BILL ANALYSIS
By: Krusee
BACKGROUND AND PURPOSE
Article III, Section 52-a of the Texas Constitution grants the legislature authority to create statutory programs for economic development, including grants and loans. The section also provides that such programs serve a public purpose, overturning previous court decisions that held that economic development was unconstitutional. Chapter 380 of the Local Government Code was enacted to implement the constitutional amendment.
Numerous Texas cities have relied on Chapter 380 to make long-term grants and loans of public funds to create jobs. A recent trial court case, however, has held that a grant program lasting longer than one year results in an unconstitutional debt in violation of Article 11, Section 5 of the Texas Constitution. That constitutional section, along with the cases interpreting it, requires that certain obligations of municipal funds extending longer than one year are a debt, and therefore require an interest and sinking fund-based method of financing, such as bonds or certificates of obligation.
Such a finding renders Chapter 380 virtually unusable, as the only prudent way to grant public funds for economic development is to do so long-term, such that the performance of corporate grantees can be closely monitored and the publics’ funds thereby protected. It is unlikely that the legislature or the voters, when enacting Article III, Section 52-a , considered economic development programs to be a constitutional debt.
HJR 80 states that programs, loans and grants made pursuant to Art. III, Section 52-a are not a debt for any purpose under the constitution or other law, except to the extent that bonds or other debt obligations are issued for the purpose of making the grant.
RULEMAKING AUTHORITY
It is the committee's opinion that this resolution does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.
ANALYSIS
SECTION 1. Amends Section Article III, Section 52-a, Texas Constitution, to read as follows:
Section 52-a provides that programs, loans, and grants made pursuant to the section do not in themselves constitute a debt for any purpose under the constitution or other law, except to the extent that bonds or other debt obligations are issued for the purpose of making the loan or grant.
SECTION 2. Provides that the proposed amendment shall be submitted to the voters at an election to be held on November 8, 2005, and provides ballot language for the election.
EFFECTIVE DATE
Upon passage, or, if the Act does not receive the necessary vote, the Act takes effect September 1, 2005.