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Pearsall could soon establish an Economic Development Corporation (EDC), to help diversify the city economy by retaining and attracting primary jobs and investment.
“This is how we want to potentially incentivize people,” City Manager Federico Reyes said prior to a presentation by legal counsel. “It is an entity created by the city to utilize sales tax.”
The development Corporation Act of 1979 gives cities the ability to finance new and expanded business enterprises in their local communities through EDCs. The local government code outlines the characteristics of Type A and Type B EDCs and authorizes cities to adopt a sales tax to fund the corporations and define projects EDCs are allowed to undertake.
Type A EDCs are created to fund industrial development projects such as business infrastructure, manufacturing, research and development, regional or national corporate headquarters facilities, telephone call centers, aviation facilities, commuter rail or bus operations, port-related facilities and maintenance and operating costs associated with projects.
Type B EDCs are created to fund projects eligible for Type A but also for projects that cultivate communities such as parks, museums, sports facilities and affordable housing. However, Type B EDCs are subject to more administrative restrictions.
During a presentation by Bobby Maldonado, legal counsel for the city, councilors learned they would need to conduct an election to establish an economic development sales tax.
Currently the state tax rate is 6.25 %; the maximum Texas can impose is 8.25 %; and the maximum that a city can impose is 2 percent.
“That’s where the city is,” Maldonado said. “The city gets one and a half percent, because the county gets half a percent.”
Maldonado told councilors that an election must be held, should the council decide to move forward with the establishment of an EDC, in order to reallocate the monies.
“Once you guys decide as a council to release some of that one and a half percent to form an EDC, you must hold an election,” the attorney said.
“You folks are capped now,” Maldonado said. “You have a lot of flexibility [but this is] one of the only [funding] mechanisms. You can do it now. But what it requires is that you take that money out of general fund receipts and redirect it to economic development.”
The attorney said the reason many cities choose not to form EDCs is that municipalities want their funds to go through the comptroller’s office.
“This is a way to make sure the money goes to economic development, even through administration changes,” Maldonado said. “But if you are truly committed to economic development, this is the way to go. You have all the power and authority to do anything you want. The EDC forces you to save money off the top and put into a separate bank account and use it for certain projects.”
Maldonado said councilors will appoint themselves to the EDC board. However, should members of the community be appointed, the projects are still brought before city councilors for approval.
Councilor Julian Hernandez questioned the possibility of taking back the half percent from the county.
“I was surprised when I found out that the county took that percentage,” Maldonado said. “A lot of counties do not do that.”
Councilor Davina Rodriguez said she brought the idea of an EDC to the table after talks with councilors from other communities regarding economic growth.
“I asked them how they did it because we are stuck,” Rodriguez said. “We have been in charge of economic development this whole time and have not brought nothing. Yeah, the HEB, and yeah, I voted against the abatement; we got hotels but they came because of the oilfield. But it really is not a lot that has been brought. With this economic development board, we put it on their plate and they are working on it this whole time while we are doing city business. When we run for city council we preach it that we are going to bring in economic development but then we do not do it. I know we do not want to let the money go but we are not doing nothing with the money.”
Mayor Ben Briscoe said one eighth of what the city receives is a quarter million dollars.
“So it does not affect us too bad but it does definitely fund something,” the mayor said.