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F I S C A L I M P A C T R E P O R T

SPONSOR Cisneros

DATE TYPED 02/21/05 HB

SHORT TITLE Water & Sanitation District Tax Authority

SB 864

ANALYST Padilla-Jackson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

Positive Recurring Water and Sanita-

tion Districts

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicate to House Bill 874

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 864 creates a new water and sanitation district gross receipts tax of up to 0.25 percent

of receipts within the district. The tax would be imposed by a local water and sanitation board.

The bill defines “gross receipts” to mean the money (or value) received from selling property in

a district, leasing property employed in a district, from selling services performed outside a dis-

trict, the product of which is initially used in a district, or from providing certain mobile tele-

communications services to customers whose place of primary is in a district.

The proceeds of the new tax would be used to purchase, acquire, establish and construct

1.

waterworks to supply water for domestic, commercial, and industrial purposes;

2.

sanitary sewers or a system of sewage, garbage, or refuse disposal;

3.

streets and street improvements; and to

4.

establish and construct park and recreational improvements; and

5.

pay revenue bonds issued

Senate Bill 864 -- Page 2

The Taxation and Revenue Department would be responsible for collecting and distributing the

tax for and to each district.

The effective date for the provisions of this bill is July 1, 2006.

FISCAL IMPLICATIONS

TRD notes that the fiscal impacts of the bill would depend on which districts choose to impose

the new tax. As an approximate measure, TRD calculated the impact of an additional 0.25 per-

cent imposed on the gross receipts base statewide, which would generate approximately $100

million in FY06.

ADMINISTRATIVE IMPLICATIONS

The new tax proposal would reportedly require a new program, with new instructions and publi-

cations within TRD. TRD notes that if the water and sanitation district boundaries do not align

with the current political boundaries used for GRT purposes, the complexity for taxpayers and

the department increases significantly. New system programming is estimated to exceed 1,000

hours.

TECHNICAL ISSUES

TRD cautions that the bill could create a substantial amount of complexity for taxpayers and the

department. They note that although the proposed new tax uses a number of the same definitions

from the GRT, it does not incorporate by reference all of the exemptions and deductions that ap-

ply to the latter. Thus, taxpayers could not calculate their liability for the new tax by simply

multiplying the GRT base by the new 0.25 percent.

OPJ/lg