HBA-RBT H.B. 1973 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1973 By: Oliveira Ways & Means 3/11/1999 Introduced BACKGROUND AND PURPOSE Currently, the Property Redevelopment and Tax Abatement Act authorizes taxing units to grant residential and commercial-industry tax abatements. The law requires that most tax abatement agreements executed by more than one taxing unit contain identical terms (e.g. percentage and length of abatement). Additionally, taxing units are not required to perform a cost-benefit analysis prior to granting a tax abatement. H.B. 1973 sets forth revised procedures for property tax increment financing and property tax abatements, and transfers the administration of the central registry of reinvestment zones and ad valorem tax abatement agreements from the Department of Economic Development to the comptroller. This bill authorizes different taxing units to grant different abatement terms and requires the performance of a cost-benefit analysis prior to granting a tax abatement. Additionally, this bill revises procedures that taxing units must follow when granting a tax abatement and transfers the administration of the central registry of reinvestment zones and ad valorem tax abatement agreements from the Department of Economic Development to the comptroller. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Property Tax Abatement Advisory Committee in SECTION 7 (Section 312.007, Tax Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 11.43, Tax Code, by adding Subsection (1), as follows: (1) Provides that an application for an exemption from city taxation pursuant to an agreement made under the Property Redevelopment and Tax Abatement Act must include a copy of the certification under that Act from the governing body of the taxing unit issued for the tax year and any notice under that Act that the agreement has been modified. SECTION 2. Amends Section 11.45(c), Tax Code, to require the chief appraiser to rely on a certification issued under Section 312.212(d) for the accuracy of the facts stated in the certification. Makes nonsubstantive changes. SECTION 3. Amends Section 111.301(a), Tax Code, to exempt an eligible person from ad valorem taxes if an agreement has been reached under Sections 312.204 (Municipal Tax Abatement Agreement), 312.211 (Agreement by Municipality Relating to Property Subject to Voluntary Cleanup Agreement), or 312.402 (County Tax Abatement Agreement), Tax Code, rather than Chapter 312, Tax Code (Property Redevelopment and Tax Abatement Act). SECTION 4. Amends Section 311.016(b), Tax Code, to require that a copy of a report made under this section be sent to the comptroller rather than the attorney general. Authorizes the comptroller to require a municipality to provide a summary of the report, together with any additional information the comptroller determines necessary, on a form prescribed by the comptroller. SECTION 5. Amends Section 312.004(a), Tax Code, to authorize a commissioners court that enters into a tax abatement agreement for a county to enter into a tax abatement agreement applicable to the same property on behalf of a taxing unit other than the county under specified conditions. Provides that the tax abatement agreements do not have to contain the same terms. SECTION 6. Amends Section 312.005, Tax Code, to delete existing text regarding the content of a reinvestment zone report. Sets forth the requirements for the contents of the report which must be delivered to the comptroller for each tax abatement agreement. Prohibits a taxing unit that executes a tax abatement agreement but does not comply with the reporting requirements of this section from entering into another agreement until the taxing unit complies with the reporting requirements. Authorizes the comptroller and the Texas Department of Economic Development to provide assistance to a taxing unit relating to the administration of this chapter. Authorizes the Texas Department of Economic Development, rather than the Texas Department of Commerce, to provide technical assistance to local governing bodies. Requires the comptroller, on or before November 1 of each even-numbered year, to prepare a comprehensive report on the use of tax abatements encouraging economic development in this state and deliver a copy of the report to the governor, lieutenant governor, and speaker of the house of representatives, and a taxing unit if requested. SECTION 7. Amends Subchapter A, Chapter 312, Tax Code, by adding Section 312.007, as follows: Sec. 312.007. PROPERTY TAX ABATEMENT ADVISORY COMMITTEE. (a) Creates the Property Tax Abatement Advisory Committee. (b) Provides that the committee is composed of five members who are designated by the executive director of the Texas Department of Economic Development (department) and reflect the diverse population of the state. Provides that two members must be municipal or county officials, and the three other members must have economic development experience. (c) Requires the committee to elect a presiding officer from among its members. (d) Requires the committee to meet at least twice a year and authorizes the committee to meet at other times at the call of the presiding officer. (e) Authorizes the committee to adopt rules for the committee's internal procedures. (f) Provides that members are not entitled to compensation for service on the committee. (g) Requires the department to provide staff support for the committee. (h) Requires the committee to deliver to the governor, lieutenant governor, speaker of the house of representatives, executive director of the department, and comptroller a report containing specified information by September 1, 2000. (i) Requires the committee to consider the diverse characteristics and economic development goals of communities throughout the state in preparing the report required by Subsection (h). (j) Requires the department to furnish to a taxing unit a copy of the report if requested. (j) Provides that this section expires and the committee is abolished September 1, 2000. SECTION 8. Amends Subchapter B, Chapter 312, Tax Code, by adding Sections 312.2035 and 312.2045, as follows: Sec. 312.2035. ANALYSIS OF COSTS AND BENEFITS. Provides that a municipality must perform an analysis of the costs and benefits of a proposed tax abatement agreement before the municipality is authorized to enter into the agreement. Sets forth a list of costs and benefits which must be considered. Prohibits a municipality from entering into a tax abatement agreement for which the analysis shows that the costs exceed the benefits. Sec. 312.2045. NOTICE OF TAX ABATEMENT AGREEMENT. Requires a municipality that enters into a tax abatement agreement to either, at the option of the municipality, publish notice of the agreement in a local daily newspaper or post notice of the agreement at each place the governing body of a municipality is required to post notice of its meetings within seven days of entering into the agreement. Sets forth the required contents of the notice. SECTION 9. Amends Section 312.205, Tax Code, to list terms that must be contained in a rebate agreement. Provides that the property owner must certify before February 1 of each year to the governing body of each taxing unit whether the owner is in compliance with each applicable term of the agreement and, if not, state the reason for the noncompliance. Provides that the agreement must state any circumstances under which the property owner may be excused by the governing body of the municipality for failing to comply with the agreement. Sets forth authorized provisions for the agreement. Deletes existing text regarding economic feasibility studies. Makes nonsubstantive changes. SECTION 10. Amends Section 312.206(a), Tax Code, to provide that a tax abatement agreement is not required to contain identical terms to those contained in the agreement with the municipality, rather than must contain identical terms. Provides that Sections 312.2035, 312.2045, and 312.205, Tax Code, apply to a taxing unit that enters into a tax abatement agreement under this section. Deletes existing text. Makes nonsubstantive changes. SECTION 11. Amends Subchapter B, Chapter 312, Tax Code, by adding Sections 312.212, and 312.213, as follows: Sec. 312.212. CERTIFICATION OF COMPLIANCE. Requires the governing body of a taxing unit that is a party to a tax abatement agreement to, before March 1 of each year, determine in the manner provided by law for official action of the governing body whether each property owner receiving a tax abatement under the agreement is in compliance with each term of the agreement and, if not, whether the compliance is excused. Requires the governing body to consider any certification furnished by the property owner. Authorizes the governing body to require the property owner to present additional evidence the governing body considers necessary to make the determination. Provides that the property owner has the burden of proof to show compliance with the agreement. Entitles each property owner who is a party to the tax abatement agreement to a hearing and to present evidence before the governing body of the taxing unit in person or by a representative on the issue of compliance with the terms of the agreement. Requires the governing body to certify in writing to the property owner whether the owner is in compliance with each term of the tax abatement agreement and, if not, whether the noncompliance is excused. Sec. 312.213. ACTION BY TAXING UNIT ON NONCOMPLIANCE. Authorizes the governing body of the taxing unit to excuse the property owner's failure to comply with the agreement under a circumstance stated in the tax abatement agreement. Requires the governing body of a taxing unit to recapture all or part of the property tax revenue lost as a result of the agreement and cancel or modify the agreement and give written notice of the cancellation or modification if a property owner fails to comply with a tax abatement agreement and the failure is not excused. SECTION 12. Amends Sections 312.402(a), (c), and (e), to provide that Sections 312.2035-312.205, Tax Code, apply to tax abatement agreements made by a county under this section in the same manner as those sections apply to an agreement made by a municipality. Makes conforming and nonsubstantive changes. SECTION 13. Requires the attorney general to transfer to the comptroller the copies of the reports by governing bodies of municipalities on the status of reinvestment zones consistent with this Act as soon as practicable after the effective date of this Act. SECTION 14. Requires the executive director of the Texas Department of Economic Development to designate the members of the Property Tax Abatement Advisory Committee as soon as practicable on or after the effective date of this Act. SECTION 15. Makes application of this Act prospective. Provides that this Act applies only to ad valorem taxes imposed on or after January 1, 2000. SECTION 16. Effective date: September 1, 1999. SECTION 17. Emergency clause.