Honorable Dustin Burrows, Chair, House Committee on Ways & Means
FROM:
John McGeady, Assistant Director Sarah Keyton, Assistant Director Legislative Budget Board
IN RE:
HB4102 by Sanford (Relating to the use of tax revenue by certain municipalities for the payment of certain hotel-related bonds or other obligations.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB4102, As Introduced: an impact of $0 through the biennium ending August 31, 2021.
However, there would be a negative impact of ($250,000) through the biennium ending August 31, 2023.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2020
$0
2021
$0
2022
$0
2023
($250,000)
2024
($256,000)
Fiscal Year
Probable (Cost) from General Revenue Fund 1
2020
$0
2021
$0
2022
$0
2023
($250,000)
2024
($256,000)
Fiscal Analysis
The bill would amend Section 351.102 of the Tax Code regarding the pledge of municipal hotel tax revenue to certain bonds and entitlement of certain municipalities to state tax revenue associated with certain hotel projects.
The bill would amend Subsection (e) to extend the application of the Section to a municipality with a population of 6,100 or less that is located in two counties one with a population of 788,400 or more and the other county with a population of 66,700 or more and contains a portion of state highway 289.
Section 351.102 would also be amended by striking Subsection (g), the requirement that a municipality must enter into a development agreement for a hotel project before September 1, 2019.
The bill would take effect immediately upon enactment, assuming it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2019.
Methodology
There is no requirement that development agreements for hotel projects be submitted to the comptroller or other state agency for determination of validity, and no requirement that a development agreement entered into prior to September 1, 2019 for purposes of preserving authority to receive hotel project benefits not be subsequently amended or superseded before eventual development of a project. It is expected that municipalities would enter provisional agreements before September 1, 2019 sufficient to preserve authority to receive project benefits, were the date required for such agreements not extended. Consequently, the deletion of Section 351.102(g) would have no fiscal implications.
The City of Celina would be entitled to state sales tax and state hotel tax associated with a qualified hotel project under Section 151.429(h) of the Tax Code via Sections 351.102(b) and (c) of the Tax Code. Such funds must be deposited in a suspense account outside the state treasury to be paid to the owner of a qualified hotel project.
Currently, the City of Celina has not yet developed specific plans for the construction of a hotel as a qualified hotel project. However, this estimate assumes that the city would act on the authorization provided by the bill, and that given time required for planning and construction, a project eligible for rebates of state tax revenue would be undertaken but not be operational before fiscal 2023.
This estimate is based on an assumed room size of a prospective hotel, an assumed average nightly room rate and annual average occupancy rate, and the ratio of state sales tax to hotel tax revenues paid to the owners of the extant qualified hotel projects. The entitlement to state tax revenue would be for a period of ten years after the hotel is open for initial occupancy.
In fiscal 2018, a total of $17,676,000 in state tax revenue was allocated for qualified hotel projects in the cities of Amarillo, Dallas, Fort Worth, Houston, Nacogdoches, and San Antonio.
Local Government Impact
The City of Celina would be entitled to state sales tax and state hotel tax associated with a qualified hotel project.