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Home My WebLink AboutO-2007-3023 14/15 REQUEST FOR CITY COUNCIL AGENDA ITEM Agenda Date Requested: AUl!ust 27. 2007 Requested By: Michael DOlbY~ Department: Finance Budl!et Source of Funds: Account Number: Report: Resolution: Ordinance: Amount Budgeted: Exhibits: Ordinance, Public Hearing Notice, Knox Askins, (Memo) Amount Requested: Exhibits: Purdue(memo). House Bill. COpy of Article Budgeted Item: YES NO Exhibits S, Sedic~A 1 9, Fisl:lll Note SUMMARY & RECOMMENDATION In the 2007 session, the Texas Legislature passed HB 621; which added Texas Property Tax Code 11.253 to exempt from taxation certain tangible personal property. This bill was the implementing legislation for a constitutional amendment that was passed many years ago. The bill is very similar to the Freeport exemption passed many years ago, but it has a potentially larger impact as time goes on. This bill exempts goods, principally inventory, that are stored in a location that is not owned by the owner of the goods and are transferred from that location to another location within 175 days. The goods may be in the location for the purposes of assembling, storing, manufacturing, processing, or fabricating purposes by the person who acquired or imported the property. Certain specific types of goods are presently excluded from this exemption: oil, natural gas, petroleum products, aircraft, dealer's motor vehicle inventory, dealer's vessel and outboard motor inventory, dealer's heavy equipment inventory, or retail manufactured housing inventory. Petroleum products are defined to be only the immediate derivatives of oil and natural gas, so some goods that you might think of as petroleum products may actually be exempted from taxation by this new law. The governing body of each taxing unit in the state may act to tax these goods in the year following the year in which the governing body takes action. These goods will first become exempt in 2008. If the City of La Porte wishes to continue to tax these types of goods in 2008, the City of La Porte must act to tax these goods. Action Required by Council: Approve ordinance 2007 - -which will allow us to continue taxing these goods. A enda 8kl/07 Date I ( THE STATE OF TEXAS) COUNTY OF HARRIS) CITY OF LA PORTE) NOTICE OF PUBLIC HEARING Notice is hereby given that the City Council of the City of La Porte will hold a Public Hearing on the 27th day of August 2007, in the Council Chambers of the City Hall, 604 West Fairmont Parkway, La Porte, Texas, beginning at 6:00 P.M. The purpose of this hearing is to provide members of the public the opportunity to speak for or against taxing tangible personal property in transit which would otherwise be exempt pursuant to Texas Tax Code, Section 11.253. CITY OF LA PORTE Martha A. Gillett, TRMC, CMC City Secretary 1""-'" ORDINANCE NO. 2007- 3oJ-3 AN ORDINANCE OF THE CITY OF LA PORTE TO TAX TANGIBLE PERSONAL PROPERTY IN TRANSIT WHICH WOULD OTHERWISE BE EXEMPT PURSUANT TO TEXAS TAX CODE, SECTION 11.2537 EXTENDING THE APPLICATION OF THIS ORDINANCE TO CITY OF LA PORTE INDUSTRIAL DISTRICT AGREEMENTS EFFECTIVE JANUARY I, 2008, AND THEREAFTER 7 DIRECTING THE CITY SECRETARY TO FURNISH A CERTIFIED COPY OF THIS ORDINANCE TO THE HARRIS COUNTY APPRAISAL DISTRICT 7 CONTAINING A SEVERABILITY CLAUSE 7 FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW 7 AND PROVIDING AN EFFECTIVE DATE HEREOF. WHEREAS, the 80th Texas Legislature in Regular Session has enacted House Bill 621 to take effect on January I, 2008, which added Tex. Tax Code ~11.253 to exempt from taxation certain tangible personal property held temporarily at a location in this state for assembling, storing, manufacturing, processing or fabricating purposes (goods-in-transit) which property has been subject to taxation in the past; and WHEREAS, Tex. Tax Code 11.253 (j) as amended allows the governing body of a taxing unit, after conducting a public hearing, to provide for the continued taxation of such goods-in-transiti and WHEREAS, the city Council of the City of La Porte, having conducted a public hearing as required by section 1-n(d), Article VIII, Texas Constitution, is of the opinion that it is in the best interests of the City to continue to tax such goods-in-transiti NOW THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE: Section 1. That goods-in-transit, as defined in Tex. Tax Code l1.253(a) (2), as amended by House Bill 621, enacted by the 80th Texas Legislature in Regular Session, shall remain subject to taxation by the City of La Porte. Section 2. That goods-in-transit, as defined in Tex. Tax Code 11.253 (a) (2), as amended by House Bill 621, enacted by the 80th Texas Legislature in Regular Session, shall remain subject to in lieu of taxation under City of La Porte Industrial District Agreements effective January I, 2008, and thereafter. Section 3. If any section,sentence, phrase, clause or any part of any section, sentence, phrase, or clause, of this ordinance shall, for any reasons, be held invalid, such invalidity shall not affect the remaining portions of this ordinance, and it is hereby declared to be the intention of this City Council to have passed each section, sentence, phrase or clause, or part thereof, irrespective of the fact that any other section, sentence, phrase or claus€, or part thereof, may be declared invalid. Section 4. The City Secretary shall furnish a certified copy of this Ordinance to the Harris County Appraisal District. Section 5. .The City Council officially finds, determines, recites, and declares that a sufficient written notice of the date, hour, place and subject of this meeting of the City Council was posted at a place convenient to the public at the City Hall of the City for the time required by law preceding this meeting, as required by the Open Meetings Law, Chapter 551, Texas Government Code; and that this meeting has been open to the public as required by law at all times during which this ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The city Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 6. This Ordinance shall be effective from and after its passage and approval, PASSED AND APPROVED, and it is so ordered. this).1I'- day of nu tt - / , 2007. By: C~P~ ~.f~ Alton E. Porter, Mayor ATTEST: . ~. ~tJ{{/~ ~ Mart a . illett City Secretary APPROVED, ~ V&c-d~/ ~ Knox W. Askins city Attorney 2 ASKINS & ASKINS, p.e. ATTORNEYS AT LAW 702 W. FAIRMONT PARlfmAY P.O. BOX 1218 LA PORTE, TEXAS 77572-1218 KNOX W. ASKINS CLARK T. ASKINS telephone 281.471.1886 telecopier 281.471.2047 kaskins@houston.rr.com ctaskins@swbell.net MEMORANDUM DATE: July 3, 2007 TO: Mr. John Joerns, Interim city Manager Mr. Michael Dolby, Interim Finance Director vMs. Kathy Powell, Tax Assessor Collector Mr. Hugh L. Landrum, Jr., Industrial Appraiser Ms. Martha A. Gillett, City Secretary Mr. Alton E. Porter, Mayor FROM: Knox W. Askins, City Attorney RE: Agenda Request for city Council Meeting of July 23, 2007 Taxation of "Goods In Transit" ******************************************************************* Dear Folks: This letter is to request an agenda item on the City Council meeting of July 23, 2007, to read as follows: "CONSIDER CALLING A PUBLIC HEARING ON ( DATE ), TO CONSIDER AN ORDINANCE TO TAX TANGIBLE PERSONAL PROPERTY IN TRANSIT WHICH WOULD OTHERWISE BE EXEMPT PURSUANT TO TEXAS TAX CODE, SECTION 11.253." I enclose herewith the following: 1. Letter from Mr. Robert Mott of the City's delinquent tax collection firmi 2. Photocopy of House Bill No. 621, adding section 11.253, "Tangible Personal Property In Transit", to the Texas Tax Codei 3. Copy of Article 8, Section 1-9, of the Texas Constitution, with particular reference to subparagraph (d) thereofi 4. Fiscal note by the Texas Legislative Budget Board on HB 621i and 5. Proposed Ordinance for consideration and adoption by City Council, following a public hearing. A notice of the public hearing should be published in The Bayshore Sun. MEMORANDUM July 3, 2007 page 2 I understand that Mr. Hugh L. Landrum, Jr. and members of City staff will be present at the July 23, 2007, meeting of City Council, to answer your questions on this matter. Our office, Mr. Landrum, and City staff, will recommend passage of the Ordinance. :;y;;;J.~ Knox W. Askins city Attorney city of La Porte KWA: sw EnclosnrF's Howard Perdue ( 1933-2005) Larry Brandon C. David Fielder James O. Collins Terry Ann White Gregg M. McLaughfin R. Bruce Medley Robert Mott Kevin Brennen Harold Lerew Jeanmarie Baer David A. Elison Laura J. Monroe Tab Beall B. Lynn Stavinoha Michael J. Darlow Joseph T. Longoria David S. Crawford Donald B. Roseman Terry G. Wiseman Carl O. Sandin Jason Bailey Owen M. Sonik David Hudson PerdueBrandonFielderCollins&Mott LLP ATTORNEYS AT LAW July 2, 2007 R. Gregory East Elizabeth Banda W. Tracy Crites Jr. Karen Evertson Yolanda M. Humphrey John T. Banks Sandra Griffin Sergio E. Garcia E. Stephen Lee Eboney Cobb D'Layne Peeples Alesha L. Wiliams Christopher S. Jackson Hiram A. Gutierrez Charles E. Brady Leslie M. Short Carol Barton D'Arwyn Daniels Thelma Banduch George Dowlen' 'Retired 1235 North Loop West Suite 600 Houston, Texas 77\JJ9 Telephone: 713-862-1860 Facsimile: 713-896-0030 pbfcm.com Mchael J. Siwierka Of Counsel Clients of the Firm RE: New Exemption of "Goods in Transit"-Local Option to Tax Dear Client: In the 2007 session, the Texas Legislature passed HB 621. This bill was the implementing legislation for a constitutional amendment that was passed several years ago. The bill is very similar to the Freeport exemption passed many years ago, but it has a potentially larger impact as time goes on. This letter is to inform you of your options to tax the goods subject to the new exemption and to provide you with the forms and procedure to tax these goods if you choose. Our [um takes no position on the policy question of whether or not to continue to tax the property that is subject to this new exemption. We simply believe that the governing body of each of our clients should have the tools to make an informed decision on behalf of the taxpayers they represent. This new law passed without much scrutiny because it was a bracket bill that only affected one county in Texas until the closing days of the legislative session. Then an amendment made the exemption applicable statewide. What is Exempted? This bill exempts goods, principally inventory, that are stored in a location that is not owned by the owner of the goods and are transferred from that location to another location within 175 days. The goods may be in the location for the purposes of assembling, storing, manufacturing, processing, or fabricating purposes by the person who acquired or imported the property. Certain specific types of goods are presently excluded from this exemption: oil, natural gas, petroleum products, aircraft, dealer's motor vehicle inventory, dealer's vessel and outboard motor inventory, dealer's heavy equipment inventory, or retail manufactured housing inventory. Petroleum products are defined to be only the immediate derivatives of oil and natural gas, so some goods that you might think of as petroleum products may actually be exempted from taxation by this new law. AMARILLO ARLINGTON AUSTIN HOUSTON LUBBOCK MCALLEN MIDLAND TYLER WICHITA FALLS What is the Impact on Your Tax Base? At present, this new law will probably have a limited impact because most goods are kept in facilities that are owned by the owners of the goods themselves. However, this may change rapidly. In order to take advantage of this new law, many property owners may seek to transfer ownership of either the goods or the facilities in which the goods are stored, manufactured, processed, etc. to legal entities with different ownership. These types of paper changes could make the property exempt. What Can You Do? The governing body of each taxing unit in the state may act to tax these goods in the year following the year in which the governing body takes action. These goods will first become exempt in 2008. So if you wish to continue to tax these types of goods in 2008, you must act to tax the goods before the end of 2007. You must inform all the appraisal districts in which your local government is located that you have acted to tax these goods. A copy of the resolution, order, or ordinance is the best way to document your decision to your appraisal district. Before you act to tax these goods, you must hold a public hearing on the question of whether to tax them or whether to let them become exempt. The legislature has prescribed no special procedures for this hearing, so it may be held at a meeting of the governing body called for other purposes. The item must be listed on the agenda for that meeting as an action item in compliance with the Open Meetings Act, but there is no additional public notice required. The legislature required that each taxing unit act in the manner required for official action by the governing body of the taxing unit. For counties, this means that action must be taken by an order of the commissioner's court. For cities, this means that action must be taken by an ordinance. For school districts and other taxing units, this means that action should be taken by resolution. A sample order, ordinance and resolution are attached to this letter. Special Note for School Districts The wealth lost to this exemption will be deducted from the taxable wealth of the school district as determined by the Comptroller for purposes of calculating state aid. Until the hold harmless provisions of House Bill 1 are removed, this will have little impact on the amount of state aid your school district receives. At present, the Comptroller's wealth estimate affects only the additional four cents that a school district may impose and the amount of certain types of facilities aid the district receives from the state (existing debt allotment and instructional facilities allotment). So as the law exists today, a school district will lose taxable wealth due to this exemption without an offsetting increase in state aid. Even if the legislature restores the Comptroller's finding of taxable wealth to its previous role in state aid to school districts, the effect ofthe additional state aid is not a dollar for dollar offset. We hope that this letter and the attached forms will help you make an informed decision on behalf of the taxpayers that you represent. If you should have any questions concerning this matter, please feel free to call your attorney at your local office or call me in Houston. Sincerely, ~ Robert Matt -~ 3O(R) HB 621 - Enrolled version - Bill Text I 10f9 http://www.capitol.state.tx.us/tlodocs/80R/bllltext/htmL ., H.B. No. 621 AN ACT relating to the exemption from ad valorem taxation of tangible personal property held temporarily at a location in this state for assembling, storing, manufacturing, processing, or fabricating purposes. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Subchapter B, Chapter 11, Tax Code, is amended by adding Section 11.253 to read as follows: Sec. 11.253. TANGIBLE PERSONAL PROPERTY IN TRANSIT. / (a) In this section: (1) "Dealer's motor vehicle inventory," "dealer's vessel and outboard motor inventory," "dealer's heavy equipment inventory," and "retail manufactured housing inventory" have the meanings assigned by Subchapter B, Chapter 23. (2) "Goods-in-transit" means tangible personal property that: (A) is acquired in or imported into this state to be forwarded to another location in this state or outside this state; (B) is detained at a location in this 7/3/20079:09 M 8O(R) HE 621 - Enrolled version - Bill Text http://www.capitol.state.tx.us/tlodocs/80R/billtext/htmL .. ( D) does not include oil, natural gas, petroleum products, aircraft, dealer's motor vehicle inventory, dealer's vessel and outboard motor inventory, dealer's heavy equipment inventory, or retail manufactured housing inventory. (3) "Location" means a physical address. (4) "Petroleum product" means a liquid or gaseous material that is an immediate derivative of the refining of oil or natural gas. (b) A person is entitled to an exemption from taxation of the appraised value of that portion of the person's property that consists of goods-in-transit. (c) The exemption provided by Subsection (b) lS subtracted from the market value of the property determined under Section 23.01 or 23.12, as applicable, to determine the taxable value of the property. (d) Except as provided by Subsections (f) and (g) , the chief appraiser shall determine the appraised value of goods-in-transit under this subsection. The chief appraiser shall determine the percentage of the market value of tangible personal property owned by the property owner and used for the production of income in the preceding calendar year that was contributed by goods-in-transit. For the first year in which the exemption applies to a taxing unit, the chief appraiser shall determine that percentage as if the exemption applied in the preceding year. The chief appraiser shall apply that percentage to the market value of the property owner's tangible personal property used for the production of income for the current year to determine the appraised value of goods-in-transit for the current year. (e) In determining the market value of goods-in-transit 2of9 7/3120079:09 M 80(R) HE 621 - Emolled version - Bill Text http://www.capitol.state.tx.us/tlodocs/80R/billtextlhtml. . that in the preceding year were assembled, stored, manufactured, processed, or fabricated in this state, the chief appraiser shall exclude the cost of equipment, machinery, or materials that entered into and became component parts of the goods-in-transit but were not themselves goods-in-transit or that were not transported to another location in this state or outside this state before the expiration of 175 days after the date they were brought into this state by the property owner or acquired by the property owner in this state. For component parts held ln bulk, the chief appraiser may use the average length of time a component part was held by the owner of the component parts during the preceding year at a location in this state that was not owned by or under the control of the owner of the component parts in determining whether the component parts were transported to another location in this state or outside this state before the expiration of 175 days. (f) If the property owner was not engaged in transporting goods-in-transit to another location in this state or outside this state for the entire preceding year, the chief appraiser shall calculate the percentage of the market value described in Subsection (d) for the portion of the year in which the property owner was engaged in transporting goods-in-transit to another location in this state or outside this state. (g) If the property owner or the chief appraiser demonstrates that the method provided by Subsection (d) significantly understates or overstates the market value of the property qualified for an exemption under Subsection (b) ln the current year, the chief appraiser shall determine the market value of the goods-in-transit to be exempt by determining, according to 30f9 7/3/20079:09 M 80eR) HB 621 - Enrolled version - Bill Text http://www.capitol.state.tx.us/t10docs/8 OR/billtextlhtml... ( v 40f9 7/3/20079:09 M 80(R) HB 621 - Emolled version - Bill Text http://www.capitol.state.tx.us/tlodocs/80Rlbilltext/html. .. not exempt under other law. The official action to tax the goods~in-transit must be taken before January 1 of the first tax year in which the governing body proposes to tax goods-in-transit. Before acting to tax the exempt property, the governing body of the taxing unit must conduct a public hearing as required by Section 1-n(d), Article VIII, Texas Constitution. If the governing body of a taxing unit provides for the taxation of the goods-in-transit as provided by this subsection, the exemption prescribed by Subsection (b) does not apply to that unit. The goods-in-transit remain subject to taxation by the taxing unit until the governing body of the taxing unit, in the manner required for official action, rescinds or repeals its previous action to tax goods-in-transit, or otherwise determines that the exemption prescribed by Subsection (b) will apply to that taxing unit. (k) A property owner who receives the exemption from taxation provided by Subsection (b) is not eligible to receive the exemption from taxation provided by Section 11.251 for the same property. SECTION 2. Section 26.012(15), Tax Code, lS amended to read as follows: (15) "Lost property levy" means the amount of taxes levied in the preceding year on property value that was taxable in the preceding year but lS not taxable in the current year because the property is exempt in the current year under a provision of this code other than Section 11.251 or 11.253, the property has qualified for special appraisal under Chapter 23 [of thi8 ee-eJ:e.] in the current year, or the property is located in territory that has ceased to be a part of the unit since the preceding year. SECTION 3. Section 403.302(d), Government Code, is amended to read as follows: (d) For the purposes of this section, "taxable value" means 50f9 7/3/2007 9:09 MY 80(R) HB 621 - Enrolled version - Bill Text http://www.capitol.state.tx.us/tlodocs/~OR/bllltext/htm1. .. the market value of all taxable property less: (1) the total dollar amount of any residence homestead exemptions lawfully granted under Section ll.13(b) or (c), Tax Code, in the year that is the subject of the study for each school district; (2) one-half of the total dollar amount of any residence homestead exemptions granted under Section 11.13(n), Tax Code, in the year that is the subject of the study for each school district; (3) the total dollar amount of any exemptions granted before May 31, 1993, within a reinvestment zone under agreements authorized by Chapter 312, Tax Code; (4) subject to Subsection (e), the total dollar amount of any captured appraised value of property that: (A) is within a reinvestment zone created on or before May 31, 1999, or is proposed to be included within the boundaries of a reinvestment zone as the boundaries of the zone and the proposed portion of tax increment paid into the tax increment fund by a school district are described in a written notification provided by the municipality or the board of directors of the zone to the governing bodies of the other taxing units in the manner provided by Section 311.003(e), Tax Code, before May 31, 1999, and within the boundaries of the zone as those boundaries existed on September 1, 1999, including subsequent improvements to the property regardless of when made; (B) generates taxes paid into a tax increment fund created under Chapter 311, Tax Code, under a reinvestment zone financing plan approved under Section 311.011(d), Tax Code, on or before September 1, 1999; and (C) is eligible for tax increment financing under Chapter 311, Tax Code; 60f9 7/3/20079:09 AN SOeR) HB 621 - Enrolled version - Bill Text http://www.capitol.state.tx.us/tlodocs/80RJbilltext/html. .. (5) for a school district for which a deduction from taxable value 1S made under Subdivision (4), an amount equal to the taxable value required to generate revenue when taxed at the school district's current tax rate in an amount that, when added to the taxes of the district paid into a tax increment fund as described by Subdivision (4) (B), is equal to the total amount of taxes the district would have paid into the tax increment fund if the district levied taxes at the rate the district levied in 2005; (6) the total dollar amount of any exemptions granted under Section 11.251 or 11.253, Tax Code; (7) the difference between the comptroller's estimate of the market value and the productivity value of land that qualifies for appraisal on the basis of its productive capacity, except that the productivity value estimated by the comptroller may not exceed the fair market value of the land; (8) the portion of the appraised value of residence homesteads of individuals who receive a tax limitation under Section 11.26, Tax Code, on which school district taxes are not imposed in the year that is the subject of the study, calculated as if the residence homesteads were appraised at the full value required by law; (9) a portion of the market value of property not otherwise fully taxable by the district at market value because of: (A) action required by statute or the constitution of this state that, if the tax rate adopted by the district is applied to it, produces an amount equal to the difference between the tax that the district would have imposed on the property if the property were fully taxable at market value and the tax that the district is actually authorized to impose on the property, if this subsection does not otherwise require that portion to be deducted; or 70f9 7/3/2007 9:09 M, 80eR) HE 621 - Enrolled version - Bill Text http://www.capltol.state.tx.lis/tlodocs/80R/bllltextlhtml... (B) action taken by the district under Subchapter B or C, Chapter 313, Tax Code; (10) the market value of all tangible personal property, other than manufactured homes, owned by a family or individual and not held or used for the production of income; (11) the appraised value of property the collection of delinquent taxes on which is deferred under Section 33.06, Tax Code; (12) the portion of the appraised value of property the collection of delinquent taxes on which is deferred under Section 33.065, Tax Code; and (13) the amount by which the market value of a residence homestead to which Section 23.23, Tax Code, applies exceeds the appraised value of that property as calculated under that section. SECTION 4. This Act applies only to taxes imposed for a tax year beginning on or after the effective date of this Act. SECTION 5. This Act takes effect January 1, 2008. President of the Senate Speaker of the House I certify that H.B. No. 621 was passed by the House on April 4, 2007, by the following vote: Yeas 134, Nays 0, 1 present, not voting; and that the House concurred in Senate amendments to H.B. No. 621 on May 23, 2007, by the following vote: Yeas 145, Nays 0, 2 present, not voting. Chief Clerk of the House I certify that H.B. No. 621 was passed by the Senate, with amendments, on May 18, 2007, by the following vote: Yeas 29, Nays o . 80f9 7/3/20079:09 AN 80eR) HB 621 - Enrolled version - Bill Text APPROVED: 90f9 http://www.capitol.state.tx.us/tlodocs/80R/bllltext/html. .. Secretary of the Senate Date Governor 7/3/2007 9:09 NY The Texas Constitution - Art 8 - See I-n http://tl02.tIc.state. tx. us/txeonst/sections/ en000800-0 I-n.. The Texas Constitution Article 8 - TAXATION AND REVENUE Section I-n - AUTHORIZATION TO EXEMPT FROM AD VALOREM TAXATION TANGIBLE PERSONAL PROPERTY (Text of section as added by Acts 2001, 77th Leg., R.S., SJ.R. 6.) (a) To promote economic development in this state, the legislature by general law may exempt from ad valorem taxation goods, wares, merchandise, other tangible personal property, and ores, other than oil, natural gas, and other petroleum products, if: (1) the property is acquired in or imported into this state to be forwarded to another location in this state or outside this state, whether or not the intention to forward the property to another location in this state or outside this state is formed or the destination to which the property is forwarded is specified when the property is acquired in or imported into this state; (2) the property is detained at a location in this state that is not owned or under the control of the property owner for assembling, storing, manufacturing, processing, or fabricating purposes by the person who acquired or imported the property; and (3) the property is transported to another location in this state or outside this state not later than 270 days after the date the person acquired the property in or imported the property into this state. (b) For purposes of this section: (l) tangible personal property includes aircraft and aircraft parts; (2) property imported into this state includes property brought into this state; (3) property forwarded to another location in this state or outside this state includes property transported to another location in this state or outside this state or to be affixed to an aircraft to be transported to another location in this state or outside this state; and (4) property detained at a location in this state for assembling, storing, manufacturing, processing, or fabricating purposes includes property, Iof2 7/3/2007 9:08 A1v The Texas Constitution - Art 8 - See I-n v . 20f2 http://tlo2.tIc.state. tx. us/txconst/seetions/cn000800-0 I-n.. aircraft, or aircraft parts brought into this state or acquired in this state and used by the person who acquired the property, aircraft, or aircraft parts in this state or who brought the property, aircraft, or aircraft parts into this state for the purpose of repair or maintenance of aircraft operated by a certificated air carrier. (c) A property owner who is eligible to receive the exemption authorized by Section l-j of this article may apply for the exemption authorized by the legislature under this section in the manner provided by general law, subject to the provisions of Subsection (d) of this section. A property owner who receives the exemption authorized by the legislature under this section is not entitled to receive the exemption authorized by Section l-j of this article for the same property. (d) The governing body of a political subdivision that imposes ad valorem taxes may provide for the taxation of property exempt under a law adopted under Subsection ( a) of this section and not exempt from ad valorem taxation by any other law. Before acting to tax the exempt property, the governing body of the political subdivision must conduct a public hearing at which members of the public are permitted to speak for or against the taxation of the property. (e) (Added Nov. 6,2001; expired Jan. 1,2003.) I /' . .. 7/3/2007 9:08 M 80(R) HB 621 - Enrolled version - Fiscal Note http://www.capito1.state.tx.us/tlodocs/8 0 RI fiscalnoteslht. .. LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 80TH LEGISLATIVE REGULAR SESSION May 21,2007 TO: Honorable Tom Craddick, Speaker of the House, House of Representatives FROM: John S. O'Brien, Director, Legislative Budget Board IN RE: HB621 by Chavez (Relating to the exemption from ad valorem taxation of tangible personal property held temporarily at a location in this state for assembling, storing, manufacturing, processing, or fabricating purposes.), As Passed 2nd House Estimated Two-year Net Impact to General Revenue Related Funds for HB621, As Passed 2nd House: a negative nnpact of($25,215,000) through the biennium ending August 31, 2009. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. General Revenue-Related Funds, Five-Year Impact: 1 of 4 7/312007 9:08 Al 80CR) HB 621 - Enrolled version - Fiscal Note http://www.capitol.state.tx.us/tlodocs/80R/fisca1notes/ht. . Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds 2008 2009 2010 2011 2012 $0 ($25,215,000) ($31,184,000) ($32,429,000) ($33,723,000) All Funds, Five-Year Impact: Fiscal Year P b bl Probable 1'0 a e Revenue Savings/(Cost) from FOUNDATION Gain/(Loss) SCHOOL FUND from 193 School Districts - Initial Impact $0 ($30,221,000) ($31,430,000) ($32,687,000) ($33,994,000) 2008 2009 2010 2011 2012 $0 ($25,215,000) ($31,184,000) ($32,429,000) ($33,723,000) Fiscal Analysis Probable Revenue Gain/(Loss) from Counties $0 ($9,419,000) ($9,796,000) ($10,188,000) ($10,596,000) Probable Revenue Gain/(Loss) from Cities $0 ($6,552,000) ($6,814,000) ($7,087,000) ($7,370,000) The bill would add a new section to Chapter 11 of the Tax Code to provide a new exemption from ad valorem taxation for" goods in transit." To qualify for the exemption, personal property would have to be acquired in Texas or imported into Texas and stored at a Texas location in which the owner of the goods did not have a direct or indirect ownership interest. Oil and gas and their immediate derivatives, aircraft, and dealer's special inventories would riot qualify for the exemption. In addition, the inventory would have to be transported or distributed to another location no later than 1 7 5 days after the property was acquired in or imported into the state. 2 of4 7/3/20079:08 At-. 80(R) HB 621 - Enrolled version - Fiscal Note http://www.capitol.state.tx.us/tlodocs/80R/fiscalnotes/ht. . The exemption would have to be granted by all taxing units unless the governing body of a taxing unit proposed by official action to tax goods in transit. Before acting to tax goods in transit, the governing body of a taxing unit would have to conduct a public hearing where the public would be allowed to speak for or against the action to tax the property. The bill would take effect January 1,2008. Methodology Currently, Article VIII, Section 1-j of the Texas Constitution and Section 11.251 of the Tax Code provide for a " freeport exemption." This exemption, which can be granted at the option of each city, county, school district, or junior college district, exempts goods, wares, ores, raw materials, and other types of inventory that are brought into or acquired in the state and transported out of the state within 175 days of acquisition. In November 2001, Texas voters approved of the amendment proposed in SJR 6, adding Article VIII, Section 1-n to the Texas Constitution. This amendment authorized the Legislature to exempt from ad valorem taxation "goods in transit." The enabling legislation proposed in the. bill would provide an exemption for property acquired in Texas or imported into Texas if the property is stored at a location in which the owner of the goods does not have a direct or indirect ownership interest and is transported to another location either inside or outside of the state within 175 days. The bill would provide a local option procedure to continue taxing the property. The proposed exemption could cause an undetermined revenue loss to cities, counties, school districts, and junior college districts exempting goods in transit. Because the state is constitutionally prohibited from imposing a state property tax, there would be no direct fiscal impact on the state. However, Section 403.302 of the Government Code requires the Comptroller to 30f4 7/3/2007 9:08 AN 80eR) HB 621 - Enrolled version - Fiscal Note http://www.capitol.state.tx.usltlodocs/80Rltiscalnotes/ht. .. conduct a property value study to determine the total taxable value for each school district. Total taxable value is an element in the state's school funding formula. Depending on the number of school districts allowing the exemption, the state would reimburse school districts an undetermined amount of funding for this exemption, after a one-year lag. The bill is estimated to have an impact on the state aid districts receive based on the enrichment tier as tied to the yield of the Austin Independent School District (ISD). To the extent that the bill has the effect of lessening Austin lSD's revenue per weighted student per penny of tax effort, as determined by the Commissioner of Education, the equalized yield on those enrichment pennies would decrease, resulting in a decrease in state aid. Local Government Impact Because it is not known how many taxing unit governing bodies might vote to continue taxing the covered items, the fiscal impact cannot be determined. The fiscal impact table provides an illustrative example only. Appraisal district information about the potential value loss to the proposed bill was trended over the proj ection period to estimate the value loss in each year. The appropriate taxing unit rates were applied to estimate the levy loss. Information was not available to estimate special district losses. In addition, with respect to school districts, the mechanics of the school finance system would likely transfer the initial fiscal impacts to the state, resulting in a zero or negligible fiscal impact to the school districts. Initial school district losses are shown, even though the operation of the "hold harmless" feature ofHB 1, 79th Legislature, Third Called Session (2006), would likely transfer the losses to the state causing a net school district loss of zero. Source Agencies: 304 Comptroller of Public Accounts LBB Staff: JOB, CT, SD, SJS 40f4 7/3/20079:08 Ail ASKINS & ASKINS, P.C. ATTORNEYS AT LAW 702 W. FAIRMONT PARKWAY P.O. BOX 1218 LA PORTE. TEXAS 77572-1218 telephone 281.471.1886 telecopier 281.471.2047 knoxaskins@comcast.net ctaskins@swbell.net <NOX W. ASKINS CLARK T. ASKINS TELECOPIER MESSAGE DATE: AUQ'ust 28, 2007 TO: HUQ'h L. Landrum FIRM: HUQ'h L. Landrum & Assoc. FAX NUMBER: 281.484.7272 FROM: Knox W. Askins REPLY TO: Askins & Askins, P.C. Attorneys at Law 702 W. Fairmont Parkway P.O. Box 1218 La Porte, Texas 77572-1218 Telephone: 281.471.1886 Telecopier: 281.471.2047 NUMBER OF PAGES: 5 (Including this cover page) THIS MESSAGE IS INTENDED ONLY FOR THE USE OF THE INDIVIDUAL TO WHOM IT IS ADDRESSED, AND CONTAINS INFORMATION THAT IS PRIVILEGED, CONFIDENTIAL AND EXEMPT FROM DISCLOSURE UNDER APPLICABLE LAW. IF YOU ARE NOT THE INTENDED RECIPIENT, OR THE EMPLOYEE OR AGENT RESPONSIBLE FOR DELIVERING THIS MESSAGE TO THE INTENDED RECIPIENT, YOU ARE HEREBY NOTIFIED THAT ANY UNAUTHORIZED DISCLOSURE, DISSEMINATION, DISTRIBUTION, OR COPYING OF THIS COMMUNICATION IS STRICTLY PROHIBITED. IF YOU HAVE RECEIVED THIS COMMUNICATION IN ERROR, PLEASE NOTIFY US IMMEDIATELY BY TELEPHONE, AND RETURN THE ORIGINAL MESSAGE TO US AT THE ABOVE ADDRESS VIA THE U.S. POSTAL SERVICE. THANK YOU. City of La Porte Established 1892 August 28, 2007 via cm/rrr#70070710000258041383 Chief Appra' Harris C nty Appraisal District P.O. 920975 Ho TX 77292-0975 Dear Sir: I enclose herewith a certified copy of City of La Porte Ordinance No. 2007-3023, passed and approved by City Council of the city of La Porte at its regular meeting of August 27, 2007. The caption of the Ordinance reads as follows: "AN ORDINANCE OF THE CITY OF LA PORTE TO TAX TANGIBLE PERSONAL PROPERTY IN TRANSIT WHICH WOULD OTHERWISE BE EXEMPT PURSUANT TO TEXAS TAX CODE, SECTION 11.253; EXTENDING THE APPLICATION OF THIS ORDINANCE TO CITY OF LA PORTE INDUSTRIAL DISTRICT AGREEMENTS EFFECTIVE JANUARY I, 2008, AND THEREAFTER; DIRECTING THE CITY SECRETARY TO FURNISH A CERTIFIED COPY OF THIS ORDINANCE TO THE HARRIS COUNTY APPRAISAL DISTRICT; CONTAINING A SEVERABILITY CLAUSE; FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW; AND PROVIDING AN EFFECTIVE DATE HEREOF." As specified in Section 1 of the ordinance goods-in-transit, as defined in Tex. Tax Code 11.253(a) (2), as amended by House Bill 621, enacted by the 80th Texas Legislature in Regular Session, shall remain subject to taxation by the City of La Porte. Yours very truly, CITY OF LA PORTE By: Martha A. Gillett City Secretary MAG: sw cc: Mr. John Joerns, Interim City Manager Mr. Michael Dolby, Interim Finance Director Ms. Kathy Powell, Tax Assessor Collector ~ Hugh L. Landrum, Jr., Industrial Appraiser via fax no. 281.484.7272 P.O. Box 1115 e La Porte, Texas 77572-1115 e (281) 471-5020 THE ST ATE OF TEXAS )( COUNTY OF HARRIS )( CITY OF LA PORTE )( I hereby certify that the attached and foregoing is a true and correct copy of Ordinance No. 2007-3023 passed and approved by the City Council of the City of La Porte at a Meeting Council held on the 27th day of August 2007 and at which meeting a majority of the City Council was present and voted in favor of the passage of said Ordinance, and notice of which meeting was properly posted according to law, prior to the date of such meeting, as said Ordinance appears on record in the minutes of said meeting. To certify which, witness my hand and Seal of Office, this, the 28th day of August 2007. ~~~ Sharon Harris, TRMC Assistant City Secretary ORDINANCE NO. 2007 - 3oJ-3 AN ORDINANCE OF THE CITY OF LA PORTE TO TAX TANGIBLE PERSONAL PROPERTY IN TRANSIT WHICH WOULD OTHERWISE BE EXEMPT PURSUANT TO TEXAS TAX CODE, SECTION 11.2537 EXTENDING THE APPLICATION OF THIS ORDINANCE TO CITY OF LA PORTE INDUSTRIAL DISTRICT AGREEMENTS EFFECTIVE JANUARY 1, 2008, AND THEREAFTER 7 DIRECTING THE CITY SECRETARY TO FURNISH A CERTIFIED COPY OF THIS ORDINANCE TO THE HARRIS COUNTY APPRAISAL DISTRICT 1 CONTAINING A SEVERABILITY CLAUSE 1 FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW 1 AND PROVIDING AN EFFECTIVE DATE HEREOF. WHEREAS, the 80th Texas Legislature in Regular Session has enacted House Bill 621 to take effect on January 1, 2008, which added Tex. Tax Code ~11.253 to exempt from taxation certain tangible personal property held temporarily at a location in this state for assembling, storing, manufacturing, processing or fabricating purposes (goods-in-transi t) which property has been subject to taxation in the past; and WHEREAS, Tex. Tax Code 11.253(j) as amended allows the governing body of a taxing unit, after conducting a public hearing, to provide for the continued taxation of such goods-in-transit; and WHEREAS, the City council of the City of La Porte, having conducted a public hearing as required by Section 1-n(d), Article VIII, Texas Constitution, is of the opinion that it is in the best interests of the City to continue to tax such goods-in-transit; NOW THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE: Section 1. That goods-in-transit, as defined in Tex. Tax Code 11.253 (a) (2), as amended by House Bill 621, enacted by the 80th Texas Legislature in Regular Session, shall remain subject to taxation by the City of La Porte. Section 2. That goods-in-transit, as defined in Tex. Tax Code 11.253 (a) (2), as amended by House Bill 621, enacted by the 80th Texas Legislature in Regular Session, shall remain subject to in lieu of taxation under City of La Porte Industrial District Agreements effective January 1, 2008, and thereafter. section 3. If any section, sentence, phrase, clause or any part of any section, sentence, phrase, or clause, of this ordinance shall, for any reasons, be held invalid, such invalidity shall not affect the remaining portions of this ordinance, and it is hereby declared to be the intention of this city Council to have passed each section, sentence, phrase or clause, or part thereof, irrespective of the fact that any other section, sentence, phrase or claus€, or part thereof, may be declared invalid. Section 4. The city Secretary shall furnish a certified copy of this Ordinance to the Harris County Appraisal District. Section 5. .The City Council officially finds, determines, recites, and declares that a sufficient written notice of the date, hour, place and subject of this meeting of the City Council was posted at a place convenient to the public at the city Hall of the City for the time required by law preceding this meeting, as required by the Open Meetings Law, Chapter 551, Texas Government Code; and that this meeting has been open to the public as required by law at all times during which this ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The city Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 6. This Ordinance shall be effective from and after its passage and approval, and it is so ordered. PASSED AND APPROVED, this )JIL day of flU CJ / , 2007. By: C~i'7~ Alton E. Porter, Mayor ATTEST, . /::2. ~(}f{i1b 41 Mart a . illett City Secretary APPROVED, / d. P~~~" ~ Knox W. Askins City Attorney 2