HBA-TYH H.B. 3029 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 3029 By: Oliveira Economic Development 4/20/1999 Committee Report (Amended) BACKGROUND AND PURPOSE The sales tax for economic development has been an effective tool used by cities throughout the state to promote economic development. Although authorization for the local option tax has been in effect only since 1989, over 378 cities have levied an economic development sales tax. The cities that have voted to adopt this tax have cumulatively raised in excess of $200 million dollars annually, which is dedicated to the promotion of local economic development. The purpose of this bill is to clarify and strengthen the Development Corporation Act of 1979. H.B. 3029 redefines "project" to include targeted infrastructure and improvements to promote new and expanded business development, job creation and retention, job training, and educational facilities. This bill provides that the costs of a publicly owned and operated project that is purchased or constructed under this section include the maintenance and operating costs of the project. This bill allows the public to petition for the dissolution of, reduction in, or increase in the rate of a sales and use tax. This bill also exempts the projects from property taxation by local tax units. 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 2(10), Article 5190.6, V.T.C.S. (Development Corporation Act of 1979), by redefining "project" to include targeted infrastructure and improvements to promote new and expanded business development, job creation and retention, job training, and educational facilities. SECTION 2. Amends Section 4A, Article 5190.6, V.T.C.S. (Development Corporation Act of 1979), by adding Subsection (c-1), as follows: (c-1) Provides that the costs of a publicly owned and operated project that is purchased or constructed under this section include the maintenance and operating costs of the project. Authorizes the proceeds of taxes imposed under this section to be used to pay the maintenance and operating costs of a project, unless within 60 days of the date notice of this specific use of the tax proceeds is first published, the governing body of the city receives a petition from more than 10 percent of the registered voters of the city requesting that an election be held before the tax proceeds may be used to pay the maintenance and operating costs of a project. SECTION 3. Amends Section 4B, Article 5190.6, V.T.C.S. (Development Corporation Act of 1979), by adding Subsection (e-1) and amending Subsection (i), as follows: (e-1) Provides that in a city in which a sales and use tax for the benefit of a corporation has been imposed under this section, in the same manner and by the same procedure, the city by majority vote of the qualified voters of the city voting at an election called and held for the purpose is authorized to reduce or increase the tax. Authorizes the rate to be reduced in one or more increments of one-eighth of one percent to a minimum of one-eighth of one percent or increased in one or more increments of one-eighth of one percent to a maximum of one-half of one percent. Requires the governing body of the city, on petition of 10 percent or more of the registered voters of the city requesting an election on the increase or reduction of the tax under this section, to order an election on the issue. Requires the ballot, in an election to increase or reduce the tax under this section, to be printed to provide for voting for or against the proposition. Sets forth the specific language to be placed on the ballot. (i) Requires the governing body, on petition of 10 percent or more of the registered voters of the city requesting an election on the dissolution of the corporation, to order an election on the issue at the next available uniform election date that is within 45 days of the date on which the petition is filed. Provides that the election must be conducted according to the applicable provisions of the Election Code. Requires the ballot for the election to be printed to provide for voting for or against the proposition: "Dissolution of the ___________________ (name of the corporation)." Requires the corporation, if a majority of voters voting on the issue approve the dissolution, to continue operations only as necessary to pay the principal of and interest on its bonds and to meet obligations incurred before the date of the election and, to the extent practicable, to dispose of its assets and apply the proceeds to satisfy those obligations. Requires any remaining assets of the corporation, when the last of the obligations is satisfied, to be transferred to the city, and provides that the corporation is dissolved. Prohibits a tax, rather than a sales and use tax, imposed under this section from being collected after the last day of the first calendar quarter beginning, rather than occurring, after notification to the comptroller by the corporation that the last of its obligations is satisfied. Deletes text providing that certain bonds and obligations have been set aside in a trust account dedicated to the payment of the bonds and other obligations. SECTION 4. Amends Article 5190.6, V.T.C.S. (Development Corporation Act of 1979), by adding Section 4D, as follows: Sec. 4D. Provides that the legislature finds for all constitutional and statutory purposes that projects are owned, used, and held for public purposes for and on behalf of the eligible city incorporating the corporation, and that Section 23(b) (Powers of Corporation) of this article and Section 25.07(a) (Leasehold and Other Possessory Interests in Exempt Property), Tax Code, are not applicable to leasehold or other possessory interests granted by the corporation during the period projects are owned by the corporation on behalf of the eligible city. Provides that projects are exempt from taxation under Section 11.11 (Public Property), Tax Code, for that period. SECTION 5. Effective date: September 1, 1999. SECTION 6. Emergency clause. EXPLANATION OF AMENDMENTS Committee Amendment #1 amends H.B. 3029 by inserting the following appropriately numbered section and renumbering subsequent sections appropriately: SECTION ___. Amends Section 4B(a)(1), Article 5190.6, V.T.C.S. (Development Corporation Act of 1979), by redefining "eligible city" as a city in which the combined rate of all sales and use taxes imposed by the city, the state, and other political subdivisions of the state having territory in the city does not exceed 8.25 percent, rather than 7.25 percent, on the date of any election held under or made applicable to this section (Corporation in City Located in County With Population of 750,000 or More, or 150,000 or more). Committee Amendment #2 amends H.B. 3029 by inserting the following appropriately numbered section and renumbering subsequent sections appropriately: SECTION ___. Amends Article 5190.6, V.T.C.S. (Development Corporation Act of 1979), by adding an appropriately numbered section to define "defense base development corporation (corporation)." Provides that each of the enumerated acts of a corporation is validated and confirmed as of the date it occurred. Provides that this section does not apply to: _an act, proceeding, bond, or obligation the validity of which is the subject of litigation that is pending on the effective date of this article; _an election or appointment of a director or official the validity of which is the subject of litigation that is pending on the effective date of this article; _an act or proceeding that was void or that, under a statute of this state at the time the action or proceeding occurred, was a misdemeanor or felony; or _an act or proceeding that has been held invalid by a final judgment of a court. Committee Amendment #3 amends H.B. 3029 by inserting the following appropriately numbered section and renumbering subsequent sections appropriately: SECTION ___. Amends Article 5190.6, V.T.C.S. (Development Corporation Act of 1979), by adding Section 4__, as follows: Sec. 4. DEVELOPMENT CORPORATION FOR SPACEPORT FACILITIES. (a) Defines "eligible entity," "project," "spacecraft," and "spaceport." (b) Authorizes an eligible entity to create a corporation under this article governed by this section. Provides that the corporation has the powers granted by this section and by other sections of this article and is subject to the limitations of a corporation created under other provisions of this article. Provides that to the extent of a conflict between this section and another provision of this article, this section prevails. Provides that the articles of incorporation of a corporation must state that the corporation is governed by this section and may include within its name any words and phrases specified by the eligible entity. (c) Authorizes a corporation to acquire, convey, mortgage, or otherwise dispose of property, and to exercise the power of eminent domain to acquire property for a spaceport, including the enumerated powers. (d) Prohibits a corporation from issuing a bond or acquiring property unless a site in the territory of the eligible entity that established the corporation has been designed as the site for a spaceport. (e) Provides that before exercising the power of eminent domain, a corporation must obtain a resolution approving the proposed condemnation from the governing body of a county or municipality in which the property is located. Provides that for purposes of this section, territory in the extraterritorial jurisdiction of a municipality is considered to be in the jurisdiction of the municipality. Provides that the exercise of the power of eminent domain by the corporation is governed by Chapter 21 (Eminent Domain), Property Code. (f) Authorizes a corporation to make an agreement with or accept a donation, grant, or loan from any person. Authorizes a corporation to enter into an interlocal contract under Chapter 791 (Interlocal Cooperation Contracts), Government Code. Prohibits a corporation from contracting to operate a spaceport unless the agreement provides that the person contracting with the corporation must assume the corporation's liability for a cause of action arising from environmental damage. Authorizes a corporation to sue and be sued. (g) Provides that a corporation is governed by a board of seven directors. Requires the commissioners court of a county, for a corporation established by a single county, to appoint the directors. Provides that if more than one public entity creates the corporation the board must be appointed by written agreement between the governing bodies of those entities. Sets forth the term of each director. Requires a board to elect a presiding officer from among its members. Authorizes a board, by rule, to provide for the election of other officers. Requires the board to meet at least once every three months and at the call of the presiding officer or a majority of the directors. (h) Authorizes a board, by rule, to develop a plan for higher education courses and degree programs to be offered at or near a spaceport. Provides that the planned courses and degree programs must be related to the purposes of this chapter. Requires the Texas Aerospace Commission and the Texas Higher Education Coordinating Board to cooperate with and advise a board in carrying out this section. (i) Authorizes a corporation to perform the enumerated financial transactions. (j) Provides that a corporation's property, income, and operations are exempt from taxes imposed by the state or a political subdivision of the state. Requires a corporation, in lieu of taxes, to make a payment to each political subdivision of the state in an amount equal to the ad valorem taxes that would be paid on the land of the corporation if the land were privately owned. Provides that tangible property such as a spacecraft or other property necessary to launch the spacecraft is not taxable under Section 11.01 (Taxable Property and Exemptions), Tax Code, if it is located in the spaceport. Provides that Chapter 151 (Limited Sales, Excise, and Use Tax), Tax Code, does not apply to tangible personal property purchased by a person for use in a spaceport. (k) Authorizes a corporation to issue bonds. Provides that the bonds are not an obligation or a pledge of the faith and credit of the state, a sponsoring entity or other political subdivision or agency of the state. Provides that a bond issued must meet the enumerated conditions. (l) Provides that Section 24 of this article does not apply to a corporation under this section.