LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION April 29, 2013 TO: Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB3703 by Rodriguez, Eddie (Relating to property tax appraisals of certain nonexempt property used for low-income or moderate-income housing.), As Introduced Estimated Two-year Net Impact to General Revenue Related Funds for HB3703, As Introduced: a negative impact of ($60,569,000) through the biennium ending August 31, 2015. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION
April 29, 2013
TO: Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB3703 by Rodriguez, Eddie (Relating to property tax appraisals of certain nonexempt property used for low-income or moderate-income housing.), As Introduced
TO: Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means
FROM: Ursula Parks, Director, Legislative Budget Board
IN RE: HB3703 by Rodriguez, Eddie (Relating to property tax appraisals of certain nonexempt property used for low-income or moderate-income housing.), As Introduced
Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means
Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means
Ursula Parks, Director, Legislative Budget Board
Ursula Parks, Director, Legislative Budget Board
HB3703 by Rodriguez, Eddie (Relating to property tax appraisals of certain nonexempt property used for low-income or moderate-income housing.), As Introduced
HB3703 by Rodriguez, Eddie (Relating to property tax appraisals of certain nonexempt property used for low-income or moderate-income housing.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB3703, As Introduced: a negative impact of ($60,569,000) through the biennium ending August 31, 2015. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Estimated Two-year Net Impact to General Revenue Related Funds for HB3703, As Introduced: a negative impact of ($60,569,000) through the biennium ending August 31, 2015.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
General Revenue-Related Funds, Five-Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds 2014 $0 2015 ($60,569,000) 2016 ($139,759,000) 2017 ($152,269,000) 2018 ($165,163,000)
2014 $0
2015 ($60,569,000)
2016 ($139,759,000)
2017 ($152,269,000)
2018 ($165,163,000)
All Funds, Five-Year Impact: Fiscal Year Probable Savings/(Cost) fromFoundation School Fund193 Probable Revenue Gain/(Loss) fromSchool Districts Probable Revenue Gain/(Loss) fromCounties Probable Revenue Gain/(Loss) fromCities 2014 $0 $0 $0 $0 2015 ($60,569,000) ($96,223,000) ($47,803,000) ($52,966,000) 2016 ($139,759,000) ($32,088,000) ($52,206,000) ($57,944,000) 2017 ($152,269,000) ($35,227,000) ($56,759,000) ($63,105,000) 2018 ($165,163,000) ($38,479,000) ($61,431,000) ($68,415,000) Fiscal Year Probable Revenue Gain/(Loss) fromOther Special Districts 2014 $0 2015 ($34,941,000) 2016 ($38,129,000) 2017 ($41,420,000) 2018 ($44,794,000)
Fiscal Year Probable Savings/(Cost) fromFoundation School Fund193 Probable Revenue Gain/(Loss) fromSchool Districts Probable Revenue Gain/(Loss) fromCounties Probable Revenue Gain/(Loss) fromCities 2014 $0 $0 $0 $0 2015 ($60,569,000) ($96,223,000) ($47,803,000) ($52,966,000) 2016 ($139,759,000) ($32,088,000) ($52,206,000) ($57,944,000) 2017 ($152,269,000) ($35,227,000) ($56,759,000) ($63,105,000) 2018 ($165,163,000) ($38,479,000) ($61,431,000) ($68,415,000)
2014 $0 $0 $0 $0
2015 ($60,569,000) ($96,223,000) ($47,803,000) ($52,966,000)
2016 ($139,759,000) ($32,088,000) ($52,206,000) ($57,944,000)
2017 ($152,269,000) ($35,227,000) ($56,759,000) ($63,105,000)
2018 ($165,163,000) ($38,479,000) ($61,431,000) ($68,415,000)
Fiscal Year Probable Revenue Gain/(Loss) fromOther Special Districts 2014 $0 2015 ($34,941,000) 2016 ($38,129,000) 2017 ($41,420,000) 2018 ($44,794,000)
2014 $0
2015 ($34,941,000)
2016 ($38,129,000)
2017 ($41,420,000)
2018 ($44,794,000)
Fiscal Analysis
This bill would amend Section 11.1825(q) of the Tax Code, regarding a property tax exemption for organizations constructing or rehabilitating low-income housing, to provide that for specified low-income or moderate-income housing property that is required to be appraised using the income method, a chief appraiser must determine the property's expenses in accordance to Section 11.182(a)(1) of the Tax Code which provides that cash flow includes money generated by a housing project less disbursements including standard property maintenance, debt service, employee compensation, fees required by government agencies, expenses incurred in satisfaction of requirements of lenders (including reserve requirements), insurance, and other justifiable expenses related to the operation and maintenance of the project. The bill would rename the title of Section 11.182 of the Tax Code to "Community Housing Development Organizations and Properties Financed with Low-Income Housing Tax Credits for Low-Income and Moderate-Income Housing Families and Seniors." The bill also would rename the title of Section 11.1825 of the Tax Code to "Organizations Constructing or Rehabilitating Low-Income Housing and Properties Financed with Low-Income Housing Tax Credits for Low-Income and Moderate-Income Housing for Families and Seniors." This bill would take effect immediately upon enactment, assuming that it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2013.
This bill would amend Section 11.1825(q) of the Tax Code, regarding a property tax exemption for organizations constructing or rehabilitating low-income housing, to provide that for specified low-income or moderate-income housing property that is required to be appraised using the income method, a chief appraiser must determine the property's expenses in accordance to Section 11.182(a)(1) of the Tax Code which provides that cash flow includes money generated by a housing project less disbursements including standard property maintenance, debt service, employee compensation, fees required by government agencies, expenses incurred in satisfaction of requirements of lenders (including reserve requirements), insurance, and other justifiable expenses related to the operation and maintenance of the project.
The bill would rename the title of Section 11.182 of the Tax Code to "Community Housing Development Organizations and Properties Financed with Low-Income Housing Tax Credits for Low-Income and Moderate-Income Housing Families and Seniors." The bill also would rename the title of Section 11.1825 of the Tax Code to "Organizations Constructing or Rehabilitating Low-Income Housing and Properties Financed with Low-Income Housing Tax Credits for Low-Income and Moderate-Income Housing for Families and Seniors."
This bill would take effect immediately upon enactment, assuming that it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2013.
Methodology
The bill would require chief appraisers to deduct specified disbursements when determining the market value of low-income housing that already receives a partial exemption under Section 11.1825 of the Tax Code and the market value of eligible low-income housing or moderate-income housing properties that were financed with federal low income tax credits. The bill would require chief appraisers to deduct certain property expenses, including debt service. Generally, debt service is not included as a deduction in a market value appraisal. A review of the typical amount of debt service in relation to the value of low income housing property indicates that deducting debt service would result in an average 80 percent reduction in value. The value loss was estimated based on information from appraisal districts and the Texas Department of Housing and Community Affairs and this loss was reduced to take into account depreciation and the existing partial exemption under Section 11.1825 of the Tax Code. The applicable projected tax rates were applied to estimate the levy loss to special districts, cities and counties, and to estimate the initial school district loss. Because of the operation of the hold harmless provisions of the Education Code, about 60 percent of the school district cost related to the compressed rate is transferred to the state in the first year the bill takes effect and 100 percent in later years. Because lagged year property values are used in the enrichment formula, school districts lose enrichment funding (state savings) in the first year of a taxable property value reduction. In the second and successive years the enrichment cost and a portion of the school district debt (facilities) cost are transferred to the state through the relevant funding formulas. All costs were estimated over the five year projection period.
Local Government Impact
The fiscal implication to units of local government is reflected in the table above.
Source Agencies: 304 Comptroller of Public Accounts
304 Comptroller of Public Accounts
LBB Staff: UP, KK, SD, SJS
UP, KK, SD, SJS