HBA-SEP H.B. 3532 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3532 By: Coleman Ways & Means 3/30/2001 Introduced BACKGROUND AND PURPOSE Areas with major transportation nodes are often areas of poverty and economic distress. Incentives that address economic development, education, and quality of life may be necessary to prompt people to take advantage of proximity to major transportation nodes and to reinvest in these areas of the community. Tax increment reinvestment zones have proven to achieve these goals, but only municipalities are authorized to create them. This practice limits unincorporated areas of counties that have similar economic development needs. House Bill 3532 creates a commercial and industrial development zone with its own nongovernmental board to administer its activities and extends the authority to create a zone to counties. 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 3532 amends the Local Government, Transportation, and Tax codes relating to economic development by local governmental entities. The bill amends the Local Government Code to create a commercial and industrial development zone (zone) to promote and encourage commercial and workforce development and to set forth eligibility provisions. The bill prohibits a municipality from containing within its jurisdiction or a county in its unincorporated areas more than three zones and provides that creation of a zone does not affect the number of enterprise zones that may be designated in a municipality or county. Each creating body must hold a public hearing before adopting an ordinance order and the governing body of a county is prohibited from designating territory in the jurisdiction of a municipality as part of a proposed zone unless the governing body also designates the territory. The bill provides that a zone is a political subdivision of the state and a special district (Secs. 386.031 and 386.033). The bill sets forth requirements for an ordinance or order (order) designating an area as a zone including a summarization of certain area business incentives or programs. The bill does not prohibit a municipality or county from extending additional incentives to business enterprises in a zone by a separate order (Sec. 386.034). A creating body is authorized to allow one quarter of one percent of a local property tax increment to fund a zone. On adoption of an order by each creating body, the fund is authorized to be used to pay salaries of the employees of the board of directors and administrative expenses (Sec. 386.035). A creating body, by order, is authorized to amend the boundary of a zone after a public hearing on the issue if the entire zone continues to meet unemployment or economic distress requirements. A creating body is prohibited from making more than one boundary amendment for a development zone in a calendar year and if more than one body created the zone, each body must agree on the amendment by order (Sec. 386.036). The bill sets forth provisions regarding the composition, terms, qualification, disqualification, vacancies, removal, organization, duties, meetings, compensation, and bond of oath of a zone's board of directors (Secs. 386.061-386.069). The zone is authorized to acquire and dispose of projects and has the powers, authority, rights, and duties that are necessary to permit the accomplishment of purposes for which the zone was created. The zone is also authorized to provide for general promotion of and tourist information regarding the zone and its vicinity and for a marketing program to attract visitors and to conduct those activities under contracts for professional services. A zone is further authorized to enter into a memorandum of understanding with any state agency to further the economic development of the zone (Sec. 386.101). The bill requires the board to evaluate all options available to the zone as an alternative to imposing a tax (Sec. 386.102). The board is required to monitor each person in a zone who receives benefits and on the board's request, the Texas Workforce Commission (TWC) or the office of the comptroller of public accounts (comptroller) is required to provide to the board tax records of a person who receives benefits (Sec. 386.104). The board is authorized to designate an area as a zone if the area is adjacent to the zone and eligible for inclusion. A zone is authorized to exercise the powers available to it in such an area (Sec. 386.105). A zone may sue and be sued and service of process in a suit may be had by serving a director (Sec. 386.106). The bill authorizes a zone's money to be disbursed only by certain means and provides who is authorized to disburse the money (Sec. 386.201). Provisions regarding competitive bidding apply to a zone as if the zone were a municipal management district (Sec. 386.202). After a hearing and under certain criteria, a creating body is authorized to dissolve a zone. Such a dissolution does not affect the validity of a tax incentive or regulatory relief granted or accrued before the removal or the validity of a bond issued (Sec. 386.301). A board is authorized to petition a creating body to dissolve the zone if a majority of the board finds that before the authorization of bonds or the final lending of its credit, the continuation of the zone is impractical or cannot be successfully and beneficially accomplished or that all debts are paid and the purposes accomplished (Sec. 386.302). On dissolution of a zone, any taxes levied on behalf of the zone are abolished (Sec. 386.303). The Transportation Code is amended to provide that a local government corporation (corporation) is not subject to a competitive bidding requirement or other restriction imposed on the procedure related to the lease, sale, or other disposition of real property. A corporation created after September 1, 1999, by a municipality for the purpose of the development of a convention center hotel project or water treatment and distribution facilities is exempt from competitive bidding requirements and other restrictions on the award of contracts for the limited purpose of completing a project initiated prior to December 31, 2000. Any expansion of the treatment facility is also exempt (Sec. 431.101). Provisions regarding the regulation of conflicts of interest of officers of municipalities, counties, and certain other local governments apply to the award of contracts by a corporation (Sec. 431.110). Not later than February 1 of each year, the board of a corporation is required to submit to the comptroller a report in the required form which is prohibited from exceeding one page in length. The bill sets forth report requirements and requires a copy of the annual report to be submitted to the local government that created the corporation (Sec. 431.111). The bill amends the Tax Code to specify that the Tax Increment Financing Act applies to counties as well as municipalities. The bill authorizes the governing body of a county with a population in excess of 2.1 million to designate an area to be a reinvestment zone in an unincorporated area (Sec. 311.002 and 311.100). EFFECTIVE DATE On passage, or if the Act does not receive the necessary vote, the Act takes effect September 1, 2001.