H.J.R. 90 78(R)    BILL ANALYSIS


H.J.R. 90
By: Bonnen
Local Government Ways and Means
Committee Report (Unamended)



BACKGROUND AND PURPOSE 

Municipalities and counties have often targeted desirable inbound
businesses by offering leases of publicly-owned land.  Sometimes included
are "high profile" properties, such as downtown convention hotels,
metropolitan sports facilities, and others which provide entertainment and
related benefits to the public at large.  An often critical element to
attracting target businesses has been a reduced ad valorem tax burden.
Under the Texas Tax Code, only the leasehold is taxable and valued
typically on one year's lease payments. 

A recent Austin Court of Appeals decision suggested that leases of
governmentally-owned property for anything other than an unquestionably
"public" (i.e. governmental) purpose makes not only the leasehold, but the
entire fee simple ownership interest in the property, fully taxable.  The
decision would have a drastic impact on existing lessees and make it much
harder for state and local governments to negotiate new leases with target
businesses. 

There are some types of taxable leaseholds in government-owned property
which the legislature, based on perceived importance, expressly prohibited
taxing, even on the leasehold.  These protected interests include land
owned by the permanent university fund and county public school funds,
foreign trade zone, park, market, fairground or other public facility
lands, a broad variety of airport support facilities, concert halls,
skating facilities, and visitor or convention centers.  Because the
statutory prohibition against taxation of such leaseholds assumes the
leasehold interest to be in "exempt property,"the court decision, by
disputing the underlying exempt status of all such properties, might
threaten even this last broad group of property uses. 

HJR 90 proposes a constitutional amendment to allow the legislature to
amend the Tax Code to define "public purpose" as it is used to determine
ad valorem tax exempt status of property owned by a political subdivision
and leased by a private business. 


RULEMAKING AUTHORITY

It is the committee's opinion that this resolution does not expressly
grant any additional rulemaking authority to a state officer, department,
agency, or institution. 

ANALYSIS

HJR 90 proposes a constitutional amendment to be approved or denied by
voters at an election on November 4, 2003.  If approved, it would amend
Section 2 (a), Article VIII of the Texas Constitution to allow the
legislature to define "public purposes" as it relates to public property
ad valorem tax exemption.  It would also amend Section 9, Article XI of
the Texas Constitution to allow the legislature to define "public
purposes" as it relates to the use of property of counties, cities and
towns. 

FOR ELECTION

November 4, 2003