LEGISLATIVE BUDGET BOARD
Austin, Texas
 
FISCAL NOTE, 81ST LEGISLATIVE REGULAR SESSION
 
March 25, 2009

TO:
Honorable Rene Oliveira, Chair, House Committee on Ways & Means
 
FROM:
John S. O'Brien, Director, Legislative Budget Board
 
IN RE:
HB831 by Taylor (Relating to exempting from ad valorem taxation property used by certain nonprofit community business organizations to provide services to aid in the economic development of local communities.), As Introduced



Estimated Two-year Net Impact to General Revenue Related Funds for HB831, As Introduced: a negative impact of ($1,194,000) through the biennium ending August 31, 2011.

The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.



Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2010 $0
2011 ($1,194,000)
2012 ($1,448,000)
2013 ($1,607,000)
2014 ($1,782,000)




Fiscal Year Probable Savings/(Cost) from
Foundation School Fund
193 		Probable Revenue Gain/(Loss) from
School Districts - Net Impact		 Probable Revenue Gain/(Loss) from
Counties		 Probable Revenue Gain/(Loss) from
Cities
2010 $0 $0 $0 $0
2011 ($1,194,000) ($397,000) ($467,000) ($448,000)
2012 ($1,448,000) ($329,000) ($518,000) ($495,000)
2013 ($1,607,000) ($378,000) ($574,000) ($547,000)
2014 ($1,782,000) ($435,000) ($636,000) ($605,000)

Fiscal Analysis

The bill would amend Chapter 11 of the Tax Code to exempt from ad valorem taxation property used by certain nonprofit community business organizations providing services to support the economic development of local communities.

The bill would require organizations receiving this exemption to have been in existence for at least five years, maintained a dues-paying membership of at least 50 members for at least the past three years, been organized and registered as a nonprofit corporation, not been a statewide organization, and other factors indicating public support and purpose.

The bill would be effective January 1, 2010.


Methodology

The bill's requirement for mandatory exemptions for qualifying economic development corporation property would create a cost to cities, counties, school districts and the state through the operation of the school finance formulas. The bill would be effective on January 1, 2010, so the fiscal costs would appear in fiscal 2011. The number of Texas economic development corporations that own eligible property was estimated and multiplied by the estimated average value of the property to estimate potential value losses under the proposed bill. The appropriate trended tax rates were applied to the trended value losses to estimate the tax revenue losses.

Because of the operation of the hold harmless provisions of HB 1, 79th Legislature, Third Called Session (2006), the school district cost related to the compressed rate would be transferred to the state. Portions of the enrichment cost and the school district debt (facilities) cost would also be transferred to the state after a one-year lag because of the operation of the enrichment and facilities funding formulas. All costs were estimated over the five year projection period.

The bill is estimated to have an impact on the state aid districts receive based on the enrichment tier as tied to the yield of the Austin Independent School District (ISD). To the extent that the bill has the effect of lessening Austin ISD's revenue per weighted student per penny of tax effort, as determined by the Commissioner of Education, the growth of the equalized yield on those enrichment pennies would slow, resulting in slower growth in state aid.


Local Government Impact

The estimated fiscal implication to units of local government is reflected in the table above.


Source Agencies:
304 Comptroller of Public Accounts
LBB Staff:
JOB, MN, SD, SJS