78R4353 CLG-D
By: Dukes H.B. No. 2398
A BILL TO BE ENTITLED
AN ACT
relating to fiscal accountability for the receipt of a subsidy or
other form of assistance for economic development purposes;
providing a civil penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle F, Title 4, Government Code, is amended
by adding Chapter 489 to read as follows:
CHAPTER 489. ECONOMIC DEVELOPMENT AND FISCAL ACCOUNTABILITY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 489.001. DEFINITIONS. In this chapter:
(1) "Corporate parent" means a person that owns or
controls 50 percent or more of a recipient corporation.
(2) "Date of the subsidy" means the date on which the
recipient corporation receives the development subsidy, except
that:
(A) if the development subsidy involves the
purchase of new equipment, the date of the subsidy is the date on
which the recipient corporation places the equipment into service;
or
(B) if the development subsidy is for an
improvement made to property, the date of the subsidy is the earlier
of:
(i) the date on which the last improvement
to the property is made; or
(ii) the date on which the recipient
corporation occupies the property.
(3) "Department" means the Texas Department of
Economic Development or its successor.
(4) "Development subsidy" means an expenditure of
public money or financial assistance in the form of a bond, grant,
loan at a rate below the commercial rate, loan guarantee, tax
credit, tax increment financing, fee waiver, land price subsidy,
matching funds, tax abatement, tax exemption, or tax reduction that
is provided to a recipient corporation for economic development
purposes. The term does not include:
(A) financial assistance that is generally
available to all businesses or to a general class of similar
businesses; and
(B) bonds issued to refund outstanding bonds.
(5) "Full-time employee" means an employee who is
normally scheduled to work at least 35 hours a week.
(6) "Granting entity" means a state agency or local
governmental entity that grants a development subsidy.
(7) "Local governmental entity" means a county,
municipality, or other political subdivision of this state and a
municipally created economic development corporation, including a
development corporation organized under the Development
Corporation Act of 1979 (Article 5190.6, Vernon's Texas Civil
Statutes).
(8) "Part-time employee" means an employee who is not
a full-time employee or temporary employee.
(9) "Person" does not include a government or
governmental subdivision or agency;
(10) "Project" means any undertaking or work that the
granting entity determines will result in new or expanded business
development or opportunities or other types of economic
development;
(11) "Project site" means the site of a project for
which a development subsidy is granted.
(12) "Property-taxing entity" means an entity that
imposes taxes on real or personal property in this state.
(13) "Recipient corporation" means a person that
receives a development subsidy from a granting entity.
(14) "Small business" means a corporation that:
(A) is formed to make a profit;
(B) has fewer than 20 full-time employees or less
than $1 million in annual gross receipts; and
(C) does not have a subsidiary or corporate
parent that has more than 20 full-time employees or more than $1
million in annual gross receipts.
(15) "Temporary employee" means an individual
employed on a temporary basis for the performance of services for an
employer during regular employee absences, temporary skill
shortages, seasonal work loads, special assignments and projects,
and other similar work situations for a limited period.
Sec. 489.002. PUBLIC RECORD; DISCLOSURE. A report or other
document required to be prepared or maintained under this chapter,
including an application, progress report, or recapture notice, and
any related record or proceeding, is a public record subject to
Chapter 552.
[Sections 489.003–489.100 reserved for expansion]
SUBCHAPTER B. DEVELOPMENT SUBSIDIES
Sec. 489.101. APPLICABILITY OF SUBCHAPTER TO CERTAIN
DEVELOPMENT SUBSIDY AMOUNTS. Except as otherwise provided by this
subchapter, this subchapter applies only to a development subsidy
of more than $25,000.
Sec. 489.102. APPLICATION. (a) To receive a development
subsidy for a project, a person eligible for the subsidy must file a
written application with the appropriate granting entity. The
application must be on a form prescribed by the department and must
contain:
(1) an application tracking number provided by the
granting entity;
(2) the name, business address, and business phone
number of the chief executive officer of the granting entity
provided by the granting entity;
(3) the name, business address, and business phone
number of the chief executive officer of the applicant;
(4) the name, business address, and business phone
number of the chief executive officer of the applicant's corporate
parent, if any;
(5) the street address of the project site;
(6) the three-digit North American industry
classification system number of the project site;
(7) the total number of full-time, part-time, and
temporary employees employed by the applicant at the project site
on the date of the application;
(8) the total number of full-time, part-time, and
temporary employees in this state that are employed by the
corporate parent and each subsidiary of the applicant, if any, as of
December 31 of the prior fiscal year;
(9) the dollar amount or fair market value to the
applicant of the development subsidy for which application is being
made;
(10) the number of the applicant's current full-time,
part-time, and temporary employment positions at the project site
for which the hourly wage is:
(A) less than $6 an hour;
(B) at least $6 an hour but less than $7;
(C) at least $7 an hour but less than $8;
(D) at least $8 an hour but less than $9;
(E) at least $9 an hour but less than $10;
(F) at least $10 an hour but less than $11;
(G) at least $11 an hour but less than $12;
(H) at least $12 an hour but less than $13;
(I) at least $13 an hour but less than $14; or
(J) at least $14 an hour;
(11) the number of new full-time, part-time, and
temporary employment positions to be created by the applicant at
the project site for which the starting wage is:
(A) less than $6 an hour;
(B) at least $6 an hour but less than $7;
(C) at least $7 an hour but less than $8;
(D) at least $8 an hour but less than $9;
(E) at least $9 an hour but less than $10;
(F) at least $10 an hour but less than $11;
(G) at least $11 an hour but less than $12;
(H) at least $12 an hour but less than $13;
(I) at least $13 an hour but less than $14; or
(J) at least $14 an hour;
(12) the average hourly wage to be paid to the
applicant's current full-time, part-time, and temporary employees
at the project site for each of the wage groups described by
Subdivision (10);
(13) the average hourly wage to be paid to the
applicant's new full-time, part-time, and temporary employees at
the project site for each of the wage groups described by
Subdivision (11);
(14) if the project site is located in a metropolitan
statistical area, as defined by the federal office of management
and budget, the average hourly wage paid to nonsupervisory
employees in this state for the industries involved at the project,
as established by the United States Bureau of Labor Statistics;
(15) if the project site is located outside the
boundaries of a metropolitan statistical area, the average weekly
wage paid to nonsupervisory employees in the county for industries
involved at the project, as established by the United States
Department of Commerce;
(16) the type and amount of health care coverage to be
provided by the applicant to its employees not later than the 90th
day after the commencement of employment at the project site,
including any costs of the coverage to be paid by the employees;
(17) a description of any other development subsidy
for which the applicant has filed an application or is eligible for
and interested in receiving, including the name of the granting
entity for each subsidy;
(18) a statement as to whether receipt of the
development subsidy will cause a reduction in the workforce at any
other project site or job site of the applicant or the applicant's
corporate parent in this state or another state as a result of
automation, merger, acquisition, corporate restructuring, or other
business activity; and
(19) a statement as to whether the project involves
the relocation of jobs from another location and if it does involve
the relocation of jobs, the number of full-time, part-time, and
temporary employees to be relocated to the project site, and the
location from which the employees are being transferred.
(b) The application must include a signed sworn statement of
the chief executive officer of the applicant certifying that the
application has been reviewed by the officer for factual accuracy.
Sec. 489.103. SUBSIDY LIMIT AND JOB QUALITY STANDARDS. (a)
A granting entity may not grant a development subsidy if the cost
per employment position is greater than $35,000.
(b) The cost per employment position is determined by
dividing the total amount or face value of the development subsidy
by the number of full-time employment positions to be created by the
applicant as described in the application.
(c) A granting entity may not grant a subsidy to an
applicant unless the applicant pays wages to employees at the
project site that are equal to or exceed 85 percent of the average
wage rate established under Sections 489.102(a)(14) and (15), as
appropriate, except that if the applicant is a small business, the
applicant shall pay wages that are equal to or exceed 75 percent of
the average wage rate established under those sections.
Sec. 489.104. APPROVAL OF APPLICATION; AWARDING OF
DEVELOPMENT SUBSIDY. (a) On receipt of a proper application, the
granting entity shall review the application for approval.
(b) A granting entity may not approve an application unless:
(1) the applicant agrees to:
(A) meet its job creation, wage, and health care
coverage requirements not later than the second anniversary of the
date of the subsidy; and
(B) maintain those requirements for the term of
the subsidy or five years, whichever is later; and
(2) the corporate parent of the applicant, if any,
agrees to maintain at least 90 percent of its workforce in this
state on the date of the subsidy for the later of five years or the
term of the subsidy.
(c) A granting entity shall send a copy of each approved
application to the department not later than the 15th day after the
date of approval. The granting entity shall maintain a file of
applications for development subsidies that are not approved.
Sec. 489.105. ANNUAL PROGRESS REPORT. (a) Not later than
February 1 of each year, each granting entity shall file a progress
report with the department for each project for which a development
subsidy has been granted during the previous fiscal year.
(b) The progress report must contain:
(1) the application tracking number;
(2) the name, business address, and business phone
number of the granting entity and of the entity's chief executive
officer;
(3) the name, business address, and business phone
number of the recipient corporation and of the corporation's chief
executive officer;
(4) a summary of the number of full-time, part-time,
and temporary employment positions required, created, and lost
during the year, by wage groups as described by Sections
489.102(a)(10) and (11);
(5) the type and amount of health care coverage
provided to employees at the project site, including any costs of
the coverage to be paid by the employees;
(6) a comparison of the total number of full-time,
part-time, and temporary employees in this state employed by the
recipient's corporate parent, if any, on the date of the
application and on the date of the report; and
(7) a statement as to whether the use of the
development subsidy during the fiscal year has reduced the
workforce at any other project site or job site of the recipient
corporation or its corporate parent, in this state or another
state, as a result of automation, merger, acquisition, corporate
restructuring, or other business activity.
(c) The progress report must include a signed sworn
statement of the chief executive officer of the recipient
corporation certifying that the report has been reviewed by the
officer for factual accuracy.
(d) On each progress report following the initial progress
report, the granting entity must indicate whether the recipient
corporation has met or is still in compliance with its job creation,
wage, and health care coverage requirements and whether the
corporate parent of the recipient corporation, if any, has met or is
still in compliance with its state employment requirement. If
either the recipient corporation or its corporate parent are not in
compliance with any of the requirements described in this
subsection, the recipient corporation or corporate parent shall
state the reason for the noncompliance.
(e) A granting entity shall file a progress report until the
later of:
(1) the end of the term of the development subsidy; or
(2) the fifth anniversary of the date of the subsidy.
Sec. 489.106. RECAPTURE. (a) If a granting entity
determines that a corporation has failed to comply with the
requirements of Section 489.103 and 489.104, the granting body
shall recapture the development subsidy from the recipient
corporation as follows:
(1) if a recipient corporation fails to create the
required number of jobs, pay the required wages, or provide the
required health care coverage, the amount to be recaptured shall be
computed based on the pro rata amount by which the unfulfilled jobs,
wages, or benefits bear to the total amount of the development
subsidy; and
(2) if a corporate parent fails to maintain 90 percent
of its employment in this state, the percentage rate of the amount
to be recaptured is equal to the percentage rate by which the
employment is less than 90 percent multiplied by two.
(b) The granting entity shall provide notice to the
recipient corporation of its intent to recapture the development
subsidy. The notice must include the grounds for the recapture and
the amount to be recaptured.
(c) The recipient corporation shall remit to the granting
entity the amount recaptured under this section not later than the
60th calendar day after the date on which the recapture notice is
received by the corporation.
(d) If a recipient corporation defaults on a development
subsidy for three consecutive calendar years, the granting entity
shall declare the subsidy void and shall notify the department and
the recipient corporation of its declaration. The recipient
corporation must pay any remaining amount or face value of the
development subsidy to the granting entity not later than the 180th
calendar day after the date on which the notice of default is
received by the corporation.
(e) A recipient corporation may appeal a determination or
declaration made by a granting entity under this section to the
department.
Sec. 489.107. UPDATE REPORT ON DEVELOPMENT SUBSIDY. (a)
Not later than the 15th day after the second anniversary of the date
of the subsidy, the granting entity shall file a report with the
department that contains the same information required under
Section 489.105 for the two-year period, including whether the
recipient corporation has achieved its job creation, wage, and
health care coverage requirements and whether the corporate parent,
if any, has maintained its state employment requirement.
(b) The update report must include a signed sworn statement
of the chief executive officer of the recipient corporation
certifying that the report has been reviewed by the officer for
factual accuracy.
Sec. 489.108. PUBLISHING OF REPORTS. For each of the
reports required under this subchapter, the department shall
annually consolidate all of the information contained in the
reports and make the consolidated information available in both
written and electronic form, including making the information
available in a printable format on the department's Internet
website.
[Sections 489.109-489.200 reserved for expansion]
SUBCHAPTER C. ECONOMIC DEVELOPMENT BUDGETS AND REPORTS
Sec. 489.201. CONSOLIDATED ECONOMIC DEVELOPMENT BUDGET.
(a) In this section, "company" means a corporation, partnership,
limited partnership, registered limited liability partnership,
trust, association, joint stock company, joint venture, limited
liability company, or other form of business organization. The
term does not include a sole proprietorship or individual.
(b) Not later than the 90th day after the end of the state's
fiscal year, the comptroller shall submit an annual consolidated
economic development budget to the legislature. The report must
include:
(1) for each state agency or local governmental entity
that developed or engaged in an economic development activity or
project:
(A) legislative appropriations for each economic
development activity or project, if any;
(B) the amount of bond proceeds, taxes, or other
revenue received or collected in connection with or to support each
economic development activity or project, if applicable; and
(C) the amount spent on each economic development
activity or project;
(2) the amount of revenue foregone by this state or a
local governmental entity, to the extent it is possible to assess,
because of exemptions, discounts, exclusions, credits, special
valuations, or abatements provided by this state or a local
governmental entity to a company in relation to:
(A) the state sales, excise, and use tax under
Chapter 151, Tax Code;
(B) the franchise tax under Chapter 171, Tax
Code;
(C) property taxes, including school district
property taxes, property taxes imposed for special district
purposes, and property taxes imposed on inventory;
(D) utility taxes; and
(E) gross receipts taxes; and
(3) the name of each company that claimed any
exemption, discount, exclusion, credit, special valuation, or
abatement described by Subdivision (2) in an amount equal to or
greater than $5,000, including the dollar amount received by that
company.
(c) The report may not include an itemization for any
exemption, discount, exclusion, credit, special valuation, or
abatement described by Subsection (b)(2) in an amount that is less
than $5,000. The comptroller shall report the total dollar amount
for those exemptions, discounts, exclusions, credits, special
valuations, or abatements and the total number of companies
receiving them.
(d) Each state agency and local governmental entity shall
cooperate with the comptroller to the extent necessary and allowed
by law to enable the comptroller to prepare the report required by
this section.
Sec. 489.202. CONSOLIDATED REPORT OF PROPERTY TAX
ABATEMENTS AND REDUCTIONS. (a) Not later than the 90th day after
the end of the entity's fiscal year, each property-taxing entity
shall submit, on a form prescribed by the comptroller, an annual
report to the comptroller regarding any real property in the
entity's jurisdiction that has received an exemption from taxation
under a property tax abatement agreement or a reduction from
taxation for economic development purposes during the entity's
fiscal year.
(b) The report must include:
(1) the name of the property owner;
(2) the location of the property, including the street
address of the property;
(3) the term of any tax abatement agreement, including
the beginning and ending dates of the property tax exemption;
(4) the schedule of any tax reduction for the
property;
(5) the portion of the value of the property that is
exempt from taxation in each year covered by a tax abatement
agreement;
(6) the appraised value of the property before any tax
abatement agreement or reduction takes effect;
(7) an estimate of any loss in ad valorem tax revenue
from the property during the term of any tax abatement agreement or
as a result of any tax reduction; and
(8) any other tax abatement, reduction, or exemption
provided by the entity for the property.
(c) At the end of the entity's fiscal year, each
property-taxing entity shall also submit a report to the
comptroller containing the total property tax revenue foregone by
the entity during the fiscal year as a result of property tax
abatements, reductions, or exemptions provided in the entity's
jurisdiction.
(d) If a property-taxing entity fails to submit a required
report within the prescribed time, the comptroller shall withhold
further payments of any development subsidy to the delinquent
entity until the entity files the required report.
Sec. 489.203. PUBLISHING OF REPORTS. For each of the
reports required under this subchapter, the comptroller shall
annually consolidate all of the information contained in the
reports and make the consolidated information available in both
written and electronic form, including making the information
available in a printable format on the comptroller's Internet
website.
[Sections 489.204-489.300 reserved for expansion]
SUBCHAPTER D. MONITORING AND ENFORCEMENT
Sec. 489.301. ACCESS TO PROJECT SITE AND CERTAIN RECORDS.
(a) The granting entity and the department have the authority to
access the project site and the relevant records of the recipient
corporation at any reasonable time for purposes of monitoring the
project and preparing a progress or other report required under
this chapter.
(b) A recipient corporation that fails to provide the
granting entity with the information or access required under this
section is liable to the state for a civil penalty in an amount not
to exceed:
(1) $1,000 for each day of violation occurring after
the 10th day after the date on which the report is due but before the
21st day after the due date of the report; or
(2) $5,000 for each day of violation occurring after
the 20th day after the report's due date.
(c) The attorney general may bring suit to recover the civil
penalty imposed by this section.
Sec. 489.302. PRIVATE ENFORCEMENT ACTION. (a) If a
granting entity fails to enforce this chapter, any interested
person may bring an action to compel enforcement of this chapter.
(b) The court shall award reasonable attorney's fees and
court costs to a prevailing plaintiff under this section.
SECTION 2. This Act takes effect July 1, 2004.