Honorable Dustin Burrows, Chair, House Committee on Ways & Means
FROM:
John McGeady, Assistant Director Sarah Keyton, Assistant Director Legislative Budget Board
IN RE:
HB2438 by Phelan (Relating to the extension of the expiration date of certain statutes authorizing ad valorem tax incentives for economic development.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB2438, As Introduced: an impact of $0 through the biennium ending August 31, 2021.
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
2020
$0
2021
$0
2022
$0
2023
($252,000)
2024
($327,000)
2025
($350,209)
2026
($2,136,458)
2027
($26,150,849)
2028
($87,195,845)
2029
($166,298,542)
Fiscal Year
Probable Savings/(Cost) from General Revenue Fund 1
Probable Savings/(Cost) from Foundation School Fund 193
Probable Revenue Gain/(Loss) from School Districts
Change in Number of State Employees from FY 2019
2020
$0
$0
$0
0.0
2021
$0
$0
$0
0.0
2022
$0
$0
$0
0.0
2023
($252,000)
$0
$0
3.0
2024
($327,000)
$0
$0
4.0
2025
($402,000)
$51,791
($2,151,791)
5.0
2026
($477,000)
($1,659,458)
($23,740,542)
6.0
2027
($552,000)
($25,598,849)
($57,501,151)
7.0
2028
($627,000)
($86,568,845)
($71,031,155)
8.0
2029
($702,000)
($165,596,542)
($75,803,458)
9.0
Fiscal Analysis
The bill would amend Tax Code, Section 312.006 of the Property Redevelopment and Tax Abatement Act by extending the expiration date of this Act to December 31, 2032.
The bill would amend Texas Tax Code, Section 313.007 to extend the expiration date of Subchapters B and C of Chapter 313 (Texas Economic Development Act) from December 31, 2022 to December 31, 2032.
The bill would take effect immediately upon enactment, assuming it received the requisite two-thirds majority votes in both houses of the Legislative. Otherwise, the effective date of the bill is September 1, 2019.
Methodology
Currently, Chapter 312 expires August 31, 2019. Extending the expiration of Chapter 312 out would allow local governments to enter into the agreements until December 31, 2032. The extension proposed by the bill for Chapter 312 would affect local governmental entities that have or use reinvestment zones and abatements.
The extension proposed by the bill for Chapter 312 would affect local governmental entities that have or use reinvestment zones and abatements and could result in a fiscal impact to local governments. There is no fiscal impact to the state.
Currently Subchapters B and C of the Tax Code, Chapter 313 expire December 31, 2022. Extending the expiration of Subchapters B and C would allow ten additional years of applicant projects.
Annual "model classes" of future applicants to the Chapter 313 program were created from an analysis of project data, and applications submitted between 2013 and 2018. The model class revenue reduction estimates were reduced by ten percent in each year to adjust for project terminations, and depreciation differences over time. Modeled estimates of the lifetime gross tax benefit for each of the ten additional annual "model classes" are approximately $1 billion.
The estimated cost to the Foundation School Program is $0.1 million in fiscal year 2025, $1.7 million in fiscal year 2026, increasing to $165.6 million in fiscal year 2029.
To the extent that some projects would not locate in Texas "but for" the Chapter 313 program, the estimated local revenue reductions shown in the above below may not create a state cost through the Foundation School Program.
The Comptroller's office reports that administrative costs to implement provisions of the bill would total $252,000 per year starting in fiscal year 2023. The administrative cost estimate reflects the funds that would be necessary to hire two program specialist IVs and one auditor III to handle the forecasted expansion of the program. The growth of the program would require the addition of one program specialist IV each year to manage the increased number of projects in the program. Each application statutorily requires staff to perform an economic impact analysis, data collection, reporting, and certification of the applicant.
Local Government Impact
The estimated fiscal implication to units of local government is reflected in the table above.
Estimated school levy losses in the years 2030 through 2049 due to the 10-year Chapter 313 program extension are approximately $9.6 billion.