Finance & Revenue

Property development has a litany of economic benefits. In some locations, to develop high rise living requires the developer to include a certain number of units for low income individuals. But, what if there was a way around this?

Negotiations in San Francisco permitted a devloper to pay $13.85Million to avoid requirements related to low income housing requirements. [SF Chronicle]

Villalba points to the $24 Billion benefit to the Texas economy from business that received Enterprise Funds. He also highlights flaws in the State Auditor Report, including that one award flagged by the auditor was in actuality an appropriation. [Dallas Morning News]

Texas Tribune offers TribTalk, a collection of perspectives. One of these perspectives is from Konnie Burton, Van Taylor, Brandon Creighton and Bob Hall on the spending cap. Each session the spending cap is debated. Each session there are supporters and detractors. Highlights from the Burton, Taylor, Creighton, Hall perspective:

• The 2014-2015 Budget was the largest budget in Texas history.
• General Revenue, non-dedicated spending, reached $85 Billion. 
• In 2015, two health agencies will request an additional $1 Billion for the current biennium.

Their final paragraph: “We reject the Washington-style budgeting gimmicks and political tricks used to pressure legislators into accepting spending trends that jeopardize our children’s future. The citizens of Texas have sent a clear message that they expect their elected officials to roll up their sleeves and make the tough decisions necessary to keep Texas a beacon of freedom and opportunity, and that’s exactly what we intend to do.” [TribTalk]

Every tax system has tax breaks. There are deductions, exemptions, and credits that impact every tax payer. Tax breaks for wind energy and natural gas has caught the eye of Texas Comptroller Combs.

Comptroller Combs has called on the wind sector needing to stand on its own feet and will soon highlight the tax breaks and will call for a review of natural gas tax incentives.    [Comptroller Combs Wind Energy Report] [Texas Tribune]  

Refreshing Recollection: 2013 LBB GEER recommendation included modifying the natural gas tax incentives. LBB offered the following 3 recommendations:

[2013 LBB GEER Report]

The Comptroller issued a new report on school district indebtedness. 36 districts will have bond propositions on the November ballot, which will increase indebtedness. 

Comptroller analysis of school construction shows us that the majority of construction is for elementary schools. [Fiscal Notes]

Schools turned to bond financing to cover construction costs when the Legislature reduced state funding in 2011. Bond financing requires increased revenue to cover the indebtedness.  The uptick after 2011 for school bond financing resulted in more school districts hitting the tax cap.

When the Legislature addresses school finance, there will be a renewed push for facilities funding. Facilities funding would address schools that incur indebtedness to cover construction costs associated with growing student populations. [Houston Chronicle]

Valley Morning Star decalres that Hidalgo county’s 59 cent tax rate per $100 valuation is among the highest for populous counties in Texas. This November it’ll go higher. A proposition to fund a county hospital district seeks to add 8 cents to the total property tax rate. To address this high rate, Senator Hinojosa will be filing a local bill to lower the cap from 75 cents to 25 cents. 

“State Sen. Juan “Chuy” Hinojosa, D-McAllen, published in Saturday’s Monitor a notice of intent to file a local bill lowering the cap to 25 cents per $100 of valuation.” In reponse, McAllen’s mayor  will not make any appointments to the hospital district board until the Hinjosa bill becomes law. [Valley Morning Star]

During this week’s House Select Committee on Economic Incentives hearing, a 2011 State Auditor Office (SAO) Report on the Emerging Technology Fund was mentioned multiple times.

The SAO opens this report by faulting the Emerging Technology Fund for its accountability and transparency. This should have been a warning sign for all  economic development incentive funds. [The Full SAO Audit of Emerging Technology Fund 2011]

Generally, its not easy to sue a governmental entity. Getting through the barrier of soveriegn immunity takes special circumstances. In the case of Zachry v. the Port of Houston, those special circumstances were alleged bad acts on the part of the Port which gave rise to a jury verdict of $22 million.

$22 million to be paid by a governmental entity to the aggreived contractor. $22 million in tax revenue to be paid to a contractor because of a governmental entity’s oops moment. 

The Texas Supreme Court on August 29, 2014 ageed that bad acts had occurred, not the win that the Port was looking for with the Supremes. Today the Port filed a motion for re-hearing.

It’s a case with deep pockets, a big jury award for Zachry, and long range implications on government contracting in Texas. Be on the look out for legislation to illuminate government contracting. [Zachry v. Port of Houston]

A barrel of oil is selling at $85. That’s the lowest point in 4 years. Oil revenue is a substantial portion of the Texas economy. Oil prices are falling, but oil production is climbling. A Rice economist suggests the two offset each other.

Other economic reasons impact the lower oil prices including a strong dollar, speculators betting on lower prices, and stalled international economic growth. [KUT]

Reducing property taxes was the focus of Dan Patrick’s first election to the Texas Senate and it continues to be front and center during his campaign for Lt. Gov. The Texas Tribune this morning wrote about Dan Patrick’s tax plan. [Texas Tribune]

Revenue caps and tax cuts are de rigueur in conservative tax paralance. Ten years ago Houston voters imposed a revenue cap. The city revenue is hitting the cap; forcing a rollback.

What does this mean? If your Houston property value is $200,000, you’re rollback is $12.27 or roughly 3 cups of coffee. With every peak there is a valley, in 6 months, Houston will face a deficit of $120 Million. [Houston Chronicle] 

In 2013 the Legislature passed SJR 1 and HB 4 which created new funding mechanisms for funding the statewide water plan. Part of this new funding structure included $2 billion from the Texas Rainy Day Fund. [HB 4 (2013)]  [SJR 1(2013)]

The Texas Water Development Board has a plethora of materials on its website about the legislation and the rule making that followed. [TWDB]  There are a number of other resources as well; the Texas A&M Water Resources Institute publishes the Texas Water Journal. 

The fiscal year 2013 report on major state investment funds is available. For those salivating for the annual rate of return was 8.42% and the total increase in market value of all the funds was 5.6% above the 2012 levels. [LBB] 

California has Prop 2 on its November ballot. Prop 2 is Governor Brown’s belief that California needs a larger, more robust Rainy Day Fund with greater restrictions on use. Sound familar, Texas? Education Groups aren’t opposing Prop 2, but they won’t support it either. [EdSource]

In 2013 HB 585 reformed the appraisal system, which remains under fire for what is perceived as a disproportionate impact on revenue collection from commercial property re-appraisals.  

HB 585 required the Comptroller issued model appraisal review board hearing procedures in December 2013. The Office of the Comptroller will issue a report on the model procedures in early 2015.  [Model Appraisal Review Board hearing Procedures] 

HB 585 also established a new burden of proof standard of clear and convincing. An Appraisal District has to establish the value by the clear and convincing evidence.  [HB 585 (2013)] 

Bexar County Commissioner Tommy Addkisson supports indexing the gas tax. He points to the Governor’s Business Council which said that a 10 cent per gallon increase could make up the $60-90 Billion deficit in Texas transportation funding. He goes on to say that local governments are contributing millions in upfront funding to cover TXDOT transportation projects. [My SA]

Economic Development is under the gun in the Legislature. A total of 4 committees are looking into whether state revenues should be used for economic development. Texas has the strongest economy in the country and many say its because of economic development.

The Comptroller has been busy updating the rules and the application process for tax increment reimbursement for major and other events. [Major Event Fund Rules] [Other Event Fund Rules] [New Application Process]

Concerns over Texas economic development funds has percolated since before the State Auditor report in September. It’s campaign fodder. It’s fodder for editorials. Longview chimes in on the issue referring to “shoddy record keeping;” “potential misuse of tax dollars;” and the transparency of the process is questioned. [Longview News Journal]

Texas Enterprise Fund faces a hiccup with the recent State Auditor report purporting that hundreds of millions in awards were made without application. Tea Party wants to end corporate entitlements and let the free market prevail. State leaders are looking to every available solution.  A look at both sides.[Houston Chronicle]

EU regulators found that tax deals granted to Apple and Fiat violate the prohibition against state support of companies. Economic Development in Europe is broken too. Fix It Again, Tony. [WSJ] 

It takes a lot of human capital to run oil fields. Those humans need to sleep somewhere. A Houston based company that provides accommodations for oil field works discovered the tax implications of booming business. The company considered converting to a REIT, but hot summer days led to a better conclusion- move to Canada. Not only does Canada offer cooler summers but is also offers a lower tax rate for this C-Corp. The 25-26% tax rate in Canada is roughly 4% lower than the US tax rate on the C-corp’s income.  [Financial Post]

Reform the Enterprise Fund is the mantra of this election season. Whether the legisaltive solution relies on greater transperancy, a stricter application process, a faster application process to improve competitiveness, stricter enforcement, or elimination of the fund is the question du jour.  Tea Partiers lean toward elimination. Business interests lean toward reform.

Will the Legislature take the politically expedient option or the option that strengthens Texas position has an economic powerhouse? Greg Abbott told the Houston Chronicle that every option should be on the table. [Houston Chronicle]

For decades, the fight to control your tax rates has been brewing. The State wants to control inflated property tax rates. Locals want to be able to provide for their own needs. Controlling the purse strings is a very big deal. 

Some state leaders are talking about property tax caps. Not a popular concept to local officials. Beaumont Enterprise is first out of the gate railing against property tax caps. [Beaumont Enterprise]

Austin Chronicle awarded Real Values for Texas the “2014 Best Grassroots Campaign to Hit Home.”  Real Values for Texas supports fairness in the proeprty tax system. What’s interesting is the organizations supporting Real Values for Texas. They aren’t the usual far right red meat, the organizations supporting Real Values for Texas are of the blue variety: AFL CIO, Move On, AFT….[Real Values for Texas] 

The US Bureau of Economic Analysis maps economic growth. Its searchable. There are printable maps. [US Dept. of Commerce]

Tax Shelters are Feeling the Heat. Luxembourg has agreed to EU requirements for account information sharing. [WSJ]

Deja vu all over again. Remember the last years long battle to establish statutory balance that helps alleviate the concerns of residential property tax payers? We’re back! Hello talks of appraisal caps and providing property relief for residential property tax owners. [Houston Press] 

SB 1678 (2013) added events to the Major Events Trust Fund recipient pool. Nobel goal to draw events and the corresponding tax revenue to Texas. But, when you draft these bills you have to remember that just adding an event to the list isn’t enough.  You have to add the ability to award those funds to the event too. Want to know how to draft a bill like this? Read [GA-1052]

Protesting taxes, an American tradition, comes to life in San Antonio as people gather to rally to reform commercial property tax system. In Boston, protestors throw tea into a harbor, in San Antonio does one dump tequila in the river? What makes this protest intersting is that the activists are of the blue variety, not the red variety. [My San Antonio]

Legislators hear a lot about high tax rates in Harris County, Dallas County and the corresponding metropolitican areas. But, which county has the highest tax rates? Who should be the most vocal and concerned about high tax rates?  Politifact sifts through tax rates, includes links to country tax rates and decalres Travis as the highest tax rate. [Politifact]

Tax law is complicated. Complicated laws lead to law suits. Property tax law suits brought by commercial property owners are impacting the coffers in San Antonio. [ My SA]