During the 84th session there were multiple changes made to the contracting process for some agencies, and all agencies saw a change with the reporting requirements. Additionally, there were changes made to various economic development tools during the 84th which were a focus of the discussion when the House Committee on Economic and Small Business Development met on January 7.
During the hearing Bryan Daniel, Executive Director for Economic Development and Tourism in the Governor’s Office spoke on recent changes for several economic development program. Daniel spoke on several components of HB 26 (84th Session) and audit findings being addressed including implementing sound accountability, stronger internal protocols, and approving new time frames to increase approval process timeline for the Texas Enterprise Fund. There are some grants that the Governor’s office still maintains from the Emerging Technology Fund and will continue to administer until the grant period has ended. The transfer of the Major Events Trust fund from the Comptroller’s Office to the Governor’s Office, now called the Major Event Reimbursement program, went smoothly so that they were able to start accepting applications on September 1. Additionally the Governor’s University Research Initiative; which was established by legislation in the 84th will be open to applications in approximately the next 45 days. Final rules for the program may be published as early as next week.
HillCo has provided a brief refresher below that spotlights changes made during the 84th Session to contracts and Economic Development. A complete report of the hearing is also available, for those who have a HillCo website account, by clicking the hearing report link in the article below.
Contracts Database and Reporting
The Contracts Database is the single point of data entry for all contract information or contract documents that state entities are required to report to the LBB either by statute or the General Appropriations Act (GAA). The LBB has redesigned its Contracts Database to comply with reporting and oversight provisions of the GAA for the 2016-17 biennium.
Of note, in an LBB December Update from the Contract Overisght Team, there will be a new field added for maximum contract value. Maximum contract value is defined as the total value of the contract, amendments, and all extensions or renewals, even if not exercised. Therefore, the database field for this value will show the maximum liability the state may accrue in accordance with the terms of the contract. The maximum contract value should be used to determine whether the contract meets the threshold requirements for reporting.
The old database was closed to data entry effective August 15, 2015, and the new database became available beginning September 1, 2015. Click on the hyperlinks below for more details:
Economic Development
There are multiple local and state incentives provided as a tool to bring projects, tourism and economic development to the State of Texas. The Texas Enterprise Fund which was started back in 2003 may be well known but other funds such as the Texas Enterprise Zone Program, also administered by the Office of the Governor, and the Texas Capital Fund Infrastructure Program & Real Estate Development Program administered by the Texas Department of Agriculture all also offer economic development incentives.
Texas Enterprise Fund (TEF)
At Gov. Rick Perry's request, the 78th Texas Legislature established the Texas Enterprise Fund (TEF) in 2003 to help attract new jobs and investment to the state. The fund is a cash grant used as a financial incentive tool for projects that offer significant projected job creation and capital investment for which a single Texas site is competing with another viable out-of-state option.
Projects that are considered for the TEF must demonstrate a significant rate of return on the public dollars being invested in the project. Additionally there are several primary measures that every TEF project must meet in order to be considered for an award including but not limited to: competition with another state for the project must exist, new job creation must be significant (75 jobs in urban areas) and high-paying (above average wage), and the capital investment by the company must be significant.
Variations in award amounts are influenced by the number of jobs to be created, the expected timeframe for hiring, and the average wages to be paid. In the past, awards have ranged from $194,000 to $50 million. The average amount of money granted per job committed: $5,973.16
Legislation was recently passed changing the time period an application may be reviewed by the Speaker of the House and the Lieutenant Governor before being considered disapproved from 91 days to 31 days. The TEF was appropriated $45 million during the 84th for 2016-17. The TEF is administered through the Office of the Governor, Economic Development Bank.
Texas Emerging Technology Fund/Governor’s University Research Initiative
The Texas Emerging Technology Fund (TETF) was created by the Texas Legislature in 2005 at the urging of Gov. Perry to provide Texas with an unparalleled advantage in the research, development, and commercialization of emerging technologies. The fund was abolished in 2015 and funds remaining for this program were diverted to the Texas Enterprise Fund and the Governor’s University Research Initiative (GURI). The GURI was created and appropriated $40 million to provide matching funds to Texas public universities to recruit Nobel Laureates and National Academy members to Texas.
Events Trust Fund
The Events Trust Fund applies local and state gains from sales and use, auto rental, hotel and alcoholic beverage taxes generated over a specified period of time. Eligible events are not restricted to sports, but the venue must have been selected through a highly competitive selection process.
The Events Trust Fund can be used to help pay costs related to preparing for or conducting an event, including equipment, or to pay principal and interest on notes used to build or improve facilities to host the proposed event. One hundred percent of allowable expenses can be funded, provided sufficient tax receipts are deposited in the trust fund. The state has three separate event trust fund programs (the Events Trust Fund, Major Events Reimbursement Program and Motor Sports Racing Trust Fund), each designed to support different types of events.
During the 84th Session legislation was passed that moves the Events Trust Fund from the Comptroller’s Office to the Governor’s Office. The Major Events Trust Fund will now be called the Major Events Reimbursment Program. Legislation in the 84th also created the Economic Incentive Oversight Board that, for certain incentive awards, will: review the effectiveness of certain programs and funds to business entities and other persons; evaluate the benefits and costs to the state, local governments and residents of the state from the economic development activity; develop a schedule for periodic review of certain state incentive programs; and make recommendations for audits to the Legislative Audit Committee.