By: Coleman H.B. No. 3470
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of state subsidies granted for economic
development purposes.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. (a) The Legislature of the state of Texas finds
that:
(1) Numerous studies indicate that state
funded-economic development incentives are not a principal factor
in attracting, creating, and sustaining quality economic and
employment opportunities because recipients of these funds are not
subject to any accountability standards.
(2) Absent accountability standards, there is nothing
that requires the recipients of economic development or enterprise
incentives to improve Texas employment standards to offset a labor
pool that has a high percentage of low-wage jobs that offer
inadequate or non-existent health care benefits, both of which
inhibit economic growth.
(3) Absent accountability standards, economic
development is not enhanced by financial incentives because long
term economic success and prosperity is subjugated to headline
hunting that brings short term political prosperity for
politicians.
(4) Other state funding priorities have proven to
provide much greater benefit to the state economy, including but
not limited to the Children's Health Insurance Program, Public
Education, and other "quality of life" indicators that are also
most important to business and corporate relocation.
(b) Because of the conditions stated in Subsection (a) of
this section, it is the purpose of this act to provide
accountability standards for entities that receive economic
subsidies or grants from the state of Texas for economic
development.
SECTION 2. Chapter 481, Government Code, is amended by
adding Subchapter Q to read as follows:
SUBCHAPTER Q. PUBLIC SUBSIDY PERFORMANCE AND ACCOUNTABILITY
Sec. 481.221. SHORT TITLE. This subchapter may be cited as
the Public Subsidy Performance and Accountability Act.
Sec. 481.222. DEFINITIONS. In this subchapter:
(1) "Benefit date" means the date on which the
recipient receives the subsidy, except that:
(A) if the subsidy involves the purchase, lease,
or donation of physical equipment, the benefit date is the date on
which the recipient places the equipment into service; or
(B) if the subsidy is for an improvement made to
property, the benefit date is the earlier of:
(i) the date on which the last improvement
to the property is made; or
(ii) the date on which the recipient
occupies the property, and if more than one recipient occupies the
property, a grantor may assign a separate benefit date for each
recipient based on when the recipient first occupies the property.
(2) "Grantor" means a state agency that grants a
subsidy.
(3) "Local governmental entity" means a county,
municipality, or other political subdivision of this state and a
municipally created economic development corporation, including a
development corporation organized under the Development
Corporation Act of 1979 (Article 5190.6, Vernon's Texas Civil
Statutes).
(4) "Nonprofit organization" means a private,
nonprofit, tax-exempt organization described by Section 501(c)(3),
Internal Revenue Code of 1986, that has at least 100 full-time
employees.
(5) "Public subsidy" or "subsidy" means financial
assistance in the form of a grant, loan at a rate below the
commercial rate, tax abatement, tax increment financing,
contribution of property, tax reduction, or infrastructure, or a
preferential use of a government facility, that is provided to a
business or nonprofit organization for economic development
purposes. The term does not include:
(A) financial assistance that is generally
available to all businesses or to a general class of similar
businesses;
(B) federal assistance until the assistance has
been repaid to and reinvested by the state;
(C) a public improvement made to property owned
by the state that serves a public purpose and does not primarily
benefit a single business or defined group of businesses when the
improvement is made;
(D) redevelopment property polluted by a
hazardous substance as defined by Section 361.003, Health and
Safety Code, or contaminant as defined by Section 361.401, Health
and Safety Code;
(E) assistance the sole purpose of which is to
provide job readiness and training services;
(F) assistance for housing, pollution control or
abatement, or energy conservation;
(G) workers' compensation and unemployment
compensation;
(H) a benefit derived from regulation;
(I) an indirect benefit derived from assistance
provided to an educational institution;
(J) bonds issued to refund outstanding bonds;
(K) bonds issued for the benefit of an
organization described by Section 501(c)(3), Internal Revenue Code
of 1986;
(L) assistance for a collaboration between an
institution of higher education as defined by Section 61.003,
Education Code, and a business;
(M) redevelopment if the recipient's investment
in the purchase of the site and in-site preparation is 70 percent or
more of the assessor's estimated market value for the current year;
and
(N) federal loan funds provided through the
United States Department of Commerce, Economic Development
Administration.
(6) "Recipient" means a business entity or nonprofit
organization that receives a subsidy from a grantor.
Sec. 481.223. APPLICABILITY OF SUBCHAPTER TO CERTAIN
SUBSIDIES. (a) Except as otherwise provided by this subchapter,
this subchapter applies only to a public subsidy of more than
$25,000.
(b) This subchapter does not apply to a subsidy in the form
of a loan of $75,000 or less.
Sec. 481.224. GRANTING OF SUBSIDY; PUBLIC PURPOSE. A state
agency may not grant a public subsidy unless:
(1) the agency has adopted criteria for issuance of
the subsidy;
(2) the agency enters into a subsidy agreement under
Section 481.227 with an eligible recipient; and
(3) if the eligible recipient is a business entity,
the entity executes a corporate responsibility agreement as
provided by Section 481.228.
Sec. 481.225. CRITERIA FOR GRANTING SUBSIDY. (a) A state
agency, after a public hearing, shall adopt eligibility and other
criteria for granting a subsidy.
(b) The criteria adopted by the agency must:
(1) be standard for all recipients and may not be
adopted on a case-by-case basis;
(2) set specific minimum requirements that a business
entity or nonprofit organization must meet to be eligible to
receive a subsidy, including requirements that:
(A) the entity or organization must be in good
standing under the laws of the state in which the entity or
organization was formed or organized, as evidenced by a certificate
issued by the secretary of state or the state official having
custody of the records pertaining to entities or other
organizations formed under the laws of that state;
(B) the entity or organization must owe no
delinquent taxes to a taxing unit of this state or to another state,
local, or federal governmental entity; and
(C) the entity or organization must be in
compliance with:
(i) any applicable rules or regulations
adopted by any environmental protection agency of the United
States, this state, or a political subdivision of this state for the
prevention, control, or reduction of air, water, or land pollution;
(ii) any applicable rules or regulations
adopted by the Occupational Safety and Health Administration; and
(iii) any applicable state or federal laws
applying to employment issues, including Chapters 21 and 61, Labor
Code, and the Fair Labor Standards Act of 1938 (29 U.S.C. Section
201 et seq.); and
(3) include a floor for the wages to be paid for any
jobs created with the subsidy.
(c) The requirement of Subsection (b)(3) must be stated as a
specific dollar amount or a formula that will generate a specific
dollar amount.
(d) The state agency shall submit a copy of the criteria to
the office for review and comment.
(e) A state agency may modify the criteria adopted by the
agency under this section by documenting the applicable
modification and submitting a copy of the report to the office for
review and comment not later than the 30th day after the date on
which the modification is made.
Sec. 481.226. DUTY OF GRANTOR TO DETERMINE ELIGIBILITY.
Before a grantor enters into a public subsidy agreement, the
grantor shall contact the office to determine whether the proposed
recipient is eligible to receive a subsidy under this subchapter.
Sec. 481.227. SUBSIDY AGREEMENT. (a) As a condition of
receiving the subsidy, an eligible recipient must enter into a
subsidy agreement with the grantor that meets the requirements of
this section.
(b) The subsidy agreement must:
(1) describe the subsidy, including the amount and
type of subsidy, and the type of district if the subsidy is tax
increment financing;
(2) state the purpose for the subsidy;
(3) describe the project to be developed or performed
with the subsidy and the project site;
(4) contain measurable, specific, and tangible goals
for the subsidy, including:
(A) the schedule for accomplishing the goals;
(B) goals for the number of jobs to be created by
the recipient with the subsidy, which may include separate goals
for:
(i) the number of part-time or full-time
jobs; or
(ii) in cases in which job loss is imminent
and demonstrable, goals for the number of jobs retained; and
(C) wage goals for the jobs created or retained;
(5) describe the financial obligation of the recipient
if the goals described in Subdivision (4) are not met in accordance
with Section 481.231;
(6) require the recipient to continue the recipient's
operations in the municipality in which the subsidy is to be used
for at least five years after the benefit date;
(7) state the name and address of the parent
corporation of the recipient, if any; and
(8) list any other form of financial assistance
provided to the recipient by other grantors or local governmental
entities for the project.
(c) The goals specified in Subsections (b)(4)(B) and (C)
must be attained not later than the fifth anniversary of the benefit
date. In determining whether the recipient has met the goals
specified in Subsection (b)(4)(B), the grantor must include only
jobs created by the recipient at the sites of the funded project.
(d) If, after a public hearing, the grantor determines that
the creation or retention of jobs is not a goal of the subsidy
agreement, the wage and job goals may be set at zero.
Notwithstanding Subsection (b)(6), a recipient may move its
operations without violating the terms of the subsidy agreement if
the grantor, after a public hearing, approves the recipient's
request to move its operations.
(e) A subsidy in the form of a grant must be structured as a
forgivable loan. An agreement for a subsidy in a form other than a
grant must state:
(1) the fair market value of the subsidy to the
recipient, including the value of conveying property at less than a
fair market price; or
(2) whether the recipient is receiving an in-kind
benefit.
(f) If a subsidy benefits more than one recipient, the
grantor must assign a portion of the subsidy to each recipient that
signs a subsidy agreement. The proportion of the benefits assessed
to each recipient must reflect a reasonable estimate of the
recipient's share of the total benefits of the project.
(g) The grantor and each recipient must sign the subsidy
agreement. The subsidy agreement may provide for an informal
dispute resolution process that provides for adjudication by an
appropriate disinterested person in a regional office of the
office.
Sec. 481.228. CORPORATE RESPONSIBILITY AGREEMENT. (a) The
grantor shall require each business entity eligible to receive a
subsidy from the grantor to sign a corporate responsibility
agreement as a condition of receiving the subsidy.
(b) The responsibility agreement shall require that:
(1) the business entity agree to:
(A) provide basic health insurance coverage to
all entity employees residing in this state and to dependents of
employees residing in this state that is at least comparable to the
basic health coverage provided to state employees and dependents of
state employees under Chapter 1551, Insurance Code; and
(B) pay at least 50 percent of the cost of the
insurance coverage;
(2) the business entity agree to provide pension
benefits substantially similar to service retirement benefits
provided by the Employees Retirement System of Texas for members in
the employee class under Subtitle B, Title 8, Government Code;
(3) the business entity agree not to create, during
the 15 years immediately following the date of the agreement,
employment suitable for performance in this state, in another
state, or a country other than the United States and, as a result,
eliminate or fail to create similar employment in this state;
(4) the business entity agree to annually provide to
the grantor salary and benefits information for all of the entity's
employees in this state, including salary and benefits information
relating to the chief executive officer of the entity;
(5) the business entity owe no delinquent taxes to a
taxing unit of this state or to another state, local, or federal
governmental entity;
(6) the business entity agree to submit to an annual
performance audit when requested by the grantor; and
(7) the business entity comply with:
(A) applicable rules or regulations adopted by
any environmental protection agency of the United States, this
state, or a political subdivision of this state for the prevention,
control, or reduction of air, water, or land pollution;
(B) applicable rules or regulations adopted by
the Occupational Safety and Health Administration; and
(C) Chapters 21 and 61, Labor Code, and the Fair
Labor Standards Act of 1938 (29 U.S.C. Section 201 et seq.) and any
other applicable state or federal law applying to employment
issues.
(c) The grantor may require as part of the responsibility
agreement that the business entity provide a surety bond, purchase
insurance, or provide other security in a reasonable amount
necessary to cover the amount of the grant.
Sec. 481.229. EXTENSION OF TIME TO MEET AGREED GOALS. (a)
A grantor, after a public hearing, may extend up to one year the
period for meeting job and wage goals under the subsidy agreement.
(b) A grantor may extend the period for meeting goals other
than job and wage goals. The grantor shall:
(1) prepare and maintain a written record of any
extension granted under this subsection that includes the reason
for the extension; and
(2) forward a copy of a record maintained under this
subsection with the annual report required under Section 481.237.
Sec. 481.230. PUBLIC NOTICE AND HEARING BEFORE GRANTING
LARGE SUBSIDY. (a) Notwithstanding Section 552.131, a state
agency shall publish notice and hold a public hearing before
granting a subsidy of more than $500,000.
(b) Public notice and a hearing to grant a subsidy under
this section is not required if notice and hearing is otherwise
required by law.
(c) A state agency shall publish notice of the hearing
required under this section in the Texas Register and shall hold the
hearing in Austin. The notice must:
(1) include the date, time, and place of the hearing;
and
(2) identify the location at which information about
the subsidy, including a summary of the terms of the subsidy
agreement, is available.
(d) A grantor shall:
(1) make printed copies of information on the subsidy
available on request to members of the public; and
(2) to the extent possible, make the information
available through the Internet.
Sec. 481.231. FAILURE TO MEET GOALS AND OBLIGATIONS UNDER
SUBSIDY AGREEMENT. (a) A subsidy agreement entered into under
Section 481.227 must contain a provision requiring a recipient that
fails to meet each of the goals specified in the agreement within
the deadline specified in the agreement or that fails to comply with
each of the terms of the corporate responsibility agreement
executed under Section 481.228 to, at a minimum, repay the amount of
the subsidy with interest at the agreed rate and terms. The
repayment must be prorated to reflect a partial fulfillment of
goals.
(b) On making a determination that a recipient has failed to
meet a deadline specified in the subsidy agreement or has otherwise
violated the terms of the subsidy agreement or the corporate
responsibility agreement or any extensions or modifications made to
the subsidy agreement, the grantor shall immediately send notice of
the failure to the recipient and demand repayment of the subsidy.
The notice must be sent by registered mail, return receipt
requested.
Sec. 481.232. PROHIBITION ON RECEIPT OF SUBSIDY. A
recipient that fails to meet the terms of a subsidy agreement or the
corporate responsibility agreement under Section 481.228 may not
receive a subsidy from a grantor before the earlier of:
(1) five years after the date on which the grantor made
its determination regarding the failure; or
(2) the date on which the recipient satisfies its
repayment obligation under the terms of the subsidy agreement.
Sec. 481.233. ANNUAL REPORT REQUIRED BY RECIPIENT. (a) A
grantor must monitor the progress of a recipient in achieving the
goals as stated in the subsidy agreement and a recipient's
continued compliance with the corporate responsibility agreement.
(b) For each subsidy received, a recipient shall submit, not
later than March 1 of each year, a report containing the information
compiled during the previous year regarding progress in the
attainment of each of the stated goals and, if applicable, the
recipient's continued compliance with the corporate responsibility
agreement. The recipient shall submit the report to the office.
(c) The information required under this section must be
submitted on a form and in the manner prescribed by the office.
Sec. 481.234. CONTENTS OF ANNUAL REPORT. (a) The annual
report must include:
(1) the type, public purpose, and amount of subsidy
and type of district if the subsidy is tax increment financing;
(2) the number of any new jobs to be created because of
the subsidy for which the starting wage is:
(A) less than $8 an hour;
(B) at least $8 but less than $20 an hour; and
(C) at least $20 an hour;
(3) the sum of the hourly wages and cost of health
insurance provided by the employer with respect to the wages;
(4) the date job and wage goals were or will be met;
(5) a statement of goals identified in the subsidy
agreement and the recipient's progress toward attainment of those
goals;
(6) the principal office of the recipient before
receiving a subsidy if the recipient changed its principal office
after receiving the subsidy;
(7) if applicable, any reasons why the recipient did
not complete the project at the site disclosed in the subsidy
agreement if the recipient moves its operations to another site;
(8) the name and address of the parent corporation of
the recipient, if any;
(9) a list of all financial assistance by all grantors
or local governmental entities for the project; and
(10) any other information that may be requested by
the office.
(b) If the recipient is a business entity, the report must
also include information on:
(1) health insurance coverage provided by the
recipient to all of the recipient's employees residing in this
state and to dependents of those employees; and
(2) the employee salary and benefit information
required to be provided under Section 481.228(b)(4).
Sec. 481.235. FILING OF ANNUAL REPORT. (a) A recipient
shall file the report required by Section 481.233 not later than
March 1 of each year.
(b) In addition to filing a report within the reporting
period prescribed by Subsection (a), the recipient must file a
report containing the information required by Section 481.233(a)
not later than the 30th day after the date of the deadline for
attaining the job and wage goals specified in the subsidy
agreement.
(c) A recipient shall continue to file the report containing
the information required by Section 481.233(a) until the second
anniversary of the later of:
(1) the benefit date; or
(2) the date on which the goals are met.
(d) A recipient shall continue to file the report containing
the information required by Section 481.233(b) until the date the
subsidy agreement expires.
(e) Notwithstanding Subsection (c), a recipient that has
not met the goals stated in the subsidy agreement shall file the
report required under this section until the subsidy is repaid.
Sec. 481.236. FAILURE TO FILE REPORT. (a) If a recipient
fails to file a report under Section 481.233, the grantor shall send
a written reminder to the recipient not later than the seventh day
after the date on which the report is due.
(b) If the recipient fails to file a report before the 14th
day after the date a reminder letter sent under Subsection (a) is
postmarked, the recipient is liable to the grantor for a penalty of
$100 for each day the report is not filed.
(c) The penalty under this section may not exceed $1,000.
Sec. 481.237. REPORT BY GRANTOR TO OFFICE. (a) Not later
than April 1 of each year, each state agency that has awarded a
public subsidy shall file a report with the office regarding the
subsidy.
(b) The office shall adopt procedures regarding the
reporting requirements of this section and shall provide
information on those requirements to each appropriate state agency.
(c) The report must include:
(1) a list of recipients that did not complete the
report required under Section 481.233;
(2) a list of recipients that have not met their job
and wage goals within the past two years and any action being taken
by the grantor to:
(A) bring those recipients into compliance; or
(B) recoup the subsidy; and
(3) a list of recipients that have not complied with
the terms of a corporate responsibility agreement under this
subchapter and any action being taken by the grantor to recoup the
subsidy.
(d) The office shall send a written reminder to each grantor
that does not file a report within the time prescribed by this
section. A grantor for whom the office has not received a required
report by June 1 of the same year the report is due is prohibited
from granting a subsidy until it files the report with the office.
Sec. 481.238. SUBSIDY COMPILATION AND SUMMARY REPORT BY
OFFICE. (a) Not later than July 1 of each year, the office shall
submit to the legislature a report summarizing the results of the
reports required under Sections 481.233 and 481.237 for the
previous calendar year. The summary report must include for each
grantor:
(1) the total amount of subsidies awarded in each
development region of the state, as defined by office rule;
(2) the distribution of subsidy amounts by size of the
subsidy;
(3) the distribution of subsidy amounts by month,
quarter, and year;
(4) the distribution of subsidy amounts by type;
(5) the percentage of recipients that met the goals
specified in the subsidy agreement;
(6) the percentage of recipients that did not meet the
goals specified in the subsidy agreement by the fifth anniversary
of the benefit date;
(7) the percentage of recipients that did not comply
with the terms of the corporate responsibility agreement;
(8) the total amount of subsidies issued to recipients
that did not meet the goals specified in the subsidy agreement by
the fifth anniversary of the benefit date;
(9) the percentage of recipients that did not meet the
goals specified in the subsidy agreement and have not satisfied
their repayment obligations;
(10) the percentage of recipients that did not comply
with the terms of the corporate responsibility agreement and have
not satisfied their repayment obligation;
(11) the name of each recipient that failed to meet the
terms of its subsidy agreement in the previous five years and has
not satisfied its repayment obligation;
(12) the number of part-time and full-time jobs
created because of the subsidy for which the starting wage is:
(A) less than $8 an hour;
(B) at least $8 but less than $20 an hour; and
(C) at least $20 an hour; and
(13) the benefits paid for jobs created because of the
subsidy for which the starting wage is:
(A) less than $8 an hour;
(B) at least $8 but less than $20 an hour; and
(C) at least $20 an hour.
(b) The office shall coordinate information provided to the
office under this subchapter in a manner that allows a person to
make a useful comparison among grantors and across different
periods.
(c) The office may include any other information in the
report as necessary to evaluate subsidies.
Sec. 481.239. REPORT MADE AVAILABLE TO PUBLIC. The office
shall make available to the public on the office's Internet website
all reports submitted to the office under Section 481.237 and the
summary report submitted by the office under Section 481.238.
Sec. 481.240. SUBSIDY CRITERIA COMPILATION REPORT BY
OFFICE. Not later than August 1 of each year, the office shall
publish a compilation of grantors' criteria policies adopted in the
previous calendar year.
SECTION 2. This Act takes effect September 1, 2005.