HBA-JRA C.S.H.B. 2684 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 2684 By: Coleman Ways & Means 4/13/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE A tax increment reinvestment zone is a special district created by a local governmental entity to revitalize an area by using the tax increment generated by economic development to finance debt service on bonds used to revitalize the zone. C.S.H.B. 2684 authorizes board of directors of a reinvestment zone to authorize the governing body of the municipality of a reinvestment zone to exercise the powers of the municipality with respect to the administration, management, or operation of a zone. This bill also authorizes a taxing unit other than a school district to enter into tax abatement agreements with owners of property in a reinvestment zone. In addition, the bill further specifies the powers and duties of a local government corporation acting of behalf of local government. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 311.002(1), Tax Code, to redefine "project costs" to include projects inside or outsize a reinvestment zone. SECTION 2. Amends Section 311.009, Tax Code, by adding Subsection (g), as follows: (g) Provides that a member of the board of directors of a reinvestment zone is not a public official by virtue of that position and, unless otherwise ineligible, is authorized to be appointed to serve concurrently on the board of directors of a local government corporation created under Subchapter D, Chapter 431, Transportation Code. SECTION 3. Amends Section 311.010, Tax Code, by amending Subsections (a) and (b) and adding Subsections (d)-(f), as follows: (a) Authorizes the governing body of the municipality that created the zone by ordinance or resolution to authorize, rather than delegate to, the board of directors of the reinvestment zone (board) to exercise any of the municipality's powers with respect to the administration, management, or operation of the zone or the implementation of the project plan for the zone, except that the governing body is prohibited from issuing bonds, imposing taxes or giving final approval to the project plan. (b) Authorizes the governing body of the municipality that creates a reinvestment zone to enter into agreements as it considers necessary or convenient to implement the project plan and reinvestment zone financing plan and achieve their purposes. Authorizes an agreement, during its term, to pledge, or otherwise provide for the use of revenue in the tax increment fund to pay any project costs that benefit the reinvestment zone, regardless of whether the public works or public improvements are inside or outside the zone, including project costs of buildings, schools, or other educational facilities owned by or on behalf of a school district, community college district, or other political subdivision of this state; railroad or transit facilities, affordable housing, the remediation of conditions of contaminate public or private land or buildings, the preservation of the facade of public or private buildings, or the demolition of public or private buildings. Provides that project costs associated with public works or public improvements that are located outside a reinvestment zone must be approved by each taxing unit that deposits or agrees to deposit any part of its tax increment into the tax increment fund for the zone. (d) Authorizes the board to exercise any power granted to a municipality by Section 311.008, except that the municipality that created the reinvestment zone by ordinance or resolution is authorized to restrict any power granted the board by this chapter and the board is authorized to exercise a power granted to a municipality under Section 311.008(a)(2) only with the consent of the governing body of the municipality. (e) Authorizes the board to exercise any power granted to a board under this chapter after the governing body of a municipality by ordinance creates a reinvestment zone. (f) Authorizes the board and the governing body of the municipality to enter into a contract with a local government corporation to manage the reinvestment zone or implement the project plan and reinvestment zone financing plan for the term of the agreement. Defines "local government corporation" in this subsection. SECTION 4. Amends Section 311.011(f), Tax Code, to delete the provision that the project plan of a county with a population of more than 2.1 million must exempt at least one third of the surface area of the zone, excluding certain roadways and public areas, from ad valorem taxation and be dedicated to residential housing. Provides that at least one-third of the tax increment must be used, rather than dedicated, to provide affordable, rather than low-income, housing. SECTION 5. Amends Chapter 311, Tax Code, by adding Section 311.0125, as follows: Sec. 311.0125. TAX ABATEMENT AGREEMENTS. (a) Authorizes a taxing unit other than a school district to enter into a tax abatement agreement with an owner of real or personal property in a reinvestment zone, regardless of whether the taxing unit deposits or agrees to deposit any portion of its tax increment into the tax increment fund, notwithstanding any provision in this chapter to the contrary. (b) Provides that an agreement to abate taxes on real property in a reinvestment zone, to be effective, must be approved by the board of directors of the reinvestment zone and the governing body of each taxing unit that imposes taxes on real property in the reinvestment zone and deposits or agrees to deposit any of its tax increment into the tax increment fund for the zone. (c) Authorizes the board to covenant that the board will not approve a tax abatement agreement that applies to real property in that zone in any contract entered into by the board of directors of a reinvestment zone in connection with bonds or other obligations. (d) Provides that, if a taxing unit enters into a tax abatement agreement authorized by this section, taxes that are abated under that agreement are not considered taxes to be imposed or produced by that taxing unit in calculating the amount of the tax increment of that taxing unit or that taxing unit's deposit to the tax increment fund for the reinvestment zone. SECTION 6. Amends Section 311.013, Tax Code, by adding Subsection (j), as follows: (j) Provides that Section 26.05(f) does not prohibit a taxing unit from depositing all of the tax increment produced by the taxing unit in a reinvestment zone into the tax increment fund for that zone. SECTION 7. Amends Section 431.101, Transportation Code, as follows: Sec. 431.101. CREATION AND DISSOLUTION OF LOCAL GOVERNMENT CORPORATION. (a) Provides that the articles of incorporation and the bylaws of a local government corporation must be approved by ordinance, resolution, or order adopted by the governing body of each local government for which the corporation is created to aid and act on behalf of. (b) Makes no change. (c) Provides that the provisions of Article 1396-1.01 et seq., V.T.C.S. (Texas Non-Profit Corporation Act) relating to powers, standards of conduct, and interests in contracts, apply to the directors and officers of the local government corporation. (d) Provides that a provision of this chapter relating to the creation, dissolution, administration, or supervision of a corporation by the commission does not apply to a local government corporation. (e) Provides that the provisions of Section 394.904(a) (Exemption from Requirements and Restrictions Applying to Public Property), Local Government Code, are applicable to property and improvements owned by a local government corporation and that Section 394.904(b) of that code applies to each contract awarded by the local government corporation. (f) Provides that a member of the board of directors of a local government corporation is not a public official by virtue of that position and, unless otherwise ineligible, is authorized to be appointed to serve concurrently on the board of directors of a reinvestment zone created under Chapter 311, Tax Code. SECTION 8. Amends Chapter 311, Tax Code, by adding Section 311.018, as follows: Sec. 311.018. CONFLICTS WITH MUNICIPAL CHARTER. Provides that, to the extent of a conflict between this chapter (Tax Increment Financing Act) and a municipal charter, this chapter controls. SECTION 9. Repealer: Section 311.003(h), Tax Code, which authorized the board of directors of the reinvestment zone to exercise any of the municipality's power with respect to the administration, management, and operation of the zone or the implementation of the project plan and reinvestment zone financing plan, with certain exceptions. SECTION 10. Amends Section 431.102(a), Transportation Code, to provide that Subsection (c) provides an exception to Subsection (a). SECTION 11. Amends Section 431.102(c), Transportation Code, by adding Subsection (c), as follows: (c) Prohibits the requirement of Section 394.021(a), Local Government Code, that all directors must be residents of the local government, from applying to directors of a local government corporation except that a person is prohibited from being appointed to the board of a local government corporation if the appointment of that person would result in less than a majority of the board members being residents of the local government. SECTION 12. Provides that nothing in this Act is intended to have any effect on the calculation of the taxable value of a school district under Section 403.302, Government Code, or to prohibit a member of a governing body of a taxing unit that levies taxes on real property in the reinvestment zone from serving as a member of the board of directors of a reinvestment zone under Chapter 311, Tax Code. SECTION 13.Emergency clause. Effective date: upon passage. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original caption to include tax increment financing under the Tax Increment Financing Act and tax abatement agreements within reinvestment zones. The substitute changes the sections of the bill to all caps to conform to Legislative Council format. The substitute modifies the original by adding new SECTION 1 to amend Section 311.002(1), Tax Code, to redefine "project costs" to include projects inside or outside a reinvestment zone and a new SECTION 2 to amend Section 311.009, Tax Code, by adding Subsection (g), to provide that a member of the board of directors of a reinvestment zone is not a public official by virtue of that position and, unless otherwise ineligible, is authorized to be appointed to serve concurrently on the board of directors of a local government corporation created under Subchapter D, Chapter 431, Transportation Code. The substitute modifies the original by redesignating proposed SECTION 1 to SECTION 3, which amends Section 311.010, Tax Code, and amending Subsection (a), making changes to proposed Subsection (b), and adding Subsections (d)-(f). In Subsection (a), the substitute authorizes the governing body of the municipality that created the zone by ordinance or resolution to authorize the board of directors of the reinvestment zone (board) to exercise any of the municipality's powers with respect to the administration, management, or operation of the zone or the implementation of the project plan for the zone, with certain exceptions. In Subsection (b), the substitute provides that project costs associated with public works or public improvements that are located outside a reinvestment zone must be approved by each taxing unit that deposits or agrees to deposit any part of its tax increment into the tax increment fund for the zone and makes conforming and nonsubstantive changes. The substitute adds Subsections (d)-(f), which relate to the powers of the board of directors of a reinvestment zone and are substantially the same as Subsections (d), (f), and (g) of proposed SECTION 2. The substitute modifies the original by deleting proposed SECTION 2, which amended Section 311.011, Tax Code, by adding Subsections (d), (e), (f), and (g), which related to the powers of the board. (As noted above, much of proposed Subsections (d), (f), and (g) is now expressed in SECTION 3 of the substitute.) Proposed Subsection (e) authorized a taxing unit to enter into a tax abatement agreement with personal or real property owners in the reinvestment zone after it had agreed to pay its tax increments into the tax increment fund. The substitute modifies the original by redesignating proposed SECTION 3 to SECTION 4. The substitute modifies the original by deleting SECTION 4, which amended Section 311.014, Tax Code, by adding Subsection (j), to authorize a taxing unit to retain from the amount otherwise required to be paid into the tax incremental fund of a reinvestment zone created on or after September 1, 1999, the amount resulting from the levy of a tax on the captured appraised value of the zone at the rate the taxing unit levies to pay its bonds or other obligations and to prohibit the taxing unit from retaining such a tax increment in a reinvestment zone created before September 1, 1999, unless the taxing unit retained that right in the agreement to participate in the zone. The substitute modifies the original by adding new SECTION 5, to amend Chapter 311, Tax Code, by adding Section 311.0125, to provide for tax abatement agreements for school districts. The substitute modifies the original by adding new SECTION 6, to amend Section 311.013, Tax Code, by adding Subsection (j) to provide that Section 26.05(f) does not prohibit a taxing unit from depositing all of the tax increment produced by the taxing unit in a reinvestment zone into the tax increment fund for that zone. The substitute modifies the original by redesignating proposed SECTION 5 to SECTION 7 and modifies the original to correctly reflect the title of Section 431.101 (Creation of Local Government Corporation). The substitute makes nonsubstantive changes to Subsection (a). The substitute deletes the proposed amendments to Subsection (b), substantially moves those proposed amendments to Subsection (c), and deletes the proposed Subsection (c) of the original. The substitute adds a new Subsection (d), to provide that the provisions of Section 394.904 (Exemption from Requirements and Restrictions Applying to Public Property), Local Government Code, are applicable to contracts awarded by a local government corporation and to property or improvements owned by the local government corporation. The substitute deletes proposed Subsection (e) of the original, which related to the members of the boards of a local government corporation and a reinvestment zone created by a municipality, and adds new Subsection (e), to provide that the provisions of Section 394.904(a) (Exemption from Requirements and Restrictions Applying to Public Property), Local Government Code, are applicable to property and improvements owned by a local government corporation and that Section 394.904(b) of that code applies to each contract awarded by the local government corporation. The substitute adds a new Subsection (f) relating to a member of the board's eligibility to serve concurrently on the board of directors of reinvestment zone created under Chapter 311, Tax Code. The substitute adds new SECTIONS 8-12 and redesignates proposed SECTION 6 to SECTION 13.