| TO: | Honorable David Dewhurst, Lieutenant Governor, Senate Honorable Joe Straus, Speaker of the House, House of Representatives |
| FROM: | Ursula Parks, Director, Legislative Budget Board |
| IN RE: | HB3390 by Hilderbran (Relating to the Texas Economic Development Act; imposing a penalty.), Conference Committee Report |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2014 | ($1,683,165) |
| 2015 | ($1,389,165) |
| 2016 | ($26,489,165) |
| 2017 | ($93,789,165) |
| 2018 | ($83,989,165) |
| 2019 | ($133,989,165) |
| 2020 | ($179,789,165) |
| 2021 | ($225,289,165) |
| 2022 | ($267,089,165) |
| 2023 | ($305,989,165) |
| Fiscal Year | Probable (Cost) from General Revenue Fund 1 |
Probable (Cost) from Foundation School Fund 193 |
Probable Revenue (Loss) from School Districts |
Change in Number of State Employees from FY 2013 |
|---|---|---|---|---|
| 2014 | ($1,683,165) | $0 | $0 | 14.5 |
| 2015 | ($1,389,165) | $0 | $0 | 12.6 |
| 2016 | ($1,389,165) | ($25,100,000) | ($38,677,581) | 12.6 |
| 2017 | ($1,389,165) | ($92,400,000) | ($82,590,119) | 12.6 |
| 2018 | ($1,389,165) | ($82,600,000) | ($132,598,225) | 12.6 |
| 2019 | ($1,389,165) | ($132,600,000) | ($178,372,072) | 12.6 |
| 2020 | ($1,389,165) | ($178,400,000) | ($223,858,687) | 12.6 |
| 2021 | ($1,389,165) | ($223,900,000) | ($265,712,626) | 12.6 |
| 2022 | ($1,389,165) | ($265,700,000) | ($304,625,382) | 12.6 |
| 2023 | ($1,389,165) | ($304,600,000) | ($340,578,025) | 12.6 |
The bill would amend Chapter 313 of the Tax Code, relating to the Texas Economic Development Act.
Section 1 of the bill would amend legislative "Findings" in Tax Code, Section 313.002. Section 1 of the bill would also amend "Purposes" in Tax Code, Section 313.003.
Section 1 of the bill would also amend Tax Code, Section 313.004 to clarify that only entities subject to Chapter 171 are eligible for benefits under the chapter. The bill would clarify that economic development decisions involving school district taxes should occur at the local level with oversight by the state and should be consistent with identifiable statewide economic development goals. The bill would also clarify that, in implementing Chapter 313, the comptroller should strictly interpret the criteria and selection guidelines provided by this chapter and issue certificates for limitations on appraised value only for those applications for an ad valorem tax benefit provided that they create high-paying jobs, provide a net benefit to the state over the long term, and advance the economic goals of this state.
Section 1 of the bill would also amend Tax Code, Section 313.007 to extend the expiration date of Subchapters B and C, Chapter 313, Tax Code from December 31, 2014 to December 31, 2022. Subchapter D, related to tax credits, is repealed in Section 21 of the bill.
Section 2 of the bill would add a new Tax Code, Section 313.010 to require the State Auditor to review at least three major limitation agreements annually, and make recommendations to increase the efficiency and effectiveness of the administration of the chapter.
Section 3 of the bill would amend the definition of qualified property under 313.021(2) to permit tangible personal property placed in service in a newly expanded building to be qualified property.
Section 3 of the bill would amend the definition of "qualifying job" in Tax Code, Section 313.021(3) to delete language that currently allows the minimum required wage standard for qualifying jobs to be 110 percent of the county average weekly wage for all jobs in a county if the project creates more than 1,000 jobs. The requirement that a Subchapter B applicant create at least 25 "new jobs" would be changed to at least 25 "new qualifying jobs" in an amended Section 313.021(2)(A)(iv)(b) in Section 3 of the bill. The requirement that a Subchapter C applicant create at least 10 "new jobs" would be changed to at least 10 "new qualifying jobs" in an amended Section 313.051(b) in Section 16 of the bill. The current law provision that "at least 80 percent of all the new jobs created by the property owner must be qualifying jobs" would be deleted in both Subchapters B and C, in amended Sections 313.024(d) and 313.051(b).
Section 3 of the bill would add a new subsection 313.021(3)(F) to allow both Subchapter B and Subchapter C applicants to alternatively satisfy their minimum "new qualifying job" requirement if the Texas Workforce Commission (TWC) determines that the cumulative economic benefit of related jobs created in connection with the project is the same or greater than that associated with the minimum number of required jobs. The TWC would be given rule-making authority to implement this provision.
Section 3 of the bill adds language that requires that the average wage for all jobs that are not qualifying jobs exceed the average weekly wage for all jobs in the county.
Section 4 of the bill would create a new subsection 313.024(d-2) to allow the Governor's Office of Texas Economic Development and Tourism to determine that two or more projects in different school districts, covered by two or more limitation agreements, may constitute a "single unified project." The new qualifying jobs created in each agreement in a unified project could be considered together when determining if the minimum new qualifying jobs requirement has been satisfied. The Office of Texas Economic Development and Tourism would be given rule-making authority to implement this provision.
Section 4 of the bill would amend Tax Code, 313.024(b) to expand the types of properties eligible for a value limitation to include a "Texas priority project." Section 5 of the bill would amend Tax Code, Section 313.024(e) to define a Texas priority project as a project on which the applicant has committed to expend or allocate a qualified investment of more than $1 billion.
Section 6 of the bill would amend Tax Code, Section 313.025 to require the governing board of a school district to submit a copy of the application to the comptroller and request the comptroller conduct an economic impact evaluation of the investment proposed by the application. The bill would require the comptroller to provide the school board with an economic impact evaluation along with the comptroller's certificate or written explanation and recommendation, if requested, not later than the 90th day after the date the comptroller receives the application.
Section 6 of the bill would also amend Tax Code, Section 313.025 to require the Texas Education Agency to determine the effect that the applicant's proposal would have on the number or size of the school district's instructional facilities and submit a written report to the school district instead of the comptroller.
Section 6 of the bill would also amend Tax Code, Section 313.025 to require the comptroller, no later than 90 days after the receipt of the application, to issue a certificate for a limitation on appraised value of the property and provide the certificate to the governing body of the school district, or provide the governing body a written explanation of the comptroller's decision not to issue a certificate.
Section 6 of the bill would also amend Tax Code, Section 313.025 to require that a governing body of a school district may not approve an application unless the comptroller submits to the governing body a certificate for a limitation on appraised value of the property.
Section 7 of the bill would amend Tax Code, Section 313.026 to require the economic impact evaluation to include any information the comptroller determines is necessary or helpful to the governing body of the school district in determining whether to approve the application. The itemized list of criteria required to be included in the economic impact evaluation under current law would be deleted [Section 313.026(a)(1) through Section 313.026(a)(20)]. The bill would require the comptroller to not issue a certificate for a limitation on appraised value unless the comptroller determines that "the project proposed by the applicant is reasonably likely to generate, before the 25th anniversary of the beginning of the limitation period, tax revenue, including state tax revenue, school district maintenance and operations ad valorem tax revenue attributable to the project, and any other tax revenue attributable to the effect of the project on the economy of the state, in an amount sufficient to offset the school district maintenance and operations ad valorem tax revenue lost as a result of the agreement." Before issuing a certificate of limitation, the comptroller would also be required to determine that the limitation on appraised value is a determining factor by the applicant in determining whether to invest capital and construct the project in this state. The bill would authorize the comptroller to make a "qualitative determination" that "other considerations associated with the project result in a net positive benefit to the state," and issue the certificate.
Section 8 of the bill would amend Tax Code, Section 313.0265 to make conforming changes related to the repeal of Subchapter D.
Section 9 of the bill would create 313.027 (a-1) to provide that a limitation period applies for a period of 10 years, and specifies three options for the start date of the limitation.
Section 9 of the bill would amend Tax Code, Section 313.027 to limit the deferral date on which a qualifying time period could begin to a date not later than January 1 of the sixth tax year after the date the application is approved. The bill would prohibit any supplemental payments from property owners to school districts, or to an entity that exists primarily to provide financial or material support to the school district, in an amount that exceeds an amount equal to the greater of $100 per student per year in average daily attendance or $50,000 per year, or for a period ending 3 years after the limitation period.
Section 10 of the bill would amend Tax Code, Section 313.0275 to allow a person to request and the comptroller to grant a waiver of a penalty imposed in the event of casualty loss. Section 10 also strikes language that requires recipients to create the number of qualifying jobs in each year of the agreement.
Section 11 of the bill would create an annual review process by the comptroller and penalty provisions by the applicant for failing to meet the requirements for creating qualifying jobs.
Section 12 of the bill would amend Tax Code, Section 313.031 to clarify that the amount of the application fee may not exceed the estimated cost to the district of processing and acting on an application, including any costs to the school district associated with the economic impact evaluation.
Section 13 of the bill would amend Tax Code, Section 313.032 to modify the types of data the comptroller must include in the required "Report on Compliance with Agreements." The bill would require the report to include an assessment of agreements considered in the aggregate. The bill would authorize the comptroller to use standard economic estimation techniques, including economic multipliers in preparing the report. The bill would require that data must be based on data certified to the comptroller by each recipient, or former recipient of a limitation on appraised value.
Section 14 of the bill would create a report on compliance with job-creation requirements due annually by limitation recipients. The report would be submitted to the comptroller.
Section 15 of the bill would change Subchapter C's title to "Limitation on Appraised Value of Property in Strategic Investment Area or Certain Rural Districts."
Section 16 the bill would amend Tax Code, Section 313.051 to create a definition of a strategic investment area as an area the comptroller determines is a county within this state with unemployment above the state average and per capita income below the state average, an area within this state that is a federally designated urban enterprise community or an urban enhanced enterprise community, or a defense economic readjustment zone designated under Chapter 2310, Government Code.
Section 16 of the bill would amend Tax Code, 313.051 to require the comptroller to determine demographic eligibility under Subchapter C using the latest two federal censuses, and to also consider the average rate of population increase in the state during the same period.
Section 16 of the bill would also amend Tax Code, Section 313.051 to require the comptroller, not later than September 1 of each year, to determine areas that qualify as a strategic investment area using the most recently completed full calendar year data available on that date and, not later than October 1, publish a list and map of the designated areas. The determination would be effective for the following tax year.
Section 17 of the bill would amend 313.0054(a) to require, under subchapter C, the amount the limitation on appraised value to increase from a range of $1,000,000 to $30,000,000 to a range of $10,000,000 to $30,000,000.
Section 19 of the bill would amend Tax Code, Section 313.171 to state the repeal of Subchapter D does not affect a property owner's entitlement to a tax credit granted prior to the repeal.
Sections 20 and 21 of the bill would amend Education Code, Sections 42.2515 and 42.302 to make conforming changes related to repeal of Subchapter D.
Section 22 of the bill would repeal Tax Code, Sections 313.008 and 313.009 regarding redundant reporting requirements, as well as Subchapter D, "School Tax Credits." Future Chapter 313 project owners would receive a ten-year benefit from the limitation on appraised value, with no benefit through a tax credit.
Section 23 of the bill states that changes within this Act would only apply to applications filed on or after the effective date of this Act, with certain exceptions for projects with agreements entered into after January 1, 2013. Such projects could be exempted from current law wage and jobs requirements and allowed to access the amended, more flexible job and wage requirements proposed in this bill, which if enacted, would otherwise take effect January 1, 2014.
Section 24 of the bill clarifies the comptroller shall make the initial determinations of areas that qualify as a strategic investment not later than September 1, 2014 and shall publish the initial list and map required not later than October 1, 2014.
The bill would take effect January 1, 2014.
Currently, Subchapters B, C, and D of Tax Code, Chapter 313 expire December 31, 2014.
The estimate assumes a 10 year limitation period but no tax credit benefit.
Extending the expiration of Subchapters B and C of the Act would allow eight more years, or "classes," of applicant projects. Investment and taxable value estimates for each model project were derived using data from existing Chapter 313 agreements executed in 2012. Different distributions of project investment amounts or locations would result in different estimated school district Maintenance and Operation (M&O) property tax levy losses. This estimate assumes no significant avoidance of wage and job requirements through the hiring of contract personnel.
The state would incur cost under the Foundation School Program (FSP) corresponding to local M&O revenue losses. Costs of $25.1 million are estimated beginning in FY 2016, increasing to $82.6 million by FY 2018 and $304.6 million by FY 2023. Different distributions of project investment amounts or locations from that estimate described in the preceding paragraphs would affect state costs under the FSP.
The proposed reduction in the wage standard, the reduced "new qualifying jobs" requirement, and the elimination of the requirement that 80 percent of all jobs be qualifying jobs would allow more applicants to access the program.
The fiscal impact for the addition of eligibility for "priority projects" cannot be determined.
A provision for the Governor's Office to allow projects with multiple limitation agreements in different school districts to be considered "a single unified project" for the purposes of meeting the minimum "new qualifying jobs" requirement would not have a significant fiscal impact.
The General Revenue Costs for the Comptroller of Public Accounts reflect the funds that would be necessary to hire 7 (Full-time Equivalents) FTEs to handle the new duties outlined in this legislation including expanded economic impact evaluations and data collection, additional applications due to amended eligibility requirements, and to conduct job and wage compliance audits.
The General Revenue costs for the State Auditor's Office reflect the funds needed to hire an estimated 7.5 FTEs in fiscal year 2014 and 5.6 FTEs in every year thereafter to complete the audits required by Section 2 of the bill.
| Source Agencies: | 304 Comptroller of Public Accounts
|
| LBB Staff: | UP, RB, SD, KK, JSp
|