86th Texas Legislative Agenda by Bay Area Houston Economic Partnership

86th Texas Legislative Agenda Bay Area Houston Economic Partnership  Education and Workforce Development  Franchise Tax  Supporting the Region’s Healthcare System  Coastal Spine / Taxing Authority  Space Alliance Technology Outreach Program and Texas Aerospace Scholars Program  Spaceport Development Corporation and Texas Spaceport Trust Fund  Draft Bill  Texas Ports / Texas Enterprise Fund  Draft Bill  Transportation Funding  BayTran  Maritime Jobs Preservation and Growth  Ellington Field Joint Reserve Base

2019-2020 LEGISLATIVE AGENDA

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Education & Workforce Development

Baseline Needs for Texas’ Educational Institutions  

The Legislature needs to provide a fair, adequate and sustainable system for funding public education. The alternative is to continue the on-going turmoil, uncertainty, and inequities that plagues all levels of education to the detriment of students, business, and the Texas economy. The Legislative needs to both pass reasonable legislation and provide adequate funding to assure school safety and security for students, teachers, and the community. The alternative, tragically, is another Santa Fe HS or Parkland HS incident.

School Safety Serious violence in educational institutions across Texas has led to deaths, injuries, and psychological damage to students and staff. BAHEP joins the chorus of Texans expecting their elected representatives to act comprehensively and responsibly by:  Providing necessary funding for crisis prevention, including, but not limited to, early identification of and counseling for potential perpetrators; expanded community mental health services; safe school buildings; crisis planning and communications; expanded presence of law enforcement on campuses; and coordination with all first responders and hospitals.  Providing necessary funding for crisis response, including, but not limited to, training for first responders, staff, as well as parent and community training.  Providing necessary funding for post-crisis action, including, but not limited to, support for victims, their families, staff and students; building renovation and repair, counseling services, post-incident studies, and dedicated state coordination of local and regional entities, as appropriate.  Providing necessary funding for ongoing safety needs, thus assuring long-term safety and security measures are implemented either through state allocation or by allowing districts to access up to two cents of additional local tax monies that are dedicated to school safety.

For more information, contact: Bob Mitchell - 832.536.3255 - bob@bayareahouston.com - Bay Area Houston Economic Partnership Cindy DeWease - 281.488.7676 - cindy@clearlakearea.com - Clear Lake Area Chamber of Commerce

Section I: Public Education: Pre-K - 12 Note: Compiled with input from area superintendents and business leaders.  School Safety  Agenda: We support reimbursement and on-going funding to districts to offset the costs of high priority school safety measures, including but not limited to, safety officers; counselors and mental health professionals; facilities upgrades; and safety-related training for district personnel.  Why? Recent occurrences have caused Texas’ ISDs to review their school safety measures and to devote additional resources to anticipate and respond to any emergencies. In the short-term, more resources demonstrate the State’s commitment to students and staff safety. Importantly, the long-term implications of school safety upgrades, especially those involving adding personnel, will require additional funding on a continuing basis.  School Finance Reform  Agenda: We support reform of Texas’ school finance system that will, at the least,: o Guarantee that all property tax revenues stay in public education funding; and o Assure 50-50 funding, with at least 50% from state funds and up to 50% from local funds.  Why? Texas’ quality of life, economy, and workforce readiness depend on a strong and healthy public education system. The State of Texas is constitutionally required to assure that public education is supported. 

Strong Commitment to Local Governance  Agenda: We support strong local governance of schools, which means, among other things: o Encouraging district innovation, cost-savings, and improvement through local initiatives (e.g., Districts of Innovation); o Eliminating unfunded mandates; and o Honoring the Texas Constitution’s mandate for free public schools and precludes using public tax dollars for private institutions or individuals by any means.  Why? Locally elected school boards have the primary responsibility of implementing the state’s system of public education and are closest to the local taxpayers.

Section II: Higher Education: Community Colleges Note: Compiled with input from San Jacinto Community College District and business leaders 

Build on current funding mechanisms with focus on performance funding.  Continue the current funding mechanisms and request the legislature focus on the performance funding since community colleges are increasing the use of key metrics for student success.  Increase the funding for community college success without taking away funding for enrollment. (Increase the pie rather than reshuffle the size of the pieces of the pie).  Why?: A sustainable funding model for community colleges includes provisions for funding both enrollment and performance.

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Encourage dual credit completion.  Establish statewide goals for dual credit completion for high school graduates. Community colleges are considering ways to provide for more dual credit opportunities through grants to pay for up to 12 student credit hours (SCH) in core academic transfer subjects or in career and technical education (CTE) courses leading to certifications, possibly through revisions to existing Texas Education Opportunity Grant (TEOG) program.  Expand CTE dual credit leading to certification or an associate’s degree for high school students.  Why? Accelerated degree and certification programs have proven to be cost effective and beneficial to students and educational institutions, so extending the programs works for everyone involved.

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Fund workforce development programs.  In keeping with the community colleges’ workforce mission, request additional funding for the Skills Development Fund and the Jobs in Education for Texans (JET) fund.  Why? Texas’ continued economic competitiveness depends on the State’s ability to support its citizen’s ability to get appropriate and timely training to meet employment demands across all industry sectors.

Section III: Higher Education: UHCL Note: Compiled with input from University of Houston – Clear Lake and business leaders  Restore funding for downward expansion to FY 2016-2017 levels. Background: Reduction in Non-Formula Support (Appears as Special Items) Downward Expansion request of $3.25M for a 10-year period was funded FY 2016 and FY 2017. That amount was reduced to $2,137,666 per year for FY 2018 and FY 2019. There is a threat to eliminate it all together. Without these funds, the downward expansion programs are curtailed. Quoting Sen. Larry Taylor, “It would be patently unfair for the State to not adequately fund UHCL’s downward expansion after it has significantly funded the downward expansion of other institutions.”  Restore funding for student and academic programs to FY 2016-2017 levels. Background: Called “Institutional Enhancement” funds, these programs were funded at $2,277,483 per year for FY 2016 and FY 2017. For FY 2018 and FY 2019, the amount was reduced to $1,482,071 per year. Specifically, these funds are used for student access to higher education and to student success initiatives, academic programs, faculty support and delivery of instruction.  Restore funding for critical special items to FY 2016-2017 levels. Background: Two high-priority programs in particular are necessary for the State of Texas: The Center for Autism and Developmental Disabilities (CADD) and the Environmental Institute of Houston (EIH). Both should be restored to FY2016-17 levels. The reductions have negatively impacted the intervention services for diagnosed children and the much-needed training of professionals (CADD) and curtailed research and infrastructural maintenance affecting local and state communities (EIH).

Section IV: Higher Education: UTMB - Academic Health Center Note: Compiled with input from UTMB Health – Galveston and business leaders  Provide funding to support essential healthcare services. Background: UTMB requires continued funding of the hold harmless provision ($12M); restoration of cuts enacted during last legislative session; and formula funding increases to cover rising costs.  Provide sustained reimbursements for TDCJ inmate care. Background: Adequate inmate care will require repair to Hospital Galveston, funding for reimbursements that cover direct costs; and mechanism for sustained funding.  Legislate a stable healthcare funding model. Background: To provide quality, sustainable healthcare services, the Legislature has to address the basic funding model. UTMB recommends converting the current system to a hospital formula to establish stability and cost-effectiveness.

Section V: Higher Education: TAMU - G Note: Compiled with input from Texas A&M University – Galveston and business leaders  Provide base funding to address enrollment growth, student aid, and ‘Explore’ pathways to graduation.  Support Texas’ maritime industry through restoration of funding for seafood safety lab.  Authorize use of tuition revenue bonds for new learning environment building to support engineering programs and student academic support.

Priority Requests: 1. The Legislature needs to provide a fair, adequate and sustainable system for funding public education. 2. The Legislature needs to both pass reasonable legislation and provide adequate funding to assure school safety and security for students, teachers, and the community.

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Franchise Tax

Repeal, Reduce or Repurpose 86th Legislative Session

Repeal – Background and Justification During the 2013 legislative session, S.B. 179 was introduced as a means by which the franchise tax rate would be phased out over a Four-year plan; however, this bill never made it out of committee. That said, the premise of S.B. 179 subsequently made its way into the 2015 legislative session. During 2015, H.B. 32, aka The Franchise Tax Reduction Act of 2015 (the Act), was enacted introducing a 25% reduction in the franchise tax rates for all businesses subject to the tax beginning in 2016. The Act addressed the finding that the franchise tax imposed by Chapter 171, Tax Code, has not provided sufficient reliability for property tax relief. The Act stated that the intention of the legislation was to promote economic growth by repealing the franchise tax. On September 26, 2016, in a House committee meeting, the findings of comprehensive studies required by H.B. 32 to identify the effects of economic growth on future state revenues and to identify revenue growth allocation options to promote efficiency and sustainability in meeting the revenue needs of the state, upon the repeal of the franchise tax, were reported on. The presentations were made by the Texas Conservative Coalition Research Institute and Americans for Prosperity-Texas. Both organizations citing models and analysis developed or performed by The Beacon Hill Institute at Suffolk University (BHI) and the University of Texas at San Antonio (UTSA), recommended the elimination of the franchise tax. Analyzing the results of their model, BHI notes that, “The elimination of the franchise tax leads to a reduction in the after-tax burden on income derived from capital investments. This provides a powerful incentive for business owners inside Texas to invest in their businesses. Investment projects that may not have been profitable enough to justify the investment when considering property taxes, now become more profitable on an after-tax basis. Moreover, firms looking to locate new facilities in the United States would find Texas an even more attractive location in the absence of the franchise tax.” The UTSA analysis provided a “look back” to show how the Texas economy would have grown assuming the new franchise tax had never been enacted and states that the “economic growth would also have created somewhere between $1.4 and $2.2 billion in additional tax revenues,” thus providing the funding needed for property tax relief.

Reduce - Background for Step or “Glide Path” Repeal and Proposed Process Due to the volatile nature of predicting the revenues of the State’s oil & gas interest and demands of education and health care commitments of the State, another “path” to full repeal would be to consider “glide path” legislation for the reduction and ultimate elimination of the franchise tax over time based upon financial performance of the State. A proposed “glide path” base line to use for determining to what extent the franchise tax rates would be reduced over a four-year period, could, perhaps, be the probable revenue loss from Property Tax Relief

Fund as reported in the April 2017 Fiscal Note prepared by the Legislative Budget Board. That Fiscal Note reflected the following probable revenue loss by year: Fiscal Year 2018 2019 2018 2019 2020

Probable Revenue Loss (PRL) from PTRF $0 $0 $755,110,434 $773,592,566 $792,951,179

A formula would provide a reduction in the franchise tax rate each year based upon the State achieving unrestricted net revenues to cover these PRL’s in the prior year and projecting coverage of the PRL’s in the upcoming fiscal year. Taking the above table into consideration, if the fiscal year financials of the State report unrestricted net revenues for 2018 and the projected budget for fiscal year 2019 were equal to or exceeded the PRL for 2019, then a 25% rate reduction would go into effect for fiscal year 2019. If the actual unrestricted net revenues were below the estimate of PRL or the projected unrestricted net revenues were below the PRL for the upcoming year, then NO rate reduction would go into effect for the next year. This would continue until the franchise rate was phased out. Unrestricted net revenues would, in this context, exclude the impact of state pension accruals made annually to address the unfunded State pension liabilities. While these liabilities are real, there will be, perhaps, little to no unrestricted net revenues to cover the PRL’s. It should not be the responsibility of Texas businesses to bear the burden and provide for the current shortfall in funding of State pension liabilities.

Repurpose - Workforce Development Credit Another alternative to the entire or step repeal would be to allow for a margin tax credit. We believe small businesses, as well as large, need funding for workforce development, which could include credits for hiring military veterans. This credit would be equal to at least 25% rate reduction (perhaps up to the entire tax rate in a year) for the next three years, thus not requiring an entire or step repeal. The entire and or step repeal would be reconsidered in the 2021 legislative session, based upon status of Texas budget requirements.

Recommendations for Franchise Tax Reform:  

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Eliminate the Franchise Tax, or Initiate legislation that would provide a “glide path” for the reduction and ultimate elimination of the Franchise Tax. This “glide path” would provide for automatic reductions in the Franchise Tax rate based upon the State achieving a certain amount of projected unrestricted net revenues. Provide for Workforce Development Tax Credit

For more information contact: Bob Mitchell, 832.536.3255, bob@bayareahouston.com, Bay Area Houston Economic Partnership Cindy DeWease, 281.488.7676, cindy@clearlakearea.com, Clear Lake Area Chamber of Commerce

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Supporting the Region’s Healthcare System

Access to quality healthcare services is critical to our growing and vibrant region. Hospitals and healthcare providers not only contribute significantly to the state and regional economic viability through local spending, job creation and research, but also enhance the quality of life for the communities they serve. Today, hospitals and healthcare providers face numerous financial challenges centered on a growing uncompensated care burden. In order to preserve and support the region’s healthcare system, we suggest and support the following actions: SUPPORT OF THE 1115 TEXAS HEALTHCARE TRANSFORMATION AND QUALITY IMPROVEMENT WAIVER (1115 MEDICAID WAIVER)  2011 Texas legislature directed Texas Health and Human Services Commission (HHSC) to seek Section 1115 Medicaid Transformation Waiver from federal Centers for Medicare and Medicaid Services (CMS).  Original five-year waiver (term: 2012 – September 2016). CMS directed waiver be extended for five years (beginning December 2017).  CMS approved four additional years for the Texas DSRIP program – two years of level funding, followed by two years of funding that will decrease each year. The fifth year of the waiver extension does not include any funding for DSRIP, which is roughly $3.1B loss to the state.  Proven outcomes: Reduced healthcare costs and increased flexibility in the Medicaid program; expanded access to primary care and mental and behavioral health services.  Critical federal funding to help offset the cost of uncompensated care provided by the region’s healthcare providers. MAINTAIN FUNDING FOR THE REGION’S TRAUMA CARE NETWORK  Texas has approximately 290 designated life-saving trauma care facilities – three Level 1 Trauma Care facilities serving the Greater Houston region and two facilities pursuing a Level 2 Trauma Designation.  Texas trauma facilities currently provide more than $300 million in unreimbursed trauma care, an amount that would be even larger if the state did not provide funding to offset some of these costs.  State’s trauma care network requires adequate funding to continue to meet the needs of a rapidly growing population. MAINTAIN MEDICAID FUNDING  Request that the legislature fully fund the Medicaid shortfall from 2017.  State continue its investment in the Medicaid program without cutting reimbursement to providers.  Currently, the state pays hospitals approximately 60% of cost for in-patient care in the Medicaid program.

SUPPORT HEALTHCARE WORKFORCE NEEDS  Maintain or increase funding for medical education, nursing programs and other health professions.  Texas has a continuing shortage of healthcare professionals ranking #42 among all states in the number of physicians per thousand population and ranking #47 in the number of practicing nurses per thousand population. The shortage of PTs, OTs, PAs, clinical laboratory scientists, respiratory therapists, and other healthcare professionals is equally dire.  Enlarge the capacity of current educational programs.  Provide competitive, market salaries for health education professionals.  Provide scholarships and/or loan repayment programs for students.  Provide continued support for growth in the number of graduate medical education (GME) programs in order to provide in-state training opportunities for graduates of Texas health professions programs.  If additional medical schools are approved by the state, increase the overall support for all institutions to avoid dilution of current support. IMPROVEMENTS TO OUR STATE’S MENTAL HEALTH SYSTEM  Mental health affects numerous aspects of the community – from hospitals, to schools and jails.  Harris County Jail is the largest provider of mental health services in the region.  The Texas legislature made a significant investment in behavioral health last session, appropriating more than $7.5 billion for behavioral health, including $3.6 billion for Medicaid and CHIP behavioral health services.  State has too few inpatient beds for patients with severe behavioral health needs.  Outpatient behavioral health care services are not sufficiently available to keep individuals out of behavioral health crisis or to manage chronic behavioral health needs.  Important to avoid looking at mental health issues in isolation; instead, take a comprehensive view of how to improve the system for children and adults.  Identify best practices for early identification of mental illness and ways to improve collaboration across care providers.

Recommendations: 1. Continue the 1115 Texas Healthcare Transformation and Quality Improvement Waiver (1115 Medicaid Waiver) 2. Maintain Funding for the Region’s Trauma Care Network 3. Maintain Medicaid Funding 4. Support Healthcare Workforce Needs 5. Support Improvements to our State’s Mental Health System

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Coastal Spine / Taxing Authority

National Security Issue Without protection, a storm surge could shut down the nation’s busiest port in foreign tonnage and shutter the largest petrochemical complex in the nation, which supplies 40 percent of the specialty chemical feedstock, 27 percent of the gasoline, and 60 percent of the jet aviation fuel to the nation.

Protection for Texas Economy A coastal barrier system can protect the Texas economy from devastating impacts caused by storm surge:  Port Closures  Interruptions in Specialty Chemical Feed Stocks  Statewide Transportation Disruptions  Gasoline & Fuel Shortages and Price Increases  Loss of State Revenues  Loss of Life The Bay Area Houston Economic Partnership and other entities have worked for 10 years to garner support for a Coastal Spine to protect this region. We have worked with elected officials on local, state, and federal levels with great success. It is not a matter of “will” we get the funds to build a system but “when”. We believe we will; it will happen the next time we get hit by a hurricane. We need to be ready to accept the funds, which will require a taxing authority.

Recommendations for Reform: 1. Create or authorize a taxing authority for the purposes of receiving funds, guiding maintenance needs and providing oversight for design, development, and build of the Coastal Spine.

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Space Alliance Technology Outreach Program and Texas Aerospace Scholars Program

Space Alliance Technology Outreach Program The mission of the Space Alliance Technology Outreach Program (SATOP) is to make innovative aerospace technology available to the private sector, particularly to small businesses. Secondary goals are to incorporate technology into the small business processes to produce viable products, serve as an advocate for the aerospace industry, and realize the positive economic impact to small business through new contracts, increased revenues, increased employment, and/or overall company growth due to SATOP technical assistance. SATOP transfers NASA Johnson Space Center scientific and engineering expertise to meet Texas small businessesâ&#x20AC;&#x2122; technology requirements fostering economic retention/expansion. Since 1999, SATOP has helped 800 small businesses solve their technical challenges. SATOP assistance impacts increased sales, retention, and new employment opportunities for small businesses in Texas. Industry clusters that have seen a direct impact from SATOP have been medical, oil & gas, transportation, agriculture, automotive, aviation/military, petro-chemical, and safety related challenges. NASA aerospace contractorsâ&#x20AC;&#x2122; commitment of free engineering support surpasses 12,000 engineering hours annually. Texas Aerospace Scholars Program The Texas Aerospace Scholars (TAS) program harnesses the excitement of human space exploration to inspire Texas students to consider and pursue degrees and careers in science, technology, engineering, and mathematics (STEM). TAS provides unique educational and internship experiences that ensure a competitive workforce for the future. TAS includes Community College Aerospace Scholars (CAS) and High School Aerospace Scholars (HAS) programs. NASA, with its partners, since 1999, has offered more than 10,000 high school juniors, representing 100% of Texas legislative districts, the opportunity to participate in HAS. In the last five years, nearly 74% of HAS alumni have gone on to study at Texas colleges and universities. Eighty-four percent (84%) of students completing HAS in the last five years have declared one or more majors in STEM. More than 15 HAS alumni are currently working at NASA full-time increasing the number of high-tech, STEM-capable employees in the Texas workforce. Of these, 55% represented underrepresented populations. To date, 85 students have served as interns at NASA.

Recommendation for Reform: 1. Support and fund the University of Houston Agency Submission of the Special Item funding at $474,523 per annum and the Exceptional Item of $326,745 per annum for a total of $1,602,536 bi-annually. For more information, contact: Bob Mitchell - 832.536.3255 - bob@bayareahouston.com - Bay Area Houston Economic Partnership Cindy DeWease - 281.488.7676 - cindy@clearlakearea.com - Clear Lake Area Chamber of Commerce

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Spaceport Development Corporation and Spaceport Trust Fund

An “Authorizing Entity” is defined as a political subdivision or a combination of political subdivisions that authorizes the creation of a spaceport development corporation as permitted under Section 507.003.

 “Spaceport" includes: a) an area intended to be used to launch or land a spacecraft, b) a spaceport building or facility located on an area appurtenant to a launching or landing area, c) an area appurtenant to a launching or landing area that is intended for use for a spaceport building or facility, or d) a right-of-way related to a launching or landing area, building, facility, or other area that is appurtenant to a launching or landing area. 

AUTHORITY TO CREATE CORPORATION BY ELIGIBLE ENTITIES (Section 507.003) The following entities are eligible to authorize the creation under this subtitle of a spaceport development corporation: a) a county, or b) a combination of one or more municipalities and one or more counties.

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We believe that the code was written is this manner in order to have a larger pool of residents (tax payers) input.

Recommendations for Reform: 1. Add language to Section 507.003 that enables a municipality with a population of two million or more residents to establish a spaceport development corporation provided it is within the jurisdiction of the municipality. 2. Appropriate $15 million to the Spaceport Trust Fund for infrastructure improvements only. For more information, contact: Bob Mitchell - 832.536.3255 - bob@bayareahouston.com - Bay Area Houston Economic Partnership Cindy DeWease - 281.488.7676 - cindy@clearlakearea.com - Clear Lake Area Chamber of Commerce

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Texas Ports / Texas Enterprise Fund

The Texas Enterprise Fund (TEF) is a cash grant used as a financial incentive tool for projects that offer significant job creation and capital investment and where a single Texas site is competing with another viable out-of-state option. Since its inception in 2004, the TEF has awarded over 140 grants totaling nearly $600 million across a wide variety of industries and projects committed to creating more than 80,000 jobs and investing more than $27 billion. To ensure that companies receiving Texas Enterprise Funds contribute to the economic impact of the state, legislation needs to be added that will require these companies to utilize Texas ports provided there is not a competitive disadvantage.

Recommendation for Reform: 1. To ensure that companies receiving Texas Enterprise Funds contribute to the economic impact of the state, legislation needs to be added that will require these companies to utilize Texas ports provided there is not a competitive disadvantage.

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Transportation Funding

The Houston region continues to be a leader in economic growth, attracting new residents and business investment in technology and manufacturing. Bay Area Houston is home to multiple ports, as well as the Houston Ship Channel. Due to the volume of goods being moved throughout the Bay Area, and the number of residents commuting to work or moving through the region’s increasingly congested infrastructure, mobility and safe infrastructure are vital to sustaining the economic pace of the region and the State of Texas. The people of Texas recognize the importance of investing in transportation infrastructure, as evidenced by overwhelming voter approval of Proposition 1 in 2014 and Proposition 7 in 2015. Approval of those ballot items moved the needle toward reducing a $5 billion shortfall for roadway maintenance across the state. However, they did not address new capacity needs to accommodate projected increases in population and freight movement. In addition to full appropriation of Proposition 1 and Proposition 7 funding, it is necessary to preserve existing transportation funding sources and explore new sustainable funding sources and policies which improve or maintain residents’ quality of life, keep industry competitive, and allow for funding across all modes of transportation.  The Houston region’s population of 6 million is expected to add another 3.7 million residents and 2 million more jobs by 2040.  Motor Fuels Taxes are the largest source of state revenue to the State Highway Fund and have lost considerable purchasing power since they were last increased in 1991.  Voters approved Proposition 1 by 80% and Proposition 7 by 83%.  More than 2.2 billion tons of freight moved within Texas in 2016 and is forecasted to reach 4 billion tons by 2040.  The Texas Rail Relocation and Improvement Act was established in 2005 but was never capitalized.

Recommendations for Reform: 1. Continue existing transportation funding mechanisms, including toll roads, and index outdated funding sources to keep up with inflation. 2. Provide local governments the option to propose funding options for infrastructure projects requiring approval by voters. 3. Prioritize freight projects and develop a sustainable funding source for multi-modal infrastructure.

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Maritime Jobs Preservation and Growth

Since the enactment in 2010 of a boat sales tax cap in Florida, our industry and the State of Texas have been losing jobs, economic activity, opportunities and tax revenue to Florida and other states due to a competitive disadvantage in boat sales tax and regulations. A total of 12 other coastal states have followed Florida’s lead while Texas has stood pat! Consequently, more and more Texas boat owners have been purchasing, registering, and locating their boats out-of-state, primarily Florida, and enriching those states with economic activity and tax revenue that would otherwise be benefiting Texas and our marine industry. Florida’s marine industry has boomed since the enactment of their $18,000 max tax cap while Texas remains one of the highest boat tax states in the U.S at 6.25% and even 8.25% for larger vessels! The result is that Texas is losing valuable jobs, economic activity, and tax revenue and has been declining in the number of boat registrations. The Texas Marine Industry Coalition (TMIC) is committed to reversing this trend through positive action and legislation to preserve and stimulate the marine industry and associated businesses and communities. We must re-establish the state of Texas among the nation’s leaders in boat sales, boat registrations, and employment related to the marine industry. A healthy, growing marine industry supports and generates economic activity for a multitude of other non-marine businesses located in our marine recreational communities. Establishing a boat sales tax cap, similar to Florida’s, and providing access for vessels with out-of-state registration to utilize Texas waters will stimulate marine businesses and provide a significant increase in economic activity. The result will be more jobs and improved services throughout the Texas marine industry. Importantly, it will provide a needed economic boost to our coastal communities still recovering from the devastation of Hurricane Harvey. The positive results of these measures have been proven in Florida and the 12 other states that have already taken action on these issues. The state of Texas must provide a competitive and welcoming environment for Texas boat owners and out-of-state registered boats, to stay, come to, or return to Texas ports and communities so they can spend money in local communities and engage the local marine industry for sales, services, repairs, and supplies.

Texas Marine Jobs Preservation and Growth 2018/2019 Summary of Proposed Legislation. There are four primary components to the legislation proposed by the TMIC: 1. Provide a sales tax cap on all taxable vessels by amending Tax Code Chapter 160 (Taxes on Sales and Use of Boats and Boat Motors) to cap the tax imposed at $18,750. Current tax rate is 6.25%. Action: Amend Chapter 160 of the tax code where applicable to insert the capped amount. 2. Provide that all taxable vessels are taxed under the same tax code Chapter 160 (Taxes on Sales and Use of Boats and Boat Motors). Currently Chapter 160 defines a boat as a vessel not more than 65 feet in length. Vessels more than 65 up to 115 feet in length are taxed under Tax Code Chapter 151 (Limited Sales, Excise, and Use Tax), which imposes an additional 2.0% local tax bringing the tax to 8.25%. Action: Amend the definition of boat as it applies to Tax Code Chapter 160 to be any vessel up to 115 feet in length. 3. Provide an exemption from sales tax for certain boats sold in Texas for use in another state or country. The exemption would apply to vessels purchased in Texas for use in another state or country if removed from Texas within 10 days of the sale and to vessels seeking repair or refit by Texas businesses prior to leaving the state and removed with 10 days of completion of services. Action: Provide an exemption for boats sold in Texas for use in another state or country if removed from Texas within 10 days of the sale and to vessels seeking repair or refit by Texas businesses prior to leaving the state and removed with 10 days of completion of services. 4. 4. Provide for a temporary cruising permit or other method to allow boats with out-of-state registration to visit Texas waters for certain periods of time. Action: Provide a method in Tax Code Chapter 160 for any vessel with a current out-of-state registration to be used in Texas waters during a set period of time.

Recommendation for Reform: 1. Amend Chapter 160 of the tax code where applicable to insert the capped amount. 2. Amend the definition of boat as it applies to Tax Code Chapter 160 to be any vessel up to 115 feet in length. 3. Provide an exemption for boats sold in Texas for use in another state or country if removed from Texas within 10 days of the sale and to vessels seeking repair or refit by Texas businesses prior to leaving the state and removed with 10 days of completion of services. 4. Provide a method in Tax Code Chapter 160 for any vessel with a current out-of-state registration to be used in Texas waters during a set period of time. For more information, contact: Bob Mitchell - 832.536.3255 - bob@bayareahouston.com - Bay Area Houston Economic Partnership Cindy DeWease - 281.488.7676 - cindy@clearlakearea.com - Clear Lake Area Chamber of Commerce

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Ellington Field Joint Reserve Base

Ellington Field Joint Reserve Base (EF JRB) is one of Texas’ 15 major military installations, a joint forces military and interagency installation in Southeast Texas, serving the U.S., Texas and America’s Gulf Coast. Joint Forces Military Value is a vital strategy for Texas military installations, uniquely demonstrated by all five armed services at Ellington Field JRB – Air Force, Army, Navy, Marine Corps, and Coast Guard. Ellington Field JRB is flagged as a two star Major General installation. Joint Forces Military Value missions feature battle command training headquarters and battalion, as well as air, ground and sea combat operations, training, and operations support missions. U.S. and Texas interagencies contributing include Department of Defense, Department of Homeland Security, Veterans Administration, National Aeronautics and Space Administration, Civil Air Patrol, and Texas State and Military Forces. Ellington Field JRB’s region, strategically positioned in the heart of major U.S. national security assets, serves in Defending National Security on America’s Gulf Coast. Since 2003, Ellington Field Task Force (EFTF) has served as the Houston Defense Community advocate and coalition leader. Based from the Bay Area Houston Economic Partnership (BAHEP), EFTF is responsible for the MilitaryCommunity Master Plan for Ellington Field JRB, having accomplished substantial joint forces military value growth from 1,500 personnel in the TX Air Guard, TX Army Guard, and U.S. Coast Guard units to approaching 7,000 personnel following construction and realignment of U.S. Reserve commands from the Army, Navy, Marine Corps, and U.S. Coast Guard Houston-Galveston Sector. EFTF serves as the regional coalition of stakeholders in Houston-Galveston and Southeast Texas. EFTF is a 2003 organizing member of the Texas Military Preparedness All Five U.S. Armed Services Commission (TMPC) working in direct support with the plus Interagency of NASA, VA, DHS, others Texas Military Value Task Force, Senate Veteran Affairs & Military Installation (VAMI) and House Defense & Veteran Affairs and State and Federal Power & Responsibility. With the Ellington Field Task Force defense community’s accomplishment in creating the effective Houston Defense Community based enabler for Ellington Field JRB Joint Forces Military Value in the State of Texas, EFTF requests Texas legislative support for these continuing key initiatives:

Texas 86th Legislature Support Requested for Ellington Field JRB 1 2 3

US Africa Command (USAFRICOM) – TX Joint Resolution supporting USAFRICOM  to Texas, Houston’s Ellington Field JRB, submitted to POTUS, SECDEF, SASC, HASC & TX Congressional Delegation. Joint Forces Military Value (JFMV) Initiatives– In cooperation with TMPC priority for optimizing joint forces military value for state and federal purposes, promote EF JRB JFMV projects for EF JRB missions. Veteran & Military Family Affairs – State commitment for veteran home facilities in EF JRB vicinity commensurate to region’s 130,000+ (2nd largest in U.S.) veterans & 11,000+ military families.

Bay Area Houston Bay Area Houston Economic Partnership 18045 Saturn Lane, Houston, Texas 77058 832.536.3255 www.bayareahouston.com

Clear Lake Area Chamber of Commerce 1201 NASA Parkway, Houston, Texas 77058 281.488.7676 www.clearlakearea.com

League City Regional Chamber of Commerce 319 E. Galveston Street, Suite B, League City, Texas 77573 281.338.7339 www.leaguecitychamber.com

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