Honorable Kip Averitt, Chair, Senate Committee on Natural Resources
FROM:
John S. O'Brien, Director, Legislative Budget Board
IN RE:
SB1816 by Averitt (Relating to the sales tax exemption for the reuse and recycling of wastewater used for oil and gas activities. ), Committee Report 1st House, Substituted
Estimated Two-year Net Impact to General Revenue Related Funds for SB1816, Committee Report 1st House, Substituted: a negative impact of ($1,406,000) through the biennium ending August 31, 2009.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2008
($625,000)
2009
($781,000)
2010
($938,000)
2011
($1,094,000)
2012
($1,250,000)
Fiscal Year
Probable Revenue Gain/(Loss) from GENERAL REVENUE FUND 1
Probable Revenue Gain/(Loss) from City Sales Tax Revenue
Probable Revenue Gain/(Loss) from Transit Authority (MTAs) Sales Tax Revenue
Probable Revenue Gain/(Loss) from Special District Sales Tax Revenue
2008
($625,000)
($120,000)
($41,000)
($15,000)
2009
($781,000)
($150,000)
($51,000)
($19,000)
2010
($938,000)
($180,000)
($62,000)
($23,000)
2011
($1,094,000)
($210,000)
($72,000)
($27,000)
2012
($1,250,000)
($240,000)
($82,000)
($31,000)
Fiscal Analysis
The bill would expand the manufacturing sales tax exemption for water-related items to include tangible personal property specifically used to process, reuse, and recycle wastewater that will be used in fracturing work performed at an oil and gas well. The bill would take effect immediately if it received a two-thirds vote in both houses of the Legislature. Otherwise, it would take effect on September 1, 2007.
Methodology
The Comptroller provided estimates of the annual revenue loss resulting from the bill's passage based on reports gathered from the oil and gas industry, the Commission on Environmental Quality, and the Railroad Commission. The estimate assumes that $10 million in expenditures for fracturing machinery will be made in fiscal year 2008, increasing to $20 million by 2012. The revenue loss shown in the table above was estimated by multiplying the estimated level of expenditures by the state sales tax rate. Fiscal impacts on local units of government were estimated proportionally.
Local Government Impact
There would be a loss in sales tax revenues to local governments collecting such taxes. The statewide loss to cities, metropolitan transit authorities, and special districts is presented in the tables above.
Source Agencies:
304 Comptroller of Public Accounts, 455 Railroad Commission, 582 Commission on Environmental Quality