Honorable Paul Bettencourt, Chair, Senate Committee on Local Government
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
SB867 by Bettencourt (relating to housing finance corporations; authorizing a fee.), Committee Report 1st House, Substituted
Estimated Two-year Net Impact to General Revenue Related Funds for SB867, Committee Report 1st House, Substituted: a negative impact of ($188,884) through the biennium ending August 31, 2027.
Additionally, passage of the bill would reduce the number of properties that would receive a property tax exemption relative to current law. As a result property value would be increased and the costs to the Foundation School Fund decreased through the operation of the school finance formulas.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
General Revenue-Related Funds, Five- Year Impact:
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2026
($114,692)
2027
($74,192)
2028
$154,036
2029
$154,036
2030
$154,036
All Funds, Five-Year Impact:
Fiscal Year
Probable Savings/(Cost) from General Revenue Fund 1
Probable Revenue Gain from General Revenue Fund 1
Change in Number of State Employees from FY 2025
2026
($357,892)
$243,200
1.0
2027
($317,392)
$243,200
1.0
2028
($89,164)
$243,200
1.0
2029
($89,164)
$243,200
1.0
2030
($89,164)
$243,200
1.0
Fiscal Analysis
The bill would amend Chapter 394 of the Local Government Code to require housing finance corporations (HFCs) seeking a property-based exemption to file audits annually with the Texas Department of Housing and Community Affairs (TDHCA) and the chief appraiser of the appraisal district in which the HFC development is located. TDHCA would be required to review HFC audits to determine compliance with the bill's provisions. The bill would authorize TDHCA to charge a fee to cover reasonable costs for reviewing audits. Failure to come into compliance with the audit findings in a time period specified by the bill would result in the loss of property tax exemption for the development.
The bill would restrict a HFC's ability to exercise its powers outside of it's prescribed area. The bill would add criteria a new HFC residential development would be required to meet in order to receive a property tax exemption. The bill would provide a multifamily residential development owned, financed, or supported by an HFC on September 1, 2025 (not receiving financial assistance under Subchapter DD, Chapter 2306, Government Code) located outside the area in which the corporation is authorized to engage in residential development, is not eligible for a property tax exemption after January 1, 2027.
The bill would take effect immediately if it receives a vote of two-thirds of all the members elected to each house. Otherwise, the bill would take effect on September 1, 2025.
Methodology
Based on analysis by TDHCA, the agency would require 1.0 additional Auditor II FTE, at a total cost of $89,214 per fiscal year in salary and benefits, plus one-time costs in fiscal year 2026 of $5,500 to implement the provisions of the legislation related to HFC audit reviews. Based on TDHCA's experience with recently adopted compliance requirements for public facility corporations, a $20 fee per restricted unit at each development would result in annual fee revenue deposited to the credit of the General Revenue Fund of approximately $243,200 each year.
The bill would restrict the area of operations of an HFC to the local area as defined in statute. The bill does not require any changes to the HFCs currently operating outside their original jurisdictions, however, the bill would provide certain HFCs operating a residential development outside the area boundaries as defined in the bill on September 1, 2025, would lose eligibility for the property tax exemption after January 1, 2027.
The Texas Association of Local Housing Finance Agencies (TALHFA), a non-profit organization assisting local housing finance corporations, has conducted limited research into HFCs that operate outside their immediate local area as defined in the bill. TALHFA has confirmed 88 projects/deals in 27 different jurisdictions that have been closed on since August 2024. This is not a comprehensive list. Excluding 5 projects where final value data is not available, these projects had an assessed value of $3.6 billion. Additionally, dozens of new HFCs have been created for projects that are currently in various stages of planning/execution. The bill would reduce the number of projects that would receive a property tax exemption and increase school district property value relative to current law. Under provisions of the Education Code, the school district tax revenue gain results in a savings to the state. The amount of the increase in taxable value and savings to the state through the operation of the school finance formulas cannot be estimated.
Technology
TDHCA would need to add two new modules to its existing Central Database infrastructure and acquire a new database server and a new web server. The agency would utilize the Department of Information Resource's Information Technology Staff Augmentation Contract program to obtain the services of a Programmer Analyst for this purpose. Based on the cost of a recent similar project, the agency estimates a cost of $228,228 in each fiscal year of the biennium. In addition, the agency would utilize third party cybersecurity testing services in fiscal year 2026 at a cost of $35,000.
Local Government Impact
The bill would reduce the number of projects that would receive a property tax exemption and increase taxable property value relative to current law, however, the amount of the increase in taxable property value cannot be determined.
Source Agencies:
304 Comptroller of Public Accounts, 332 Department of Housing and Community Affairs