Muncipalities are finding it easier to borrow from banks than from going out on the bond market, which requires more disclosures. Low interest rates at banks make it an alluring market for municipalities. But leaves bond and credit types frustrated for more transparency. 

Municipal Securities Rulemaking Board isn’t pleased with bank financing. They have asked the SEC to step up and require municipalities to disclose of bank financing. Credit Ratings Agencies have also voiced support for municipal disclsoure of bank financing.  

Governing 

Emile Moline Jr. is the new economic development director for Alvarado. He will be  working with the Johnson County Economic Development Commission. 

via Texas Government Insider 
 

A new bonding mechanism may soon be available for P3 projects. The new bonding option is Qualified Public Infrastructure Bonds. These bonds allow for:

• A cross between governmental bonds and private-activity bonds
• Not subject to the restrictions of Public Activity Bonds
• Increases funding flexibilty
• Lower Costs
• Ability to generate more private sector participation in large-scale P3 projects.
• More infrastructure projects:
  •  airports
  • ports
  • mass transit
  • solid waste disposal
  • sewer
  • water
  • more surface transportation projects.   National Law Review

The 6 Objectives of the Conservative Budget Coalition:

• Eliminate the Margins Tax
• Stronger Spending Limits
• Real Time Budget Transperancy
• Property Tax Limits
  • Require voter approval for property tax increases that exceed the lesser of 5% of population growth plus inflation
• Cut Sales tax & Spending through STaR Fund
  • STaR is the Sales Tax Relief Fund
• Spending Limits:
  • $217.1 B in all Funds
  • $142.2 B in state funds
  • 6.5% growth (popuation + inflations) over 2014-2015

The Coalition Members:

• Texas Public Policy Foundation
• Texans for Fiscal Responsibility
• Americans for Prosperity, Texas
• Americans for Tax Reform
• Tea Party Caucus Legislative Advisory Committee
• Young Conservatives of Texas
• Grassroots America We the People
• NFIB Texas
• R Street Institute
• Our American Initiative
• Texas Eagle Forum
• State Budget Solutions
• Heritage Alliance
• National Taxpayers Union
• Institute for Policy Innovation

www.conservativetexasbudget.com    TPPF 

Mississippi Lt. Gov. has a tax plan to phase out its franchise tax. The plan is called the Taxpayer Pay Act. Here’s what it does:

• Phase Out Franchise Tax (following the footsteps of WV & PA)
•  Tax relief for self-employed taxpayers
• Income tax cut for the first $5,000 of income

The Taxpayer Pay Act goals are:

• Make the state more competitive
• Foster economic growth
• Keep taxpayer dollars with the taxpayers 

Americans for Tax Reform       Forbes

Georgia is proposing a no-bid process for agencies purchasing automobiles produced in Georgia. Ostensibly, the goal is to lure more vehicle manufacturers to Georgia by lowering contracting standards for purchasing Georgia made vehicles. 

Go Georgian, no bid contracts await you.

Atlanta Journal Constitution

The bills:  

• SB 182 by Bettencourt: Lower the roll back effective tax rate to 4%; exceeding that rate automatically triggers an election 
• SB 156 and SJR 14 by Nichols: 5% appraisal cap

Dallas Morning News  breaks down the opposition & support. Opponents Say:

• These bills shift tax burdens (Dallas County Judge Clay Jenkins)
• Cities account for 16% of local taxes while school districts account for 55% (TML)

Supporters Say:

• Lt. Governor Patrick a long time supporter of property tax relief, calling recently for “real tax relief now, and [at] bringing down the value increases that are beyond the reach of many homeowners to keep up with.”
• Senator Bettencourt has pointed to these bills having died in sessions past in the House

TPPF tells us that from 2005-2014, state debt increased 123%. State debt totals $44.3 Billion, which means every human in Texas would need to fork over $1,479.

TPPF offers legislative debt solutions that include:

• requiring the principal cost of debt (debt outstanding)  be provided to taxpayers
• requuiring the total cost of future interest payments (debt service outstanding) be provided to taxpayers

To read more about informing tax payers about state debt: TPPF

In the last five years, there has been a 30% increase in the number of people who sought property tax lending.  What’s on the horizon in 2015 for property tax lending?

• House Business & Industry interim report recommended a 10 day notification period.  
• Consumer Credit Commissioner Pettijohn says technical tweaks are necessary. 
• Banking types are concerned about the loan priority assigned to tax liens which put the tax lender ahead of the original mortgage

Property Tax Lenders Say:

• Banks step in and help homeowners just 12% of the time
• 10 day notice requirement would limit consumer choice

Houston Chronicle

State contracting is under the microscope. This is no junior high science microscope where everything looks grainy, this is an electron microscope fitting of a PhD in neuroscience. 

HB 1, Rider 7.12, sets up new contracting requirements. The big picture:

• Contracts  over $10M or $1M in contracting/purchase will require notifications
• Notification to the LBB, SAO, Governor, and Finance/Appropriations Chairs
• Establish the basis for their contracting methods
• Establish that the contracting methods comply with state contract management and procurement standards

Text of the full rider:

Governor Abbott & Comptroller Hegar announced that the Major Events Trust Fund and the Other Events Trust Fund will be housed in the Governor’s Economic Development and Tourism Division.

The Funds, which return incremental tax increases for events to local governments, have been housed since their creation with the Comptroller’s Office. 

The purposes for the move:

• “maximize efficiency and accountability in state government”
• to optimize our state’s economic development strategy
• “will leverage our existing economic resources and promote Texas as a world-class commercial destination nationally and globally.”  

Governor Abbott and Comptroller Hegar Joint Press Release

A goup of young conservatives, Reformicons, are bucking the broad based tax cut trend and are promoting these options:

• subsidies (certianly not the word conservatives are using)
• tax credits
• incentives

Which conservatives are changing the tone on broad based tax cuts and substituting targeted tax fixes to address the middle class?

• Rick Perry
• Jeb Bush
• Mark Rubio
• Eric Cantor

The young conservatives are pushing targeted ideas as times change, requiring innovative economic thinking.  WSJ

Who is in the corner of tax cuts first?

• Lt. Gov., Senator Nelson, Governor Dallas Business Journal
• State Reps. Murphy & Huberty want to phase out the margins tax Dallas Business Journal
• Senator Creighton  wants to use excess Rainy Day Fund revenue for tax rebates Dallas Business Journal
• Senator Schwertner wants to raise the margins tax trigger to $5 Million Dallas Business Journal

Who is laser focused on reducing state debt obligations?

• State Rep. Lyle Larson Texas Public Radio  
• Senator Eltife Dallas Business Journal Houston Chronicle
• State Rep. Otto wants to use excess Rainy Day Funds to reduce debt Texas Public Radio
• Senator Nelson is flexible, saying “I’m not dug in on almost anything. “  Houston Chronicle

In August Speaker Straus called for Strategic Fiscal Review  (SFR) that consists of:

• fundamental questions about the services provided by agencies
• agency use of state funds
• the extent to which the agency could carry out their missions with fewer employees and resources.

Fall 2014, House Appropriations focused its SFR on these agencies, with the LBB being the information gatherer:

• Trusteed Programs within the Office of the Governor
• Department of Information Resources
• General Revenue-funded programs at the Department of Assistive and Rehabilitative Services
• Higher Education Coordinating Board
• System Offices of General Academic Institutions
• Available University Fund
• Texas State Law Library
• Juvenile Justice Department
• Department of Public Safety
• Department of Transportation
• Public Utility Commission   Speaker Straus August 12, 2014 Press Release 

State Representative John Otto filed HB 5 which codifies SFRs. It will require biennial written reports of selected agencies that include:

• a description of the discrete activities the state  agency is charged with conducting or performing together with:
  •  a justification
  • an evaluation of the effectiveness and efficiency of the state agency’s policies, management, fiscal affairs, and operations in relation to each activity;including:
    •  a quantitative estimate of reasonable adverse effects if the activity ceased
    • an itemized account of expenditures required to maintain the activity at the minimum level of service 
    • an itemized account of expenditures required to maintain the activity at the current level 
    • a ranking of activities by relative importance of each  activity to the overall goals and purposes of the state agency at current service or performance levels;
• recommendations to the legislature regarding whether the legislature should continue funding each activity & at what level HB 5

Total State & Local Debt: $249,600,000,000

• Local Debt: $ 205,300,000,000 or 82.3%
• State Debt: $44,300,000,000 or 17.7%

Bonds backed by the full faith and credit of the state, General Obligation Bonds:

• $10,445,700 in self supporting
• $4,642,700 in non-self supporting

Total Revenue Bonds: $23,562,700

Everyone knows NFIB opposes the impact of the franchise tax. In supporting the Lt. Governor and Governor who have made business tax cuts a priority, NFIB lays out why it supports a repeal:

• 96% of all businesses in TX are small businesses
• Small businesses have “smaller profit margin partly due to competition and pressure from larger firms”
• Small businesses are “hurt most by the state franchise tax.”

Dallas Business Journal

Glendale, AZ, home to the 2015 Super Bowl, is broke according to Americans for Tax Reform. 

Americans for Tax Reform (ATR) opposes public financing of stadiums, among other things. Here’s why ATR is outraged over the Super Bowl Stadium:

• Glendale is small- 230,000 residents
• Moody’s lists its debt at 4.9% of its tax base. Bad, very bad.
  • Glendale’s debt is 4 times the national median & 2 times the average AZ city
  • 40% of the city’s debt is dedicated to paying off sports arenas
• AZ is probably on the hook for $150M for the stadium. A court found the mechanism to pay the stadium debt, an increased rental car tax, is unconstitutional in AZ (the rental car tax is constitutionally dedicated to other things, not stadiums)
• If you tax it, visitors will not come to your state
• Glendale is in Maricopa County which financed $1.2B of the stadium relying on hotel taxes
  • Super Bowl visitors stayed in other counties, thereby not helping with the stadium debt.

Americans for Tax Reform

Florida is asking state economists to rank the economic vitality of sport stadium projects to determine when, and if, state economic development or tax reimbursements should be granted.

What team projects are in the bullseye?

• Jacksonville Jaguars
•  Miami Dolphins
• Orlando City Lions soccer team
• Daytona International Speedway.

The State​ Economic Development agency says no ranking is required. The Speaker of the House requested the rankings. The Speaker Wins & Rankings are moving forward.

Why the drama over pro sports teams?

In 2013, a bill that would have provided financial incentives to the Miami Dolphins died because of concerns of aiding the team’s owner.  Lawmakers returned vowing to protect taxpayers. 

Washington Times

Streamlining Economic Development, Governor Abbott announced that 4 economic development & tourism offices will report to the new Director of Economic Development, Bryan Daniel.

Reporting to Daniel will be:

• Texas Film Commission
• Texas Music Office
• Women’s Commission
• Workforce Investment Council 

Governor Abbott Press Release

Governor Abbott proposed elimination of the Emerging Technology Fund. Fund proceeds would be used to create the new University Research Initiative. Governor Abbott Press Release

Business support includes:

• Texas Association of Business Bill Hammond “praises” the plan.
• John Sharp, Texas A&M Chancellor, “applauds” the move to support university research
• Bill Sproull, CEO of the Metroplex Economic Development Partnership in Dallas-Fort Worth, supports the Governor’s plan

Bill Filed by David Simpson to eliminate Emerging Technology Fund: HB 1037

Austin Business Journal  

Texas House Republican Caucus Chair Tan Parker lays out the following priorities:

• fully funding public school enrollment growth

• strengthening our border security

• bold step toward fully meeting our public highway needs.　 

• keeping spending flat

• leaving billions of available revenue unspent

• Make a strong investment in tax relief for hardworking Texans   The Leader

The Republican Governor of Maine is calling for tax cuts for families and businesses, but the cut could come with a cost to non-profits.

Maine is poised to be the first state to assess a reduced rate property tax on large non-profits, such as colleges and hospitals. Churches would remain exempt.

WSJ

The home page of Governing Magazine features this headline: 

Motorola Gets (Another) No-Bid Contract with Texas County.

The County is Harris. The Contract amount is $7.5 million. Harris County is justifying theno-bid contract because it piggy backed onto a contract that Motorola had received through competitive bidding.

News clips, bill filings, and Governor Abbott press release have all raised concerned about no-bid contracts. See Nelson’s SB 353

As state contracting is under the microscope, local government contracts are prepping their slides for a turn under the microscope.  Governing 

Surgeon General Vivek Murthy said that its unclear if e-cigarettes are friend or foe.

If the associated costs of e-cigarettes are like those of cigarettes, then taxation seems par for the course.

If e-cigarettes lead to cessation of smoking traditional cigarettes, then maybe not so much. 

There are FDA rules on e-cigarettes, like prohibiting sales to minors, but research is inconclusive on the effect of e-cigarettes. ABC 13

TPPF shares its 3 reasons pension reform is crucial:

• Higher taxes and fees are on the horizon.
• Unfunded liabilities are an “astonishing” $56.99 billion.
• Defined benefit pensions are government entitlement programs.
  • “entitlement programs lead to unsustainable government spending growth.”  TPPF

The Comptroller’s annual review of the Texas Economic Development Act is hot off the presses.

What you need to know to be conversant:

• Chapter 313 projects have invested approximately $59.5 billion in Texas through 2013

• 259 active projects (as of May 2014) 
  • 45% are manufacturing
  • 53% are renewable energy 
• $123 billion estimated investment under the 259 agreements
  • 76%of the investments are in manufacturing
  • 21% are in renewable energy.
  • 3% of the investments are in research and development and electric power generation (Integrated Gasification Combined Cycle)
• Jobs breakdown. Total jobs: 5,487 qualifying jobs
  • 89% are in manufacturing
  • 10% are in renewable energy.
  • 1% of jobs are in research and development. 
• Gross tax benefit break down. Total benefit:  $5.5 billion
  • ​72% for manufacturing projects
  • 26% for renewable energy projects
  • 2% for research & development

Making good on her promise to improve transparency in state contracting, Senator Nelson filed SB 353 which will require:

• Ethics training for state agency purchasing personnel
• Disclosures of conflicts of interests for those involved in contract procurement and contract management
• Prohibits contracts if:
  • Agency governing body member(s) have a financial interest
  • Governing official, executive director, general counsel, chief procurement officer, or procurement director of the agency has a financial interest; or
  • A family member of the above has a financial interest
• All no-bid contracts are going online for the world to see
• Big Contracts, over $1 Million and $5Million, have new reporting requirements
• Agencies must have risk analysis procedures.

In the spring of 2014, Attorney General Opinion, [GA-1052], illuminated a drafting error in SB 1678 (2013) that prohibited funds from being awarded when the site selection committee for an event isn’t on the statutory laundry list.

A quagmire emerged for events that thought they qualified for reimbursements. Unhappy event organizers. Happy lawyers.

Welcome to the Remedy:  HB 902 , a short bill that adds NASCAR to the site selection list. 

Refreshing Recollection: Previously on Information Intelligence

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]

“Tax lien lenders are nothing more than payday lenders for homeowners,” said Eric Sandberg Jr., president of the Texas Bankers Association.

As a counter, Propel CEO compares tax lien lending rates to mortgage lending rates. 

What do Banks want to do about it?

• 12-day cooling off period for consumers
• Notice to the mortgage lender, giving the lender the ability to pay off the tax lien

                                                                                                                      Statesman

What did Business & Industry Interim Committee Report recommend?

• 10 day notification period for property owners to notify their mortgage lender before signing a property tax loan

• Require the Office of Consumer Credit Commissioner to collect information “regarding how often mortgage companies pay off the loans, and whether they do so because the borrower has defaulted and the company is trying to protect is collateral. “

Republicans are voting to raise taxes. No, not D.C. Republicans, but Republicans in state legislatures. So, what taxes are they raising?

NV: Gross receipts tax & mining tax |  Information Intelligence 

MI: Sales tax 

UT: E-cigarettes tax | Information Intelligence

SC & SD: Gas tax | Information Intelligence    Transportation funding has been shown to return 400% return on investment, which makes it a safer bet. Information Intelligence

NYTimes

The hottest of hot topics are: Open government & Open Access to government records. There has been ongoing war waging over records in the Tarrant County Water Board. Wars breed bill filings.

Van Taylor’s  SB 335 , SB 336 & SB 337  clarifiy access to local governmental records.

This brewing war over eminent domain and transparency has resulted in :

• $235,000 in campaign contributions for  a local water board Information Intelligence
• Texas Tea Party Requests Information Concerning Eminent Domain from a Texas Water District  Information Intelligence 

Georgia Techies are actively pushing for tax credits like:   

• Extend Angel Investor Tax Credit
• More Film Tax Credits
• “…triple the qualifying period on a sales-tax exemption for companies buying more than $15 million in computer equipment, from one year to three”
  • This tax credit has made Georgia a hot spot for data centers
• Create a committee to make Georgia a leader in data and cyber security
  • Georgia is home to IBM and to U.S. military’s cyber command, which they believe make Georgia the perfect leader in data and cyber security

Athens Online 

5 California mayors are proposing a constitutional initiative to reform pensions which would:

• Give governments authority to negotiate changes to existing employee pensions.
• This will include retiree health benefits would be affected as well.

Remember 2014 GASB rules now require accounting for health care costs to pension systems. Governing

Keeping up with technology is hard. It’s harder for laws. Bills to tax e-cigarettes are swirling around the country, let’s look: 

• Utah looks to gain $10M in revenue by taxing e-cigs
  • The debate notes that nicotine replacements (gum, patches) are not subject to excise taxes
• Minnesota taxes e-cigs
  • By taxing them like packs at $2.90 
• North Carolina taxes e-cigs
  • By taxing the liquid nicotine at the rate of 5-cent per milliliter 
• In 2014, these states introduced tax legislation for e-cigs: Delaware, Hawaii, Indiana, Kentucky, New Jersey, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Vermont and Washington
  • Indiana will tax e-cigs like cigars and impose a licensing requirement on stores that sell e-cigarettes
  • Washington state wants to raise traditional cigarette pack tax and tax e-cigarettes to generate $56M in revenue
• Michigan Governor last week vetoed an e-cig tax because it wasn’t harsh enough

What would be the potential impact?

• Close small businesses that sell e-cigarettes
• If the price is driven up, tobacco, which is cheaper, would see a sales boom

What are the tax trends?

• Tax e-cigs like cigarette packs
• Tax e-cigs like cigars
• Tax e-cigs like nicotine patches or gum
• Tax liquid nicotine, but not the e-cig device
• Tax the business that sell e-cigs by imposing business licensing requirements.

Governing

What received incentives?   Wade Park mixed-use development

Where is it located? Frisco

Which incentives were granted? Local sales and ad valorem tax grants + infrastructure improvements which will be paid through the Frisco Economic Development Corporation and the Frisco Community Development Corporation. The details:

City sales tax grant (half of the city’s 1 percent sales tax collected from the property): $30 million

City ad valorem tax grant (50 percent of the ad valorem taxes collected from the portion of the property dedicated to a mixed-use development of retail, commercial, hotel, multifamily): $60 million

Frisco EDC qualified infrastructure (half of the EDC’s 0.5 percent sales tax revenue generated from the property): $15 million

Frisco CDC qualified infrastructure (half of the CDC’s 0.5 percent sales tax revenue generated from the property): $15 million

City waiving reimbursement costs (costs owed to city from developer for building Lebanon Road and Parkwood Drive): $1.25 million 

Frisco EDC building John Hickman Parkway (EDC will build John Hickman from the tollway to Parkwood): $1.5 million

Total incentive package assuming all performance measures are achieved: $122.75 million

Dallas Morning News RECON @ the Texas A&M Real Estate Center

SJR 9 by Van Taylor would move the ball toward legislative approval of rule making.

Sound far fetched? It’s not.  Other states are doing it:

• 59 % of Arkansas Voters approved it this past November. 
• Utah does it. 
• Idaho tried. 50.59% of voters opposed it. 

A quick, non-exhaustive, list of contentious Texas rule making issues:

• The Railroad Commission common carrier rule making, which is a fight over eminent domain.
• The Racing Commission rule making on historical racing terminals, a fight currently waged in Texas Courts. 

An area heavily dependent on oil and gas, Eagle Pass ISD,  had their A+ bond rating affirmed by Fitch Ratings.

Good News for stability in lending.  Business Wire

Tea Party wants to reign in state and local debt to increase government finance transparency. It’s on every other op-ed/press release. Dallas Morning News examines whether lower oil prices affect Texas debt and equity markets.

• Short answer- don’t know yet.
• Best answer- so far; there’s no sign of an impact on lending.
• Concerning Answer: money people are talking about it. 

It’s a toss up whether underwriters will increase scrutiny on debt and equity markets in Texas after lower oil prices. The pros & cons:

• Con: Knee Jerk Reaction:
  • “There is a knee-jerk reactions to do that,” said Stuart Wernick, senior vice president of Dallas-based Berkadia Commercial Mortgage LLC. “I was in Miami last week at a conference, and two guys came up to me telling me, ‘You are in Texas, right? It’s going to be tough.’  “They said they are going to be more stringent in their underwriting.”
• Pro: No Current Impact: 
  • Anne Raymond, managing director of Crow Holdings, said investors will be discerning in their evaluation of the nuances of Texas’ real estate markets.

    “Of course, it is very early to understand the implications of the falling oil prices,” she said. “To date, however, we have experienced no concern from lenders and equity partners for deals in Austin or Dallas.

• Con: All of Texas is the Same:

  • “People lump the whole state together in terms of energy,” said Mark Dotzour, chief economist at the Real Estate Center at Texas A&M Univeristy. “Some underwriters may scrutinize loans in Texas more.

    “There are a lot of people who only read the headlines, and if they do, they will think Texas is in trouble.”

Dallas Morning News

Pension Systems have diverse investments. CALPERS, California’s state retirement system, has some land investments.Very valuable land in the middle of Sacramento. Land that would make for an ideal Sacramento Kings arena.

CALPERS says the land’s value is $12.5 Million. It has a fiduciary duty to protect the financial integrity of its retirement system. The City of Sacramento finds this value millions too high.

Sacramento Bee

Governor Sandoval (R-NV), who gave up his federal judgeship to run for state office, is proposing a gross receipts tax. The details of his proposal:

• $570 million tax-increase package
• Gross receipts tax that would cost businesses from $400 to $4 million.
  • Greatest burden on businesses grossing over $1Billion
  • Currently businesses pay a $200 business license fee
• Also in the Governor’s tax proposal:
  • Cigarette taxes go up to $1.20 from $0.80
  • Slot machine route operators would be taxed like casinos
  • Increase the mining payroll tax to 2%, up from 1.17%     Las Vegas Sun

Tesla’s new Nevada plant will be near one the largest lithium mines, which its cars require. Reno Gazette Journal

Only 11 states have funded more than 10% of retiree health care liabilities. Thank you to Standard & Poors for tracking the data.

The potential lingering debt liabilities do not grow rosier if we look locally. According to a study by Pew Charitable trusts only 8 of the largest 30 cities fund 5% of retiree health benefits.

These health benefits fill the gap before medicare kicks in for the retirees. If state and local employs retire in their 50s, it could be 15 year of health benefits.

GASB saw the problem. 2014 GASB rules require that governments show these unfunded liabilities on their balance sheets. 

Suggested reforms:

• Link health-care to the number of years of service, above a threshold.
• Apply new reductions in health-care benefits to new or younger workers, while not impacting the health benefits of retired employees.

Wall Street Journal Opinion of Robert Pozen, Harvard Business School

LBB answers questions about the mysteries of fiscal notes:

Speaker Straus announced that the House budget will include provisions that require contracts with an agency or institution of higher education to meet new requirements. 

Which Contracts are affected?

• Contracts over $10 million,  or
• A contract or purchases over $1 million that didn’t go through a competitive bidding process.

What are the new contract transparency requirements?

• Notification, within 30 days, will be required to the following: 
  • ​ Legislative Budget Board
  • Governor
  • State Auditor
  • chair of the House Appropriations Committee
  • chair of the Senate Finance Committee and
  • chairs of any other committees with jurisdiction over contracting 
• Information about the nature of the contract and the vendor awarded it.
• Certification by the agency’s executive director that:
  • They complied with the state’s Contract Management Guide, State of Texas Procurement Manual and all applicable laws.
  • And, if they did not, why, with a legal justification.
  • A certification by the agency’s executive director that the agency can verify vendor performance and deliverables, payment of goods and services only within the scope of the contract, and other information.
• The LBB becomes the enforcer.
  • LBB must sign off before the Comptroller will release funds. 

Speaker Straus Press Release

8 Reasons why the Gas tax Should be abolished:

• Cars are more efficient, eroding the projected growth of the tax 
• Purchasing Power of the Gas Tax has slipped
• Diversions
  • 1/4 the federal gas tax is diverted to:
    •  mass transit in 6 metro areas &
    •  other programs:  street cars, ferries, sidewalks, bike lanes, hiking trails, urban planning and  landscaping nationwide
• Federal spending on “other programs”  has increased 38% since 2008, while highway spending is flat.
• Texas recovered only 88 cents of every dollar
• 7 states and Washington, D.C. eceived more than twice as much.  
• “States can build cheaper in any case, since the Davis-Bacon prevailing wage rules and Buy America procurement provisions that accompany federal funding don’t apply.”

WSJ

If you want people to read interim committee reports, make them interesting. That’s exactly what the House Committee on Economic and Small Business Development did. 

The committee handled hot topics, sifted through detailed audits, and successfully managed to entice people to read their report. Kudos.

The report’s big picture: Texas needs economic development incentives.  But, we’ve got to do it right, and do better with accountability and transparency. In the midst of its clever approach, the committee makes serious recommendations, including establishing specific accountability measures for each fund. 

Houston Chronicle covered the report’s popularity.

House Committee on Economic Development 83R Report

An economic analysis of SB 276, by Campbell, creating the Taxpayer Savings Grant Program, providing grants for private school tuition reimbursements, lists the following economic benefits of the bill:

• Increased GDP 17-30% over 25 years
• Increased property values by 20% or more
• Boost the economy with an increasingly educated workforce
• 560,000 and 985,000 new jobs 

 TPPF

The House Select Committee on Economic Incentives released its interim report calling for consolidated economic development funds with more oversight and more transparency. if this were a court opnion, it’d be a plurality. What everyone agreed on- the auditor reports were spot on, transperancy and accountability can be improved.

Multiple State Auditor reports referenced in the report and the letters of the 4 members, who added their own take to the report.  The Auditor Reports:

Enterprise Fund Audit | September 2014 | Need more Checks & Balances | SAO 15-003 

Emerging Technology Fund Audit | April 2011 | Consistency, Transparency & Accountability |  SAO 11-029   

313 Economic Development Act Audit | November 2014 | Trust, But Verify (Information)| SAO 15-009

The laundry list of reasons this Bloomberg View piece says, “Oil May Not Mess With Texas:”

• “Energy is only 11 percent of Texas’ economy.”
• “In the decade and a half after 1986, Texas’ economy grew by 118 percent, while the mining industry (which includes oil and gas) grew only 18 percent.”
• “Texas actually exports more high-technology goods to other countries than does California.”
• Young population
• Favorable regulatory climate
• Low Taxes
• High job growth in:
  • professional services
  • technology
  • health care

Bloomberg View

As part of an economic development deal with the City of Houston, Valero’s refinery within Houston’s city limits was de-annexed. Thereby, Valero has a lower property tax burden. Information Intelligence

Empower Texas reacted, like this:

• “allowed to skirt around Houston’s property taxes”
• “Essentially this means that city hall could reduce property tax on any Houston homeowner, but they chose Valero.”
• “While the average homeowner in Houston could benefit from a property tax break, developers are using theirs to build lavish lofts.”
• “Reports show the city’s deficit is growing and it seems that there is no effort from city hall to curb the growing debt. Rather than taking away tax-breaks from businesses to increase inflow, City Hall chooses to increase rates on taxpayers.”  

Empower Texashttp://www.empowertexans.com/around-texas/bayou-city-favors-big-business-over-taxpayers/

After the Comptroller announcement that there will be a surplus of $7.5billion, TPPF issued a press release with these highlights:

• A surplus shows Texans are taxed too much
• Calls for substantial tax relief
• TPPF and 13 organizations have called for a conservative budget,  limited to no more than $217.1 billion (The Comptroller estimates of all funds available is $220B)

TPPF Press Release:

FOR IMMEDIATE RELEASE
January 12, 2015

TPPF Statement on the Texas Comptroller’s
2016-17 Biennial Revenue Estimate 

By effectively prioritizing state spending, the Legislature
will have sufficient funds to provide substantial tax relief. 

AUSTIN – Today, Texas Comptroller Glenn Hegar released the report Biennial Revenue Estimate 2016-17 that provides the 84th Texas Legislature with an estimate of revenue likely available to appropriate for the next two-year budget. Given the state’s constitution requires a balanced budget, this report sets the stage for how much legislators have available for spending and tax cuts in the 2015 Legislative Session that starts tomorrow.
 
The report shows that there will likely be $113 billion in general revenue-related funds available. This amount is calculated from a $7.5 billion surplus at the end of the current 2014-15 fiscal period plus general revenue-related funds of $110.4 billion during the 2016-17 budget period less $5 billion in transfers to the state’s Rainy Day Fund and State Highway Fund. The estimated amount of total funds available, including state and federal funds, is $220.9 billion.
 
The Foundation’s Center for Fiscal Policy Director Talmadge Heflin issued the following statement:
 
“With another surplus expected during the current budget period, Texans are clearly taxed too much,” said Heflin. “Despite economic concerns over the steep drop in oil prices, today’s revenue estimate for the upcoming two-year budget period shows that there will be sufficient revenue available from continued economic growth to cover core government functions and provide substantial tax relief.
 
“The Texas Public Policy Foundation and 13 other organizations have called for the Texas Legislature to pass a conservative Texas budget. This conservative budget would limit the total budget to no more than $217.1 billion providing legislators with room for tax relief. To sustain the nation’s economic and job creation engine that has provided opportunities for Texans to prosper, legislators should work to eliminate the margin tax as they limit the growth of the state’s budget.”The Honorable Talmadge Heflin, Director of the Center for Fiscal Policy at the Texas Public Policy Foundation. In the 78th Session, Heflin served as chairman of the House Committee on Appropriations and navigated a $10 billion state budget shortfall through targeted spending cuts that allowed Texans to avoid a tax increase.

The Texas Public Policy Foundation is a non-profit, free-market research institute based in Austin, Texas.

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The Numbers:

• $7.5B beginning balance for 2015 Lege
• $110.4B General Revenue Collections
• $113B for general purpose spending

Comptroller Hegar Comments on Economic Forecast:

2016-2017 Biennial Revenue Estimate   Comptroller One Pager: Why it Counts Comptroller Press Release

TPPF on the margin tax: “The margin tax is an inefficient form of taxation that presents both a financial and compliance burden on small businesses and the Texas economy. “

It’s recommendation for margin tax reform in 2015 include:

• 1. Use the budget surplus to quickly buy down and eliminate the margin tax. 

​  TPPF

TPPF’s pension, local & state, related recommendations:

Valero operates a large refinery within the city limits of Houston. It’s the only refinery within the city limits. To ensure an $800Million expansion in Texas, isn’t replaced by a  move to Louisiana, Houston City Council is voting to redefine the location of the plant.  

The reported tax deal is:

• Valero will pay a projected $37.7 million in fees under the 15-year deal,
• Roughly $10 – $18 million less than if the refinery remained in Houston and paid property taxes

Residential property tax activists are not pleased. Houston has hit the revenue cap, and if the revenue cap remains static, then there would no revenue impact to the city.  Houston Chronicle 

The updated forms:

• Texas Economic Development Act Agreement (Form 50-826)
• Biennial School District Cost Data Request (CDR) (Form 50-827)

The corresponding rule changes for the updated forms were published for comment in the 1/2/15 Texas Register. 

Dynamic fiscal modeling is often heralded as necessary by fiscal conservatives in Texas. This week the U.S. House adopted a rule to require dynamic fiscal models.

The benefits of dynamic modeling:

• More favorable for tax cuts
• Includes broad economy  impacts ( think: rates of inflation and employment)
• More comprehensive view of a bill’s impact on the federal budget.

The Hill NYTimes

WallStreet Journal reports on the effect of declining oil prices on Texas Economy:

“Richard Fisher, President of the Federal Reserve Bank of Dallas, says the Lone Star state may have expanded into other industries enough to ward off a downturn. “This is a test,” Mr. Fisher said. “Is Texas indeed as diversified as people like me say it is?”  WSJ Energy Journal

Two conflicting Texas federal court rulings on whether property tax lending will impact the future of their business. Under state law is it an extension of credit or not?

• Senior U.S. District Judge Harry Lee Hudspeth ruled that property tax loans are an extension of credit governed by the federal Truth in Lending Act (TILA).
• U.S. District Judge Orlando Garcia ruled that allowing property taxpayers to defer the payment of their property-tax obligations doesn’t amount to an offer of credit, so the transactions are not subject to TILA.

According to Empower Texas, 52% of the gas tax is diverted and tolls are back-end taxes.  Their proposal is: 

“Republican leadership must push stricter, constitutional limits on total spending growth that can’t be gamed.”

Empower Texas

Last year California produced 3.5 million gallons of olive oil. Texas produced 15,000 gallons of olive oil. 

The US is one of the world’s largest consumers of olive oil, and it imports 97% of the olive oil consumed. There’s a market as California has learned. 

“Olive farming isn’t going to provide huge numbers of jobs,” said Tunstall, research director at the Institute for Economic Development at the University of Texas at San Antonio. “But it offers some specialization.”

Bloomberg

Environment Texas supports economic incentives for solar power based on these facts:

• Solar is currently the fastest-growing industry in the country
• In 2013 it  added 143,000 jobs nationwide.
• Employs 4,000 people in Texas
• Is on its way to providing 20% of Texas power.

Houston Chronicle 

Governing Magazine looks at the tax interests of  Texas legislators; Phil King; Craig Estes;  Dan Patrick; Greg Abbott. Highlights: 

•  “Making sure that government tightens its belt will be a — if not the — priority of the session,” says Phil King, national chair of the conservative American Legislative Exchange Council.
• On Business Taxes:
  • Greg Abbott, the incoming governor, has expressed support for modifying or eliminating the business franchise tax, which accounts for 10 percent of the state’s revenues. “The question is, can we afford to get rid of it?” says state Sen. Craig Estes. “We’re crunching the numbers and I think the answer is yes.”
• On Property Taxes:
  • “Maybe so, but there’s competition for those dollars, even among tax-cut true believers. Lt. Gov. Dan Patrick, who presides over the state Senate, is more interested in reducing the burden on property taxpayers than on businesses.”
• On Transportation Funding:
  • “Texas voters approved a measure that will redirect a share of the state’s energy revenues from its rainy day fund, devoting them to roads instead. That is expected to increase the state’s infrastructure budget by $1.7 billion in 2015 alone. But given increasing demands, “that gets us only halfway, at best, to where we need to be,” says King. “We’re probably still at least a couple billion a year short on transportation funding, and that’s a conservative estimate.”   Governing

To expand Medicaid, Arizona Governor Jan Brewer proposed a fee on hospitals. It passed. 36 Republican legislators sued claiming the hospital fee was really a tax, triggering a required 2/3 vote by the Arizona Legislature.

 An Appellate Court allowed the suit noting that the legislators have a constitutional right to support the efficacy of their votes. If the 2/3 vote was required, the legislators purport the measure would have failed.  

Courthouse News Service

Last week the Joint Select Committee on Economic Stabilization Fund Balance set the fund’s floor at $7Billion. Panola Watchman

The LBB presented materials on the background and composition of the Rainy Day Fund (AKA Economic Stabilization Fund). This LBB document gives you:

• 1 slide history of the Rainy Day Fund
• A chart detailing which funds go into the Rainy Day Fund
• Estimates for Rainy Day Fund
• History of Transfers to the Rainy Day Fund
• The votes needed to access the fund: 2/3 present for any purpose; 3/5 present in other situations (depends on which portion of the TX Constitution you reference to get to the funds)

LBB

Local governmental entities can approve extra sales tax for economic development purposes, which Ray Perryman says has “enhanced the performance of the state economy.”

Perryman lists 3 reasons Economic Development Corporations, funded by this sales tax, are key to Texas economic growth: 

• EDCs increase job opportunities
• EDCs increase business investment, and
• EDCs increase tax receipts. 

Perryman lists 5 factors as to why an array of economic development options are crucial:

• Increase in labor and capital mobility 
• More sophisticated site selection process
• Increasing globalization
• Higher public scrutiny for businesses in debt and equity markets
• Use of site selection consultants

Midland Reporter Telegram

Greater Houston Partnership Annual Report says 62,900 new jobs will come to the Hosuton Area in 2015. Any losses in oil production jobs will be offset by petro-chemical jobs increasing. 

GHP Employment Forecast Press Release: Greater Houston Partnership  Click 2 Houston 

Take aways from a Conroe forum featuring Senator Nichols and Representative-Elect Metcalf:

• $3.5Billion can be added to road funding by dedicating vehcile sales tax to TXDOT
• Cut unnecessary spending 
• To offset the hit to general revenue from dedicating the vehicle sales tax, Metcalf is quoted as saying “Our plan is to add 10 percent of the funds to the road funds over a 10-year span.”

[The Courier of Montgomery County]

TPPF supports tax liens as a tool for maintaining homeownership.

To support their positions, TPPF points to:

•  Tax lien transfers “do not impose a new obligation on property owners.”
• “Instead, the transfers offer them a way to restructure an existing debt…” [Statesman]

Beaumont editorial details additional costs needed in public education and transportation, but concludes by calling on the Legislature to return the budget surplus to the taxpayers. [Beaumont Enterprise]

[LBB]

Ray Perryman offers 6 reasons our economy has been strong:

• Technology sectors,
• Incentive programs,
• Texas’ workforce,
• Texas’ location,
• Texas’ cost structure,
• ” But the oil boom above all of that is really what has created so much additional momentum for the state,”

[KSAT 12 ABC]

The Texas Supreme Court has upheld the pole tax just in time for the holidays. [TX Tribune] [TX Tribune via San Marcos Mercury] [1200 News Radio WOAI] [Law 360]

Previously on Information Intelligence: Is the $5 entrance fee to Strip Clubs an Occupation Tax? Whose Occupation- the bouncers? the dancers? the janitors?  

Whoever said tax law was boring, hasn’t been paying attention. The Legislature nobly passed this tax to increase funding to  domestic violence prevention programs. But, since it passed the Legislature in 2008, this tax is a lesson in litigating tax laws.  

First, the Texas Supreme Court says in 2011 we may have a first amendment violation of free speech. The case gets sent back to the trial court to look at it again. Back through the courts we go for 3 more years. Now the courts say so long to the first amendment, and hello occupation tax. Wait, if its an occupation tax, we have to allocate 25% to public education, scratch that analysis. Definitely not an occupation tax. It’s just a tax. Definitely no first amendment problems, thanks to a U.S. Supreme Court ruling. But, wait folks, it’s not done yet, we still have the Texas Supreme Court to give its final word. [Third Court of Appeals] [Texas Tribune]

The official press release lists the group’s website as www.fairtaxesfortexas.com. [PRNewswire]

Previously on Information Intelligence:  TAB, Realtors Join Forces to Stop Sales Price Disclosure

Texas Association of Business and the Realtors are joining forces to oppose mandatory sales price disclosure. The group will be called Coalition for Equal and Uniform Taxation, and will also include: 

•  North Texas chapter of NAIOP
• Texas chapter of the International Council of Shopping Centers
• Texas Association of Builders
• Texas Self Storage Association
• Texas Hotel & Lodging Association have formed the 

Sales price disclosure has been supported by county appraisers.  [Austin Business Journal] 

In sharp contrast to the Dallas Morning News editorial supporting tax incentives, the Beaumont editorial leads with “Economic speculation isn’t good fit for Texas school districts.” The editorial goes on to call the audit “disturbing.” [Beaumont Enterprise]

Add the Tyler Morning Telegraph editorial board to those supporting reforming or ending the margins tax.

The editorial relies on TPPF data, and says either Sen. Estes’ bill to eliminate the margins tax or Sen. Schwertner’s bill to increase the deduction to $5 million would be an improvement. [Tyler Morning Telegraph]

The State Auditor released a report looking at 313 tax abatement agreements. The auditor made recommendations below. Dallas Morning News supports Texas being in the game, offering tax incentives, but supports monitoring of tax incentives and abatements. 

— Requiring independent verification of information that businesses provide to school districts on job creation and investment pledged as part of a tax break deal.

— Requiring school district officials and employees to disclose annually any potential conflicts of interest with the tax break agreements.

— Require the state comptroller’s office to obtain and post on its website copies of tax credit applications from school districts that granted credits.

— Require the comptroller to define performance requirements school districts must include in tax break agreements with businesses and require districts to review compliance annually.

[Dallas Morning News]

New TPPF publication: Tax Lien Transfers: A Reasonable Means of Rectifying Property Tax Obligations.

Big picture, in TPPF’s words:

• Tax lien transfers offer Texas property owners a reasonable and cost effective means of rectifying their tax obligation
• The demand for tax liens is driven in part by the Texas’ overreliance on property taxes as a main source of public revenue. 

• Denying Texas property owners access to tax lien transfers will not eliminate demand but merely push them into an expensive delinquency process. [TPPF]

• TPPF: Should have gone with a lower rate 
• Statesman: “Texas budget board picks lowest spending cap”
• Breitbart: Texas budget board picks lowest spending cap
• Texas Tribune: Texas Leaders Adopt Spending Cap for Next Budget
• Dallas Morning News Trailblazers:  State leaders set tighter spending limit than required, rebut critics on the right
• The LBB documents: [The LBB Motion and Vote] [Revenue Documents: How do Tax Revenues Break Down by Tax] [Revenue Estimator’s Report: Fiscal and Economic Conditions]

TPPF highlights:

• LBB vote reflects a rate of growth of 11.68% on personal income
• TPPF recommends a 6.5% limit on the growth of the entire state budget
• TPPF supports its recommendation with:
  • total spending is up 13.4 percent
  • support for “…match[ing] spending growth with Texas families’ ability to support it by limiting the increase in appropriations to population growth plus inflation.”  [TPPF Press Release]

LBB met on Monday to set the revenue limit for the 2015 legislature at $94,267,654,158.   

[The LBB Motion and Vote] [Revenue Documents: How do Tax Revenues Break Down by Tax] [Revenue Estimator’s Report: Fiscal and Economic Conditions]

A Texas A&M study found that the economic activity generated from state parks is an estimated: 

Texas Association of Business and the Realtors are joining forces to oppose mandatory sales price disclosure. The group will be called Coalition for Equal and Uniform Taxation, and will also include: 

•  North Texas chapter of NAIOP
• Texas chapter of the International Council of Shopping Centers
• Texas Association of Builders
• Texas Self Storage Association
• Texas Hotel & Lodging Association have formed the 

Sales price disclosure has been supported by county appraisers.  [Austin Business Journal] 

House Select Committee on Economic Development Incentives will soon release its report on economic devleopment programs. Economic development dominated conversations this fall, especially as oil prices fall. 

2 state auditor reports have been published within months of each other,  and an audit from a few years ago has found new life as Texas determines how to keep its economic engine alive and kicking.

• Late August release of the SAO report on the Enterprise Fund [SAO]
• November release of the SAO review of 313 Programs [SAO]
• 2011’s SAO review of Emerging Technology Fund [SAO] 

As we near the release of the report from the House Select Committee on Economic Incentives, let’s look back at the State Auditor Report on the Enterprise Fund. The SAO report sparked the newsclips which purport that funds were awarded without adequate application, or in some cases, any application. [SAO]

What’s more important than job growth to Texas economy? Research.

That’s according to noted economist Ray Perryman. Quality research leads to quality education with leads to a quality, educated workforce. It’s a chicken and egg situation. [Perryman Group, ” US Energy Workforce”] [Corpus Christi Caller]

Fuel Fix notes two recommendations from State Auditor Keel regarding Chapter 313 Agreements: 

• Require independent verification
• Set tighter policies on school board members and district employees who handle tax break applications.  [Fuel Fix] [SAO Report]

313 Tax Abatement Agreements allow school districts to affect the taxable value of appraised property to ecourage capital investment and jobs creation.

On Friday, the Sate Auditor released a report directing attention to the self-reporting required under Tax Code Chapter 313. [SAO]

At a Tea Party candidate forum this weekend, SD 18 candidates were asked about whether their businesses participated in any RFP process.  [Big Jolly Politics]

Furgeson, Missouri has challenges. Add to the list of challenges, declining sales tax revenues due to protests. The month protests began, sales tax revenue fell by nearly 25%. [Washington Post]

TPPF proposes eliminating the property tax, swapping it for a broad base sales tax at a rate of 11%. TPPF points to a report by economist Art Laffler. The economic benefits listed in the report incude: 

• personal income would likely increase by at least $23 billion during the five years after the swap compared with the current tax structure.
• create more than 200,000 net nonfarm jobs during this five-year period

[TPPF]

New Jersey needs more funding for transportation. Its a common refrain. New Jersey has the nation’s 2nd lowest gas tax at 10.5 cents. 

New Jersey has a Transportation Trust Fund, but the funds  go to pay transportation bond debt. Sounding familiar?

To fill transportation funding gaps, NJ raised its toll prices. It’s not enough.

The head of the Assembly’s Transportation Committee wants to increase the wholesale gas price. The cost to people in NJ will be about 80cents per day, but it will raise $1.25 Billion per year for transportation funding.

A couple weeks ago there was an election, and a lone Republican Governor lost his re-election bid in Pennsylvania’s. He had signed a nearly 30 cent increase in the gas tax. That’s on Chris Christie’s mind as NJ grapples with funding transportation. [NorthJersey.Com]

Add the Marketplace Fairness Act to the list of things US Senator Ted Cruz opposes. He calls it bad for consumers and for small start ups. Marketplace Fairness would allow what Cruz labels an internet sales tax. Speaker Boehner calls it DOA in his chamber. 

Brick and mortar retailers think it will level competition. Supporters include: National Governors Association, National Retail Federation and Alliance for Main Street Fairness.

An Alliance spokesperson said, “The Texas small business community, tea party leaders, and state legislators support e-fairness because it closes loopholes, protects the free market.” [Dallas Morning News]

Refreshing Recollection: Texas House Ways & Means had a hearing about it in October. 

A major state univeristy system has two arguments against complying with state transparency laws:

• Our university is a lot more than just a budget. Your laws cannot pigeon hole us.
• Our univerisity collects its revenue information in a different format, so we can’t really answer your questions accurately. So, we’ll just not comply.

The university’s positions sound like legalese. It’s also like when my dog eats the cat food, looks innocent like he has no idea what happened, while he has cat food crumbles stuck in his wrinkles.

The University- University of California System. [SF Gate]

Americans for Tax Reform sent a letter to members of the 2015 Texas Legislature urging members to:

• “Rein in the unsustainable trajectory of state spending, which can be accomplished by instituting a true and unbustable state spending cap; and
• eliminate the state’s business tax, otherwise known as the margin tax.”

  Grover Norquist urges legislators to follow TPPF’s advice. He points members to the TPPF publication, The Conservative Texas Budget.

[Americans for Tax Reform]

Property Tax Relief and Santa Claus are both on their way to Texas. Whether one or both are real is a bigger question. Senator Bettencourt filed SB 182 to cut the tax rollback rate in half.

The Senator’s words:

“If property appraisals go up, tax rates should come down; otherwise property tax bills will continue to go through the roof. In this example, a 5 penny tax rate cut means that homeowners and business owners would both get the same tax relief because the taxing jurisdictions would have to keep their rates below the new, lower rollback tax rate limit.”  [Breitbart]

San Antonio Express News Business Writer and Columnist David Hendricks declares the Legislature will act on a business tax bill.

Week #1 of prefiling offers plenty of business tax bills to choose from- repeal the margins tax, reduce the rate of the amrgins tax, increase the exemption to $5 million, phase out the margins tax,  and/or add in new exemptions.  [San Antonio Express News]

Milwaukee Bucks need a new stadium. An option is taxing the income of professional atheltes and stadium workers. It’s creative tax revenue usage. [AP]