Article
Proposed Constitutional Amendment #3
This week, I will continue outlining each of the proposed constitutional amendments so that you may make an informed decision as you head to the polls on November 8 to help ratify or reject amendments to the Texas Constitution.
The third proposed constitutional amendment was passed by the legislature as House Joint Resolution 80. On the ballot, the proposal will be labeled as Amendment #3 and will read as follows: "The constitutional amendment clarifying that certain economic development programs do not constitute a debt."
SUMMARY: The proposed amendment amends Section 52-a, Article III, Texas Constitution, to provide that a program created or a loan or grant made as provided by that section, other than a program, loan, or grant secured by a pledge of ad valorem taxes or financed by the issuance of bonds or other obligations payable from ad valorem taxes, does not constitute or create a debt for the purpose of any provision of the Texas Constitution.
Arguments For: Expressly affirming the legality of long-term economic development programs will have a positive effect on the economy of this state. Agreements between municipalities and private persons under Chapter 380, Local Government Code, provide a variety of economic development programs that attract new business, and any uncertainty regarding the legality of these agreements is a disincentive for a business to enter into such an agreement in this state because the business cannot predict whether the municipality will be able to perform the municipality's obligations under the agreement. This uncertainty could result in a business locating in another state where such agreements are more clearly authorized by law. Economic development agreements between municipalities and private persons providing for the rebate of certain taxes are legal under current law; the proposed amendment merely clarifies the original intent of the legislature and the voters of this state.
Arguments Against: Adopting the proposed amendment would undermine the constitutional protections for taxpayers regarding the creation of public debt. If the constitution is amended to provide that any long-term economic development agreement that is not secured by a pledge of ad valorem taxes or financed by the issuance of bonds does not create debt, future governing bodies may be bound by agreements that were entered into without the constitutional requirements regarding the issuance of debt. It is unnecessary to take the step of amending the state constitution to address concerns raised by a single lower-court case. The recent district court ruling that an agreement under Chapter 380, Local Government Code, created an "unconstitutional debt" applies only to the narrow circumstances of that case. Furthermore, the district court's ruling is subject to appeal.
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