HBA-JRA C.S.S.B. 1804 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 1804 By: Barrientos Ways & Means 5/14/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Currently, the property tax rollback rate can be adjusted when one governmental unit transfers a department or function to another governmental unit which are usually transfers of departments between cities and counties. The language in the law assumes complete transfers of functions or departments and does not allow one governmental unit to assume a greater financial responsibility for simultaneous functions conducted by both governmental units through separate departments. Travis County and the city of Austin both operate EMS departments. The city of Austin serves areas outside its corporate boundaries, which Travis County would like to serve, including other incorporated cities in Travis County; however, because of the rollback tax rate law, neither Travis County nor the city of Austin can transfer a portion of the EMS function without subjecting themselves to a greater risk of exceeding the rollback tax rate in the next fiscal year. In addition, a governmental unit giving up all or part of a function has its property tax rollback decreased dollar for dollar in property taxes, even though property taxes may comprise only a portion of the general fund budget spent on the function. C.S.S.B. 1804 sets forth provisions for the calculation of a tax rollback rate. 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 HBA-JRA S.B. 1804 76(R) SECTION 1. Amends Section 26.04, Tax Code, by adding Subsections (k), (l), (m), (n), (o), (p), and (q), as follows: (k) Provides that this subsection applies to a taxing unit that has agreed by written contract to transfer all or a part of the responsibility for funding a distinct department, function, or activity to another taxing unit and that reduces its taxation for the purpose of funding that distinct department, function, or activity if that reduced portion of the funding of the department, function, or activity in all or a majority of the territory of the taxing unit is continued by another existing taxing unit or by a new taxing unit. Provides that the rollback tax rate of a taxing unit to which this subsection applies in the first tax year in which a budget is adopted that reduces the funding of the department, function, or activity is calculated as otherwise provided by this section, except that last year's levy used to calculate the effective maintenance and operations rate of the unit is reduced by the decrease in the amount of maintenance and operations tax revenue spent by the taxing unit on the department, function, or activity compared to the amount of maintenance and operations tax revenue spent in the 12 months preceding the month in which the calculations required by this chapter are made. Requires the unit to reduce last year's levy used for calculating the effective maintenance and operations rate of the unit by the amount of the decrease in the amount of maintenance and operations tax compared to the amount of revenue spent in the last full fiscal year in which the unit funded all of part of the department, function, or activity if the taxing unit did not fund all or part of that department, function, or activity for the full 12 months preceding the month in which the calculation required by this chapter are made. (l) Provides that this subsection applies to a taxing unit that has agreed by written contract to accept the transfer of all or a part of the responsibility for funding a distinct department, function, or activity from another taxing unit and that funds all or part of that distinct department, function, or activity if the funding for a substantially similar department, function, or activity in all or a majority of the territory of the taxing unit has been reduced by another existing taxing unit, including a dissolved taxing unit. Provides that the rollback tax rate of a taxing unit to which this subsection applies in the first tax year after the other taxing unit reduced the funding of the department, function, or activity in which a budget is adopted that allocates revenue to the department, function, or activity is calculated as otherwise provided by this section, except that last year's levy used to calculate the effective maintenance and operations rate of the unit is increased by the amount of the decrease of maintenance and operations tax revenue spent by the taxing unit that reduced funding for the department, function, or activity compared to the amount of maintenance and operations tax revenue spent in the 12 months preceding the month in which the calculations required by this chapter are made. Authorizes the unit to increase last year's levy used for calculating the effective maintenance and operations rate of the unit by the amount not to exceed the decrease in the amount of property tax revenue spent by the other taxing unit to fund the department, function, or activity compared to the amount of maintenance and operations tax revenue spent in the last full fiscal year in which the unit funded all of part of the department, function, or activity if the taxing unit did not fund all or part of that department, function, or activity for the full 12 months preceding the month in which the calculation required by this chapter are made. (m) Defines "funding." (n) Provides that, notwithstanding any other provision of this section, for purposes of calculating the rollback tax rate of a taxing unit under Subsection (k) or (l), the effective maintenance and operations rate of the taxing unit is increased or reduced only by the amount that would generate the amount of ad valorem tax revenue spent by the taxing unit on that part of the funding of the department, function, or activity that is assumed or discontinued by the taxing authority. Authorizes the taxing unit to use any reasonable method to calculate the amount of ad valorem tax revenue that is or has been spent to fund the department, function, or activity, if the department, function, or activity has been funded by revenue sources other than ad valorem taxes. (o) Requires a taxing unit, in a year in which it calculates an adjustment under Subsection (k) or (l), to publish in the manner provided by Subsection (e), a schedule that includes the name of the taxing unit transferring responsibility for funding of the department, function, or activity; the amount of property tax revenue spent by that taxing unit to operate the department, function, or activity in the 12 months preceding the month in which the calculations required by this chapter are made; and the name of the taxing unit that accepted funding responsibility for a distinct department, function, or activity in all or a majority of the territory of the taxing unit that transferred the responsibility. (p) Requires a taxing unit, in the year immediately following a year in which the rollback tax rate of a taxing unit is increased under Subsection (l), to publish in the manner provided by Subsection (e), a schedule that includes the amount of property tax revenue spent by the taxing unit to fund the department, function, or activity for the which the taxing unit's rollback tax rate was increased under Subsection (l) for the 12 months preceding the month in which the calculation required by this chapter are made; and the amount of property tax revenue spent by that taxing unit to operate the department, function, or activity in the 12 months preceding the month in which the calculations required by this chapter are made published by the taxing unit in the preceding year. (q) Provides that this subsection and Subsections (k), (l), (m), (n), (o), and (p) expire January 1, 2001. SECTION 2.Emergency clause. Effective date: upon passage. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original in the caption to specify that this Act relates to the calculation of the rollback tax rate of a taxing unit in certain circumstances. The substitute modifies the original in SECTION 1 (Section 26.04, Tax Code) by deleting the proposed amendments to existing Subsection (e). Rather than amending the notice requirements contained in Subsection (e), the substitute adds new Subsections (o) and (p), which reference Subsection (e). The substitute adds a new Subsection (k), rather than amending existing Subsection (i). The new Subsection (k) contains the same provisions the amended Subsection (i) contained. The substitute adds a new Subsection (l) to set forth the rollback tax rate for a taxing unit that has agreed by written contract to accept the transfer of all or a part of the responsibility for funding a distinct department, function, or activity from another taxing unit and that funds all or part of that distinct department, function, or activity if the funding for a substantially similar department, function, or activity in all or a majority of the territory of the taxing unit has been reduced by another existing taxing unit, including a dissolved taxing unit. The substitute also deletes the proposed amendments to existing Subsection (j) and incorporates them into the new Subsection (l). The substitute redesignates proposed Subsections (k) and (l) of the original to Subsections (m) and (n) and makes conforming and nonsubstantive changes. The substitute adds a new Subsection (o), which sets forth the publication requirements for a taxing unit in a year in which it calculates an adjustment under Subsection (k) or (l). The substitute adds a new Subsection (p), which sets forth the publication requirements for a taxing unit in the year immediately following a year in which the rollback tax rate of a taxing unit is increased under Subsection (l). The substitute adds a new Subsection (q), which provides that this subsection and Subsections (k), (l), (m), (n), (o), and (p) expire January 1, 2001. The substitute deletes SECTION 2 of the original, which provided an effective date of September 1, 1999, and redesignates SECTION 3 (short emergency clause) of the original as SECTION 2 (long emergency clause).