the purchase of
equipment, machinery, and building materials sold to, and labor for
remodeling, rehabilitating, or constructing a structure by an enterprise
project for use at the qualified business site rather than in an
enterprise zone; that the refund shall be based on the amount of capital
investment made at the qualified business site and refund per job with a
maximum refund to be included in a computation of tax refund for the
project. Establishes criteria for calculating the refund amount. 

CSHB 1233 amends the Tax Code to provide a refund for the purchase of
equipment, machinery, and building materials sold to, and labor for
remodeling, rehabilitating, or constructing a structure by an enterprise
project for use at the qualified business site rather than in an
enterprise zone; that the refund shall be based on the amount of capital
investment made at the qualified business site and refund per job with a
maximum refund to be included in a computation of tax refund for the
project. Establishes criteria for calculating the refund amount. 

CSHB 1233 amends the Tax Code to eliminate the provision that an
enterprise project may not apply for a refund under this section after the
end of the state fiscal year immediately following the state fiscal year
in which the enterprise project's designation expires or is removed.   

CSHB 1233 amends the Tax Code to make a conforming change to require the
bank rather than the department to provide the comptroller with
assistance.   

CSHB 1233 amends the Tax Code to make a conforming change to refer to the
bank rather than the department in regards to designating an enterprise
project; deletes reference to a "qualified hotel project."   

CSHB 1233 amends the Tax Code to amend the requirement that a "new
permanent job" be intended to exist for at least three years rather than
during the period that the qualified business is designated as an
enterprise project. 

CSHB 1233 amends the Tax Code to add the definitions of "Double Jumbo
Enterprise Project" and "Triple Jumbo Enterprise Project."  

CSHB 1233 amends the Tax Code to transfer the requirement that the
department certify whether the level of employment of qualified employees
has been maintained to the comptroller. 

CSHB 1233 amends the Tax Code to establish the maximum refunds for a
double jumbo enterprise project as $500,000 and for a triple jumbo
projects as $750,000 in each fiscal year.  

CSHB 1233 amends the Tax Code to provide that an enterprise project
approved by the Texas Economic Development Bank after September 1, 2003,
may not receive a refund before September 1, 2005. 

CSHB 1233 amends the Tax Code to make a conforming changes to refer to the
bank rather than the department with regards to defense readjustment
projects and to require the comptroller rather than the department to
annually certify to the legislative budget board whether the level of
employment of qualified employees has been maintained. 

CSHB 1233 amends the Tax Code to make a conforming change to refer to the
bank rather than the department with regards to designation of a defense
readjustment project. 

CSHB 1233 amends the Tax Code to make a conforming change to refer to the
jurisdiction of the nominating body rather than the enterprise zone with
regards to applying for a one-time refund of sales and use tax paid by the
qualified business; and require that the project certify to the
comptroller rather than the department that the business is retaining 10
or more jobs held by qualified employees during the year. Removes the
provision that the qualified businesses that have been certified as
eligible under this section by the governing body or bodies to the
department and retains the provision that they be certified as eligible to
the comptroller. 

CSHB 1233 amends the Tax Code to define "governing body" as meaning the
governing body of  a municipality or county that applied to have the
project or activity of a qualified business designated as a project under
Section 2303.405, Government Code. 

CSHB 1233 amends the Tax Code to transfer the certification process for
eligibility for franchise tax refunds under the enterprise zone program
from the department to the comptroller. 

CSHB 1233 amends the Tax Code to define "governing body" as the governing
body of a municipality or county that applied to have the project or
activity of a qualified business designated as a project under Section
2303.405, Government Code. 

CSHB 1233 amends the Tax Code to define "Defense Readjustment Project" as
a person designated by the department as a project on or after September
1, 2001, but before September 1, 2003, and a person designated as a
project by the bank after September 1, 2003; and "Enterprise Project" as a
person designated by the department as a project on or after September 1,
2001, but before September 1, 2003, and a person designated as a project
by the bank after September 1, 2003. 

CSHB 1233 amends the Insurance Code make a conforming change to refer to
the bank rather than the department with regards the establishment of a
task force to study the feasibility of instituting various property and
casualty insurance initiatives in the state. 

CSHB 1233 amends the Development Corporation Act of 1979 (Article 5190.6,
Vernon's Texas Civil Statutes), to require that the governor appoint the
board of directors of the Texas Small Business Industrial Development
Corporation and that the governor or the governor's designee and the
executive director of the office shall serve as nonvoting ex officio
members of the Board.  Makes conforming changes to refer to the bank
rather than the department with regards to prohibiting the use of Texas
Small Business Development funds except to reimburse expenses incurred in
its official capacity on behalf of the Texas Small Business Industrial
Development Corporation. 

CSHB 1233 specifies that the changes in made by this Act to Chapter 2303,
Government Code, and Chapters 151 and 171, Tax Code, apply only to an
application for a designation under the enterprise zone program that is
filed on or after the effective date of this Act; and that an application
that is filed prior to the effective date of this Act is governed by the
law in effect on the date the application was filed. 

CSHB 1233 repeals several sections that have expired, including the Texas
Exporters Loan Fund, Statewide Certified Development Corporation, Rural
Economic Development loans, bonds and authority for the Economic
Development Act, and Texas Manufacturing Institute. Repeals several
sections that do not directly relate to the office's new structure.
Repeals sections relating to the governing board and establishing
divisions within the department. Also repeals sections that authorize the
appointment of advisory committees, require establishing memorandums of
understanding with 12 other entities, and require an agreement with the
Historical Commission. Repeals sections that do not directly relate to the
office's new focus and primary functions, including the Office of Small
Business Assistance, development corporation training, annual tax
incentive and economic development law report, Statewide Economic
Development Plan, Texas-Mexico Commerce and International Relations
Coordinated Plan, and Texas-Mexico Development Fund. Repeals sections that
relate to creating the Texas Economic Development Bank and consolidating
existing programs under the bank, including the subchapter that references
the Product Development and Small Business Incubators program in the
enabling statute for the Office of the Comptroller. Repeals a limitation
on the amount that can be deposited in linked deposits. Repeals provisions
from the Tax Code and the enabling statutes for the enterprise zone
program and  defense economic readjustment zone program that do not relate
to the newly-designed enterprise zone program and defense economic
readjustment zone program. 

EFFECTIVE DATE

September 1, 2003

COMPARISON OF ORIGINAL TO SUBSTITUTE

 The substitute modifies the original to change the name of the Texas
Economic Development Office to the Texas Economic Development and Tourism
Office; transfers the functions of the Texas Aerospace Commission to the
aerospace and aviation office within the Office; makes changes to the
administration and operation of certain economic development programs,
including the enterprise zone and linked deposit programs; and establishes
the Texas Economic Development Bank. 

The substitute changes the name of the Office to the Texas Economic
Development and Tourism Office. 

The substitute adds a definition of "industry cluster."

The substitute changes the sunset date from September 1, 2012 to September
1, 2015. 

The substitute prohibits the executive director, high-level employees, and
spouses from serving as an officer or employee of a tourism trade
association. 

The substitute requires the office to  establish and maintain an aerospace
and aviation office to encourage economic development by fostering the
growth and development of aerospace and aviation industries in Texas, to
hire a director for the aerospace and aviation office, and to set forth
the requirements of the aerospace and aviation office. Transfers the
functions of the Texas Aerospace Office to the aerospace and aviation
office. 

The substitute requires the executive director to designate an individual
as the small business advocate. Sets eligibility requirements for
designation. Requires the small business advocate to serve as the focal
point for assisting small and historically underutilized businesses by
performing certain functions; provide assistance to these businesses; and
perform research, studies, and analyses of matters affecting these
businesses. 

The substitute provides that the equal employment opportunity officer and
the internal auditor of the office of the governor shall serve the same
functions for the office.  

The substitute removes the provision that authorizes the office to sue and
be sued. 

The substitute requires the office to work with industry associations and
organizations to identify regional and statewide industry clusters;
authorizes activities of the office in identifying industry clusters;
requires the office to identify targeted sectors within industry clusters;
requires the office to work with targeted sectors and other organizations
and institutions to strengthen the competitiveness of industry clusters;
authorizes activities of the office to assist in the development of
targeted sectors; requires the office to evaluate certain factors on a
continuing basis; and requires the office to use information gathered  in
each region to meet certain goals. Requires the office to coordinate state
efforts to attract, develop, or retain technology industries in this state
in certain specified sectors. Requires the office to recommend actions to
the governor to promote economic development in advanced technology;
identify and assess specific economic development opportunities; and
engage in outreach to advanced technology industries. 

The substitute adds definition of "medium-sized business" and authorizes
these businesses as eligible borrowers of the linked deposit program. 

The substitute changes the language regarding the transfer of the
executive director and employees of the Texas Department of Economic
Development to the Texas Economic Development and Tourism Office.
Requires the executive director to apply for that position and be approved
by the governor, and requires the employees to apply for a position and be
approved by the governor and executive director. 

The substitute removes the provision that exempted out-of-state tourism
advertising from the state's historically underutilized business
requirements. 

The substitute removes language requiring the consolidation of tourism
activities, and adds language to require the office, as the sole state
governmental entity responsible for out-of-state tourism  marketing and
promotion efforts, to perform certain acts, including entering into a
memorandum of understanding with certain state agencies to direct the
efforts of these agencies in all matters relating to promotion of tourism.

The substitute deletes ARTICLE 2 (CONSOLIDATION OF TOURISM FUNCTIONS) in
its entirety and replaces it with ARTICLE 2 (CREATION OF TEXAS ECONOMIC
DEVELOPMENT BANK.) 

The substitute adds language to create the Texas Economic Development Bank
within the office, and consolidates several existing business incentive
and finance programs, including the product development and small business
incubator programs, into the bank. The substitute establishes the
operation and funding for the bank, and authorizes the bank to transfer
funds between the existing programs to meet changes in demand and to
charge fees to support the administration of the programs. 

The substitute deletes ARTICLE 3 (EFFECTIVE DATE), which is now contained
in ARTICLE 5 of the committee substitute, and replaces it with ARTICLE 3
(ENTERPRISE ZONES; CERTAIN OTHER ECONOMIC DEVELOPMENT PROGRAMS
ADMINISTERED BY TEXAS ECONOMIC DEVELOPMENT BANK). 

The substitute adds language to re-design the enterprise zone program by
eliminating the application process and authorizing the bank to designate
the enterprise zones based on areas with a poverty rate of 20 percent or
higher. The substitute strengthens incentives for larger investments and
new job creation, and requires administrative costs of the program to be
fully cost-recovered.