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May 01

May 1, 2020 TML Coronavirus Update #35

Posted on May 1, 2020 at 4:15 PM by TML Staff

Urgent Updates


Has the attorney general issued further guidance regarding Executive Order GA-18 and how it supersedes local orders? In other words, can I now get my hair cut?


He has. But that much-needed haircut? Still can’t get one as of now. 


The Texas Department of Licensing and Regulation issued guidance today (May 1) regarding barbershop, cosmetology salon, nail salon, esthetician salon, massage establishment, and laser hair establishment closures:


“Yesterday, the Texas Attorney General's Office released a guidance letter to address questions relating to Governor Abbott's Executive Order GA-18. Barbershops, cosmetology salons (including nail and esthetician), massage establishments, and laser hair establishments must remain closed until further notice. The Governor's order overrides conflicting local and county orders.”


The guidance letter referenced by TDLR has clarifying language that is applicable well beyond haircuts about how Executive Order GA-18 should be interpreted, and the attorney general’s advice generally tracks what’s been in previous TML updates.


Passages in the letter of particular interest are reprinted here verbatim:


-Your question concerns numerous public reports suggesting that the Governor’s order is vague and unenforceable. As explained below, the Governor’s order is neither vague nor unenforceable, and local governments are prohibited from allowing businesses to reopen unless they are recognized as essential or reopened services under the Governor’s order. 

-Executive Order GA-18 expressly provides that it supersedes “any conflicting order issued by local officials” to the extent such order “expands the list of essential services or the list or scope of reopened services as set forth in this executive order.” Exec. Order GA-18 at 5. A local order that purports to allow businesses that are neither essential services nor reopened services under GA-18 to reopen would “expand the list of essential services or the list or scope of reopened services.” Therefore, such an order would be superseded by GA-18 and would be invalid.  See Exec. Order GA-18 at 5; see also Tex. Const. art. XI, § 5(a) (providing that local regulation may not be inconsistent with the State Constitution or laws); Tex. Gov’t Code § 418.012 (providing that the Governor’s executive orders “have the force and effect of law”); City of Laredo, Tex. v. Laredo Merchants Assoc., 550 S.W.3d 586, 592 (Tex. 2018) (recognizing municipal ordinances may not be inconsistent with the Constitution or state law); Tex. Att’y Gen. Op. KP-0296 (2020) (concluding municipal and county officials lack emergency authority to regulate or restrict the sale of firearms).


How does a city calculate the percentage of dine-in occupancy for restaurants re-opened by Executive Order GA-18?


It’s hard to tell. Executive Order GA-18 provides in relevant part that:


“‘Reopened services’ shall consist of the following to the extent they are not already ‘essential services:’


b) Dine-in restaurant services, for restaurants that operate at up to 25 percent of the total listed occupancy of the restaurant; provided, however, that (a) this applies only to restaurants that have less than 51 percent of their gross receipts from the sale of alcoholic beverages and are therefore not required to post the 51 percent sign required by Texas law as determined by the Texas Alcoholic Beverage Commission, and (b) valet services are prohibited except for vehicles with placards or plates for disabled parking…


f) For Texas counties that have filed with DSHS, and are in compliance with, the requisite attestation form promulgated by DSHS regarding five or fewer cases of COVID- 19, those in-store retail services, dine-in restaurant services, movie theaters, shopping malls, and museums and libraries, as otherwise defined and limited above, may operate at up to 50 percent (as opposed to 25 percent) of the total listed occupancy.”


City officials across the state have experienced differing interpretations about how to calculate the 25 or 50 percent occupancy. For example, should restaurant employees be considered in that number? Most cities had worked it out locally by cross-referencing a restaurant’s certificate of occupancy. 


However, yesterday (April 30), the governor’s office issued a two-sentence letter to the Texas Restaurant Association. It stated that:


“As you know, Governor Abbott’s executive order GA-18 limits the occupancy of restaurants for dine-in restaurant services to 25% of the total listed occupancy. This limitation is for the number of restaurant customers in the restaurant, and does not include essential employees of the restaurant.”


Many cities have adopted building and fire codes, and they issue certificates of occupancy to businesses based on those codes. While each city’s C.O. can be different, many provide that the total listed occupancy includes all people, including staff. How to ultimately interpret the percentage is up to each city based on the advice of local legal counsel.


Has the comptroller released recent tax data that indicates the impact of Coronavirus on state revenues?  


Yes, the Texas comptroller issued the following today (May 1):


“Texas Comptroller Glenn Hegar today said state sales tax revenue totaled $2.58 billion in April, 9.3 percent less than in April 2019, the steepest decline since January 2010.


The majority of April sales tax revenue is based on sales made in March and remitted to the agency in April. Widespread social distancing requirements were not in place across much of the state until late March, meaning the impact of those measures affected only a portion of sales tax remittances in April. Next month’s remittances likely will show steeper declines compared to a year ago, as the effects of both the shuttering of businesses related to COVID-19 and plummeting oil prices were manifest throughout April.


‘State sales tax collections declined as a result of efforts to stem the spread of COVID-19 through business closures, crowd limits and stay-at-home orders adopted in the state, as well as a precipitous drop in worldwide demand for oil,’ Hegar said. ‘The steepest declines in tax remittances were from businesses most quickly and dramatically affected by social distancing: restaurants, performing arts venues, movie theaters, theme parks and fitness centers, as well as department stores and boutique retail shops. However, those losses were, to a degree, offset by increases from big-box retailers, grocery stores and online vendors. Remittances from oil- and gas-related sectors also fell significantly as oil and gas exploration and production companies slashed capital spending in response to the crash in oil price.’


Sales tax is the largest source of state funding for the state budget, accounting for 57 percent of all tax collections. It can also be a lagging indicator of economic slowdowns. The recession associated with the financial crisis more than a decade ago began in December 2007 and lasted 18 months, but Texas did not see significant sales tax declines until early 2009. While the effect on sales taxes from the current economic contraction has been more immediate, the impact of rising unemployment and contracting economic activity in many parts of the state’s economy, including oil and natural gas exploration and production, likely will act as a drag on sales tax revenue for many months.


The effects of the March economic slowdown and falling oil prices were more evident in other sources of revenue in April 2020. Texas collected the following revenue from other major taxes:


-Motor vehicle sales and rental taxes — $164 million, down 45 percent from April 2019, the largest monthly drop on record in data going back to 1983;

-Motor fuel taxes — $284 million, down 12 percent from April 2019, the steepest drop since 1991;

-Natural gas production tax — $67 million, down 48 percent from April 2019;

-Oil production tax — $191 million, down 45 percent from April 2019;

-Hotel occupancy tax — $24 million, down 63 percent from April 2019, the deepest drop in data going back to 1990; and

-Alcoholic beverage taxes — $57 million, down 55 percent from April 2019. Declines were driven by mixed beverage gross receipts and sales taxes, both of which were down more than 58 percent. Excise taxes on beer were up 16 percent from April 2019, while wine excise taxes were up 9 percent from April 2019.


For details on all monthly collections, visit the Comptroller's Monthly State Revenue Watch. For an extensive history of tax policy developments and fees since 1972, visit his updated Sources of Revenue publication.”


What does the state revenue forecast above portend for city revenues?


Though sales taxes make up a somewhat smaller share of the typical city budget (around 25-28 percent versus 57 percent for the state), it’s still going to be a big hit for city budgets and the ability to pay for needed services, such as first responders. As the press release notes, the numbers reflect only a portion of the time we’ve been under a stay home/work home order. The next round of figures may give us a better indication of the trouble ahead.


Further Updates


Has anyone compiled programs related to assisting Texans as they comply with the stay at home order, especially as it relates to housing assistance?


Yes, the University of Texas has prepared a web page to track policies adopted by the federal government, State of Texas, and local jurisdictions to help Texas residents stay in their homes during the pandemic and accompanying financial crisis. This site will also include policy best practices and opportunities to increase Texans’ housing stability.


Is there new guidance related to federal loan programs for small businesses?


Yes. Yesterday (April 30), the Federal Reserve Board announced the expansion of the Main Street Lending Program. The Main Street Lending Program is designed to support small and medium-sized businesses that were in sound financial condition before the COVID-19 pandemic. After receiving public feedback, the Federal Reserve expanded the loan options available to businesses and increased the maximum size of businesses that are eligible for support. Now, businesses with up to 15,000 employees or $5 billion in annual revenue are eligible for loans under the program. Additionally, the minimum loan size for certain loans was lowered to $500,000.


City officials are encouraged to pass along information related to the Main Street Lending Program to their local business leaders. The Federal Reserve’s press release contains links to guidance and frequently asked questions.


Has the governor announced new guidance for unemployment claimants?


Yes, the governor issues the following press release yesterday (April 30):


“Governor Greg Abbott today announced that the Texas Workforce Commission (TWC) has issued new guidance to unemployment claimants concerning their eligibility for unemployment benefits should they choose not to return to work at this time due to COVID-19. Under this guidance, Texans can continue to receive unemployment benefits throughout the COVID-19 response if they choose not to return to work for certain reasons as specified by TWC.


‘As the Lone Star State begins the process of safely and strategically opening the economy, our top priority is protecting the health and safety of all Texans—especially those who are most vulnerable to COVID-19,’ said Governor Abbott. ‘This flexibility in the unemployment benefit process will help ensure that Texans with certain health and safety concerns will not be penalized for choosing not to return to work.’


Each unemployment insurance claim is currently evaluated on an individual basis. However, because of the COVID-19 emergency, the following are reasons benefits would be granted if the individual refused suitable work.


Reason for refusal:


-At High Risk: People 65 years or older are at a higher risk for getting very sick from COVID-19.

-Household member at high risk: People 65 years or older are at a higher risk of getting very sick from COVID-19.

-Diagnosed with COVID: The individual has tested positive for COVID-19 by a source authorized by the State of Texas and is not recovered.

-Family member with COVID: Anybody in the household has tested positive for COVID-19 by a source authorized by the State of Texas and is not recovered and 14 days have not yet passed.

-Quarantined: Individual is currently in 14-day quarantine due to close contact exposure to COVID-19.

-Child care: Child’s school or daycare closed and no alternatives are available.

-Any other situation will be subject to a case by case review by TWC based on individual circumstances.”


 What is the General Land Office’s official beach opening guidance? 


The GLO issued the following to the City of Galveston yesterday (April 30):


“On March 17, 2020, the GLO gave approval for local governments to close beaches due to COVID-19. The basis for the GLO approval was the Governor’s State of Disaster proclamation on March 13, 2020. The proclamation was followed by Executive Order GA-16, which will expire at 11:59 p.m. on April 30, 2020. The Governor’s Office has also issued Executive Order GA-18, which encourages outdoor activities so long as necessary precautions are maintained to minimize the transmission of COVID-19 and to minimize in-person contact with people who are not in the same household.


Therefore, the GLO is rescinding its approval for local governments to close beaches due to COVID-19, effective April 30, 2020, at 11:59 p.m. The GLO understands that conditions may change, and local governments are required to contact the GLO for prior approval for any future closures of the beach to vehicles or pedestrians, closures of beach access points, time limitations, or restrictions on particular uses or activities on the beach. Local governments should also encourage the public to follow the recommended individual health protocols outlined by the Texas Department of Health and Human Services at the following link:“ 


Is the attorney general’s office offering assistance with disseminative information about price-gouging during the pandemic?


Yes, the attorney general’s office has created a COVID-19 consumer issues page. The page contains helpful information about scams, price gouging, and how to report one of those.


Where can I find archived issues of the TML Coronavirus Updates?


TML Coronavirus Updates are archived by date here and by subject here