S.B. No. 771

An act relating to tax increment financing.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subsection (a), Section 311.005, Tax Code, is
amended to read as follows:
(a) To be designated as a reinvestment zone, an area must:
(1) substantially arrest or impair the sound growth of
the municipality creating the zone, retard the provision of housing
accommodations, or constitute an economic or social liability and
be a menace to the public health, safety, morals, or welfare in its
present condition and use because of the presence of:
(A) a substantial number of substandard, slum,
deteriorated, or deteriorating structures;
(B) the predominance of defective or inadequate
sidewalk or street layout;
(C) faulty lot layout in relation to size,
adequacy, accessibility, or usefulness;
(D) unsanitary or unsafe conditions;
(E) the deterioration of site or other
improvements;
(F) tax or special assessment delinquency
exceeding the fair value of the land;
(G) defective or unusual conditions of title;
[or]
(H) conditions that endanger life or property by
fire or other cause; or
(I) structures, other than single-family
residential structures, less than 10 percent of the square footage
of which has been used for commercial, industrial, or residential
purposes during the preceding 12 years, if the municipality has a
population of 100,000 or more;
(2) be predominantly open and, because of obsolete
platting, deterioration of structures or site improvements, or
other factors, substantially impair or arrest the sound growth of
the municipality; [or]
(3) be in a federally assisted new community located
in the municipality or in an area immediately adjacent to a
federally assisted new community; or
(5) be an area described in a petition requesting that
the area be designated as a reinvestment zone, if the petition is
submitted to the governing body of the municipality by the owners of
property constituting at least 50 percent of the appraised value of
the property in the area according to the most recent certified
appraisal roll for the county in which the area is located.
SECTION 2. Section 311.008, Tax Code, is amended by adding
Subsection (e) to read as follows:
(e) The implementation of a project plan to alleviate a
condition described by Section 311.005(a)(1), (2), or (3) and to
promote development or redevelopment of a reinvestment zone in
accordance with this chapter serves a public purpose.
SECTION 3. Chapter 311, Tax Code, is amended by adding
Section 311.0087 to read as follows:
Sec. 311.0087. RESTRICTION ON POWERS OF CERTAIN
MUNICIPALITIES. (a) This section applies only to a proposed
reinvestment zone:
(1) the designation of which is requested in a
petition submitted under Section 311.005(a)(5) before July 31,
2004, to the governing body of a home-rule municipality that:
(A) has a population of more than 1.1 million;
(B) is located primarily in a county with a
population of 1.5 million or less; and
(C) has created at least 20 reinvestment zones
under this chapter; and
(2) that is the subject of a resolution of intent that
was adopted before October 31, 2004, by the governing body of the
municipality.
(b) If the municipality imposes a fee of more than $25,000
for processing the petition, the municipality may not require a
property owner who submitted the petition, as a condition of
designating the reinvestment zone or approving a development
agreement, interlocal agreement, or project plan for the proposed
reinvestment zone:
(1) to waive any rights of the owner under Chapter 245,
Local Government Code, or under any agreed order or settlement
agreement to which the municipality is a party;
(2) to dedicate more than 20 percent of the owner’s
land in the area described in the petition as open-space land; or
(3) to use a nonconventional use pattern for a
development to be located within the proposed reinvestment zone.
SECTION 4. Section 311.010, Tax Code, is amended by adding
Subsections (g), (h), and (i) to read as follows:
(g) Chapter 252, Local Government Code, does not apply to a
dedication, pledge, or other use of revenue in the tax increment
fund for a reinvestment zone by the board of directors of the zone
in carrying out its powers under Subsection (b).
(h) Subject to the approval of the governing body of the
municipality that created the zone, the board of directors of a
reinvestment zone, as necessary or convenient to implement the
project plan and reinvestment zone financing plan and achieve their
purposes, may establish and provide for the administration of one
or more programs for the public purposes of developing and
diversifying the economy of the zone, eliminating unemployment and
underemployment in the zone, and developing or expanding
transportation, business, and commercial activity in the zone,
including programs to make grants and loans from the tax increment
fund of the zone in an aggregate amount not to exceed the amount of
the tax increment produced by the municipality and paid into the tax
increment fund for the zone for activities that benefit the zone and
stimulate business and commercial activity in the zone. For
purposes of this subsection, on approval of the municipality, the
board of directors of the zone has all the powers of a municipality
under Chapter 380, Local Government Code.
(i) The board of directors of a reinvestment zone or a local
government corporation administering a reinvestment zone may
contract with the municipality that created the zone to allocate
from the tax increment fund for the zone an amount equal to the tax
increment produced by the municipality and paid into the tax
increment fund for the zone to pay the incremental costs of
providing municipal services incurred as a result of the creation
of the zone or the development or redevelopment of the land in the
zone, regardless of whether the costs of those services are
identified in the project plan or reinvestment zone financing plan
for the zone.
SECTION 5. Section 311.013, Tax Code, is amended by
amending Subsection (b) and adding Subsections (l) and (m) to read
as follows:
(b) Each taxing unit shall pay into the tax increment fund
for the zone an amount equal to the tax increment produced by the
unit, less the sum of:
(1) property taxes produced from the tax increments
that are, by contract executed before the designation of the area as
a reinvestment zone, required to be paid by the unit to another
political subdivision; and
(2) for a taxing unit other than the municipality that
created the zone, a portion, not to exceed 15 percent, of the tax
increment produced by the unit as provided by the reinvestment zone
financing plan or a larger portion as provided by Subsection (f).
(l) The governing body of a municipality that designates an
area as a reinvestment zone may determine, in the designating
ordinance adopted under Section 311.003 or in the ordinance adopted
under Section 311.011 approving the reinvestment zone financing
plan for the zone, the portion of the tax increment produced by the
municipality that the municipality is required to pay into the tax
increment fund for the zone. If a municipality does not determine
the portion of the tax increment produced by the municipality that
the municipality is required to pay into the tax increment fund for
a reinvestment zone, the municipality is required to pay into the
fund for the zone the entire tax increment produced by the
municipality, except as provided by Subsection (b)(1).
(m) The governing body of a municipality that is located in
a county with a population of more than 1.4 million but less than
2.1 million or in a county with a population of 3.3 million or more
by ordinance may reduce the portion of the tax increment produced by
the municipality that the municipality is required to pay into the
tax increment fund for the zone. The municipality may not reduce
under this subsection the portion of the tax increment produced by
the municipality that the municipality is required to pay into the
tax increment fund for the zone unless the municipality provides
each county that has entered into an agreement with the
municipality to pay all or a portion of the county’s tax increment
into the fund an opportunity to enter into an agreement with the
municipality to reduce the portion of the tax increment produced by
the county that the county is required to pay into the tax increment
fund for the zone by the same proportion that the portion of the
municipality’s tax increment that the municipality is required to
pay into the fund is reduced. The portion of the tax increment
produced by a municipality that the municipality is required to pay
into the tax increment fund for a reinvestment zone, as reduced by
the ordinance adopted under this subsection, together with all
other revenues required to be paid into the fund, must be sufficient
to complete and pay for the estimated costs of projects listed in
the reinvestment zone financing plan and pay any tax increment
bonds or notes issued for the zone, and any other obligations of the
zone.
SECTION 6. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2005.

______________________________ ______________________________
President of the Senate Speaker of the House

I hereby certify that S.B. No. 771 passed the Senate on
May 2, 2005, by the following vote: Yeas 31, Nays 0;
May 26, 2005, Senate refused to concur in House amendments and
requested appointment of Conference Committee; May 27, 2005, House
granted request of the Senate; May 29, 2005, Senate adopted
Conference Committee Report by the following vote: Yeas 31,
Nays 0.

______________________________
Secretary of the Senate
I hereby certify that S.B. No. 771 passed the House, with
amendments, on May 25, 2005, by the following vote: Yeas 147,
Nays 0, two present not voting; May 27, 2005, House granted request
of the Senate for appointment of Conference Committee;
May 29, 2005, House adopted Conference Committee Report by the
following vote: Yeas 142, Nays 0, one present not voting.

______________________________
Chief Clerk of the House

Approved:

______________________________
Date

______________________________
Governor