| TO: | Honorable David Dewhurst, Lieutenant Governor, Senate Honorable Joe Straus, Speaker of the House, House of Representatives |
| FROM: | John S O'Brien, Director, Legislative Budget Board |
| IN RE: | HB3275 by Coleman (Relating to the operation and governance of tax increment financing reinvestment zones, the creation of renewable energy reinvestment zones, and the governance of certain special districts.), Conference Committee Report |
The bill would amend Chapter 311 of the Tax Code to disallow the designation of a reinvestment zone by a city if the percentage of residential property in the proposed reinvestment zone is above 30 percent, rather than 10 percent. For a city with a population of 100,000 or more, a zone designation would be disallowed if the total appraised value of taxable real property in the city and in the industrial districts created by the city exceeds 25 percent. For a city with a population of less than 100,000, a zone designation would be disallowed if the total appraised value of taxable real property in the city and in the industrial districts created by the city exceeds 50 percent, rather than 15 percent. Cities would not be permitted to change the boundaries of an existing reinvestment zone to include property in excess of the restrictions described.
The bill would amend Chapter 311 of the Tax Code to provide that for a taxing unit (other than a municipality or county that created a reinvestment zone) that levies taxes on real property in a reinvestment zone to appoint a member on the reinvestment zone's board of directors, the taxing unit must approve the payment of all or part of the tax increment produced by the unit into the tax increment fund for the zone. The bill would provide that certain eligibility requirements for board members do not apply to an individual appointed by certain conservation and reclamation districts with a jurisdiction which covers four counties.
The bill provides for a county that designates a zone to determine the portion of the tax increment that is required to be paid into the tax increment fund and that a municipality or county can make such a designation in an ordinance or an order, rather than only in an ordinance. The bill would modify the due date of the reinvestment zone status report that a municipality or county must send to each taxing unit in the zone, from on or before the 90th day to on or before the 150th day following the end of the fiscal year.
The bill would create new Chapter 314 of the Tax Code regarding property tax abatement in a renewable energy reinvestment zone. The bill would apply only to a city that has a population of at least 45,000, but not more than 60,000, and that is located in a county with a population of at least one million, and that does not contain within its corporate limits more than two school districts that are categorized as category II school districts under Section 313.022 of the Tax Code or any school districts to which Subchapter C, Chapter 313 of the Tax Code applies.
The bill would define renewable energy company and allow a city to establish a renewable energy reinvestment zone. The city would be required to hold a public hearing, to designate the reinvestment zone with specified boundaries by ordinance, and to establish guidelines and criteria governing tax abatements in the zone. Only areas that are at least 100 acres, at least 75 percent owned by the city designating the zone or owned by a municipal development corporation, and zoned for commercial purposes would be eligible for designation as a renewable energy reinvestment zone.
The city would be permitted to abate 50 percent of the value of the real and personal property owned by a renewable energy company in the zone for 15 years on the condition that the company construct a facility on the property to be used in connection with the company's operations as specified by the abatement agreement. The specific terms of a tax abatement agreement would be required to (among other conditions) provide for recapturing property tax revenue lost as a result of the agreement if the owner of the property fails to make the agreed improvements. A tax abatement agreement could be terminated or modified by agreement of the parties, but not to extend the term beyond the original 15 years.
Counties and school districts would be permitted to participate in the tax abatement agreement.
The bill would modify the board of directors of reinvestment zones, the designation process of tax increments into a tax increment fund, and the due date of reports regarding zones. This modification would not change taxable values, tax rates or any other variable directly affecting property tax revenues and, consequently, would not create a fiscal impact to the state or units of local government.
To the extent that cities, counties and school districts participate in property tax abatements in renewable energy reinvestment zones under the bill, the bill would create a cost to these units of local government. The future tax abatement participation by these units of local government cannot be predicted so the fiscal impact on units of local government cannot be estimated. There would be no fiscal impact to the state through the operation of the school funding formula because no value would be deducted in the Comptroller's property value study for the abated value in school districts that choose to participate.
The bill would take effect September 1, 2011.
| Source Agencies: | 304 Comptroller of Public Accounts, 701 Central Education Agency
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| LBB Staff: | JOB, AG, KK, SD, SJS, JGM, TP, JSp
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