By:  Keffer of Eastland                                           H.B. No. 3549


A BILL TO BE ENTITLED
AN ACT
relating to the establishment, operation, and funding of an economic development bank; authorizing programs and services within the bank; BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Subtitle F, Title 4, Government Code, is amended by adding Chapter 489 to read as follows:
CHAPTER 489. TEXAS ECONOMIC DEVELOPMENT BANK
SUBCHAPTER A. GENERAL PROVISIONS
Section 489.101. DEFINITIONS. In this chapter: (1) "Account" means the community infrastructure development revolving loan account. (2) "Act" means the Development Corporation Act of 1979, Article 5190.6 Vernon's Texas Civil Statutes. (3) "Bank" means the Texas Economic Development Bank. (4) "Bonds" includes bonds, notes, and other evidences of indebtedness. (5) "Capital access loan" means a loan that is entitled to be secured by the fund. (6) "Child-care provider" means a small business that operates or proposes to operate a day-care center or group day-care home, as those terms are defined by Section 42.002, Human Resources Code. (7) "Day" means the period between 8 a.m. and 5 p.m. of a day other than a Saturday, Sunday, or state or federal holiday. (8) "Defense worker" means: (A) an employee of the United States Department of Defense, including a member of the armed forces and a government civilian worker; (B) an employee of a government agency or private business, or an entity providing a department of defense related function, who is employed on a defense facility; (C) an employee of a business that provides direct services or products to the department of defense and whose job is directly dependent on defense expenditures; or (D) an employee or private contractor employed by the United States Department of Energy working on a defense or department of energy facility in support of a department of defense related project. (9) "Defense worker job" means a department of defense authorized permanent position or a position held or occupied by one or more defense workers for more than 12 months. (10) "Eligible borrower" means: (A) a person who proposes to begin operating a small business in an enterprise zone, as defined by subsection (13), or a historically underutilized business; (B) a nonprofit corporation; or (C) a child-care provider. (11) "Eligible community" means a local governmental entity eligible for a grant under Section 486.003 and that is located less than 25 miles from a defense base facility described by Section 486.003(b)(1). (12) "Eligible lending institution" means a financial institution that makes commercial loans, is a depository of state funds, and agrees to participate in the linked deposit program established by this chapter and to provide collateral equal to the amount of linked deposits placed with it. (13) "Enterprise zone" means an area designated as an enterprise zone under this chapter. (14) "Financial institution" includes a bank, trust company, banking association, savings and loan association, mortgage company, investment bank, credit union, or nontraditional financial institution. (15) "Fund" means the Texas Economic Development Bank Fund. (16) "Historically underutilized business" means: (A) a corporation formed for the purpose of making a profit in which at least 51 percent of all classes of the shares of stock or other equitable securities is owned by one or more persons who are members of certain groups, including black Americans, Hispanic Americans, women, Asian Pacific Americans, and American Indians; (B) a sole proprietorship formed for the purpose of making a profit that is 100 percent owned, operated, and controlled by a person described by Paragraph (A) of this subdivision; (C) a partnership formed for the purpose of making a profit in which 51 percent of the assets and interest in the partnership is owned by one or more persons described by Paragraph (A) of this subdivision. Those persons must have proportionate interest and demonstrate active participation in the control, operation, and management of the partnership's affairs; or (D) a joint venture in which each entity in the joint venture is a historically underutilized business under this subdivision. (17) "Industrial development corporation" shall mean a corporation created and existing under the provisions of the Development Corporation Act of 1979 (V.T.C.S. article 5190.6). (18) "Loan" includes a line of credit. (19) "Medium-sized business" means a corporation, partnership, sole proprietorship, or other legal entity that: (A) is domiciled in this state or has at least 51 percent of its employees located in this state; (B) is formed to make a profit, and (C) employs 100 or more but fewer than 500 full-time employees. (20) "Neighborhood enterprise association" means an association certified as a neighborhood enterprise association under Section 489.324. (21) "Nominating body" means the governing body of a municipality or county, or a combination of the governing bodies of municipalities or counties, that nominates and applies for designation of an area as an enterprise zone. (22) "Nonprofit corporation" means a not for profit corporation organized under the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes). (23) "Nonprofit organization" means a private, nonprofit, tax-exempt corporation, association, or organization listed in Section 501(c)(3), Internal Revenue Code of 1986, that is domiciled in this state or has at least 51 percent of its members located in this state. (24) "Office" means the Texas Economic Development Office. (25) "Panel" means the Defense Economic Adjustment Assistance Panel. (26) "Project" means a project as defined by the Development Corporation Act of 1979 (V.T.C.S. article 5190.6). (27) "Qualified business" means a person certified as a qualified business under Section 489.328. (28) "Qualified employee" means a person who: (A) works for a qualified business; and (B) performs at least 50 percent of the person's service for the business in the readjustment zone. (29) "Qualified hotel project" means a hotel proposed to be constructed by a municipality or a nonprofit municipally sponsored local government corporation created under the Texas Transportation Corporation Act, Chapter 431, Transportation Code, that is within 1,000 feet of a convention center owned by a municipality having a population of 1,500,000 or more, including shops, parking facilities, and any other facilities ancillary to the hotel. (30) "Readjustment zone" means an area designated as a defense economic readjustment zone under this chapter. (31) "Reserve account" means an account established in a participating financial institution on approval of the office in which money is deposited to serve as a source of additional revenue to reimburse the financial institution for losses on loans enrolled in the program. (32) "Small business" means a corporation, partnership, sole proprietorship, or other legal entity that: (A) is domiciled in this state or has at least 51 percent of its employees located in this state; (B) is formed to make a profit; (C) is independently owned and operated; and (D) employs fewer than 100 full-time employees. Section 489.102. PURPOSE. (a) The office shall establish a Texas Economic Development Bank for the purpose of providing globally competitive, cost effective state incentives to expanding or relocating businesses and to ensure that Texas communities and businesses have access to capital for economic development. (b) The bank shall offer a variety of financial incentives to help Texas communities and businesses compete and succeed in the global marketplace. The bank shall assist communities by providing them with grants and debt financing with which to fund their economic development efforts. (c) The bank may provide qualifying communities with tax incentives for expanding or relocating businesses and may offer incentives to lenders to make loans to near bankable businesses and low interest loans to qualifying businesses. (d) The bank may offer bond based long-term debt financing for capital investment in large commercial and industrial projects, act as a link between businesses searching for investment capital and potential investors, inform institutional lenders of Texas economic development plans and strategies for each region of the state and encourage them to support these plans in their marketing and investment strategies. (e) The bank may offer communities a one-stop source of financing for their economic development efforts and technical assistance in the development of their incentives programs to attract and retain businesses as well as in the design of incentives packages for specific prospects. (f) The bank may also provide expanding or relocating businesses with a single source for information concerning financial incentives offered by Texas to relocating or expanding businesses. (g) The bank may allocate its resources as necessary to efficiently meet the level of demand experienced by each program under this chapter. The bank's effectiveness shall be measured on the basis of the number of jobs created and retained and the total non-state dollars leveraged as a result of its efforts. (h) The bank shall charge fees to the beneficiaries of its services as necessary. These fees may be used to support the bank's administration of its programs and implementation of its strategies. Section 489.103. FUNDING. (a) The Texas Economic Development Bank fund is a dedicated account in the general revenue fund. (b) Appropriations for the implementation and administration of this chapter, funds deposited into the Capital Access Fund No. 5035 and the Texas Leverage Program Fund No. 851, investment earnings, fees charged under this chapter, federal funds, and any other amounts received by the state under this chapter shall be deposited in the Texas Economic Development Bank Fund. (c) Money in the fund may be appropriated only to the office for use in carrying out the purposes of this chapter. (d) The office may accept gifts, grants, and donations from any source for the purposes of this chapter. Section 489.104. POWERS OF THE OFFICE IN ADMINISTERING THE TEXAS ECONOMIC DEVELOPMENT BANK FUND. (a) The office shall administer the fund. In administering the fund, the office has the powers necessary to carry out the purposes of this chapter, including the power to: (1) make, execute, and deliver contracts, conveyances, and other instruments necessary to the exercise of its powers; (2) invest money in obligations and select and use depositories for its money as determined proper by the office and permitted by law; (3) impose and collect fees and charges in connection with any transaction and provide for reasonable penalties for delinquent payment or performance; and (4) issue bonds for economic development projects as defined by the Industrial Development Corporation Act of 1979. (b) In administering the Texas Small Business Industrial Development Corporation, the office may: (1) make loans through the purchase of or participation in, and pledge, hypothecate, negotiate, and sell, bonds notes, and other evidences of indebtedness incurred by users to finance projects that represent a direct loan, grant, or loan participation, or the repayment of which is totally or partially insured or otherwise guaranteed, by the United States of America, by the state, or by any agency, office, or instrumentality of either; and (2) otherwise provide financing for users, either directly or indirectly, in the manner that the Texas Small Business Industrial Development Corporation determines to be necessary or convenient for the performance of its public purposes, functions, and duties under this chapter. (c) The office shall adopt rules necessary to carry out the purposes of this chapter. Section 489.105. REPORTS; AUDITS. (a) On or before January 1 of each year, the office shall submit to the legislature an annual status report on the activities of the Texas Economic Development Bank. (b) The financial transactions of the fund are subject to audit by the state auditor as provided by Chapter 321. Section 489.106. STATE LIABILITY PROHIBITED. The state and its officers and employees are not liable to participants for grants, loans, or other transactions under this chapter except as specifically provided by law. Section 489.107. PROGRAMS AND SERVICES CONSTITUTING THE TEXAS ECONOMIC DEVELOPMENT BANK. The bank shall include, but is not limited to, the following programs and services: (1) the Texas Small Business Industrial Development Corporation; (2) the Capital Access Program; (3) the Texas Leverage Fund; (4) the Linked Deposit Program; (5) the Enterprise Zone Program; (6) the Industrial Revenue Bond Program; (7) the Defense Economic Adjustment Assistance Grant Program; (8) the Defense Economic Readjustment Zone Program; (9) the Defense Revolving Loan Program; (10) the Texas Small Business Incubator Fund; and (11) the federal Empowerment Zone, Enterprise Community, and Renewal Community Program.
SUBCHAPTER B. FINANCE PROGRAMS
Section 489.201. TEXAS SMALL BUSINESS INDUSTRIAL DEVELOPMENT CORPORATION. (a) The Texas Small Business Industrial Development Corporation shall act on behalf of the state to carry out the public purposes of this chapter. The Texas Small Business Industrial Development Corporation shall be considered to be a corporation within the meaning of the Development Corporation Act of 1979 (Article 5190.6 Vernon's Texas Civil Statutes), shall be organized and governed in accordance with the provisions of the Act, and shall have all of the powers, and shall be subject to all of the limitations, provided for corporations by the Act, except as otherwise provided by this section. For purposes of the Act, the state shall be considered to be the unit under whose auspices the Texas Small Business Industrial Development Corporation is created and the office shall be considered to be the governing body. To the extent that the provisions of this section are inconsistent with other provisions of the Act, the provisions of this section shall control as to the existence, powers, limitations, organization, administration, operation, and affairs of the Texas Small Business Industrial Development Corporation. (b) All bonds issued and delivered by the Texas Small Business Industrial Development Corporation before September 1, 1987, and all proceedings authorizing those bonds are validated, ratified, confirmed, and approved in all respects, and they are incontestable. (c) The governor shall appoint the board of directors of the Texas Small Business Industrial Development Corporation. The governor or his designee shall serve ex officio as a member of the board of directors. (d) A director, officer, employee, or member of the office acting on behalf of the Texas Small Business Industrial Development Corporation is not personally liable for damage, loss, or injury resulting from the performance of the person's duties under this chapter or on any contract, commitment, or agreement executed on behalf of the Texas Small Business Industrial Development Corporation under this chapter. (e) All programs and expenditures of the Texas Small Business Industrial Development Corporation must be approved on behalf of the state by the office. Expenses incurred by the Texas Small Business Industrial Development Corporation in the operation and administration of its programs and affairs, including expenditures for employees and program assistance or development, shall be paid out of fees collected or revenues generated under this chapter. (f) The revenues and funds of the Texas Small Business Industrial Development Corporation shall be deposited with one or more financial institutions chosen for that purpose by the board of directors. (g) Notwithstanding any other provision of this Act, "project" includes any use of amounts financed through the purchase by the Texas Small Business Industrial Development Corporation of bonds, notes, or other evidences of indebtedness of users under this subsection if the uses are found by the board of directors of the Texas Small Business Industrial Development Corporation to be required or suitable for the promotion of economic development in the state. Those findings may be based solely on a review by the board of directors of the Texas Small Business Industrial Development Corporation of the criteria used to determine eligibility of a user for obtaining a direct loan, grant, loan participation, insurance, or any other guarantee from the United States of America, the state, or any agency or instrumentality of either. Proceeds of bonds issued before September 1, 1987, may be used to pay all or part of the costs of a project regardless of whether the costs or project were within the definition of those terms under the Texas Department of Commerce Act before that date, or for any other purposes authorized by this chapter or the Act. (h) The Texas Small Business Industrial Development Corporation may not issue bonds for any purpose after September 1, 1987. Section 489.202. INDUSTRIAL REVENUE BOND PROGRAM. (a) The office shall review and approve the contents of any loan agreement made in connection with Industrial Revenue Bonds issued under the Act and shall prescribe rules and regulations setting forth minimum standards for project eligibility and loan agreements. (b) Industrial Development Corporations established under the Act shall submit a transcript of proceedings in connection with the issuance of the bonds to the office and request that the office approve the bonds. On filing a request for the office's approval of issuance of the bonds, the corporation shall pay to the office a nonrefundable filing fee. The office shall set the amount of the fee at a reasonable amount, but not less than $500 or more than $25,000. If the office refuses to approve the bond issue solely on the basis of law, the corporation may seek a writ of mandamus from the Supreme Court, and for this purpose the executive head of the office shall be considered a state officer as provided in Section 22.002, Government Code. (c) No corporation shall sell or offer for sale any bonds or other securities until a permit authorizing the corporation to offer and sell such securities has been granted by the securities commissioner under the registration provisions of The Securities Act, as amended (Article 581-1 et set., Vernon's Texas Civil Statutes), except as the State Securities Board may exempt from registration by rule, regulation, or order. Appeal from any adverse decision of the securities commissioner or the State Securities Board shall be as provided by the Administrative Procedure and Texas Register Act, as amended (Chapter 2001, Government Code). The substantial evidence rule shall apply in all such appeals. (d) The office by rule shall require corporations to file fee schedules and bond procedures. Bond counsel and financial advisors participating in an issue shall be mutually acceptable to the corporation and the user. Section 489.203. TEXAS LEVERAGE FUND. (a) Pursuant to the provisions of Article III, Section 52-a, of the Texas Constitution and the Development Corporation Act of 1979 (Article 5190.6 Vernon's Texas Civil Statutes), the office shall administer the Texas Leverage Fund for the purpose of making loans secured by and paid from economic development sales and use tax receipts to certain local industrial development corporations to fund the cost of eligible projects under the Act. (b) The office shall review and approve the contents of any lease, sale, or loan agreement made in connection with the Texas Leverage Fund and shall prescribe rules and regulations setting forth minimum standards for project eligibility and loan agreements. In no event shall the office approve any agreement unless it finds that the project sought to be financed is in furtherance of the public purposes of the Act. Section 489.204. CAPITAL ACCESS PROGRAM. (a) The office shall administer the capital access program to assist a participating financial institution in making loans to businesses and nonprofit organizations that face barriers in accessing capital. (1) The office shall use money in the fund to make a deposit in a participating financial institution's reserve account in an amount specified by this chapter to be a source of money the institution may receive as reimbursement for losses attributable to loans in the program. (2) The office shall determine the eligibility of a financial institution to participate in the program and may set a limit on the number of eligible financial institutions that may participate in the program. (3) To participate in the program, an eligible financial institution must enter into a participation agreement with the office that sets out the terms and conditions under which the office will make contributions to the institution's reserve account and specifies the criteria for a loan to qualify as a capital access loan. (b) To qualify as a capital access loan, a loan must: (l) be made to a small or medium-sized business or to a nonprofit organization; (2) be used by the business or nonprofit organization for any project, activity, or enterprise in this state that fosters economic development; and (3) meet any other criteria provided by this section. (c) The office may provide by rule for criteria under which a certain line of credit may be issued by an eligible financial institution to a small or medium-sized business or nonprofit organization qualifies to participate in the program; and may authorize a consortium of financial institutions to participate in the program subject to common underwriting guidelines. (d) To qualify for participation in the program, a line of credit must: (1) be an account at a financial institution under which the financial institution agrees to lend money to a person from time to time to finance, one or more projects, activities, or enterprises that are authorized by this section; and (2) contain the same restrictions, to the extent possible, that are placed on a capital access loan that is not a line of credit. (e) Except as otherwise provided by this section, the office may not determine the recipient, amount, or interest rate of a capital access loan or the fees or other requirements related to the loan. (f) A loan is not eligible to be enrolled under this section if the loan is for: (1) construction or purchase of residential housing; (2) simple real estate investments, excluding the development or improvement of commercial real estate occupied by the borrower's business or organization; (3) inside bank transactions, as defined by the office. (g) The borrower of a capital access loan must apply the loan to working capital or to the purchase, construction, or lease of capital assets, including buildings and equipment used by the business or nonprofit organization. Working capital uses include the cost of exporting, accounts receivable, payroll, inventory, and other financing needs of the business or organization. (h) A capital access loan may be sold on the secondary market under conditions as may be determined by the office. (i) When enrolling a loan in the program, a participating financial institution may specify an amount to be covered under the program that is less than the total amount of the loan. (j) Reserve Account. On approval by and after entering into a participation agreement with the office, a participating financial institution making a capital access loan shall establish a reserve account. The reserve account shall be used by the institution only to cover any losses arising from a default of a capital access loan made by the institution under this section or as otherwise provided by this section: (1) When a participating financial institution makes a loan enrolled in the program, the institution shall require the borrower to pay to the institution a fee in an amount that is not less than two percent but not more than three percent of the principal amount of the loan, which the financial institution shall deposit in the reserve account. The institution shall also deposit in the reserve account an amount equal to the amount of the fee received by the institution from the borrower under this subsection. The institution may recover from the borrower all or part of the amount the institution is required to pay under this subsection in any manner agreed to by the institution and borrower. (2) For each capital access loan made by a financial institution, the institution shall certify to the office, within the period prescribed by the office, that the institution has made a capital access loan, the amount the institution has deposited in the reserve account, including the amount of fees received from the borrower, and, if applicable, that the borrower is located in or financing a project, activity, or enterprise in an area designated as an enterprise zone under Chapter 489, Subchapter C. (3) On receipt of a certification made under Subsection (j)(2) and subject to Subsection (k), the office shall deposit in the institution's reserve account for each capital access loan made by the institution: (A) an amount equal to the amount deposited by the institution for each loan if the institution: (i) has assets of more than $1 billion; or (ii) has previously enrolled loans in the program that in the aggregate are more than $2 million; (B) an amount equal to 150 percent of the total amount deposited under Subsection (j)(1) for each loan if the institution is not described by Subdivision (3)(A); or (C) notwithstanding Subdivisions (3)(A) and (3)(B), an amount equal to 200 percent of the total amount deposited under Subsection (j)(1) for each loan if: (i) the borrower is located in or financing a project, activity, or enterprise in an area designated as an enterprise zone under Subchapter C; or (ii) the borrower is a small or medium-size business or a nonprofit organization that operates or proposes to operate a day-care center or a group day-care home, as those terms are defined by Section 42.002, Human Resources Code. (k) Limitations on State Contribution to Reserve Account. (1) The amount deposited by the office into a participating financial institution's reserve account for any single loan recipient may not exceed $150,000 during a three-year period. (2) The maximum amount the office may deposit into a reserve account for each capital access loan made under this section is the lesser of $35,000 or an amount equal to: (A) eight percent of the loan amount if: (i) the borrower is located in or financing a project, activity, or enterprise in an area designated as an enterprise zone under Subchapter C; or (ii) the borrower is a small or medium-size business or a nonprofit organization that operates or proposes to operate a day-care center or a group day-care home, as those terms are defined by Section 42.002, Human Resources Code; or (B) six percent of the loan amount for any other borrower. (l) All of the money in a reserve account established under this section is property of the state. (1) The state is entitled to earn interest on the amount of contributions made by the office, borrower, and institution to a reserve account under this section. The office shall withdraw monthly or quarterly from a reserve account the amount of the interest earned by the state. The office shall deposit the amount withdrawn under this subsection into the fund. (2) If the amount in a reserve account exceeds an amount equal to 33 percent of the balance of the financial institution's outstanding capital access loans, the office may withdraw the excess amount and deposit the amount in the fund. A withdrawal of money authorized under this subsection may not reduce an active reserve account to an amount that is less than $200,000. (3) The office shall withdraw from the institution's reserve account the total amount in the account and any interest earned on the account and deposit the amount in the fund when: (A) a financial institution is no longer eligible to participate in the program or a participation agreement entered into under this section expires without renewal by the office or institution; (B) the financial institution has no outstanding capital access loans; and (C) the financial institution has not made a capital access loan within the preceding 24 months. (m) Annual Report. A participating financial institution shall submit an annual report to the office. The report must: (1) provide information regarding outstanding capital access loans, capital access loan losses, and any other information on capital access loans the office considers appropriate; (2) state the total amount of loans for which the office has made a contribution from the fund under this section; (3) include a copy of the institution's most recent financial statements; and (4) include information regarding the type and size of businesses and nonprofit organizations with capital access loans. Section 489.205. LINKED DEPOSIT PROGRAM. (a) A linked deposit is a time deposit governed by a written deposit agreement between the state and an eligible lending institution that provides: (l) that the eligible lending institution pay interest on the deposit at a rate that is not less than the greater of: (A) the current market rate of a United States treasury bill or note of comparable maturity minus two percent; or (B) 1.5 percent; and (2) that the eligible lending institution agree to lend the value of the deposit to an eligible borrower at a maximum rate that is the current market rate of a United States treasury bill or note of comparable maturity plus four percent. (b) The office shall administer a linked deposit program to encourage commercial lending for the development of: (1) small businesses in enterprise zones; (2) historically underutilized businesses; (3) child-care services provided by and activities engaged in this state by nonprofit organizations; and (4) quality, affordable child-care services in this state. (c) Applications: (1) In order to participate in the linked deposit program, an eligible lending institution may solicit loan applications from eligible borrowers. (2) After reviewing an application and determining that the applicant is an eligible borrower and is creditworthy, the eligible lending institution shall send the application for a linked deposit loan to the office. (3) The eligible lending institution shall certify the interest rate applicable to the specific eligible borrower and attach it to the application sent to the office. (4) After reviewing each linked deposit loan application, the office shall approve or deny the application. (c) After the office's acceptance of the application and the lending institution originates a loan to an eligible borrower, the office shall place a linked deposit with the applicable eligible lending institution for the period of the loan, subject to subsections (d) and (e). The office is not required to maintain the deposit with the lending institution if the loan is extended, renewed, or renegotiated unless the office accepts a new linked deposit loan application under this section for the loan as modified. Subject to the limitation described by Section 489.205(h), the comptroller shall place a time deposit at the direction of the office at an interest rate described by Subsection (a) and may modify the interest rate during the period of the loan, notwithstanding any order of the State Depository Board to the contrary. (d) Before the placing of a linked deposit, the eligible lending institution and the state, represented by the office, shall enter into a written deposit agreement containing the conditions on which the linked deposit is made. The deposit agreement must provide that: (l) the comptroller shall place the time deposit within ten business days; (2) the lending institution shall notify the office if the borrower to which the deposit is linked defaults on the loan; and (3) in the event of a default, the comptroller shall withdraw the linked deposit at the direction of the office. (e) If a lending institution holding linked deposits ceases to be a state depository, the comptroller may withdraw the linked deposits at the direction of the office. (f) On acceptance of its application to receive linked deposits, an eligible lending institution shall loan money to an eligible borrower in accordance with the deposit agreement and this section. The eligible lending institution shall forward a compliance report to the office. (g) The state is not liable to an eligible lending institution for payment of the principal, interest, or any late charges on a loan made to an eligible borrower. Linked deposits are not an extension of the state's credit within the meaning of any state constitutional prohibition. (h) The maximum amount of a loan under the linked deposit program is $250,000. (i) The borrower shall apply a loan granted under this subchapter to working capital or to the purchase, construction, or lease of capital assets, including land, buildings, and equipment. Section 489.206. SMALL BUSINESS INCUBATOR FUND. (a) The Texas small business incubator fund is a revolving fund in the bank. (b) The small business fund is composed of proceeds of bonds issued under this chapter, financing application fees, loan repayments, guarantee fees, royalty receipts, dividend income, money appropriated by the legislature for authorized purposes of the small business fund, amounts received by the state from loans, loan guarantees, and equity investments made under this chapter, amounts received by the state from federal grants or other sources, and any other amounts received under this chapter and required by the office to be deposited in the small business fund. The small business fund contains a project account, an interest and sinking account, and other accounts that the office authorizes to be created and maintained. Money in the small business fund is available for use by the office under this chapter. Notwithstanding any other provision of this chapter, any money in the small business fund may be used for debt service. (c) Money in the project account of the small business fund, minus the costs of issuance of bonds under this chapter and necessary costs of administering the small business fund, may be used to provide financing to foster and stimulate the development of small businesses in this state. The office shall provide financing from the small business fund on the terms and conditions that the office determines to be reasonable, appropriate, and consistent with the purposes and objectives of the small business fund and this chapter, for the purpose of fostering and stimulating the development of new or existing small businesses in this state.
SUBCHAPTER C. ENTERPRISE ZONES.
Section 489.301. SHORT TITLE. This subchapter may be cited as the Texas Enterprise Zone Act. Section 489.302. PURPOSES. The purposes of this subchapter are to establish a process that clearly identifies severely distressed areas of the state and provides incentives by state and local government to induce private investment in those areas by removing unnecessary governmental regulatory barriers to economic growth and to provide tax incentives and economic development program benefits. Section 489.303. JURISDICTION OF MUNICIPALITY. For the purposes of this subchapter, territory in the extraterritorial jurisdiction of a municipality is considered to be in the jurisdiction of the municipality. Section 489.304. ASSISTANCE. (a) The office shall assist: (1) a qualified business in obtaining the benefits of any incentive or inducement program provided by law; (2) a unit of local government in obtaining status as a federal enterprise zone; (3) the governing body of an enterprise zone in obtaining assistance from another state agency, including training and technical assistance to qualified businesses in a zone; and (4) the governing body of an enterprise zone in developing small business incubators. (b) The office shall provide to persons desiring to locate and engage in business in an enterprise zone information and appropriate assistance relating to the required legal authorization, including a state license, permit, certificate, approval, registration, or charter, to engage in business in this state. (c) The office shall publicize existing tax incentives and economic development programs in enterprise zones. (d) On request the office shall offer to a unit of local government having an enterprise zone within its jurisdiction technical assistance relating to tax abatement and the development of alternative revenue sources. Section 489.305. COORDINATION WITH OTHER GOVERNMENTAL ENTITIES. (a) In cooperation with the appropriate units of local government and other state agencies, the office shall coordinate and streamline state business assistance programs and permit or license application procedures for businesses in enterprise zones. (b) The office shall: (1) work with the responsible state and federal agencies to coordinate enterprise zone programs with other programs carried out in an enterprise zone, including housing, community and economic development, small business, banking, financial assistance, transportation, and employment training programs; (2) work to expedite, to the greatest extent possible, the consideration of applications for those programs by consolidating forms or by other means; and (3) work, when possible, for the consolidation of periodic reports required under those programs into one summary report. (c) The office shall encourage other state agencies in awarding grants, loans, or services to give priority to businesses in enterprise zones. Section 489.306. CRITERIA FOR ENTERPRISE ZONE DESIGNATION. (a) To be designated as an enterprise zone an area must: (1) have a continuous boundary; (2) be at least one square mile but not larger than the greater of: (A) 10 square miles, excluding lakes, waterways, and transportation arteries; or (B) an area, not to exceed 20 square miles, that is equal to five percent of the area, excluding lakes, waterways, and transportation arteries, of the municipality, county, or combination of municipalities or counties nominating the area as an enterprise zone; (3) be an area of pervasive poverty, unemployment, and economic distress; and (4) be nominated as an enterprise zone by an ordinance or order adopted by the nominating body. (b) The office may not designate an area as an enterprise zone if three enterprise zones are located in the jurisdiction of and were nominated as enterprise zones by the governing body of the municipality or county nominating the area as an enterprise zone. Section 489.307. AREA OF PERVASIVE POVERTY, UNEMPLOYMENT, AND ECONOMIC DISTRESS. (a) An area is an area of pervasive poverty, unemployment, and economic distress for the purposes of Section 489.306 if: (1) the average rate of unemployment in the area during the most recent 12-month period for which data are available was at least one and one-half times the state average for that period; or (2) the area had a population loss of at least 12 percent during the most recent six-year period or at least four percent during the most recent three-year period; and (A) the area is a low-income poverty area; (B) the area is in a jurisdiction or pocket of poverty eligible for urban development action grants under federal law, according to the most recent certification available from the United States Department of Housing and Urban Development; (C) at least 70 percent of the residents or households of the area have an income that is less than 80 percent of the median income of the residents or households of the locality or state, whichever is less; or (D) the nominating body establishes to the satisfaction of the office that: (i) chronic abandonment or demolition of commercial or residential structures exists in the area; (ii) substantial tax arrearages for commercial or residential structures exist in the area; (iii) substantial losses of businesses or jobs have occurred in the area; (iv) the area is part of a disaster area declared by the state or federal government during the preceding 18 months; or (v) the area has had a substantial increase in the number of individuals younger than 18 years of age arrested due to criminal activity. (b) Labor force and population data are considered current if: (1) they are the most recently published estimates; or (2) the enterprise zone application containing the data is received by the office before the 61st day after the date revised estimates of that data are published. (c) For purposes of determining the average rate of unemployment in the area under Subsection (a)(1), individuals who are employed by a business and whose principal place of employment is on property for which the business has received a certificate of completion under Section 361.609, Health and Safety Code, are not considered. Section 489.308. NOMINATION OF ENTERPRISE ZONE. (a) The governing body of a municipality or county, individually or in combination with other municipalities or counties, by ordinance or order, as appropriate, may nominate as an enterprise zone an area within its jurisdiction that meets the criteria under Section 489.306. (b) Unless the nominating body holds a public hearing before adopting an ordinance or order under this section, the ordinance or order is not valid. (c) The governing body of a county may not nominate territory in a municipality, including extraterritorial jurisdiction of a municipality, to be included in a proposed enterprise zone unless the governing body of the municipality also nominates the territory and together with the county files a joint application under Section 489.310. (d) The governing bodies of a combination of municipalities or counties may not jointly nominate an area as an enterprise zone unless the governing bodies have entered into a binding agreement to administer the zone jointly. (e) Notwithstanding Subsections (c) and (d), the governing body of a county with a population of 1.3 million or more may nominate territory in that county that is in the extraterritorial jurisdiction of a municipality to be included in one or more of the county's enterprise zones, and the county shall administer a zone that is established as the result of the nomination. Section 489.309. NOMINATING ORDINANCE OR ORDER. (a) An ordinance or order nominating an area as an enterprise zone must: (1) describe precisely the area to be included in the zone by a legal description or reference to roadways, lakes, waterways, or municipal or county boundaries; (2) state a finding that the area meets the requirements of this chapter; (3) summarize briefly the incentives, including tax incentives, that, at the election of the nominating body, apply to business enterprises in the area; and (4) nominate the area as an enterprise zone. (b) At least one of the incentives summarized under Subsection (a)(3) must not apply throughout the governmental entity or entities nominating the area as an enterprise zone. (c) This section does not prohibit a municipality or county from extending additional incentives, including tax incentives, for business enterprises in an enterprise zone by a separate ordinance or order. Section 489.310. APPLICATION FOR DESIGNATION. (a) For an area to be designated as an enterprise zone, the nominating body, after nominating the area as an enterprise zone, must send to the office a written application for designation of the area as an enterprise zone. (b) The application must include: (1) a certified copy of the ordinance or order, as appropriate, nominating the area as an enterprise zone; (2) a map of the area showing existing streets and highways; (3) an analysis and appropriate supporting documents and statistics demonstrating that the area qualifies for designation as an enterprise zone; (4) a statement that specifies each tax incentive, grant, other financial incentive or benefit, or program to be provided by the nominating body to business enterprises in the area that is not to be provided throughout the governmental entity or entities nominating the area as an enterprise zone; (5) a statement of the economic development and planning objectives for the area; (6) a description of the functions, programs, and services to be performed by a neighborhood enterprise association in the area; (7) an estimate of the economic impact of the designation of the area as an enterprise zone on the revenues of the governmental entity or entities nominating the area as an enterprise zone, considering all the financial incentives and benefits and the programs contemplated; (8) a transcript or tape recording of all public hearings on the proposed zone; (9) if the application is a joint application, a description and copy of the agreement between the applicants; (10) the procedures for negotiating with residents, community groups, and other entities affected by the designation of the area as an enterprise zone and with qualified businesses in the area; (11) a description of the administrative authority, if one is to be appointed for the enterprise zone under Section 489.319; and (12) any additional information the office requires. (c) Information required by Subsection (b) is for evaluation purposes only. Section 489.311. REVIEW OF APPLICATION. (a) On receipt of an application for the designation of an enterprise zone, the office shall review the application to determine if the nominated area qualifies for designation as an enterprise zone under this chapter. (b) The office shall allow an applicant to correct any omission or clerical error in the application and to return the application to the office on or before the 10th day after the day on which the office receives the application. Section 489.312. DESIGNATION AGREEMENT. (a) If the office determines that a nominated area for which a designation application has been received satisfies the criteria under Section 489.306, the office shall negotiate with the nominating body for a designation agreement. (b) A designation agreement must: (1) designate the nominated area as an enterprise zone; and (2) designate the administrative authority, if one is to be appointed for the zone under Section 489.319, and describe its functions and duties, which should include decision-making authority and the authority to negotiate with affected entities. (c) The office shall complete the negotiations and sign the agreement not later than the 60th day after the day on which the application is received unless the office extends that period to the 90th day after the day on which the application was received. (d) If an agreement is not completed within the 60-day period provided by Subsection (c), the office shall provide to the nominating body the specific areas of concern and a final proposal for the agreement. (e) If the agreement is not executed before the 91st day after the day on which the application was received, the application is considered to be denied. Section 489.313. DENIAL OF APPLICATION; NOTICE. (a) The office may deny an application for the designation of an enterprise zone only if the office determines that the nominated area does not satisfy the criteria under Section 489.306. (b) The office shall inform the nominating body of the specific reasons for denial of an application, including denial under Section 489.312(e). Section 489.314. PERIOD OF DESIGNATION. (a) An area may be designated as an enterprise zone for a maximum of seven years. A designation remains in effect until September 1 of the final year of the designation. (b) Notwithstanding Subsection (a), an area designated as a federal enterprise zone, federal empowerment zone, or federal enterprise community may be designated as an enterprise zone without further qualification for longer than seven years but not longer than the period permitted by federal law. Section 489.315. AMENDING BOUNDARIES. (a) The nominating body may amend the boundary of an enterprise zone by ordinance or order, as appropriate, adopted after a public hearing on the issue. (b) The amended boundary: (1) must be continuous; (2) may not exceed the original size requirement of Section 489.306; and (3) may not exclude any area originally included within the boundary of the zone as designated. (c) The entire enterprise zone with the amended boundary must continue to meet the unemployment and economic distress requirements of Section 489.306. (d) A nominating body may not make more than one boundary amendment annually for an enterprise zone. (e) For each amendment of an enterprise zone boundary, the nominating body shall pay the office a reasonable fee, in an amount specified by the office, not to exceed $500. The office may use fees collected under this subsection to administer this chapter and for other purposes to advance this chapter. Section 489.316. REMOVAL OF DESIGNATION. (a) The office may remove the designation of an area as an enterprise zone if: (1) the area no longer meets the criteria for designation under this chapter or by rule adopted under this chapter; or (2) the office determines that the governing body of the enterprise zone has not complied with commitments made in the ordinance or order nominating the area as an enterprise zone. (b) The removal of a designation does not affect the validity of: (1) a tax incentive or regulatory relief granted or accrued before the removal; or (2) bonds issued under this chapter. Section 489.317. EXCEPTION TO LIMIT ON DESIGNATION. Designation as an enterprise zone under this subchapter of an area designated as a federal enterprise zone, federal empowerment zone, or federal enterprise community located in a municipality or county does not reduce the number of enterprise zones that the municipality or county may have designated under this subchapter. Section 489.318. ADMINISTRATION BY GOVERNING BODY. The governing body of an enterprise zone is the governing body of the municipality or county, or the governing bodies of the combination of municipalities or counties, that applied to have the area designated as an enterprise zone. Section 489.319. ADMINISTRATION BY ADMINISTRATIVE AUTHORITY. (a) The governing body of an enterprise zone may delegate its administrative duties to an administrative authority appointed by the governing body. (b) An administrative authority must: (1) be composed of 3, 5, 7, 9, 11, or 15 members; (2) be a viable and responsive body generally representative of all public or private entities that have a stake in the development of the zone; and (3) include enterprise zone residents and representatives of the governing body of the zone and of local businesses Section 489.320. PARTICIPATION BY NEIGHBORHOOD ENTERPRISE ASSOCIATIONS. Each neighborhood enterprise association organized under Section 489.323 should: (1) actively participate in the administration of the enterprise zone for which the association was organized; and (2) be encouraged to participate in planning and carrying out activities in the enterprise zone. Section 489.321. LIAISON. The governing body of an enterprise zone shall designate a liaison to communicate and negotiate with: (1) the office; (2) the administrative authority, if one exists; (3) an enterprise project; and (4) other entities in or affected by the enterprise zone. Section 489.322. ANNUAL REPORT. (a) Not later than October 1 of each year, the governing body of an enterprise zone shall submit to the office a report in the form required by the office. (b) The report must be approved by the enterprise zone's administrative authority, if one exists. (c) The report must include for the year preceding the date of the report: (1) a list of local incentives for community development available in the zone; (2) the use of local incentives for which the governing body provided in the ordinance or order nominating the enterprise zone and the effect of those incentives on revenue; (3) the number of businesses assisted, located, and retained in the zone since its designation due to the existence of the enterprise zone; (4) a summary of all industrial revenue bonds issued to finance projects located in the zone; and (5) a description of all efforts made to attain revitalization goals for the zone. Section 489.323. ORGANIZATION OF NEIGHBORHOOD ENTERPRISE ASSOCIATION. (a) Individuals residing in an enterprise zone may organize a neighborhood enterprise association. (b) Only one association may exist for a geographic neighborhood area. (c) The association must: (1) be a nonprofit corporation organized under the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes); and (2) be eligible for federal tax exemption under Section 501(c) of the Internal Revenue Code of 1986 (26 U.S.C. Section 501(c)). (d) The articles of incorporation must: (1) describe the geographic neighborhood area of the association; and (2) authorize the association to engage in business only in the enterprise zone in which the neighborhood area is located. (e) The incorporators shall publish in a newspaper of general circulation in the governmental entity or entities that applied to have the area designated as an enterprise zone an explanation of the proposed association and the incorporators' rights in the association. (f) A copy of the association's articles of incorporation and bylaws shall be available for public inspection at: (1) the office of the city manager or comparable municipal officer if the entity is a municipality; or (2) the county judge's office if the entity is a county. Section 489.324. CERTIFICATION OF ASSOCIATION. (a) After a neighborhood enterprise association is organized, the association's board of directors must apply to the governing body of the enterprise zone or to the office for certification as a neighborhood enterprise association. (b) The governing body of the enterprise zone or the office may not grant certification unless the association has hired or appointed a suitable chief executive officer. Section 489.325. MEMBERSHIP; VOTING. (a) The membership of a neighborhood enterprise association may be composed only of residents of the enterprise zone. (b) An individual is entitled to be a member of a neighborhood enterprise association if the individual is: (1) a resident of the association's geographic neighborhood area; and (2) of voting age. (c) To be entitled to vote, a member of the association must have been a resident of the association's neighborhood area for at least one year. Section 489.326. POWERS OF NEIGHBORHOOD ENTERPRISE ASSOCIATIONS. (a) A neighborhood enterprise association may purchase or lease publicly or privately owned real property. (b) A neighborhood enterprise association with the approval of and in coordination with the responsible state or local governmental entity may; (1) establish crime watch patrols in the association's geographic neighborhood area; (2) establish volunteer day-care centers; (3) organize recreational activities for the association's geographic neighborhood area youth; (4) provide garbage collection; (5) maintain and improve streets, bridges, and water and sewer lines; (6) provide energy or water conservation projects; (7) provide health and clinic services; (8) provide drug abuse programs; (9) provide senior citizen assistance programs; (10) maintain parks; (11) rehabilitate, renovate, operate, or maintain low or moderate income housing; and (12) provide other types of public services as authorized by law or rule. (c) A service may be provided under Subsection (b) by the association or, if feasible and prudent and after agreement with the appropriate state or local governmental entity, by a private firm or organization. (d) The governmental entity responsible for providing a service may contract with a neighborhood enterprise association to provide services in an amount equal to the amount saved by the entity by the provision of the service under the contract. (e) A neighborhood enterprise association has powers established by other law or rule, including powers available to similar corporations under state law. (f) A neighborhood enterprise association may enter into a contract and participate in a joint venture with the state or a state agency or institution. (g) A neighborhood enterprise association may receive money without approval of the governing body of the enterprise zone. Section 489.327. APPROVED PROJECTS. (a) On approval of the governing body of an enterprise zone, a neighborhood enterprise association may carry out projects other than those under Section 489.326(b). The association must submit to the governing body an application that describes the nature and benefit of the project and that specifically states: (1) how the project will contribute to the self-help efforts of the residents of the association's geographic neighborhood area; (2) how the residents of the geographic neighborhood area will be involved in the planning and implementation of the project; (3) whether there are sufficient resources to complete the project and whether the association will be fiscally responsible for the project; and (4) whether the project will enhance the enterprise zone by: (A) creating permanent jobs; (B) physically improving the housing stock; (C) stimulating neighborhood business activity; or (D) preventing crime. (b) If the governing body of an enterprise zone does not disapprove an application submitted under Subsection (a) before the 45th day after the day of receipt of the application, the application is considered to be approved. (c) If the governing body of an enterprise zone disapproves an application submitted under Subsection (a), the governing body shall notify the association of the specific reasons for the decision and shall allow the association to amend the application on or before the 60th day after the date of the notification. (d) The association shall furnish to the governing body of the enterprise zone: (1) an annual statement of the programmatic and financial status of each approved project; and (2) an audited financial statement of the project. Section 489.328. QUALIFIED BUSINESS. (a) A person is a qualified business if the office, for the purpose of state benefits under this chapter, or the governing body of an enterprise zone, for the purpose of local benefits, certifies that: (1) the person is engaged in or has provided substantial commitment to initiate the active conduct of a trade or business in the enterprise zone; and (2) at least 25 percent of the person's new employees in the enterprise zone are: (A) residents of any enterprise zone in the jurisdiction of the governing body of the enterprise zone; or (B) economically disadvantaged individuals. (b) The governing body of an enterprise zone may certify a franchise or subsidiary of a new or existing business as a qualified business if the franchise or subsidiary: (1) is located entirely in the enterprise zone; and (2) maintains separate books and records of the business activity conducted in the zone. (c) For the purposes of this section, an economically disadvantaged individual is an individual who: (1) was unemployed for at least three months before obtaining employment with the qualified business; (2) receives public assistance benefits, including welfare payments or food stamps, based on need and intended to alleviate poverty; (3) is an economically disadvantaged individual, as defined by Section 4(8), Job Training Partnership Act (29 U.S.C. Section 1503(8)); (4) is an individual with handicaps, as defined by 29 U.S.C. Section 706(8); (5) is an inmate, as defined by Section 498.001; (6) is entering the workplace after being confined in a facility operated by the institutional division of the Texas Department of Criminal Justice or under contract with the Texas Department of Criminal Justice; (7) has been released by the Texas Youth Commission and is on parole, if state law provides for such a person to be on parole; or (8) meets the current low income or moderate income limits developed under Section 8, United States Housing Act of 1937 (42 U.S.C. Section 1437f et seq.). Section 489.329. PROHIBITION ON QUALIFIED BUSINESS CERTIFICATION. If the office determines that the governing body of an enterprise zone is not complying with this subchapter, the office shall prohibit the certification of a qualified business in the zone until the office determines that the governing body is complying with this subchapter. The office may not designate more than 85 businesses as enterprise projects during any biennium. Section 489.330. REQUEST FOR APPLICATION FOR ENTERPRISE PROJECT DESIGNATION. (a) A qualified business in an enterprise zone described by Subsection (b) may request that the governing body of the enterprise zone apply to the office for designation of the business as an enterprise project. The request must also be made to the enterprise zone's administrative authority, if one exists. (b) A request may be made under this section only to the governing body of an enterprise zone that has: (1) an unemployment rate that is at least one and one-half times the state average; or (2) a population loss of at least: (A) 12 percent during the most recent six-year period; or (B) four percent during the most recent three-year period. Section 489.331. APPLICATION FOR ENTERPRISE PROJECT DESIGNATION. (a) If the governing body of an enterprise zone or the governing body and administrative authority of an enterprise zone, as appropriate, approve a request made under Section 489.330, the governing body may apply to the office for the designation of the qualified business as an enterprise project. (b) An application must: (1) describe completely the conditions in the enterprise zone that constitute pervasive poverty, unemployment, and economic distress for purposes of Section 489.306; (2) describe the procedures and efforts of the governmental entity or entities that applied to have the area designated as an enterprise zone to facilitate and encourage participation by and negotiation among all affected entities in the zone in which the qualified business is located; (3) contain an economic analysis of the plans of the qualified business for expansion, revitalization, or other activity in the enterprise zone, including: (A) the number of anticipated new permanent jobs the business will create; (B) the anticipated number of permanent jobs the business will retain; (C) the amount of investment to be made in the zone; and (D) other information the office requires; and (4) describe the local effort made by the governmental entity or entities that applied to have the area designated as an enterprise zone, the administrative authority, if one exists, the qualified business, and other affected entities to develop and revitalize the zone. (c) For the purposes of this section, local effort to develop and revitalize an enterprise zone is: (1) the willingness of public entities in the zone to provide services, incentives, and regulatory relief authorized by this chapter and to negotiate with the qualified business for which application is made and with neighborhood enterprise associations and other local groups or businesses to achieve the public purposes of this chapter; and (2) the effort of the qualified business and other affected entities to cooperate in achieving those public purposes. (d) Factors to be considered in evaluating the local effort of a public entity include: (1) tax abatement, deferral, refunds, or other tax incentives; (2) regulatory relief, including: (A) zoning changes or variances; (B) exemptions from unnecessary building code requirements, impact fees, or inspection fees; and (C) streamlined permitting; (3) enhanced municipal services, including: (A) improved police and fire protection; (B) institution of community crime prevention programs; and (C) special public transportation routes or reduced fares; (4) improvements in community facilities, including: (A) capital improvements in water and sewer facilities; (B) road repair; and (C) creation or improvement of parks; (5) improvements to housing, including: (A) low-interest loans for housing rehabilitation, improvement, or new construction; and (B) transfer of abandoned housing to individuals or community groups; (6) business and industrial development services, including: (A) low-interest loans for business; (B) use of surplus school buildings or other underutilized publicly owned facilities as small business incubators; (C) provision of publicly owned land for development purposes, including residential, commercial, or industrial development; (D) creation of special one-stop permitting and problem resolution centers or ombudsmen; and (E) promotion and marketing services; and (7) job training and employment services, including: (A) retraining programs; (B) literacy and employment skills programs; (C) vocational education; and (D) customized job training. (e) Factors to be considered in evaluating the local effort of a private entity include: (1) the willingness to negotiate or cooperate in the achievement of the purposes of this chapter; (2) commitments to hire underskilled, inexperienced, disadvantaged, or displaced workers who reside in the enterprise zone; (3) commitments to hire minority workers and to contract with minority-owned businesses; (4) provision of technical and vocational job training for enterprise zone residents or economically disadvantaged employees; (5) provision of child care for employees; (6) commitments to implement and contribute to a tutoring or mentoring program for area students; (7) prevention or reduction of juvenile crime activity; and (8) the willingness to make contributions to the well-being of the community, such as job training, or the donation of land for parks or other public purposes. Section 489.332. ENTERPRISE PROJECT DESIGNATION. (a) The office may designate a business as an enterprise project only if the office determines that: (1) the business is a qualified business under Section 489.328 that is located in or has made a substantial commitment to locate in an enterprise zone described by Section 489.330(b); (2) the governing body of the enterprise zone making the application has demonstrated that a high level of cooperation exists among public, private, and neighborhood entities in the zone; (3) the designation will contribute significantly to the achievement of the plans of the governing body making the application for development and revitalization of the zone; and (4) if the business is seeking job retention benefits: (A) the permanent employees of the business will be permanently laid off; (B) the business will close down permanently; (C) the business will relocate out-of-state; (D) a 10 percent increase in the production capacity of the business will occur; (E) a 10 percent decrease in overall cost per unit produced will occur; or (F) the business facility has been legitimately destroyed or impaired because of fire, flood, tornado, hurricane, or any other natural disaster. (b) The office shall designate qualified businesses as enterprise projects on a competitive basis. The office shall establish a minimum scoring threshold that must be met by the qualified business applying for a project designation and make its designation decisions using a weighted scale in which: (1) 50 percent of the evaluation depends on the economic distress of: (A) the enterprise zone in which a proposed enterprise project is located; and (B) the area within the enterprise zone where the project is located; (2) 25 percent of the evaluation depends on the local effort to achieve development and revitalization of the enterprise zone; and (3) 25 percent of the evaluation depends on the evaluation criteria as determined by the office, which must include: (A) the level of cooperation and support the project applicant commits to the revitalization goals of the zone; and (B) the type and wage level of the jobs to be created or retained by the business. (c) The office may remove an enterprise project designation if it determines that the business is not complying with a requirement for its designation. (d) The maximum number of qualified businesses that the office may designate as enterprise projects for each nominating body during any biennium is: (1) four, plus two additional bonus projects the office may award in a municipality or county with a population of less than 250,000; or (2) six, if the governing body of the enterprise zone is the governing body of a municipality or county with a population of 250,000 or more. Section 489.333. ALLOCATION OF JOBS ELIGIBLE FOR TAX REFUND. (a) When the office designates a business as an enterprise project, the office shall allocate to the project the maximum number of new permanent jobs or retained jobs eligible to be included in a computation of a tax refund for the project. (b) Until September 1, 2005, the maximum number of new permanent jobs or retained jobs 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 under Section 489.331, whichever is less. (c) Effective September 1, 2005, the maximum number of new permanent jobs or retained jobs 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 under Section 489.331, whichever is less. Section 489.334. DURATION OF CERTAIN DESIGNATIONS. The office's designation of a qualified business as an enterprise project is effective until the fifth anniversary of the date on which the designation is made regardless of whether the enterprise zone in which the project is located expires before the fifth anniversary of the project. Section 489.335. EXEMPTIONS FROM STATE REGULATION; SUSPENSION OF LOCAL REGULATION. (a) A state agency may exempt from its regulation a qualified business, qualified employee, qualified property, or neighborhood enterprise association in an enterprise zone if the exemption is consistent with: (1) the purposes of this subchapter; and (2) the protection and promotion of the general health and welfare. (b) A local government may suspend local regulation, including an ordinance, rule, or standard, relating to zoning, licensing, or building codes in an enterprise zone. (c) An exemption from or suspension of regulation under this section must be adopted in the same manner that the regulation was adopted. (d) The authorization provided by Subsection (a) or (b) does not apply to regulation: (1) that relates to: (A) civil rights; (B) equal employment; (C) equal opportunity; (D) fair housing rights; or (E) preservation of historical sites or historical artifacts; (2) the relaxation of which is likely to harm the public safety or public health, including environmental health; or (3) that is specifically imposed by law. (e) For the purposes of this section, property is classified as qualified property if the property is: (1) tangible personal property located in the enterprise zone that was: (A) acquired by a taxpayer not earlier than the 90th day before the date on which the area was designated as an enterprise zone; and (B) used predominantly by the taxpayer in the active conduct of a trade or business; (2) real property located in the enterprise zone that was: (A) acquired by a taxpayer not earlier than the 90th day before the date on which the area was designated as an enterprise zone and was used predominantly by the taxpayer in the active conduct of a trade or business; or (B) the principal residence of the taxpayer on the date of the sale or exchange; or (3) an interest in an entity that was certified as a qualified business under Section 2303.402 for the entity's most recent tax year ending before the date of the sale or exchange. Section 489.336. REVIEW OF STATE AGENCY RULES; REPORT. (a) A state agency rule adopted after September 1, 1987, may provide, when applicable, encouragements and incentives to increase: (1) the renovation, improvement, or new construction of housing in enterprise zones; and (2) the economic viability and profitability of business and commerce in enterprise zones. (b) Annually each state agency shall: (1) review the rules it administers that: (A) may adversely affect: (i) the renovation, improvement, or new construction of housing in enterprise zones; or (ii) the economic viability and profitability of business and commerce in enterprise zones; or (B) may otherwise affect the implementation of this chapter; and (2) report the results of the review to the office. (c) The office shall disseminate the reports to the governing bodies of enterprise zones and others as necessary to advance the purposes of this subchapter. (d) To contribute to the implementation of this subchapter, an agency may waive, modify, provide exemptions to, or otherwise minimize the adverse effects of the rules it administers on the renovation, improvement, or new construction of housing in enterprise zones or on the economic viability and profitability of business and commerce in enterprise zones. Section 489.337. STATE PREFERENCES. (a) A state agency shall give preference to the governing body of an enterprise zone or a qualified business or qualified employee located in an enterprise zone over other eligible applicants for grants or loans that are administered by the state agency if: (1) at least 50 percent of the grant or loan will be spent for the direct benefit of the enterprise zone; and (2) the purpose of the grant or loan is to: (A) promote economic development in the community; or (B) construct, improve, extend, repair, or maintain public facilities in the community. (b) The comptroller may and is encouraged to deposit state money in financial institutions located or doing business in enterprise zones. (c) A state agency may and is encouraged to contract with businesses located in enterprise zones. (d) The office may give preference to enterprise zones in granting economic development money or other benefits. Section 489.338. STATE TAX REFUNDS AND CREDITS; REPORT. (a) Subject to Section 489.351, an enterprise project is entitled to: (1) a refund of state taxes under Section 151.429. Tax Code; and (2) until September l , 2005, a franchise tax credit under Subchapter P or Q, Chapter 171, Tax Code. (b) Subject to Section 489.351, a qualified business is entitled to a refund of state taxes under Sections 151.431 and 171.501, Tax Code. (c) Not later than the 60th day after the last day of each fiscal year, the comptroller shall report to the office the statewide total of the tax refunds and credits made under this section during that fiscal year. Section 489.339. LOCAL SALES AND USE TAX REFUNDS. (a) To encourage the development of areas designated as enterprise zones, the governing body of a municipality through a program may refund its local sales and use taxes paid by a qualified business on: (1) the purchase, lease, or rental of equipment or machinery for use in an enterprise zone; (2) the purchase of material for use in remodeling, rehabilitating, or constructing a structure in an enterprise zone; (3) labor for remodeling, rehabilitating, or constructing a structure in an enterprise zone; and (4) electricity and natural gas purchased and consumed in the normal course of business in the enterprise zone. (b) To promote the public health, safety, or welfare, the governing body of a municipality or county through a program may refund its local sales and use taxes paid by a qualified business or qualified employee. (c) The governing body of a municipality or county that is the governing body of an enterprise zone may provide for the partial or total refund of its local sales and use taxes paid by a person making a taxable purchase, lease, or rental for development or revitalization in the zone. (d) A person entitled to a refund of local sales and use taxes under this section shall pay the entire amount of state and local sales and use taxes at the time the taxes would be due if an agreement for the refund did not exist. (e) An agreement to refund local sales and use taxes under this section must: (1) be written; (2) contain an expiration date; and (3) require that the person entitled to the refund provide to the municipality or county making the refund the documentation necessary to support a refund claim. (f) The municipality or county shall make the refund directly to the person entitled to the refund in the manner provided by the agreement. Section 489.340. REFUND, REBATE, OR PAYMENT OF TAX PROCEEDS TO QUALIFIED HOTEL PROJECT. (a) For a period that may not exceed 10 years, a governmental body, including a municipality, county, or political subdivision, may agree to rebate, refund, or pay eligible taxable proceeds to the owner of a qualified hotel project at which the eligible taxable proceeds were generated. (b) A municipality with a population of 1,500,000 or more may agree to guarantee from hotel occupancy taxes the bonds or other obligations of a municipally sponsored local government corporation created under the Texas Transportation Corporation Act (Article 15281, Vernon's Texas Civil Statutes) that were issued or incurred to pay the cost of construction, remodeling, or rehabilitation of a qualified hotel project. (c) An agreement under this section must be in writing, contain an expiration date, and require the beneficiary to provide documentation necessary to support a claim. (d) A governmental body that makes an agreement under this section shall make the rebate, refund, or payment directly to the beneficiary. (e) In this section, "eligible taxable proceeds" means taxable proceeds generated, paid, or collected by a qualified hotel project or a business at a qualified hotel project, including hotel occupancy taxes, ad valorem taxes, sales and use taxes, and mixed beverage taxes. Section 489.341. REDUCTION OR ELIMINATION OF LOCAL FEES OR TAXES. (a) To promote the public health, safety, or welfare, the governing body of a municipality or county through a program may reduce or eliminate fees or taxes that it imposes on a qualified business or qualified employee. (b) This section does not apply to sales and use taxes or property taxes. Section 489.342. TAX INCREMENT FINANCING AND ABATEMENT; LIMITATIONS ON APPRAISED VALUE. Designation of an area as an enterprise zone is also designation of the area as a reinvestment zone for: (1) tax increment financing under Chapter 311, Tax Code; (2) tax abatement under Chapter 312, Tax Code; and (3) limitations on appraised value under Chapter 313, Tax Code. Section 489.343. TAX EXEMPTION FOR NEIGHBORHOOD ENTERPRISE ASSOCIATION. A neighborhood enterprise association is exempt from state and local taxes during the period of the designation of the enterprise zone in which it is located. The exemption applies to tax arrearages and other back assessments on property leased under Section 489.347. Section 489.344. DEVELOPMENT BONDS. To finance a project in an enterprise zone, bonds may be issued under: (1) Chapter 1433; or (2) the Development Corporation Act of 1979 (Article 5190.6, Vernon's Texas Civil Statutes). Section 489.345. INDUSTRIAL DEVELOPMENT CORPORATION. (a) The governing body of a municipality that is the governing body of an enterprise zone may create, in accordance with the Development Corporation Act of 1979 (Article 5190.6, Vernon's Texas Civil Statutes), an industrial development corporation for use by the enterprise zone. (b) A corporation created under this section has the powers and is subject to the limitations of a corporation created under the Development Corporation Act of 1979. To the extent of a conflict between this section and that Act, that Act prevails. (c) The articles of incorporation of a corporation created under this section must state that the corporation is governed by this section. (d) The governing body of the municipality that creates an industrial development corporation shall appoint the board of directors of the corporation. Section 489.346. OTHER LOCAL INCENTIVES. (a) The governing body of a municipality or county that is the governing body of an enterprise zone may: (1) defer compliance in the zone with the subdivision and development ordinances or rules, other than those relating to streets and roads or sewer or water services, of the municipality or county, as appropriate; (2) give priority to the zone for the receipt of: (A) community development block grant money; (B) industrial revenue bonds; or (C) funds received under the federal Job Training Partnership Act (29 U.S.C. Section 1501 et seq.); (3) adopt and implement a plan for police protection in the zone; (4) amend the zoning ordinances of the municipality or county, as appropriate, to promote economic development in the zone; (5) establish permitting preferences for businesses in the zone; (6) establish simplified, accelerated, or other special permit procedures for businesses in the zone; (7) waive development fees for projects in the zone; (8) create a local enterprise zone fund for funding bonds or other programs or activities to develop or revitalize the zone; (9) for qualified businesses in the zone, reduce rates charged by: (A) a utility owned by the municipality or county, as appropriate; or (B) a cooperative corporation or utility owned by private investors, subject to the requirements of Subsection (b); (10) in issuing housing finance bonds, give priority to persons or projects in the zone; (11) in providing services, give priority to local economic development, educational, job training, or transportation programs that benefit the zone; or (12) sell real property owned by the municipality or county, as appropriate, and located in the enterprise zone in accordance with Section 489.348. (b) A reduction in utility rates under Subsection (a)(9)(B) is subject to the agreement of the affected utility and the approval of the appropriate regulatory authority. The rates may be reduced up to but not more than five percent below the lowest rate authorized for a person described by Subsection (a)(9)(B). A qualified enterprise project or the governing body of the enterprise zone may petition the appropriate utility and the appropriate regulatory authority to receive a reduced rate under this section, and the regulatory authority may order that rates be reduced. In making its determination under this section, the regulatory authority shall consider revitalization goals for the enterprise zone. In setting the rates of the utility the appropriate regulatory authority shall allow the utility to recover the amount of the reduction. Section 489.347. LEASE OF PUBLIC PROPERTY TO NEIGHBORHOOD ENTERPRISE ASSOCIATION. (a) The state or a local government may lease to a neighborhood enterprise association real property located in the association's geographical neighborhood area that is owned by the governmental entity and that is not being used by the entity. (b) The lease must be for a term of not less than 20 years and the full amount of the rental fees under the lease may not exceed $1 a year. (c) The state or local government shall renew the lease on its expiration if the association has continuously complied with this subchapter during the lease term. Section 489.348. DISPOSITION OF PUBLIC PROPERTY IN ENTERPRISE ZONE. (a) After an area is designated as an enterprise zone, the state, a municipality, or a county that owns a surplus building or vacant land in the zone may dispose of the building or land by: (1) selling the building or land at a public auction; (2) selling the land to a neighborhood enterprise association; or (3) establishing an urban homestead program described by Subsection (c). (b) A municipality or county may sell a surplus building or vacant land in the enterprise zone at less than fair market value if the governing body of the municipality or county by ordinance or order, as appropriate, adopts criteria that specify the conditions and circumstances under which the sale may occur and the public purpose to be achieved by the sale. The building or land may be sold to a buyer who is not the highest bidder if the criteria and public purpose specified in the ordinance or order are satisfied. A copy of the ordinance or order must be filed with the office not later than the day on which the sale occurs. (c) An urban homestead program must provide that: (1) the state, municipality, or county is to sell to an individual a residence or part of a residence that it owns for an amount not to exceed $100; (2) as a condition of the sale, the individual must agree to live in the residence for at least seven years and to renovate or remodel the residence to meet the level of maintenance stated in an agreement between the individual and the governmental entity; and (3) after the individual satisfies the seven-year residency and property improvement requirements of the agreement, the governmental entity shall assign the residence to the individual. Section 489.349. WAIVER OF PERFORMANCE BOND. A subcontractor is not required to execute a performance bond under Chapter 2253 if: (1) the construction, alteration, repair, or other public work to be performed under the contract is entirely in an enterprise zone; and (2) the amount of the contract does not exceed $200,000. Section 489.350. LIABILITY OF CONTRACTOR OR ARCHITECT. A contractor or architect who constructs or rehabilitates a building in an enterprise zone is liable for any structural defect in the building only for the period ending on the 10th anniversary of the date on which beneficial occupancy of the building begins after the construction or rehabilitation, notwithstanding a statute of limitations to the contrary. Section 489.351. MONITORING QUALIFIED BUSINESS OR ENTERPRISE PROJECT COMMITMENTS. (a) The comptroller may monitor a qualified business or enterprise project to determine whether and to what extent the business or project has followed through on any commitments made by it or on its behalf under this chapter. (b) The comptroller may determine that the business or project is not entitled to a refund or credit of state taxes under Section 489.338 if the comptroller finds that: (1) the business or project is not willing to cooperate with the comptroller with the information the comptroller needs to make the determination under Subsection (a); or (2) the business or project has substantially failed to follow through on any commitments made by it or on its behalf under this chapter.
SUBCHAPTER D. ASSISTANCE TO DEFENSE DEPENDENT COMMUNITIES
Section 489.401. DEFENSE ECONOMIC READJUSTMENT ZONES. (a) The office shall assist: (1) a qualified business in obtaining the benefits of any state incentive or inducement program provided by law; (2) the governing body of a readjustment zone in obtaining assistance from another state agency, including job training and technical assistance to qualified businesses in a zone; and (3) the governing body of a readjustment zone in encouraging small business development. (b) The office shall provide to persons desiring to locate and engage in business in a readjustment zone information and appropriate assistance relating to the required legal authorization, including a state license, permit, certificate, approval, registration, or charter, to engage in business in this state. (c) The office shall publicize existing tax incentives and economic development programs in readjustment zones. (d) On request the office shall offer to a unit of local government having a readjustment zone within its jurisdiction technical assistance relating to tax abatement and the development of alternative revenue sources. Section 489.402. COORDINATION WITH OTHER GOVERNMENTAL ENTITIES. (a) In cooperation with the appropriate units of local government and other state agencies, the office shall coordinate and streamline state business assistance programs and permit or license application procedures for businesses in readjustment zones. (b) The office shall work with the responsible state and federal agencies to coordinate readjustment zone programs with other programs carried out in a readjustment zone, including housing, community and economic development, small business, banking, financial assistance, transportation, and employment training programs. (c) The office shall encourage other state agencies in awarding grants, loans, or services to give priority to businesses in readjustment zones. (d) For the purposes of this subchapter, territory in the extraterritorial jurisdiction of a municipality is considered to be in the jurisdiction of the municipality. Section 489.403. CRITERIA FOR READJUSTMENT ZONE DESIGNATION. (a) To be designated as a readjustment zone an area must: (1) have a continuous boundary; (2) be at least one square mile but not larger than 20 square miles, excluding lakes, waterways, and transportation arteries, of the municipality, county, or combination of municipalities or counties nominating the area as a readjustment zone; (3) be located in an adversely affected defense-dependent community; (4) have at least 50 percent of its area located in an existing or former United States Department of Defense facility; and (5) be nominated as a readjustment zone by an ordinance or order adopted by the nominating body. (b) An area is not prohibited from being included in a readjustment zone because the area is also included in an enterprise zone designated under Subchapter C. Section 489.404. ADVERSELY AFFECTED DEFENSE-DEPENDENT COMMUNITY. A municipality or county is an adversely affected defense-dependent community if the office determines that: (1) the municipality or county requires assistance because of: (A) the proposed or actual establishment, realignment, or closure of a defense facility; (B) the cancellation or termination of a United States Department of Defense contract or the failure of the department of defense to proceed with an approved major weapon system program; (C) a publicly announced planned major reduction in department of defense spending that would directly and adversely affect the municipality or county; or (D) the closure or a significant reduction of the operations of a defense facility as the result of a merger, acquisition, or consolidation of a defense contractor operating the facility; and (2) the municipality or county is expected to experience, during the period between the beginning of the federal fiscal year during which an event described by Subdivision (1) is finally approved and the date that the event is to be substantially completed, a direct loss of: (A) 2,500 or more defense worker jobs in any area of the municipality or county that is located in an urbanized area of a metropolitan statistical area; (B) 1,000 or more defense worker jobs in any area of the municipality or county that is not located in an urbanized area of a metropolitan statistical area; or (C) one percent of the civilian jobs in the municipality or county. Section 489.405. NOMINATION OF READJUSTMENT ZONE. (a) The governing body of a municipality or county that is an adversely affected defense-dependent community, individually or in combination with other municipalities or counties that are adversely affected defense-dependent communities, by ordinance or order, as appropriate, may nominate as a readjustment zone an area within its jurisdiction that meets the criteria under Section 489.403. (b) Unless the nominating body holds a public hearing before adopting an ordinance or order under this section, the ordinance or order is not valid. (c) The governing body of a county may not nominate territory in a municipality, including extraterritorial jurisdiction of a municipality, to be included in a proposed readjustment zone unless the governing body of the municipality also nominates the territory and together with the county files a joint application under Section 489.407. (d) The governing bodies of a combination of municipalities or counties may not jointly nominate an area as a readjustment zone unless the governing bodies have entered into a binding agreement to administer the zone jointly. Section 489.406. NOMINATING ORDINANCE OR ORDER. (a) An ordinance or order nominating an area as a readjustment zone must: (1) describe precisely the area to be included in the zone by a legal description or reference to roadways, lakes, waterways or municipal or county boundaries; (2) state a finding that the area meets the requirements of this chapter; (3) summarize briefly the incentives, including tax incentives, that, at the election of the nominating body, apply to business enterprises in the area; and (4) nominate the area as a readjustment zone. (b) At least one of the incentives summarized under Subsection (a)(3) must not be offered elsewhere within the jurisdiction except within an enterprise zone designated under Subchapter C. (c) This section does not prohibit a municipality or county from extending additional incentives, including tax incentives, for business enterprises in a readjustment zone by a separate ordinance or order. Section 489.407. APPLICATION FOR DESIGNATION. (a) For an area to be designated as a readjustment zone, the nominating body, after nominating the area as a readjustment zone, must send to the office a written application for designation of the area as a readjustment zone. (b) The application must include: (1) a certified copy of the ordinance or order, as appropriate, nominating the area as a readjustment zone; (2) a map of the area showing existing streets and highways; (3) an analysis and appropriate supporting documents and statistics demonstrating that the area qualifies for designation as a readjustment zone; (4) a statement that specifies each tax incentive, grant, other financial incentive or benefit, or program to be provided by the nominating body to business enterprises in the area that is not to be provided throughout the governmental entity or entities nominating the area as a readjustment zone; (5) a statement of the economic development and planning objectives for the area; (6) an estimate of the economic impact of the designation of the area as a readjustment zone on the revenues of the governmental entity or entities nominating the area as a readjustment zone, considering all the financial incentives and benefits and the programs contemplated; (7) a transcript or tape recording of all public hearings on the proposed zone; (8) if the application is a joint application, a description and copy of the agreement between the applicants; (9) the procedures for negotiating with residents, community groups, and other entities affected by the designation of the area as a readjustment zone and with qualified businesses in the area; (10) a description of the administrative authority, if one is to be appointed for the readjustment zone under Section 489.415; and (11) any additional information the office requires. (c) Information required by Subsection (b) is for evaluation purposes only. Section 489.408. REVIEW OF APPLICATION. (a) On receipt of an application for the designation of a readjustment zone, the office shall review the application to determine if the nominated area qualifies for designation as a readjustment zone under this chapter. (b) The office shall allow an applicant to correct any omission or clerical error in the application and to return the application to the office on or before the 15th day after the date on which the office receives the application. Section 489.409. DESIGNATION AGREEMENT. (a) If the office determines that a nominated area for which a designation application has been received satisfies the criteria under Section 489.403, the office shall negotiate with the nominating body for a designation agreement. (b) A designation agreement must: (1) designate the nominated area as a readjustment zone; and (2) designate the administrative authority, if one is to be appointed for the zone under Section 489.415, and describe its functions and duties, which should include decision-making authority and the authority to negotiate with affected entities. (c) The office shall complete the negotiations and sign the agreement not later than the 60th day after the date on which the application is received unless the office extends that period to the 90th day after the date on which the application was received. (d) If an agreement is not completed within the 60-day period provided by Subsection (c), the office shall provide to the nominating body the specific areas of concern and a final proposal for the agreement. (e) If the agreement is not executed before the 91st day after the date on which the application was received, the application is considered to be denied. Section 489.410. DENIAL OF APPLICATION; NOTICE. (a) The office may deny an application for the designation of a readjustment zone only if the office determines that the nominated area does not satisfy the criteria under Section 489.403. (b) The office shall inform the nominating body of the specific reasons for denial of an application, including denial under Section 489.409(e). Section 489.411. PERIOD OF DESIGNATION. An area may be designated as a readjustment zone for a maximum of seven years. A designation remains in effect until September 1 of the final year of the designation. Section 489.412. AMENDING BOUNDARIES. (a) The nominating body may amend the boundary of a readjustment zone by ordinance or order, as appropriate, adopted after a public hearing on the issue. (b) The amended boundary: (1) must be continuous; (2) may not exceed the original size requirement of Section 486.403; and (3) may not exclude any qualified business designated as a defense readjustment project included within the boundary of the zone as designated. (c) The readjustment zone with the amended boundary must continue to meet the location requirements of Section 486.403(a)(4). (d) A nominating body may not make more than one boundary amendment annually for a readjustment zone. (e) For each amendment of a readjustment zone boundary, the nominating body shall pay the office a reasonable fee, in an amount specified by the office, not to exceed $500. The office may use fees collected under this subsection to administer this chapter and for other purposes to advance this chapter. Section 489.413. REMOVAL OF DESIGNATION. (a) The office may remove the designation of an area as a readjustment zone if: (1) the area no longer meets the criteria for designation under this chapter or by rule adopted under this chapter; or (2) the office determines that the governing body of the readjustment zone has not complied with commitments made in the ordinance or order nominating the area as a readjustment zone. (b) The removal of a designation does not affect the validity of a tax incentive or regulatory relief granted or accrued before the removal. Section 489.414. ADMINISTRATION BY GOVERNING BODY. The governing body of a readjustment zone is the governing body of the municipality or county, or the governing bodies of the combination of municipalities or counties, that applied to have the area designated as a readjustment zone. Section 489.415. ADMINISTRATION BY ADMINISTRATIVE AUTHORITY. (a) The governing body of a readjustment zone may delegate its administrative duties to an administrative authority appointed by the governing body. (b) An administrative authority must: (1) be composed of 3, 5, 7, 9, 11, or 15 members; (2) be a viable and responsive body generally representative of all public or private entities that have a stake in the development of the zone; and (3) if the readjustment zone includes private residences, include: (A) an elected official representing readjustment zone residents and businesses; or (B) at least two readjustment zone residents. Section 489.416. LIAISON. The governing body of a readjustment zone shall designate a liaison to communicate and negotiate with: (1) the office; (2) the administrative authority, if one exists; (3) a defense readjustment project; and (4) other entities in or affected by the readjustment zone. Section 489.417. ANNUAL REPORT. (a) Not later than October 1 of each year, the governing body of a readjustment zone shall submit to the office a report in the form required by the office. (b) The report must be approved by the readjustment zone's administrative authority, if one exists. (c) The report must include for the year preceding the date of the report: (1) a list of local incentives for community development available in the zone; (2) the use of local incentives for which the governing body provided in the ordinance or order nominating the readjustment zone and the effect of those incentives on revenue; (3) the number of businesses assisted, located, and retained in the zone since its designation due to the existence of the readjustment zone; (4) a summary of all industrial revenue bonds issued to finance projects located in the zone; and (5) a description of all efforts made to attain revitalization goals for the zone. Section 489.418. QUALIFIED BUSINESS. (a) A person is a qualified business if the office, for the purpose of state benefits under this chapter, or the governing body of a readjustment zone, for the purpose of local benefits, certifies that: (1) the person is engaged in or has provided substantial commitment to initiate the active conduct of a trade or business in the readjustment zone; and (2) at least 25 percent of the person's new employees in the readjustment zone are: (A) residents of the governing jurisdiction; (B) economically disadvantaged individuals, as defined by Section 489.328(c); or (C) dislocated defense workers. (b) The governing body of a readjustment zone may certify a franchise or subsidiary of a new or existing business as a qualified business if the franchise or subsidiary: (1) is located entirely in the readjustment zone; and (2) maintains separate books and records of the business activity conducted in the zone. Section 489.419. PROHIBITION ON QUALIFIED BUSINESS CERTIFICATION. If the office determines that the governing body of a readjustment zone is not complying with this chapter, the office shall prohibit the certification of a qualified business in the zone until the office determines that the governing body is complying with this chapter. The office may not designate more than two businesses in a single readjustment zone as defense readjustment projects. Section 489.420. REQUEST FOR APPLICATION FOR DEFENSE READJUSTMENT PROJECT DESIGNATION. A qualified business in a readjustment zone may request that the governing body of the readjustment zone apply to the office for designation of the business as a defense readjustment project. The request must also be made to the readjustment zone's administrative authority, if one exists. Section 489.421. APPLICATION FOR DEFENSE READJUSTMENT PROJECT DESIGNATION. (a) If the governing body of a readjustment zone or the governing body and administrative authority of a readjustment zone, as appropriate, approve a request made under Section 489.420, the governing body may apply to the office for the designation of the qualified business as a defense readjustment project. (b) An application must: (1) describe the procedures and efforts of the governmental entity or entities that applied to have the area designated as a readjustment zone to facilitate and encourage participation by and negotiation among affected entities in the zone in which the qualified business is located; (2) contain an economic analysis of the plans of the qualified business for expansion, revitalization, or other activity in the readjustment zone, including: (A) the number of anticipated new permanent jobs the business will create; (B) the anticipated number of permanent jobs the business will retain; (C) the amount of investment to be made in the zone; and (D) other information the office requires; and (3) describe the local effort made by the governmental entity or entities that applied to have the area designated as a readjustment zone, the administrative authority, if one exists, the qualified business, and other affected entities to develop and revitalize the zone. (c) For the purposes of this section, local effort to develop and revitalize a readjustment zone is: (1) the willingness of public entities in the zone to provide services, incentives, and regulatory relief authorized by this chapter and to negotiate with the qualified business for which application is made and with other local groups or businesses to achieve the public purposes of this chapter; and (2) the effort of the qualified business and other affected entities to cooperate in achieving those public purposes. (d) Factors to be considered in evaluating the local effort of a public entity include: (1) tax abatement, deferral, refunds, or other tax incentives; (2) regulatory relief, including: (A) zoning changes or variances; (B) exemptions from unnecessary building code requirements, impact fees, or inspection fees; and (C) streamlined permitting; (3) enhanced municipal services, including: (A) improved police and fire protection; (B) institution of community crime prevention programs; and (C) special public transportation routes or reduced fares; (4) improvements in community facilities, including: (A) capital improvements in water and sewer facilities; (B) road repair; and (C) creation or improvement of parks; (5) improvements to housing, including: (A) low-interest loans for housing rehabilitation, improvement, or new construction; and (B) transfer of abandoned housing to individuals or community groups; (6) business and industrial development services, including: (A) low-interest loans for business; (B) use of surplus school buildings or other underutilized publicly owned facilities as small business incubators; (C) provision of publicly owned land for development purposes, including residential, commercial, or industrial development; (D) creation of special one-stop permitting and problem resolution centers or ombudsmen; and (E) promotion and marketing services; and (7) job training and employment services, including: (A) retraining programs; (B) literacy and employment skills programs; (C) vocational education; and (D) customized job training. (e) Factors to be considered in evaluating the local effort of a private entity include: (1) the willingness to negotiate or cooperate in the redevelopment of vacated defense facilities and the creation of high-skilled, high wage jobs; (2) commitments to hire dislocated defense workers and economically disadvantaged workers; (3) commitments to hire minority workers and to contract with minority-owned businesses; (4) provision of technical and vocational job training for residents of the nominating body's jurisdiction or economically disadvantaged employees; (5) provision of child care for employees; (6) commitments to implement and contribute to a tutoring or mentoring program for area students; (7) prevention or reduction of juvenile crime; and (8) the willingness to make contributions to the well-being of the community, such as job training, or the donation of land for parks or other public purposes. Section 489.422. DEFENSE READJUSTMENT PROJECT DESIGNATION. (a) The office may designate a qualified business as a defense readjustment project only if the office determines that: (1) the business is a qualified business under Section 489.418 that is located in or has made a substantial commitment to locate in a defense readjustment zone; (2) the governing body of the readjustment zone making the application has demonstrated that a high level of cooperation exists among public, private, and neighborhood entities in the zone; and (3) the designation will contribute significantly to the achievement of the plans of the governing body making the application for development and revitalization of the zone. (b) The office shall designate qualified businesses as defense readjustment projects on a competitive basis. The office shall make its designation decisions using a weighted scale in which: (1) 50 percent of the evaluation is based on the effect of the loss of defense expenditures and employment on the community; (2) 25 percent of the evaluation depends on the local effort to achieve development and revitalization of the readjustment zone; and (3) 25 percent of the evaluation depends on the evaluation criteria as determined by the office, which must include: (A) the level of cooperation and support the project applicant commits to the revitalization goals of the zone; and (B) the type and wage level of the jobs to be created or retained by the business. (c) The office may remove a defense readjustment project designation if it determines that the business is not complying with a requirement for its designation. Section 489.423. ALLOCATION OF JOBS ELIGIBLE FOR TAX REFUND. When the office designates a business as a defense readjustment project, the office shall allocate to the project the maximum number of new permanent jobs or retained jobs eligible to be included in a computation of a tax refund for the project. The number may not exceed 500 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 a defense readjustment project under Section 489.421, whichever is less. Section 489.424. DURATION OF CERTAIN DESIGNATIONS. The office's designation of a qualified business as a defense readjustment project is effective until the fifth anniversary of the date on which the designation is made regardless of whether the readjustment zone in which the project is located expires before the fifth anniversary of the project. Section 489.425. EXEMPTIONS FROM STATE REGULATION; SUSPENSION OF LOCAL REGULATION. (a) A state agency may exempt from its regulation a qualified business, qualified employee, or qualified property in a readjustment zone if the exemption is consistent with: (1) the purposes of this subchapter; and (2) the protection and promotion of the general health and welfare. (b) A local government may suspend local regulation, including an ordinance, rule, or standard, relating to zoning, licensing, or building codes in a readjustment zone. (c) An exemption from or suspension of regulation under this section must be adopted in the same manner that the regulation was adopted. (d) The authorization provided by Subsection (a) or (b) does not apply to regulation: (1) that relates to: (A) civil rights; (B) equal employment; (C) equal opportunity; (D) fair housing rights; or (E) preservation of historical sites or historical artifacts; (2) the relaxation of which is likely to harm the public safety or public health, including environmental health; or (3) that is specifically imposed by law. (e) For the purposes of this section, property is classified as qualified property if the property is: (1) tangible personal property located in the readjustment zone that was acquired from the federal government by lease or deed or: (A) acquired by a taxpayer not earlier than the 90th day before the date on which the area was designated as a readjustment zone; and (B) used predominantly by the taxpayer in the active conduct of a trade or business; (2) real property located in the readjustment zone that was acquired from the federal government by lease or deed or: (A) acquired by a taxpayer not earlier than the 90th day before the date on which the area was designated as a readjustment zone and was used predominantly by the taxpayer in the active conduct of a trade or business; or (B) the principal residence of the taxpayer on the date of the sale or exchange; or (3) an interest in an entity that was certified as a qualified business under Section 489.418 for the entity's most recent tax year ending before the date of the sale or exchange. Section 489.426. REVIEW OF STATE AGENCY RULES; REPORT. (a) A state agency by rule may provide, when applicable, encouragements and incentives to increase: (1) the renovation, improvement, or new construction of housing in readjustment zones; and (2) the economic viability and profitability of business and commerce in readjustment zones. (b) The office shall disseminate the reports to the governing bodies of readjustment zones and others as necessary to advance the purposes of this chapter. (c) To contribute to the implementation of this chapter, an agency may waive, modify, provide exemptions to, or otherwise minimize the adverse effects of the rules it administers on the renovation, improvement, or new construction of housing in readjustment zones or on the economic viability and profitability of business and commerce in readjustment zones. Section 489.427. STATE PREFERENCES. (a) A state agency shall give preference to the governing body of a readjustment zone or a qualified business or qualified employee located in a readjustment zone over other eligible applicants for grants, loans, or credit enhancements that are administered by the state agency if: (1) at least 50 percent of the grant, loan, or credit enhancement will be spent for the direct benefit of the readjustment zone; and (2) the purpose of the grant, loan, or credit enhancement is to: (A) promote economic development in the community; or (B) construct, improve, extend, repair, or maintain public facilities in the community. (b) The comptroller may and is encouraged to deposit state money in financial institutions located or doing business in readjustment zones. (c) A state agency may and is encouraged to contract with businesses located in readjustment zones. (d) The office or another state agency may give preference to readjustment zones in granting economic development money or other benefits. Section 489.428. STATE TAX REFUNDS AND CREDITS; REPORT. (a) Subject to Section 489.437, a defense readjustment project is eligible for: (1) a refund of state taxes under Section 151.4291, Tax Code; (2) until September 1, 2005, a franchise tax credit under Subchapter P or Q, Chapter 171, Tax Code; and (3) the exclusion of receipts from service performed in a readjustment zone in the determination of gross receipts from business done in this state under Sections 171.103 and 171.1032, Tax Code. (b) Not later than the 60th day after the last day of each fiscal year, the comptroller shall report to the office the statewide total of the tax refunds or credits made under this section during that fiscal year. Section 489.429. LOCAL SALES AND USE TAX REFUNDS. (a) To encourage the development of areas designated as readjustment zones, the governing body of a municipality through a program may refund its local sales and use taxes paid by a qualified business on: (1) the purchase, lease, or rental of equipment or machinery for use in a readjustment zone; (2) the purchase of material for use in remodeling, rehabilitating, or constructing a structure in a readjustment zone; (3) labor for remodeling, rehabilitating, or constructing a structure in a readjustment zone; and (4) electricity and natural gas purchased and consumed in the normal course of business in the readjustment zone. (b) To promote the public health, safety, or welfare, the governing body of a municipality or county through a program may refund its local sales and use taxes paid by a qualified business or qualified employee. (c) The governing body of a municipality or county that is the governing body of a readjustment zone may provide for the partial or total refund of its local sales and use taxes paid by a person making a taxable purchase, lease, or rental for development or revitalization in the zone. (d) A person eligible for a refund of local sales and use taxes under this section shall pay the entire amount of state and local sales and use taxes at the time the taxes would be due if an agreement for the refund did not exist. (e) An agreement to refund local sales and use taxes under this section must: (1) be written; (2) contain an expiration date; and (3) require that the person eligible for the refund provide to the municipality or county making the refund the documentation necessary to support a refund claim. (f) The municipality or county shall make the refund directly to the person eligible for the refund in the manner provided by the agreement. Section 489.430. REDUCTION OR ELIMINATION OF LOCAL FEES OR TAXES. (a) To promote the public health, safety, or welfare, the governing body of a municipality or county through a program may reduce or eliminate fees or taxes that it imposes on a qualified business or qualified employee. (b) This section does not apply to sales and use taxes or property taxes. Section 489.431. TAX INCREMENT FINANCING AND ABATEMENT. Designation of an area as a readjustment zone is also designation of the area as a reinvestment zone for: (1) tax increment financing under Chapter 311, Tax Code; and (2) tax abatement under Chapter 312, Tax Code. Section 489.432. DEVELOPMENT BONDS. To finance a project in a readjustment zone, bonds may be issued under: (1) Chapter 1433; or (2) the Development Corporation Act of 1979 (Article 5190.6, Vernon's Texas Civil Statutes). Section 489.433. OTHER LOCAL INCENTIVES. (a) The governing body of a municipality or county that is the governing body of a readjustment zone may: (1) defer compliance in the zone with the subdivision and development ordinances or rules, other than those relating to streets and roads or sewer or water services, of the municipality or county, as appropriate; (2) give priority to the zone for the receipt of: (A) community development block grant money; (B) industrial revenue bonds; or (C) funds received for job training; (3) adopt and implement a plan for police protection in the zone; (4) amend the zoning ordinances of the municipality or county, as appropriate, to promote economic development in the zone; (5) establish permitting preferences for businesses in the zone; (6) establish simplified, accelerated, or other special permit procedures for businesses in the zone; (7) waive development fees for projects in the zone; (8) create a local readjustment zone fund for funding bonds or other programs or activities to develop or revitalize the zone; (9) for qualified businesses in the zone, reduce rates charged by: (A) a utility owned by the municipality or county, as appropriate; or (B) a cooperative corporation or utility owned by private investors, subject to the requirements of Subsection (b); (10) in issuing housing finance bonds, give priority to persons or projects in the zone; (11) in providing services, give priority to local economic development, educational, job training, or transportation programs that benefit the zone; or (12) sell real property owned by the municipality or county, as appropriate, and located in the readjustment zone in accordance with Section 489.434. (b) A reduction in utility rates under Subsection (a)(9)(B) is subject to the agreement of the affected utility and the approval of the appropriate regulatory authority under Title 2, Utilities Code. The rates may be reduced up to but not more than five percent below the lowest rate allowable for that customer class. In making its determination under this section, the regulatory authority shall consider revitalization goals for the readjustment zone. In setting the rates of the utility the appropriate regulatory authority shall allow the utility to recover the amount of the reduction. Section 489.434. DISPOSITION OF PUBLIC PROPERTY IN READJUSTMENT ZONE. (a) After an area is designated as a readjustment zone, the state, a municipality, or a county that owns a surplus building (including any structure) or vacant land in the zone may dispose of the building or land by: (1) selling the building or land at a public auction; (2) selling the building or land without notice or bidding as provided by Subsection (d); or (3) establishing an urban homestead program described by Subsection (e). (b) A municipality or county may sell a surplus building or vacant land in the readjustment zone at less than fair market value if the governing body of the municipality or county by ordinance or order, as appropriate, adopts criteria that specify the conditions and circumstances under which the sale may occur and the public purpose to be achieved by the sale. A copy of the ordinance or order must be filed with the office not later than the day on which the sale occurs. (c) If the surplus building or vacant land is sold at a public auction, the building or land may be sold to a buyer who is not the highest bidder if the criteria and public purpose specified in the ordinance or order adopted under Subsection (b) are satisfied. (d) The surplus building or vacant land may be sold without complying with notice or bidding requirements (including election or voter approval requirements imposed by other law, if any) if the criteria and public purpose specified in the ordinance or order adopted under Subsection (b) are satisfied. (e) An urban homestead program must provide that: (1) the state, municipality, or county is to sell to an individual a residence or part of a residence that it owns for an amount not to exceed $100; (2) as a condition of the sale, the individual must agree by covenant in the deed conveying the residence to live in the residence for at least seven years and to renovate or remodel the residence to meet the level of maintenance stated in an agreement between the individual and the governmental entity; and (3) after the individual satisfies the seven-year residency and property improvement requirements of the agreement, the governmental entity shall assign the residence to the individual. Section 489.435. WAIVER OF PERFORMANCE BOND. A subcontractor is not required to execute a performance bond under Chapter 2253 if: (1) the construction, alteration, repair, or other public work to be performed under the contract is entirely in a readjustment zone; and (2) the amount of the contract does not exceed $200,000. Section 489.436. LIABILITY OF CONTRACTOR OR ARCHITECT. A contractor or architect who constructs or rehabilitates a building in a readjustment zone is liable for any structural defect in the building only for the period ending on the 10th anniversary of the date on which beneficial occupancy of the building begins after the construction or rehabilitation, notwithstanding a statute of limitations to the contrary. Section 489.437. MONITORING DEFENSE READJUSTMENT PROJECT COMMITMENTS. (a) The office may monitor a defense readjustment project to determine whether and to what extent the project has followed through on any commitments made by it or on its behalf under this subchapter. (b) The office may determine that the defense readjustment project is not eligible for state tax refunds and credits under Section 489.428 if the office finds that: (1) the project is not willing to cooperate with the office in providing the office with the information the office needs to make the determination under Subsection (a); or (2) the project has substantially failed to follow through on its commitments made by it or on its behalf under this chapter. Section 489.438. GRANTS TO LOCAL AREAS AFFECTED BY DEFENSE BASE REDUCTION. (a) A local governmental entity is eligible for a grant under this section if it is: (1) a municipality or county that is an adversely affected defense-dependent community; (2) a regional planning commission that has an adversely affected defense-dependent community within its boundaries; (3) a public junior college district all or part of which is located in an adversely affected defense-dependent community; or (4) a campus or extension center for education purposes of the Texas State Technical College System located in an adversely affected defense-dependent community. (b) A municipality or county is an adversely affected defense-dependent community if the office determines that: (1) the municipality or county includes within its boundaries a defense facility that the office of defense or applicable military office has publicly proposed for closure or realignment; or (2) the municipality or county: (A) requires assistance because of: (i) the proposed or actual establishment, realignment, or closure of a defense facility; (ii) the cancellation or termination of a United States Department of Defense contract or the failure of the department of defense to proceed with an approved major weapon system program; (iii) a publicly announced planned major reduction in department of defense spending that would directly and adversely affect the municipality or county; or (iv) the closure or a significant reduction of the operations of a defense facility as the result of a merger, acquisition, or consolidation of a defense contractor operating the facility; and (B) is expected to experience, during the period between the beginning of the federal fiscal year during which an event described by Subdivision (2)(A) is finally approved and the date that the event is to be substantially completed, a direct loss of: (i) 2,500 or more defense worker jobs in any area of the municipality or county that is located in an urbanized area of a metropolitan statistical area; (ii) 1,000 or more defense worker jobs in any area of the municipality or county that is not located in an urbanized area of a metropolitan statistical area; or (iii) defense worker jobs representing one percent of the jobs in the municipality or county. (c) From money appropriated under this chapter, the office may make a grant to an eligible local governmental entity to allow the entity to meet a matching money or investment requirement in order to receive from the United States assistance that is provided to allow the local governmental entity to respond to or recover from an event described by Section 489.438(b). In addition, a grant may be made to an eligible local governmental entity to match the entity's contribution for a purpose described in Section 486.005 on a closed or realigned defense facility. (d) A grant may not be less than $50,000 or more than the least of: (1) 50 percent of the amount of matching money or investment that the local governmental entity is required to provide, subject to Subsection (c); (2) 50 percent of the local governmental entity's investment for purposes described in Section 486.005, in cases where United States assistance is not available; or (3) $2 million. (e) If the local governmental entity demonstrates to the office that, because of a limited budget, resources are not available to provide 50 percent of the amount of matching money or investment that the local governmental entity is required to provide, the grant may be not more than 80 percent of the amount of that matching money or investment requirement, but may not be more than $2 million. (f) The office may make a grant to an eligible local governmental entity described by Section 486.003(a)(3) or (4) without regard to the availability or acquisition of matching money. (g) The local governmental entity may use the proceeds of the grant for purchase of property from the department of defense or its designated agent, new construction, rehabilitation, or renovation of facilities or infrastructure, or purchase of capital equipment or insurance. (1) The local governmental entity may deliver the money to a special district, development corporation, or other instrumentality of the state or the local governmental entity for use as provided by this chapter and other applicable law. (2) An eligible local governmental entity described by Section 486.003(a)(3) or (4) may use the proceeds of the grant to purchase or lease equipment to train defense workers whose jobs have been threatened or lost because of an event described by Section 486.003(b)(2)(A). (h) The office shall establish a defense economic adjustment assistance panel within the office. The panel consists of at least three and not more than five professional full-time employees of the office appointed by the executive director of the office. (i) A local governmental entity may apply for a grant under this chapter to the office on a form prescribed by the office. The office shall establish periodic application cycles to enable the panel and office to evaluate groups of applicants in relation to each other. (j) The panel shall evaluate each application and assign the applicant a score based on: (1) the significance of the adverse effect within the local governmental entity, including the number of jobs lost in relation to the workforce in the local governmental entity's jurisdiction and the effect on the area's economy and tax revenue; (2) the extent to which the local governmental entity has used its existing resources to promote local economic development; (3) the amount of any grant that the local governmental entity has previously received under this chapter; (4) the anticipated number of jobs to be created in relation to the amount of the grant sought; and (5) the extent to which the grant will affect the region in which the local governmental entity is located. (k) The panel shall submit its scores to the office's governing body. The governing body shall use the scores to determine whether to make a grant to an applicant. The governing body may not make a grant unless the legislature has appropriated the money for the grant. Section 489.439. REVOLVING LOANS TO COMMUNITIES POTENTIALLY AFFECTED BY DEFENSE BASE REDUCTION PROCESS. (a) The office shall administer a revolving loan program for assistance to an eligible community in developing infrastructure to minimize the possibility of or the negative effects of defense base reduction on the eligible community. The loans may be granted to an eligible community before the neighboring defense base is closed. (b) The office shall establish criteria and procedures for evaluations of applications for loans under the program. (c) The office shall establish categories of eligible infrastructure projects for which an eligible community may apply for a loan. SECTION 2. Section 151.429(g), Tax Code, is amended to read as follows: (g) The refund provided by this section is conditioned on the enterprise project maintaining at least the same level of employment of qualified employees as existed at the time it qualified for a refund for a period of three years from that date. The comptroller [Texas Department of Economic Development] shall annually certify [to the comptroller] whether that level of employment of qualified employees has been maintained. On [the Texas Department of Economic Development] certifying that such a level has not been maintained, the comptroller shall assess that portion of the refund attributable to any such decrease in employment, including penalty and interest from the date of the refund. SECTION 3. Section 151.4291(g), Tax Code, is amended to read as follows: (g) The refund provided by this section is conditioned on the defense readjustment project maintaining at least the same level of employment of qualified employees as existed at the time it qualified for a refund for a period of three years from that date. The comptroller [Texas Department of Economic Development] shall annually certify to [the comptroller and] the Legislative Budget Board whether that level of employment of qualified employees has been maintained. On [the Texas Department of Economic Development] certifying that such a level has not been maintained, the comptroller shall assess that portion of the refund attributable to any such decrease in employment, including penalty and interest from the date of the refund. SECTION 4. Section 151.431, Tax Code, subsections (a), (b) and (c), are amended to read as follows: Section 151.431. Sales and Use Tax Refund for Job Retention. (a) A qualified business operating in the enterprise zone's jurisdiction for at least three consecutive years may apply for and be granted a onetime refund of sales and use tax paid by the qualified business after certification of the qualified business as provided by Subsection (b) of this section to a vendor or directly to the state for the purchase of equipment or machinery sold to the business for use in an enterprise zone if the governing body or bodies certify to the comptroller [Texas Department of Economic Development] that the business is retaining 10 or more jobs held by qualified employees during the year. For the purposes of this subsection "job" means an existing employment position of a qualified business that has provided employment to a qualified employee of at least 1,820 hours annually. (b) Only qualified businesses that have been certified as eligible for a refund under this section by the governing body or bodies to the [department and by the department to the] comptroller, including certification of the number of jobs retained, are entitled to the refund. During each calendar year, no more than three eligible qualified businesses may be certified to the department by a municipality or county, subject to Subsection (c). (c) If a municipality or county sponsors more than one enterprise zone, that municipality or county may certify to the comptroller [department] only a total of three eligible qualified businesses from all enterprise zones of which it is the governing body or one of the governing bodies and must allocate the three certifications for which it is eligible as evenly as possible among those zones. If an enterprise zone has more than one governing body, it is entitled to only the number of certifications that is equal to the total that all of its governing bodies may allocate to it, but in no case is it entitled to more than three certifications. A certification that must be allocated to a particular zone but would exceed the three allowable to that zone may not be made. The comptroller [department] by rule may require: (1) multiple governing bodies jointly to certify all or some of the certifications for which a zone is eligible; and (2) governing bodies to follow uniform procedures or selection criteria in selecting the qualified businesses certified to it under this section. SECTION 5. Section 171.501, Tax Code, subsections (a), (b) and (c), are amended to read as follows: Section 171.501. Refund for Job Creation in Enterprise Zone. (a) A corporation that has been certified a qualified business as provided by Chapter 489, Subchapter C [2303], Government Code may apply for and be granted a refund of franchise tax paid with an initial or annual report if the governing body or bodies certify to the comptroller [Texas Department of Economic Development]that the business has created 10 or more new jobs in its enterprise zone held by qualified employees during the calendar year that contains the end of the accounting period on which the report is based. [The Texas Department of Economic Development shall certify eligibility for any refund to the comptroller.] (b) Only qualified businesses that have been certified as eligible for a refund under this section by the governing body or bodies [to the department and by the department] to the comptroller are entitled to the refund. During each calendar year, no more than three eligible qualified businesses may be certified to the department by a municipality or county, subject to Subsection (c). (c) If a municipality or county sponsors more than one enterprise zone, that municipality or county may certify to the comptroller [department] only a total of three eligible qualified businesses from all enterprise zones of which it is the governing body or one of the governing bodies and must allocate the three certifications for which it is eligible as evenly as possible among those zones. If an enterprise zone has more than one governing body, it is entitled to only the number of certifications that is equal to the total that all of its governing bodies may allocate to it, but in no case is it entitled to more than three certifications. A certification that must be allocated to a particular zone but would exceed the three allowable to that zone may not be made. The comptroller [department] by rule may require: (1) multiple governing bodies jointly to certify all or some of the certifications for which a zone is eligible; and (2) governing bodies to follow uniform procedures or selection criteria in selecting the qualified businesses certified to it under this section. SECTION 6. The following laws are repealed: (1) Section 403.412, Government Code; (2) Section 481.023(c), Government Code; (3) Subchapters BB and N, Chapter 481, Government Code; (4) Chapter 486, Government Code; (5) Chapter 2303, Government Code; (6) Chapter 2310, Government Code; and (7) Section 4 and Section 24, Subsections (a), (b) and (c), Development Corporation Act of 1979 (Article 5190.6, Vernon's Texas Civil Statutes). SECTION 7. EFFECTIVE DATE. This Act takes effect September 1, 2003.