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Title 3. Local Taxation
Subtitle B. Special Property Tax Provisions

Chapter 311. Tax Increment Financing Act

Sec. 311.001. Short Title.
Sec. 311.002. Definitions.
Sec. 311.003. Procedure for Creating Reinvestment Zone.
Sec. 311.0031. Enterprise Zone.
Sec. 311.004. Contents of Reinvestment Zone Ordinance.
Sec. 311.005. Criteria for Reinvestment Zone.
Sec. 311.006. Restrictions on Composition of Reinvestment Zone.
Sec. 311.007. Changing Boundaries of Existing Zone.
Sec. 311.008. Powers of Municipality.
Sec. 311.0085. Power of Certain Municipalities.
Sec. 311.009. Composition of Board of Directors.
Sec. 311.0091. Composition of Board of Directors of Certain Reinvestment Zones.
Sec. 311.010. Powers and Duties of Board of Directors.
Sec. 311.0101. Participation of Disadvantaged Businesses in Certain Zones.
Sec. 311.011. Project and Financing Plans.
Sec. 311.012. Determination of Amount of Tax Increment.
Sec. 311.0125. Tax Abatement Agreements.
Sec. 311.013. Collection and Deposit of Tax Increments.
Sec. 311.014. Tax Increment Fund.
Sec. 311.015. Tax Increment Bonds and Notes.
Sec. 311.016. Annual Report by Municipality.
Sec. 311.0163. Annual Report by Comptroller.
Sec. 311.017. Termination of Reinvestment Zone.
Sec. 311.018. Conflicts with Municipal Charter.
Sec. 311.019. Central Registry.
Sec. 311.020. State Assistance.

Sec. 311.001. Short Title.

This chapter may be cited as the Tax Increment Financing Act.

Sec. 311.002. Definitions.

In this chapter:

(1) "Project costs" means the expenditures made or estimated to be made and monetary obligations incurred or estimated to be incurred by the municipality establishing a reinvestment zone that are listed in the project plan as costs of public works or public improvements in the zone, plus other costs incidental to those expenditures and obligations. "Project costs" include:

(A) capital costs, including the actual costs of the acquisition and construction of public works, public improvements, new buildings, structures, and fixtures; the actual costs of the acquisition, demolition, alteration, remodeling, repair, or reconstruction of existing buildings, structures, and fixtures; and the actual costs of the acquisition of land and equipment and the clearing and grading of land;

(B) financing costs, including all interest paid to holders of evidences of indebtedness or other obligations issued to pay for project costs and any premium paid over the principal amount of the obligations because of the redemption of the obligations before maturity;

(C) real property assembly costs;

(D) professional service costs, including those incurred for architectural, planning, engineering, and legal advice and services;

(E) imputed administrative costs, including reasonable charges for the time spent by employees of the municipality in connection with the implementation of a project plan;

(F) relocation costs;

(G) organizational costs, including the costs of conducting environmental impact studies or other studies, the cost of publicizing the creation of the zone, and the cost of implementing the project plan for the zone;

(H) interest before and during construction and for one year after completion of construction, whether or not capitalized;

(I) the cost of operating the reinvestment zone and project facilities;

(J) the amount of any contributions made by the municipality from general revenue for the implementation of the project plan; and

(K) payments made at the discretion of the governing body of the municipality that the municipality finds necessary or convenient to the creation of the zone or to the implementation of the project plans for the zone.

(2) "Project plan" means the project plan for the development or redevelopment of a reinvestment zone approved under this chapter, including all amendments of the plan approved as provided by this chapter.

(3) "Reinvestment zone financing plan" means the financing plan for a reinvestment zone described by this chapter.

(4) "Taxing unit" has the meaning assigned by Section 1.04.

Sec. 311.003. Procedure for Creating Reinvestment Zone.

(a) The governing body of a municipality by ordinance may designate a contiguous geographic area in the jurisdiction of the municipality to be a reinvestment zone to promote development or redevelopment of the area if the governing body determines that development or redevelopment would not occur solely through private investment in the reasonably foreseeable future.

(b) Before adopting an ordinance providing for a reinvestment zone, the governing body of the municipality must prepare a preliminary reinvestment zone financing plan. As soon as the plan is completed, a copy of the plan must be sent to the governing body of each taxing unit that levies taxes on real property in the proposed zone.

(c) Before adopting an ordinance providing for a reinvestment zone, the municipality must hold a public hearing on the creation of the zone and its benefits to the municipality and to property in the proposed zone. At the hearing an interested person may speak for or against the creation of the zone, its boundaries, or the concept of tax increment financing. Not later than the seventh day before the date of the hearing, notice of the hearing must be published in a newspaper having general circulation in the municipality.

(d) A municipality must provide a reasonable opportunity for the owner of property to protest the inclusion of the property in a proposed reinvestment zone.

(e) Not later than the 60th day before the date of the public hearing required by Subsection (c), the governing body of the municipality must notify in writing the governing body of each taxing unit that levies real property taxes in the proposed reinvestment zone that it intends to establish the zone. The notice must contain a description of the proposed boundaries of the zone, the tentative plans for the development or redevelopment of the zone, and an estimate of the general impact of the proposed zone on property values and tax revenues. The notice may be given later than the 60th day before the date of the public hearing if the governing body of each county and school district that levies real property taxes in the proposed zone agrees to waive the requirement.

(f) A taxing unit may request additional information from the governing body of the municipality. The governing body of the municipality shall provide the information requested to the extent practicable. In addition to the notice required by Subsection (e), the governing body of the municipality shall make a formal presentation to the governing body of each county or school district that levies real property taxes in the proposed reinvestment zone. The presentation must include a description of the proposed boundaries of the zone, the tentative plans for the development or redevelopment of the zone, and an estimate of the general impact of the proposed zone on property values and tax revenues. The governing body of the municipality shall notify each taxing unit that levies real property taxes in the proposed zone of each presentation to be made to a county or school district under this subsection. Members of the governing body of each taxing unit that levies real property taxes in the proposed zone may attend a presentation under this subsection. If agreed to by the county or school districts involved, the governing body of the municipality may make a single presentation to more than one county or school district governing body.

(g) Not later than the 15th day after the date on which the notice required by Subsection (e) is given, each taxing unit that levies real property taxes in the proposed reinvestment zone shall designate a representative to meet with the governing body of the municipality to discuss the project plan and the reinvestment zone financing plan and shall notify the governing body of the municipality of its designation. At any time after the 15th day after the date on which the notice required by Subsection (e) has been given to every taxing unit, the governing body of the municipality may call a meeting of the representatives of the taxing units. The governing body of the municipality may call as many meetings as it considers necessary. Each representative shall be notified of each meeting in advance. At the meetings the governing body of the municipality and the representatives of the other taxing units may discuss the boundaries of the zone, development in the zone, the tax increment that each taxing unit will contribute to the tax increment fund, the retention by a taxing unit of a portion of its tax increment as permitted by Section 311.013, the exclusion of particular parcels of property from the zone, the board of directors for the zone, and tax collection for the zone. On the motion of the governing body of the municipality calling the meeting, any other matter relevant to the proposed reinvestment zone may be discussed.

Amended by 1989 Tex. Laws, p. 4688, ch. 1137, Sec. 16; amended by 1999 Tex. Laws, p. 3769, ch. 983, Sec. 14.

Sec. 311.0031. Enterprise Zone.

Designation of an area as an enterprise zone under the Texas Enterprise Zone Act (Chapter 2303, Government Code) constitutes designation of the area as a reinvestment zone under this subchapter without further hearing or other procedural requirements than those provided by the Texas Enterprise Zone Act (Chapter 2303, Government Code).

Amended by 1995 Tex. Laws, p. 545, ch. 76, Sec. 5.95(22).

Sec. 311.004. Contents of Reinvestment Zone Ordinance.

(a) The ordinance designating an area as a reinvestment zone must:

(1) describe the boundaries of the zone with sufficient definiteness to identify with ordinary and reasonable certainty the territory included in the zone;

(2) create a board of directors for the zone and specify the number of directors of the board as provided by Section 311.009 or 311.0091, as applicable;

(3) provide that the zone take effect immediately upon passage of the ordinance;

(4) provide a date for termination of the zone;

(5) assign a name to the zone for identification, with the first zone created by a municipality designated as "Reinvestment Zone Number One, City (or Town, as applicable) of (name of municipality)" and subsequently created zones assigned names in the same form numbered consecutively in the order of their creation;

(6) establish a tax increment fund for the zone; and

(7) contain findings that:

(A) improvements in the zone will significantly enhance the value of all the taxable real property in the zone and will be of general benefit to the municipality; and

(B) the area meets the requirements of Section 311.005

.

(b) For purposes of complying with Subsection (a)(7)(A), the ordinance is not required to identify the specific parcels of real property to be enhanced in value.

(c) To designate a reinvestment zone under Section 311.005(a)(5), the governing body of a municipality must specify in the ordinance that the reinvestment zone is designated under that section.

Amended by 1989 Tex. Laws, p. 4688, ch. 1137, Sec. 17; amended by 1999 Tex. Laws, p. 3763, ch. 983, Sec. 1; amended by HB 3006, 77th Tex. Leg., 2001, eff. September 1, 2001.

Sec. 311.005. Criteria for Reinvestment Zone.

(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;

(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;

(4) Repealed in 1989.

(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.

(b) In this section, "federally assisted new community" means a federally assisted area that has received or will receive assistance in the form of loan guarantees under Title X of the National Housing Act, if a portion of the federally assisted area has received grants under Section 107(a)(1) of the Housing and Community Development Act of 1974.

Amended by 1989 Tex. Laws, p. 181, ch. 2, Sec. 14.05.

Note:

A city may not designate an area as a TIF reinvestment zone unless the area is "unproductive, underdeveloped, or blighted" as required by Article VII, Section 1-g(b), Texas Constitution. Deducting the taxable value of property located in a Chapter 311 reinvestment zone when determining a school district's taxable wealth for state finance funding does not violate the constitutional mandate that the Texas Legislature establish and maintain an "efficient system of public free schools." Op. Tex. Att'y Gen. No. JC-152 (1999).

Sec. 311.006. Restrictions on Composition of Reinvestment Zone.

(a) A municipality may not create a reinvestment zone if:

(1) more than 10 percent of the property in the proposed zone, excluding property that is publicly owned, is used for residential purposes; or

(2) the total appraised value of taxable real property in the proposed zone and in existing reinvestment zones exceeds 15 percent of the total appraised value of taxable real property in the municipality and in the industrial districts created by the municipality.

(b) A municipality may not change the boundaries of an existing reinvestment zone to include property more than 10 percent of which, excluding property dedicated to public use, is used for residential purposes or to include more than 15 percent of the total appraised value of taxable real property in the municipality and in the industrial districts created by the municipality.

(c) A municipality may not create a reinvestment zone or change the boundaries of an existing reinvestment zone if the proposed zone or proposed boundaries of the zone contain more than 15 percent of the total appraised value of real property taxable by a county or school district.

(d) For purposes of this section, property is used for residential purposes if it is occupied by a house having fewer than five living units, and the appraised value is determined according to the most recent appraisal rolls of the municipality.

(e) Subsection (a)(1) does not apply to a reinvestment zone designated under Section 311.005(a)(5).

Amended by 1989 Tex. Laws, p. 4689, ch. 1137, Sec. 19.

Sec. 311.007. Changing Boundaries of Existing Zone.

(a) Subject to the limitations provided by Section 311.006, the boundaries of an existing reinvestment zone may be reduced or enlarged by ordinance or resolution of the governing body of the municipality that created the zone.

(b) The governing body of the municipality may enlarge an existing reinvestment zone to include an area described in a petition requesting that the area be included in the 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. The composition of the board of directors of the zone continues to be governed by Section 311.009(a) or (b), whichever applied to the zone immediately before the enlargement of the zone, except that the membership of the board must conform to the requirements of the applicable subsection of Section 311.009 as applied to the zone after its enlargement. The provision of Section 311.006(b) relating to the amount of property used for residential purposes that may be included in the zone does not apply to the enlargement of a zone under this subsection.

Amended by 1989 Tex. Laws, p. 4689, ch. 1137, Sec. 20.

Note:

A county is not authorized to amend a Property Tax Code Chapter 312 tax abatement agreement by deleting land from an existing reinvestment zone. A county reinvestment zone under Chapter 312 must be contiguous and may not consist of only a portion of a building. The Legislature intended to leave the substance of criteria for tax abatement agreements to the county commissioners court's discretion, subject to general constraints and certain specific limitations imposed by Chapter 312. Op. Tex. Att'y Gen. No. DM-456 (1997).

Sec. 311.008. Powers of Municipality.

(a) In this section, "educational facility" includes equipment, real property, and other facilities, including a public school building, that are used or intended to be used jointly by the municipality and an independent school district.

(b) A municipality may exercise any power necessary and convenient to carry out this chapter, including the power to:

(1) cause project plans to be prepared, approve and implement the plans, and otherwise achieve the purposes of the plan;

(2) acquire real property by purchase, condemnation, or other means to implement project plans and sell that property on the terms and conditions and in the manner it considers advisable;

(3) enter into agreements, including agreements with bondholders, determined by the governing body of the municipality to be necessary or convenient to implement project plans and achieve their purposes, which agreements may include conditions, restrictions, or covenants that run with the land or that by other means regulate or restrict the use of land; and

(4) consistent with the project plan for the zone:

(A) acquire blighted, deteriorated, deteriorating, undeveloped, or inappropriately developed real property or other property in a blighted area or in a federally assisted new community in the zone for the preservation or restoration of historic sites, beautification or conservation, the provision of public works or public facilities, or other public purposes; or

(B) acquire, construct, reconstruct, or install public works, facilities, or sites or other public improvements, including utilities, streets, street lights, water and sewer facilities, pedestrian malls and walkways, parks, flood and drainage facilities, or parking facilities, but not including educational facilities; or

(C) in a reinvestment zone created on or before September 1, 1999, acquire, construct, or reconstruct educational facilities in the municipality

.

(c) The powers authorized by Subsection (b)(2) prevail over any law of municipal charter to the contrary.

(d) A municipality may make available to the public on request financial information regarding the acquisition by the municipality of land in the zone when the municipality acquires the land.

Amended by 1999 Tex. Laws, p. 5249, ch. 1521, Sec. 1.

Note:

Tax Code Chapter 311, the Tax Increment Financing Act, authorizes but does not require a city to exercise the powers listed, including the power to condemn property. A city may be permitted to condemn property as a group under certain circumstances at the discretion of the court. Tex. Att'y Gen. LO-96-138 (1996).

Sec. 311.0085. Power of Certain Municipalities.

(a) This section applies only to a municipality that has:

(1) territory in three counties; and

(2) a population of less than 120,000.

(b) In this section, "educational facility" has the meaning assigned by Section 311.008.

(c) In addition to exercising the powers described by Section 311.008, a municipality may enter into a new agreement, or amend an existing agreement, with a school district that is located in whole or in part in a reinvestment zone created by the municipality to dedicate revenue from the tax increment fund to the school district for acquiring, constructing, or reconstructing an educational facility located in or outside of the zone.

Added by HB 2682, 77th Tex. Leg., 2001, eff. September 1, 2001.

Sec. 311.009. Composition of Board of Directors.

(a) Except as provided by Subsection (b), the board of directors of a reinvestment zone consists of at least five and not more than 15 members, unless more than 15 members are required to satisfy the requirements of this subsection. Each taxing unit other than a municipality that levies taxes on real property in the zone may appoint one member of the board. A unit may waive its right to appoint a director. The governing body of the municipality that created the zone may appoint not more than 10 directors to the board; except that if there are fewer than five directors appointed by taxing units other than the municipality, the governing body of the municipality may appoint more than 10 members as long as the total membership of the board does not exceed 15.

(b) If the zone was designated under Section 311.005(a)(5), the board of directors of the zone consists of nine members. Each school district or county that levies taxes on real property in the zone may appoint one member of the board if the school district or county has approved the payment of all or part of the tax increment produced by the unit. The member of the state senate in whose district the zone is located is a member of the board, and the member of the state house of representatives in whose district the zone is located is a member of the board, except that either may designate another individual to serve in the member's place at the pleasure of the member. If the zone is located in more than one senate or house district, this subsection applies only to the senator or representative in whose district a larger portion of the zone is located than any other senate or house district, as applicable. The remaining members of the board are appointed by the governing body of the municipality that created the zone.

(c) Members of the board are appointed for terms of two years unless longer terms are provided under Article XI, Section 11, of the Texas Constitution. Terms of members may be staggered.

(d) A vacancy on the board is filled for the unexpired term by appointment of the governing body of the taxing unit that appointed the director who served in the vacant position.

(e) To be eligible for appointment to the board by the governing body of the municipality, an individual must:

(1) if the board is covered by Subsection (a):

(A) be a qualified voter of the municipality; or

(B) be at least 18 years of age and own real property in the zone, whether or not the individual resides in the municipality; or

(2) if the board is covered by Subsection (b):

(A) be at least 18 years of age; and

(B) own real property in the zone or be an employee or agent of a person that owns real property in the zone

.

(f) Each year the governing body of the municipality shall appoint one member of the board to serve as chairman for a term of one year that begins on January 1 of the following year. The board of directors may elect a vice-chairman to preside in the absence of the chairman or when there is a vacancy in the office of chairman. The board may elect other officers as it considers appropriate.

(g) A member of the board of directors of a reinvestment zone:

(1) is not a public official by virtue of that position; and

(2) unless otherwise ineligible, may be appointed to serve concurrently on the board of directors of a local government corporation created under Subchapter D, Chapter 431, Transportation Code.

Amended by 1989 Tex. Laws, p. 4689, ch. 1137, Sec. 21; amended by 1999 Tex. Laws, p. 3764, ch. 983, Sec. 2.

Sec. 311.0091. Composition of Board of Directors of Certain Reinvestment Zones.

(a) This section applies to a reinvestment zone designated by a municipality which is wholly or partially located in a county with a population of less than 1.4 million in which the principal municipality has a population of 1.1 million or more.

(b) Except as provided by Subsection (c), the board of directors of a reinvestment zone consists of at least five and not more than 15 members, unless more than 15 members are required to satisfy the requirements of this subsection. Each taxing unit that approves the payment of all or part of its tax increment into the tax increment fund is entitled to appoint a number of members to the board in proportion to the taxing unit's pro rata share of the total anticipated tax increment to be deposited into the tax increment fund during the term of the zone. In determining the number of members a taxing unit may appoint to the board, the taxing unit's percentage of anticipated pro rata contributions to the tax increment fund is multiplied by the number of members of the board, and a number containing a fraction that is one-half or greater shall be rounded up to the next whole number. Notwithstanding any other provision of this subsection, each taxing unit that approves the payment of all or part of its tax increment into the tax increment fund is entitled to appoint at least one member of the board, and the municipality that designated the zone is entitled to appoint at least as many members of the board as any other participating taxing unit. A taxing unit may waive its right to appoint a director.

(c) If the zone was designated under Section 311.005(a)(5), the board of directors of the zone consists of nine members, unless a greater number of members is necessary to comply with this subsection. Each taxing unit that approves the payment of all or part of its tax increment into the tax increment fund is entitled to appoint a number of members to the board in proportion to the taxing unit's pro rata share of the total anticipated tax increment to be deposited into the tax increment fund during the term of the zone. In determining the number of members a taxing unit may appoint to the board, the taxing unit's percentage of anticipated pro rata contributions to the tax increment fund is multiplied by nine, and a number containing a fraction that is one-half or greater shall be rounded up to the next whole number. Notwithstanding any other provision of this subsection, each taxing unit that approves the payment of all or part of its tax increment into the tax increment fund is entitled to appoint at least one member of the board, and the municipality that designated the zone is entitled to appoint at least as many members of the board as any other participating taxing unit. A taxing unit may waive its right to appoint a director. The member of the state senate in whose district the zone is located is a member of the board, and the member of the state house of representatives in whose district the zone is located is a member of the board, except that either may designate another individual to serve in the member's place at the pleasure of the member. If the zone is located in more than one senate or house district, this subsection applies only to the senator or representative in whose district a larger portion of the zone is located than any other senate or house district, as applicable.

(d) Members of the board are appointed for terms of two years unless longer terms are provided under Section 11, Article XI, Texas Constitution. Terms of members may be staggered.

(e) A vacancy on the board is filled for the unexpired term by appointment of the governing body of the taxing unit that appointed the director who served in the vacant position.

(f) To be eligible for appointment to the board, an individual must:

(1) be a qualified voter of the municipality; or

(2) be at least 18 years of age and own real property in the zone or be an employee or agent of a person that owns real property in the zone.

(g) Each year the board of directors of a reinvestment zone shall elect one of its members to serve as presiding officer for a term of one year. The board of directors may elect an assistant presiding officer to preside in the absence of the presiding officer or when there is a vacancy in the office of presiding officer. The board may elect other officers as it considers appropriate.

(h) A member of the board of directors of a reinvestment zone:

(1) is not a public official by virtue of that position; and

(2) unless otherwise ineligible, may be appointed to serve concurrently on the board of directors of a local government corporation created under Subchapter D, Chapter 431, Transportation Code.

Added by HB 3006, 77th Tex. Leg., 2001, eff. September 1, 2001.