84(R) - 2015
House Investments & Financial Services
House Investments & Financial Services
Investment & Financial Services
Relating to the designation of certain areas as banking or credit union development districts to encourage the establishment of branches of banks or credit unions in those areas.
A fiscal note dated April 16, 2015 anticipates no significant fiscal implication to the State.
There could be costs to a local governmental entity that chooses to create a banking or credit union development district. however, it is assumed that a local government would establish a banking or credit union development district only if sufficient funds and partnership opportunities were available or it would not result in a negative fiscal impact; therefore, no significant fiscal impact is anticipated.
House Bill 1626 would amend the Finance Code to create banking and credit union development districts.
The Finance Commission would administer and monitor a banking development district program and the credit union commission would administer and monitor a credit union development district program in order to encourage the establishment of branches of a financial institution and of a credit union in geographic areas where there is a demonstrated need for banking services and services provided by a credit union.
The finance commission and the credit union commission would consult the Texas Economic Development and Tourism Office in order to adopt rules regarding the designations of such districts. They would take into consideration local activity, consumer needs, existing commercial development and the impact additional banking or credit union services could have on the economic development of the district.
Local governments, in conjunction with a financial institution -- for the designation of a banking development district -- or with a credit union -- for the designation of a credit union development district -- would have to apply respectively to the finance commission and the credit union commission. The finance commission and the credit union commission would have 120 days to determine whether to approve an application. If an application is approved, they would have to notify the local government, the financial institution or the credit union, the comptroller, the Texas Economic Development and Tourism Office, the lieutenant governor, and the speaker of the house of representatives.
The governing body of a local government in which a banking development district or a credit union development district have been designated may designate by resolution a financial institution or a credit union located in these districts respectively as a banking district depository or a credit union district depository. The resolution would have to specify the maximum amount that may be kept in deposit. In calculating the yield of public funds deposited, depositories would have to consider the benefit to Texas of stimulating economic development. Public funds could be deposited in these depositories by a local government or by the comptroller if the comptroller designate them as state depositories.
Banking and credit union development districts would allow local governments to enter into tax abatement agreements with a financial institution that owns property in a banking development district on which it offers to open a branch, or to a credit union that owns property in a credit union development district on which it offers to open a branch.
House Bill 1626 would amend the Chapter 312 of the Tax Code to make the designation of an area as a banking development district or credit union development district a reinvestment zone in a municipality or county.
Only the governing body of a municipality or a county would be allowed to enter into tax abatement agreements with the owner of properties located in these new districts, and properties would be restricted to financial institutions and credit unions.
Vote Recommendation Notes
An amendment was introduced and adopted on the House floor that removes the provisions related to tax abatements, leaving the creation of these special districts as an option to use as banking district or credit union district depositories. As a consequence, we are changing our position to neutral on HB 1626.
The second chamber sponsor is Senator Royce West.
First chamber recommendation:
House Bill 1626 would create two new special districts in order to encourage the establishment of financial banking institutions or credit unions in areas that are currently underserved by banks and credit unions.
The banking development district and the credit union development district would allow a municipality or county to enter into a tax abatement agreement with a financial institution or a credit union that own property in the designated district and offer to open a branch.
While House Bill 1626 aims at helping Texans currently living in areas lacking these financial institutions, the proper role of government is not to encourage the expansion of certain industries in certain areas.
There are several problems with those special districts and the special tax treatments that often go with them. First, government is picking winners and losers, deciding which industries, which businesses, should get preferential treatment among all over taxpayers in the district. As a consequence, it distorts the free market system. Second, those tax favors often have unintended consequences, a good example of which is the problem Senate Bill 1368 is trying to remedy.
House Bill 1626 would expand the scope of government and would be potentially harmful to the free market system. We oppose House Bill 1626.