HBA-JLV H.B. 3271 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3271 By: Coleman Economic Development 3/23/2001 Introduced BACKGROUND AND PURPOSE Currently, businesses and other organizations are given grants, reduced-interest loans, tax abatements, tax reductions, and other incentives by state and local governmental entities to stimulate economic development. These government-provided incentives, also called public subsidies, rarely are tied to specific goals or benchmarks. As a result, it is often unclear whether businesses and other organizations that receive public subsidies are delivering measurable public benefits in return. House Bill 3271 establishes the Public Subsidy Performance and Accountability Act and requires any entity that receives a public subsidy for economic development purposes from the state to enter into a subsidy agreement with the agency providing the subsidy that describes specific goals for the subsidy, and includes provisions for repayment if the goals are not met. 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. ANALYSIS House Bill 3271 amends the Government Code to establish the Public Subsidy Performance and Accountability Act to provide that any entity that receives a public subsidy for economic development purposes from the state must enter into a subsidy agreement that describes specific goals for the subsidy (Sec. 481.228) The bill prohibits a state agency from granting a public subsidy unless the state agency has adopted criteria for issuance of the subsidy and enters into a subsidy agreement with an eligible recipient (Sec. 481.225). The bill authorizes a local governmental entity that is authorized to grant a public subsidy to adopt criteria regarding the awarding of a public subsidy and to enter into a subsidy agreement to the same extent and in the same manner as a state agency and with the same reporting requirements as a state agency and recipient of a public subsidy granted by a state agency (Sec. 481.224). The bill applies only to public subsidies of more than $25,000 or, if the subsidy is in the form of a loan, more than $75,000 (Sec. 481.223). The bill requires a state agency, after a public hearing, to adopt eligibility and other criteria for granting a subsidy and sets forth criteria requirements. The bill requires the state agency to submit a copy of the criteria to the Texas Department of Economic Development (department) for review and comment. The bill authorizes a state agency to modify the criteria adopted by the agency, subject to review and approval by the department (Sec. 481.226). The bill requires a grantor to contact the department to determine whether the proposed recipient is eligible to receive a subsidy before a grantor enters into a public subsidy agreement (Sec. 481.227). The bill authorizes a grantor, after a public hearing, to extend up to one year the period for meeting job and wage goals under the subsidy agreement and sets forth requirements for a grantor to extend the period (Sec. 481.229). The bill requires a state agency to publish notice and hold a public hearing before granting a subsidy of more than $500,000, authorizes a local governmental entity to publish notice and hold a public hearing before granting a subsidy of more than $100,000, and sets forth notification requirements. The bill sets forth contents of the notification (Sec. 481.230). The bill requires that a subsidy agreement must contain provisions requiring a recipient who fails to meet the goals specified in the agreement to, at a minimum, repay the amount of the subsidy with interest. The bill provides that the repayment may be prorated to reflect a partial fulfillment of goals. The grantor is required to send notice of the failure to the recipient and demand repayment of the subsidy (Sec. 481.231). The bill prohibits a recipient that fails to meet the terms of a subsidy agreement to receive a subsidy from a grantor before five years after the date on which the grantor made its determination regarding the failure or the date on which the recipient satisfies its repayment obligation (Sec. 481.232). The bill sets forth requirements for the recipient to submit an annual progress report on the attainment of the goals stated in the subsidy agreement (Sec. 481.233). The bill sets forth provisions relating to the information a progress report must include, the method of filing a progress report, and the written reminder and penalty for a recipient who fails to file a progress report (Secs. 481.234- 481.236). Not later than April 1 of each year, each state agency that has awarded a public subsidy is required to file a report with the department regarding the subsidy. The bill sets forth the contents of the report to be filed with the department (Sec. 481.237). Not later than July 1 of each year, the department is required to submit to the legislature a report summarizing the results of the reports required from grantors and recipients for the previous calendar year and sets forth the contents of the report (Sec. 481.238). Not later than August 1 of each year, the department is required to publish a compilation of grantors' criteria policies adopted in the previous calendar year (Sec. 481.240). EFFECTIVE DATE September 1, 2001.