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September 2003 If the voters of a municipality adopt the street maintenance sales tax at an election held on the same date on which another political subdivision adopts a sales and use tax or approves the increase in the rate of its sales and use tax and as a result the combined rate of all sales and use taxes imposed by the municipality and other political subdivisions would exceed 2 percent at any location in the municipality, the election to adopt a street maintenance sales tax will have no effect. For more information, visit our Web site <http://www.window.state.tx.us/lga/> Receive help via e-mail atlocal.govt@cpa.state.tx.us Many Texas cities do not have the funds necessary to repair existing roads. Recognizing this, the 2001 Texas Legislature passed House Bill 445, which allows cities to raise their local sales tax rate by 0.25 percent if the funds are dedicated to street maintenance and repair. WHO IS ELIGIBLE? Cities may impose the tax, with voter approval, if the new combined local sales tax rate will not exceed 2 per- cent, as provided in the Tax Code, 9327.003(b). ELECTION IS REQUIRED The voters must approve the addi- tional sales tax. The city's governing body must adopt an ordinance calling for the election at least 62 days before it is held. When can election be held? The election must be held on one of the following uniform election dates: . the first Saturday in February; . the third Saturday in May; . the second Saturday in September; or . the first Tuesday after the first Monday in November. Ballot language At the election to adopt the addi- tional tax, a ballot must allow voters the choice of voting for or against the proposition. Following is the required ballot language: The adoption of a local sales and use tax m mame of municipality) at the rate of (insert one-eighth of one percent or one-fourth of one percent) to provide revenue for maintenance and repair of municipal streets. The permissable rates are 1/8 and 1/4 of 1 percent. [Refer to V.T.CA., Tax Code 9327.006(b).] Election results If the election is successful, within 10 days of the election the city must, by resolution or ordinance entered in its minutes of proceedings, declare the results of the election. The resolution or ordinance must include statements showing: . the date the election was held; . the wording of the proposition; . the total number of votes cast for and against the proposition; and . the number of votes by which the proposition passed. [Refer to V.T.CA, Tax Code 9321.405] EFFECTIVE DATE The tax will become effective on the first day of the first calendar quarter after one complete calendar quarter passes from the date the Comptroller receives the city's notice that voters have approved the tax. [Refer to V.T.CA, Tax Code 9327.005] For example, if voters approve the tax in an election held in May 2004 and send the election results to the Rev- enue Accounting, Tax Allocation Sec- tion of the Comproller's Office by the end of June, the tax would take effect on October 1, 2004. The city would then begin receiving revenue from the Comptroller beginning with its Decem- ber 2004 sales tax allocation. ADMINISTRATION OF THE TAX The city does not have to form a devel- opment corporation or create a special district to administer the street main- tenance sales tax. The city administers the tax directly but should account for the funds separately, since the use of the tax is restricted. USE OF THE STREET MAINTENANCE SALES TAX The sales tax may be used only to maintain and repair municipal streets that existed on the date of the election to adopt the tax. It may not be used to build new streets. In addition, the city may not pledge the revenue received from the tax to the payment of bonds or other indebtedness. [Refer to V.T.CA., Tax Code 9327.008]