Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB5 by Hunter (Relating to agreements to create jobs and to generate state and local tax revenue for this state.), As Introduced
Passage of the bill would create an incentive program to provide temporary and limited incentives for large scale investment projects. Costs associated with implementing the bill would be dependent on program requirements related to project eligibility, investment levels, or potential tax savings that may result from agreements under the program. These requirements are unknown. As a result, the fiscal impact of the bill cannot be determined.
The bill would amend Chapter 403 of the Government Code by adding Subchapter S, relating to agreements to create jobs and generate state and local revenue. This bill would create a program to provide temporary and limited incentives for large scale investment projects in a qualified industry that is defined as manufacturing, critical infrastructure, or national and state security and critical domestic supply chain support.
This bill would require the eligible applicant to:
(1) submit the application with the minimal criteria as defined by the bill to the school district for approval of an agreement; (2) include in the submission, a) applicant and school district information; b) the property parcel number; c) the total number of jobs created and wages paid; d) the total investment amount; e) the appraised value and taxable values of all property associated with the project; f) the total amount of school district maintenance and operations and interest and sinking fund ad valorem taxes paid by the applicant; g) the total amount of school district ad valorem taxes the applicant would have paid in the absence of an agreement; and j) the total amount of payments other than ad valorem taxes made by the applicant to the school district; and (3) annually calculate the tax savings from the agreement by multiplying the school district maintenance and operations tax rate by the difference between the taxable value in the absence of the agreement and the taxable value as specified by the agreement. The applicant shall retain the greater percentage of any tax savings resulting from the agreement and remit the lesser percentage to the Comptroller annually.
This bill would require Comptroller to : (1) promulgate the application form; (2) establish evaluation criteria of the economic benefits; (3) publicly post all application information excluding the economic benefits statement and any information deemed confidential; (4) must recommend applications for approval by the school district if it finds that the project provides a net economic or financial benefit to the state; and (5) distribute the greater percentage of the funds received to the school district that levies the ad valorem taxes on the project and deposit the lesser percentage to the credit of the general revenue fund for distribution as specified by a general appropriations act
Under provision of this bill individual school district would be required to: (1) forward the application to the Comptroller within 30 days of receipt from the applicant; (2) approve or disapprove the application within days of receipt of the comptroller's approval and (3) submit the report to the Comptroller, that would detail all payments and any other direct or indirect benefits received by the school district from the applicant and the purposes for which the payments and benefits were used by the district.
The bill will create an incentive program to provide temporary and limited incentives for large scale manufacturing projects. Fiscal impact will be significant; however, as the bill language is lacking a number of details relating to project eligibility, investment levels, or potential tax savings that may result from agreements under the program, the fiscal impact cannot be estimated.
The Comptroller's office anticipates technology costs in fiscal years 2024 to 2026 to modify the tax systems needed to implement the provisions of the bill.
Local Government Impact
Passage of the bill would create an incentive program to provide temporary and limited incentives for large scale investment projects. Costs associated with implementing the bill would be dependent on program requirements related to project eligibility, investment levels, or potential tax savings that may result from agreements under the program. These requirements are unknown. As a result, the fiscal impact of the bill cannot be determined.