LEGISLATIVE BUDGET BOARD

Austin, Texas

FISCAL NOTE, 88TH LEGISLATIVE REGULAR SESSION

April 19, 2023

TO:	Honorable Brian Birdwell, Chair, Senate Committee on Natural Resources & Economic Development
FROM:	Jerry McGinty, Director, Legislative Budget Board
IN RE:	SB720 by Paxton (relating to the authority of certain municipalities to receive certain tax revenue derived from a hotel and convention center project and to pledge certain tax revenue for the payment of obligations related to the project.), Committee Report 1st House, Substituted

Estimated Two-year Net Impact to General Revenue Related Funds for SB720, Committee Report 1st House, Substituted : an impact of $0 through the biennium ending August 31, 2025.

However, the bill would have a negative impact to General Revenue Related Funds beginning in fiscal year 2027.

General Revenue-Related Funds, Five- Year Impact:

Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2024	$0
2025	$0
2026	$0
2027	($7,110,000)
2028	($7,400,000)

All Funds, Five-Year Impact:

Fiscal Year	Probable Revenue Gain/(Loss) from General Revenue Fund 1
2024	$0
2025	$0
2026	$0
2027	($7,110,000)
2028	($7,400,000)

Fiscal Analysis

The bill would amend Chapter 351 of the Tax Code, relating to Municipal Hotel Occupancy Taxes, to add Section 351.152(46), a municipality that has a population of 100,000 or more and is wholly located in, but is not the county seat of, a county with a population of one million or more in which all or part of a municipality with a population of one million or more is located and that is adjacent to a county with a population of 2.5 million or more, to the list of municipalities that are entitled to receive certain tax revenue derived from a hotel and convention center project and to pledge certain revenue for the payment of obligations related to the project.

The bill would add Section 351.152(47), a municipality that is the county seat of, a county with a population of one million or more in which all or part of a municipality with a population of one million or more is located and that is located adjacent to a county with a population of 2.5 million or more, to the list of municipalities that are entitled to receive certain tax revenue derived from a hotel and convention center project and to pledge certain revenue for the payment of obligations related to the project.

The bill would amend Section 351.153, to exempt a municipality described by Section 351.152(47), from the requirement that a qualified hotel project must be owned by or located on land owned by the municipality.

The bill would amend Section 351.157(b) to add (13) a municipality described by Section 351.152(46); and add Section 351.157(c) to add (13) (for a municipality described by (b)(13)) to make eligible to receive certain revenues from restaurants, bars, retail establishments, swimming pools and swimming facilities owned or operated by the related qualified hotel.

The bill would also add Section 351.161 to recapture lost state tax revenue in the event the total amount of state tax revenue received by the municipality from the state in the first 10 years entitlement exceeds the amount of revenue received by the state from the same sources over the following ten years. Section 351.161 only applies to a municipality described by Section 351.152(46).

Methodology

The bill's provisions would apply to the cities of Allen and McKinney.

Allen and McKinney would be eligible to receive from the qualified hotel and each restaurant, bar, and retail establishment located in or connected to the hotel or the related qualified convention center facility, the state sales and use tax and the state hotel occupancy tax. Allen and McKinney would be entitled to receive the revenue until the tenth anniversary of the date the qualified hotel to which the entitlement relates is open for initial occupancy. The recapture of lost state tax revenue provision would require the cities of Allen and McKinney to reimburse the state, at some point in time after the 20th anniversary of initial entitlement, any tax payments that are not sustained after the initial entitlement period of 10 years.

Allen has current plans for a 900-room qualified hotel and McKinney has plans for a 290-room hotel. The estimate is based on an assumed opening date of September 1, 2026, or state fiscal 2027, a comparison and review of revenues paid to the owners of extant qualified hotel projects, and estimated attributes of such prospective hotel.

Local Government Impact

The bill's provisions would apply to the cities of Allen and McKinney.

Allen and McKinney would be eligible to receive from the qualified hotel and each restaurant, bar, and retail establishment located in or connected to the hotel or the related qualified convention center facility, the state sales and use tax and the state hotel occupancy tax.

Source Agencies:

304 Comptroller of Public Accounts

LBB Staff:

JMc, MOc, SD, BRI, KK