HomeMy WebLinkAbout06-01-15 Meeting of the La Porte Development Corporation Board of Directors
RICHARD WARREN, PRESIDENTRICHARD WARREN, PRESIDENTMIKE CLAUSEN, BOARD MEMBERMIKE CLAUSEN, BOARD MEMBER
MIKE COOKSLEY, VICEMIKE COOKSLEY, VICE--PRESIDENTPRESIDENTRANDY WOODARD, BOARD MEMBERRANDY WOODARD, BOARD MEMBER
JAY MARTIN, BOARD MEMBERJAY MARTIN, BOARD MEMBERNANCY OJEDA, BOARD MEMBERNANCY OJEDA, BOARD MEMBER
CHUCK ENGELKEN, BOARD MEMBERCHUCK ENGELKEN, BOARD MEMBER
CITY OF LA PORTE DEVELOPMENT CORPORATION MEETING AGENDACITY OF LA PORTE DEVELOPMENT CORPORATION MEETING AGENDA
Notice is hereby given of a meeting of the City of La Porte Development Corporation to be held on Notice is hereby given of a meeting of the City of La Porte Development Corporation
to be held on
June 1, 2015June 1, 2015, at the City Hall Council Chambers, 604 W. Fairmont Parkway, La Porte, Texas, beginning , at the City Hall Council Chambers, 604 W. Fairmont Parkway, La Porte,
Texas, beginning
at 5:00 PM to consider the following items of business:at 5:00 PM to consider the following items of business:
1.CALL TO ORDERCALL TO ORDER
2.AUTHORIZATIONSAUTHORIZATIONS
Consider approval or other action of minutes of the meeting of the La Porte Development Consider approval or other action of minutes of the meeting of the La Porte Development
(a)
Corporation Board held on May 13, 2015 Corporation Board held on May 13, 2015 -- S. Harris S. Harris
Consider approval or other action regarding a development agreement with "Gantstein Consider approval or other action regarding a development agreement with "Gantstein
(b)
Esquire, LLC.", for an amount not to exceed $300,000.00 and authorizing Board President Esquire, LLC.", for an amount not to exceed $300,000.00 and authorizing Board President
Richard Warren to sign and execute such economic development incentive agreement Richard Warren to sign and execute such economic development incentive agreement - S.
LivingstonLivingston
3.DISCUSSION OR OTHER ACTIONDISCUSSION OR OTHER ACTION
Discussion or other action authorizing staff to submit any proposed revisions and/or Discussion or other action authorizing staff to submit any proposed revisions and/or Discussion or
other action authorizing staff to submit any proposed revisions and/or Discussion or other action authorizing staff to submit any proposed revisions and/or
(a)(a)
amendments to the Byamendments to the By--Laws of the La Porte Development Corporation to the La Porte City Laws of the La Porte Development Corporation to the La Porte City
Council for approval Council for approval -- S. Livingston S. Livingston
Discussion or other action authorizing staff to document rules and/or a policy for La Porte Discussion or other action authorizing staff to document rules and/or a policy for La Porte
(b)
Development Corporation meeting norms, which the La Porte Development Corporation Development Corporation meeting norms, which the La Porte Development Corporation
Board may wish to adopt Board may wish to adopt -- S. Livingston S. Livingston
4.SET DATE FOR NEXT MEETING SET DATE FOR NEXT MEETING -- S. Livingston S. Livingston
5.STAFF REPORTSSTAFF REPORTS
Receive Financial Report Receive Financial Report -- M. Dolby M. Dolby
(a)
6.Board member comments regarding matters appearing on agenda; Recognition of Board member comments regarding matters appearing on agenda; Recognition of
community members, city employees, and upcoming events; inquiry of staff regarding community members, city employees, and upcoming events; inquiry of staff regarding
specific factual information or existing policies.specific factual information or existing policies.
7.AdjournAdjourn
The La Porte Development Corporation Board reserves the right to meet in closed session on any The La Porte Development Corporation Board reserves the right to meet in closed session
on any
agenda item should the need arise and if applicable pursuant to authorization by Title 5, Chapter 551, agenda item should the need arise and if applicable pursuant to authorization by
Title 5, Chapter 551,
of the Texas Government Code (the Texas open meetings laws).of the Texas Government Code (the Texas open meetings laws).
In compliance with the Americans with Disabilities Act, the City of La Porte will provide for reasonable In compliance with the Americans with Disabilities Act, the City of La Porte
will provide for reasonable
accommodations for persons attending public meetings. To better serve attendees, requests should be received accommodations for persons attending public meetings. To better serve attendees,
requests should be received
24 hours prior to the meetings. Please contact Patrice Fogarty, City Secretary, at 281.470.5019.24 hours prior to the meetings. Please contact Patrice Fogarty, City Secretary, at 281.470.5019.
CERTIFICATIONCERTIFICATION
I certify that a copy of the June 1, 2015, agenda of items to be considered by the Board of the La Porte Development I certify that a copy of the June 1, 2015, agenda of items to be
considered by the Board of the La Porte Development
Corporation was placed on the City Hall Bulletin Board on May 26, 2015.Corporation was placed on the City Hall Bulletin Board on May 26, 2015.
Patrice Fogarty, City SecretaryPatrice Fogarty, City Secretary
RICHARD WARREN, PRESIDENT
MIKE CLAUSEN, BOARD MEMBER
MIKE COOKSLEY, VICE PRESIDENT RANDY WOODARD, BOARD MEMBER
CHUCK ENGELKEN, BOARD MEMBER NANCY OJEDA, BOARD MEMBER
JAY MARTIN, BOARD MEMBER
MINUTES OF LA PORTE DEVELOPMENT CORPORATION BOARD
MEETING OF MAY 13, 2015
May 13, 2015,
The City of La Porte Development Corporation Board met on at the City Hall Council Chambers,
5:00 p.m
604 West Fairmont Parkway, La Porte, Texas, at . to consider the following items of business:
1. CALL TO ORDER
President Richard Warren called the meeting to order at 5:00 p.m. The following members of the
La Porte Development Corporation Board were present: Vice-President Cooksley; Board members
Martin, Ojeda, Clausen and Woodard. Absent: Board member Engelken. Staff Present: Corby
Alexander, Sharon Harris, Scott Livingston, Michael Dolby, Traci Leach and Clark Askins.
2. AUTHORIZATIONS
(a)
Consider approval or other action of minutes of the meeting of the La Porte Development
Corporation Board held on April 13, 2015 P. Fogarty
Board member Clausen moved to approve the minutes of the meeting of the La Porte Development
MOTION PASSED
Corporation Board held on April 13, 2015. Vice-President Cooksley seconded. .
Ayes: President Warren, Vice-President Cooksley, Board members
Woodard, Ojeda, Clausen and Martin
Nays: None
Absent: Board member Engelken
(b)
Consider approval or other action regarding an enhancement grant amount not to exceed
$16,759.93 to David or Sharon Tindle, owners of Oak Center at 1000 S. Broadway, to be awarded
at the completion of the project S. Livingston
Economic Development Coordinator Scott Livingston presented a summary.
Board member Martin asked if the existing framework of the sign will remain. The applicants
representative, Horace Leopard, advised the existing poles will be painted; the signs will be
replaced, and added a graphic displaying an oak tree, that will include the name of the shopping center.
Board member Ojeda asked Economic Development Coordinator Scott Livingston if the applicants are
interesting in facade enhancements. Mr. Leopard responded the applicants may be interested in facade
Page 1 of 3
May 13, 2015, La Porte Development Corporation Board Minutes
enhancements at a later date. Board member Ojeda asked Mr. Livingston if the applicants are eligible
at a later date for the remaining balance or up to an additional $25,000.00. Mr. Livingston responded
the Board can re-visit for a Phase Two of the project at a later date for the remaining balance up to the
$25,000.00. Board member Ojeda asked if the property is sold, can another owner request funding for
an enhancement grant. City Manager Corby Alexander responded it is a policy decision the Board will
have to address. Board member Ojeda suggested the discussion be included at the upcoming
workshop meeting.
Board member Woodard advised language for paving is not listed as one of the eligible projects in the
La Porte Enhancement Grant Guidelines. Mr. Livingston responded the language can be included in the
guidelines and discussed at the upcoming workshop meeting.
Board member Ojeda moved to approve an enhancement grant amount not to exceed $16,759.93 to
David or Sharon Tindle, owners of Oak Center at 1000 S. Broadway, and reserve $8,240.07 for future
MOTION PASSED
facade improvements. Vice-President Cooksley seconded. .
Ayes: President Warren, Vice-President Cooksley, Board members
Ojeda, Woodard, Clausen and Martin
Nays: None
Absent: Board member Engelken
3. DISCUSSION OR OTHER ACTION
(a)
Discussion or other action regarding the Proposed Budget for Fiscal Year 2015-2016 S. Livingston
Economic Development Coordinator Scott Livingston presented a summary of the Proposed Budget for
Fiscal Year 2015-2016 and advised there is a balance of $209,090.74 in the Enhancement Grant
Account before paying outstanding commitments. In addition, Mr. Livingston advised additional funds
can be transferred to the program, if desired.
Board member Woodard questioned if the La Porte Development Corporation is named in the
MuniServices contract. Finance Director Michael Dolby responded the City of La Porte is named in the
contract. Board member Woodard asked how the amount of sales tax owed to the City is identified. Mr.
Board member Woodard requested a copy of the
contract be sent to Board members.
Board member Woodard asked if membership to the International Economic Development Council is a
necessary membership. Economic Development Coordinator Scott Livingston responded yes, if he is to
become certified as an Economic Developer.
Board member Martin commented it will be in the best interest of the City for the La Porte Development
Corporation Board to obtain accreditation and asked if it is included in the proposed budget. Mr.
Livingston responded no, the funds for the accreditation can be added to the Proposed Budget for
Fiscal Year 2015-2016, and advised he will gather an outline for the program for Board members
review.
Board member Woodard asked if the By-laws can be reviewed at the upcoming workshop meeting.
Economic Development Coordinator Scott Livingston responded yes.
Vice-President Cooksley questioned the last time funds were transferred into the Enhancement Grant
Account and from which account were the funds transferred. Mr. Livingston responded September
2013, and from the 4B General Fund.
Page 2 of 3
May 13, 2015, La Porte Development Corporation Board Minutes
Board member Ojeda asked if staff investigated the possibility of legally providing scholarships to
La Porte High School students from the Workforce Development funds. Mr. Livingston advised he will
confirm by checking his notes and files. Board member Ojeda asked Mr. Livingston to add an item to
discuss establishing meeting standards for the La Porte Development Corporation Board.
4. SET DATE FOR NEXT MEETING
S. Livingston
Board members set the next meeting date for Monday, June 1, 2015, at 5:00 p.m.
BOARD MEMBER COMMENTS
regarding matters appearing on agenda; recognition of community
5.
members, city employees, and upcoming events; inquiry of staff regarding specific factual information
or existing policies.
Board member Ojeda commented she will speak in favor of the Pipeline Grill Restaurant and
encouraged others on the Board to join her, as well, excluding the Councilmembers.
6. ADJOURN
There being no further business, Vice-President Cooksley moved to adjourn the meeting at 6:12 p.m.
MOTION PASSED
Board member Martin seconded. .
Respectfully submitted,
____________________________________
Sharon Harris, Assistant City Secretary
st
Passed and approved on this 1 day of June, 2015.
____________________________________
President Richard Warren
Page 3 of 3
May 13, 2015, La Porte Development Corporation Board Minutes
REQUEST FOR LA PORTE DEVELOPMENT CORPORATION AGENDA ITEM
Budget
Agenda Date Requested: 1 June 2015
Source of Funds:
Requested By: Scott D. Livingston
Account Number:
Department: Administration/Economic Development
Amount Budgeted:
Report: Resolution: Ordinance:
Amount Requested: $300,000
Exhibit: Development Agreement -- Option A (Signed)
Budgeted Item: YES NO
Exhibit: Development Agreement – Option B
Exhibit: Project Presentation
Exhibit: Proposed Floor Plan
Exhibit: Project Score Card w Gantstein
Exhibit: Public Hearing Posting, BAO 2-5-15
Exhibit: Prospective Projects Financial Cash Flow Analysis
SUMMARY & RECOMMENDATION
Introduction
The principals of Gantstein Esquire, LLC have purchased the former Texans Sports Bar and Grill
at 10003 Spencer Hwy. Gantstein is considering two options to either: (1) invest only the
necessary capital to redevelop the property and lease the space to an ice house operator, or (2)
invest a significantly larger sum of capital to redevelop the property and open a new Pipeline
Grill (see www.pipelinegrill.com).
$1.2
Should the principals choose to redevelop the property as a Pipeline Grill, approximately
million
will need to be invested to repair the dilapidated property and upgrade it to a condition
that is suitable for a nice, family-oriented restaurant. Once the restaurant is open for business,
4060
the project principals will hire approximately full time employees and part time employees
to staff the restaurant and provide its famous quality service to its customers. The principals of
Gantstein Esquire, LLC are planning to serve all of the Pipeline Grill’s catering customers for the
entire area surrounding the Houston Ship Channel from this restaurant location in La Porte.
Therefore, Gantstein estimates that the restaurant’s annual taxable retail sales will be
$4 million
approximately .
In order to facilitate the re-development of the vacant building and develop a new Pipeline Grill
$300,000
at this location, the principals request financial assistance in the amount of . The
3.54 years,
estimated payback period for the $300,000 incentive for this proposed project is
assuming there is no market cannibalization
. Please note the enclosed project materials for
additional information.
Background
On 26 January 2015, the 4B Board voted and authorized staff to “ . . . publish 60-day notice of a
public hearing to consider awarding an economic development incentive to Gantstein Esquire,
LLC, for an amount not to exceed $300,000 or equal to 25% of the project expenditures not to
exceed $300,000”. On Thursday, 5 February 2015, staff published public notice in the Bay Area
Observer of a hearing to be held more than 60 days later on 13 April 2015.
On 13 April 2015, the Directors of the Board voted 6-0 in favor of giving an incentive in the
amount not to exceed $300,000 to “Gantstein Esquire, LLC” to develop a new Pipeline Grill at
10003 Spencer Hwy in La Porte, Texas.
Development Agreement(s)
The City Attorney and staff have prepared two (2) different forms of a development agreement,
referred to “Option A” and “Option B” for the Board’s consideration. The managing principal of
“Gantstein Esquire, LLC” has approved and signed only “Option A”. Additional information
about both Option A and B are provided here:
Option A
– This development agreement contains the original terms which staff and the Directors
of the Board discussed with the principals of Gantstein Esquire, LLC since the earliest discussions
up
of this proposed project. The conditions of three (3) payments, each for a maximum amount
to
$100,000, are predicated upon the company’s performance as follows:
(1)The LPDC will pay “Gantstein Esquire, LLC” an amount not to exceed $100,000 upon
receipt of a Certificate of Occupancy for a Pipeline Grill at 10003 Spencer Hwy and
proof of expenditure of at least $1.2 million in infrastructure and site related
improvements,
(2)The LPDC will pay “Gantstein Esquire, LLC” an amount not to exceed $100,000 upon
proof of employment of at least 35 full time employees and 50 part time employees,
plus at least $3.75 million in annual taxable retail sales. No payment will be made for
annual taxable retail sales in calendar year 2017 which are less than $3.75 million. A
pro-rata payment will be made only for annual taxable retail sales of at least $3.75
million.
(3)The LPDC will pay “Gantstein Esquire, LLC” an amount not to exceed $100,000 upon
proof of employment of at least 35 full time employees and 50 part time employees,
plus at least $3.75 million in annual taxable retail sales. No payment will be made for
annual taxable retail sales in calendar year 2018 which are less than $3.75 million. A
pro-rata payment will be made only for annual taxable retail sales of at least $3.75
million.
Option B--
This development agreement contains terms which were introduced by staff to
account for market “cannibalization” of existing business from the current restaurants and other
food establishments in La Porte. The conditions of four (4) payments, the sum of which will not
$300,000
exceed, are predicated upon the company’s performance as follows:
$100,000
(1)The LPDC will pay “Gantstein Esquire, LLC” an amount not to exceed upon
receipt of a Certificate of Occupancy for a Pipeline Grill at 10003 Spencer Hwy and
proof of expenditure of at least $1.2 million in infrastructure and site related improvements,
(2)The cash incentive payment made to Gantstein Esquire LLC will be in an amount equal to
that specified in one of the three performance metrics indicated below, based on
Recipient’s generation of taxable sales in the “Food Service” category in relation to the
overall generation of taxable sales in the “Food Service” industry by market participants in
the City of La Porte. In other words, the amount of the incentive for calendar years 2017
through 2020, is measured by the net amount of sales tax generated by Pipeline Grill in
relation to restaurants as a whole.
a.Upon proof of employment of at least 35 full time employees and 50 part time
up to
employees, the LPDC will pay “Gantstein Esquire, LLC” an amount
$100,000
that is equal to2% of the estimated total taxable retail sales independently
generated by the Pipeline Grill in calendar year 2017.
b.Upon proof of employment of at least 35 full time employees and 50 part time
up to
employees, the LPDC will pay “Gantstein Esquire, LLC” an amount
$100,000
that is equal to2% of the estimated total taxable retail sales independently
generated by the Pipeline Grill in calendar year 2018.
c.Upon proof of employment of at least 35 full time employees and 50 part time
employees, the LPDC will pay “Gantstein Esquire, LLC” an amount up to
whichever is less:
d.$100,000, (b) 2% of the estimated total taxable retail sales independently generated
by the Pipeline Grill in calendar year 2019, or (c) $200,000 minus the sum of
payments #2 and 3.
(3)The sum total of the payments #2-4 above will not exceed $200,000.
(4)The sum total of all payments for this project will not exceed $300,000.
(5)The term of the development agreement will end upon the earliest of (a) a total payment of
$200,000 for payments #2-4, or (b) 31 March 2020.
Staff is recommending approval of a development agreement with Gantstein Esquire, LLC for
the construction of a Pipeline Grill in La Porte.
Action Required by the La Porte Development Corporation:
Consider approval or other action of a development agreement with “Gantstein Esquire, LLC” for
$300,000
an amount not to exceed and authorize Board President Richard Warren to sign and
execute such agreement.
Approved for the La Porte Development Corporation Agenda
Corby D. Alexander, City Manager Date
ECONOMIC DEVELOPMENT INCENTIVE AGREEMENT BETWEEN THE LA
PORTE DEVELOPMENT COPRPORATION, AND GANTSTEIN ESQUIRE, LLC,
A TEXAS DOMESTIC LIMITED LIABILITY COMPANY, FOR USE OF TYPE B
DEVELOPMENT CORPORATION SALES TAX FUNDS
THIS AGREEMENT made by and entered into this ____ day of June, 2015
between the La Porte Development Corporation, a Type B non-profit corporation
operating under authority of Texas Local Government Code Chapters 501 and
505 Gantstein Esquire, LLC, a Texas Domestic Limited
Liability Company,
WITNESSETH:
WHEREAS, the voters of the City of La Porte authorized the levying of
additional sales tax within the City for promotion of economic development and the
LPDC is authorized to use such tax revenues for certain qualifying projects and
other economic development related purposes; and
WHEREAS, Recipient is a Texas based commercial development company
that specializes in rehabilitating underutilized commercial buildings; and
WHEREAS, Recipient wishes to renovate the exterior and interior of a
presently vacant 9000 square foot restaurant building formerly known as the
, located at 10003 Spencer Hwy., and make
associated site improvements, for the purpose of operating
restaurant, and which would 1) result in the expenditure by Recipient of an
estimated $1,200,000.00 in capital improvements; 2) result in the generation of
approximately $4,000,000.00 in annual gross retail sales; and 3) employ an
estimated forty (40) full time and sixty (60) part-time personnel; and
WHEREAS, Recipient has requested that LPDC provide financial incentives
to Recipient to contribute towards the cost of renovation of the property at 10003
Spencer Hwy., under a qualifying project of the LPDC for infrastructure, site and
related improvements, as authorized by Texas Local Government Code Chapters
501 and 505, and it is the desire of LPDC to assist in the funding of same, finding
that such expenditures will promote or develop new or expanded business
enterprises.
WHEREAS, Texas law and the by-laws of the LPDC require that certain
expenditures and projects by the LPDC be approved by the governing body of the
City; and whereas the LPDC Board has duly approved such project and the
expenditures for same have been authorized by the La Porte City Council; and
NOW THEREFORE, in consideration of the covenants and conditions
stated herein, and in consideration of the mutual benefits that will accrue to each
of the parties hereof, as well as to the citizens of the City of La Porte, Texas, the
parties have agreed and do hereby agree as follows:
ARTICLE I
1
In consideration of Recipient renovating the existing structure at 10003
, which proposal was considered in that certain public hearing
authorizing a proposed project for the expenditure of LPDC funds for the promotion
or development of new or expanded business enterprises, held before the LPDC
on April 13, 2015, LPDC agrees to provide Recipient an incentive package
consisting of a cash payment in a total sum not to exceed $300,000.00, to be
distributed in four increments, with each distribution conditioned on the attainment
of certain performance thresholds, more specifically outlined as follows:
1) A cash incentive payment in an amount equal to $100,000.00 will
be distributed to Recipient by LPDC, upon receipt by LPDC of a)
proof of Certificate of Occupancy issued by the City of La Porte,
Texas to Recipient for completion of the renovated Restaurant
and b) proof of a minimum capital investment in the amount of
$1,200,000.00 applied towards renovation of the Restaurant and
related infrastructure and site work, exclusive of the cost to
Recipient to purchase the existing real estate tract and vacant
building. However, in no case will the $100,000.00 payment be
made by LPDC if a copy of a Certificate of Occupancy issued for
the Restaurant and documentation substantiating the expenditure
of no less than $1,200,000.00 applied towards capital
improvements to the Restaurant, is not delivered to and received
by LPDC by June 30, 2016. In the case that proof of Certificate of
Occupancy and minimum capital investment of $1,200,000.00 for
the Restaurant is presented to LPDC on or before said June 30,
2016 deadline, the LPDC shall convene a meeting of the LPDC
Board of Directors for a date no later than forty-five (45) days after
receipt of proof of the Certificate of Occupancy and minimum
capital investment of $1,200,000.00 by LPDC from Recipient.
Upon verification of the completion of the Restaurant, as reflected
by formal vote of the LPDC Board of Directors that Recipient has
satisfied the requirements of this paragraph, LPDC will then remit
the $100,000.00 to Recipient within a period not to exceed thirty
(30) days.
In the case where Recipient fails to submit proof of a Certificate of
Occupancy and proof of a minimum capital investment in the
amount of $1,200,000.00 by the June 30, 2016 deadline, despite
being disqualified for the incentive payment Recipient will remain
eligible to qualify for receipt of the incentive payments under
paragraphs 2, 3, and 4 below, in so far as the conditions
precedent established in such paragraphs are met. However,
Recipient will be required to submit proof of Certificate of
Occupancy in order to qualify for the incentive payments outlined
in paragraphs 2, 3, and 4 below.
2) A cash incentive payment will be distributed to Recipient in an
amount not to exceed $100,000.00 by LPDC, upon delivery to the
LPDC of a) an employment roster evidencing that Recipient
2
employs a minimum of thirty-five (35) full time and fifty (50) part-
time individuals as employees at the Restaurant site as of
December 31, 2017
total taxable retail sales for the period January 1, 2017---
December 31, 2017. The cash incentive payment made to
Recipient will be in an amount equal to that specified in one of the
three performance metrics indicated below,
in
.
The basis of measurement will be the information drawn from
STARS Report, which is a quarterly published and provided to the
City of La Porte by MuniServices, Inc.
a) If the amount of taxable retail sales independently
generated by the Pipeline Grill for the period January 1, 2017 -
December 31, 2017 is lessthan the increase in the aggregate
over the previous calendar year, then the incentive payment shall
be equal to two percent (2%) of the total taxable sales
independently generated by the Pipeline Grill.
b) If the amount of taxable retail sales independently
generated by the Pipeline Grill for the period January 1, 2017 -
December 31, 2017 is equal to the increase in the aggregate
t
over the previous calendar year, then 2% of the total taxable
sales independently generated by the Pipeline Grill.
c) If the amount of taxable retail sales independently
generated by the Pipeline Grill for the period January 1, 2017 -
December 31, 2017 is greater than the increase in the aggregate
over the previous calendar year, then 2% of increase in the
aggregate taxable re
in La Porte over the previous calendar year.
However, in no case will the $100,000.00 payment be made by
LPDC if proof of the employment of a minimum of thirty-five (35)
full time and fifty (50) part-time personnel as of December 31,
2017. Proof of employment, for purposes of this agreement, may
be required by submission to LPDC by the said December 31,
2017
Internal Revenue Service and C3 Report to the Texas Workforce
Commission for each employee (but with social security numbers
of each employee redacted) and b) a notarized statement
thirty-
five (35) full time and fifty (50) part-time personnel employees are
employed by Recipient for positions permanently located at the
Restaurant site.
3
3) A cash incentive payment will be distributed to Recipient in an
amount not to exceed $100,000.00 by LPDC, upon delivery to the
LPDC of a) an employment roster evidencing that Recipient
employs a minimum of thirty-five (35) full time and fifty (50) part-
time individuals as employees at the Restaurant site as of
December 31, 2018
total taxable retail sales for the period January 1, 2018---
December 31, 2018. The cash incentive payment made to
Recipient will be in an amount equal to that specified in one of the
category in
The basis of measurement will be the information drawn from
STARS Report, which is a quarterly published and provided to the
City of La Porte by MuniServices, Inc.
a) If the amount of taxable retail sales independently
generated by the Pipeline Grill for the period January 1, 2018 -
December 31, 2018 is lessthan the increase in the aggregate
over the previous calendar year, then the incentive payment shall
be equal to two percent (2%) of the total taxable sales
independently generated by the Pipeline Grill.
b) If the amount of taxable retail sales independently
generated by the Pipeline Grill for the period January 1, 2018 -
December 31, 2018 is equal to the increase in the aggregate
t
over the previous calendar year, then 2% of the total taxable
sales independently generated by the Pipeline Grill.
c) If the amount of taxable retail sales independently
generated by the Pipeline Grill for the period January 1, 2018 -
December 31, 2018 is greater than the increase in the aggregate
over the previous calendar year, then 2% of increase in the
aggregate taxable re
in La Porte over the previous calendar year.
However, in no case will the $100,000.00 payment be made by
LPDC if proof of the employment of a minimum of thirty-five (35)
full time and fifty (50) part-time personnel as of December 31,
2018. Proof of employment, for purposes of this agreement, may
be required by submission to LPDC by the said December 31,
2018
Internal Revenue Service and C3 Report to the Texas Workforce
Commission for each employee (but with social security numbers
of each employee redacted) and b) a notarized statement
-
five (35) full time and fifty (50) part-time personnel employees are
employed by Recipient for positions permanently located at the
Restaurant site.
4
4) A cash incentive payment will be distributed to Recipient by
LPDC, if Recipient has not already received the cumulative total
of $200,000.00 through payments 2 and 3, in accordance with
this Agreement, in an amount that when added with all previous
payments does not exceed the cumulative total of $300,000.00,
upon delivery to the LPDC of a) an employment roster evidencing
that Recipient employs a minimum of thirty-five (35) full time and
fifty (50) part-time individuals as employees at the Restaurant site
as of December 31, 2019 and b) documentation evidencing
2019---December 31, 2019. The cash incentive payment made to
Recipient will be in an amount equal to that specified in one of the
relation to the overall generation of taxa
The basis of measurement will be the information drawn from
STARS Report, which is a quarterly published and provided to the
City of La Porte by MuniServices, Inc.
a) If the amount of taxable retail sales independently
generated by the Pipeline Grill for the period January 1, 2019 -
December 31, 2019 is lessthan the increase in the aggregate
over the previous calendar year, then the incentive payment shall
be equal to two percent (2%) of the total taxable sales
independently generated by the Pipeline Grill.
b) If the amount of taxable retail sales independently
generated by the Pipeline Grill for the period January 1, 2019 -
December 31, 2019 is equal to the increase in the aggregate
over the previous calendar year, then 2% of the total taxable
sales independently generated by the Pipeline Grill.
c) If the amount of taxable retail sales independently
generated by the Pipeline Grill for the period January 1, 2019 -
December 31, 2019 is greater than the increase in the aggregate
n La Porte
over the previous calendar year, then 2% of increase in the
in La Porte over the previous calendar year.
However, in no case will the cash incentive payment be made by
LPDC if proof of the employment of a minimum of thirty-five (35)
full time and fifty (50) part-time personnel is not received by the
LPDC as of December 31, 2019. Proof of employment, for
purposes of this agreement, may be required by submission to
LPDC by the said December 31, 2019 deadline, of a) copies of
Report to the Texas Workforce Commission for each employee
(but with social security numbers of each employee redacted) and
5
b) a notarized statement ex
Directors affirming that thirty-five (35) full time and fifty (50) part-
time personnel employees are employed by Recipient for
positions permanently located at the Restaurant site.
The amount of the cash incentive payment made to Recipient
lesser
under this paragraph shall be the amount of either (i) the
total amount eligible to be paid to Recipient under the terms of this
paragraph, or (ii) the remaining balance of $200,000 minus the
sum of the payments in paragraphs 2 and 3.
ARTICLE II
All funds received as herein provided shall be solely for the purpose of contributing
towards Recipient in the renovation of the exterior and interior of the
presently vacant 9000 square foot restaurant building formerly known as the
located at 10003 Spencer Hwy., and for the making
of associated site and infrastructure improvements, to operate a
restaurant. Recipient further acknowledges that the incentive grant provided for
herein is tied to a project of the LPDC for the promotion or development of new or
expanded business enterprises, as authorized by Texas Local Government Code
chapters 501 and 505.
ARTICLE III
Disbursement and/or retention of the cash incentive identified in Article I of
this Agreement shall be made as follows:
A. Disbursement shall be made to Recipient, subject to the satisfaction of the
conditions precedent or conditions subsequent contained within Article I of
this Agreement.
B. LPDCobligation to Recipient shall not exceed $300,000.00, nor shall
LPDC be obligated to reimburse Recipient for requests delivered to LPDC
after the termination of this Agreement.
ARTICLE IV
Recipient understands that the funds paid to Recipient by the LPDC are
derived from tax revenues collected under Texas Local Government Code
505.252, and that LPDC has estimated the tax revenues to be collected during the
term of this Agreement. Recipient further understands, acknowledges, and agrees
that if the tax revenue actually collected is less than 90% of the estimated tax
revenues to be collected in any fiscal year during the term of this Agreement, LPDC
will be under no obligation to provide funding to Recipient for any payment or
payments during or after the fiscal year for which there is a revenue shortfall. Upon
6
execution of the Agreement, funds will be placed in a City of La Porte designated
commitment account for purposes of this Agreement.
ARTICLE V
In the event of any default by Recipient hereunder, including, but not limited
to, use of the funds provided herein for purposes other than those stated in Article
I of this Agreement, LPDC may cease all future payments hereunder and terminate
this Agreement. In addition, LPDC shall have the right to reclaim and recapture,
and Recipient shall refund, any funds that are not spent in accordance with the
terms of this Agreement, including 1) LPDC funds spent by Recipient in
contravention of this Agreement and 2) any LPDC funds previously paid to
Recipient but not yet spent by Recipient. In each such case, the previously paid
cash payment or payments shall be remitted to the LPDC within sixty (60) of receipt
of written demand for same.
Any breach of this covenant shall be grounds for immediate termination of
the distribution of funds.
ARTICLE VI
The term of this Agreement is for a period beginning on the date of approval
by LPDC and ending March 31, 2020.
ARTICLE VII
All funds provided by the LPDC pursuant to this Agreement may be used
only for the purposes authorized by this Agreement. Notwithstanding Article I,
above, City shall be under no obligation to make any fund disbursements if the
reports required under this Article have not been delivered to the LPDC.
ARTICLE VIII
This Agreement does not create any joint venture, partnership, or agency
relationship between the LPDC and Recipient. Recipient shall have exclusive
control of, and the exclusive right to control the details of the work to be performed
by Recipient hereunder and all personnel performing same, and shall be solely
responsible for the acts and omissions of its officers, members, agents, servants,
employees, subcontractors, program participants, volunteers, licensees, and
invitees. In no event shall any person participating in or performing any of
servant, or employee of the LPDC.
ARTICLE IX
Recipient agrees to assume and does hereby assume all responsibility and
liability for damages sustained by persons or property, whether real or asserted,
by or from the carrying on of work by Recipient or in the performance of services
performed and to be performed by Recipient hereunder. Recipient covenants and
agrees to, and does hereby indemnify, defend, and hold harmless LPDC and all
7
their respective officers, agents, and employees from all suits, actions, claims, and
account of any injuries or damages, whether real or asserted, sustained by any
person or property by or in consequence of any intentional or negligent act,
omission, or conduct of Recipient, its agents, servants or employees.
ARTICLE X
This Agreement may be amended by the mutual agreement of the Parties
hereto in writing to be attached to and incorporated into this Agreement.
ARTICLE XI
Recipient shall adhere to all local, state, and federal laws and regulations
that may affect its actions made pursuant to this Agreement, and shall maintain in
effect during the term of this Agreement any and all federal, state, and local
licenses and permits which may be required of Recipients generally.
ARTICLE XII
Recipient may not assign this Agreement, or any of the benefits provided
herein including but not limited to incentive payments identified in Article I, without
the written consent of LPDC.
ARTICLE XIII
The waiver by LPDC of any breach of any term, condition, or covenant
herein contained shall not be deemed a waiver of any subsequent breach of the
same, or any other term, condition, or covenant.
ARTICLE XIV
The obligations of the Parties to this Agreement are performable in Harris
County, Texas and if legal action is necessary to enforce same, venue shall lie in
Harris County, Texas.
ARTICLE XV
This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas.
ARTICLE XVI
This Agreement may be executed in triplicate, each of which shall be
deemed an original and constitute one and the same instrument.
ARTICLE XVII
8
Neither LPDC nor Participant shall be required to perform any term,
condition, or covenant in this Agreement so long as such performance is delayed
or prevented by force majeure, which shall mean Acts of God, civil riots, floods,
and any other cause not reasonably within the control of LPDC or Recipient except
as herein provided, and which by the exercise of due diligence LPDC or Recipient
is unable, wholly or in part, to prevent or overcome.
ARTICLE XVIII
In submitting this application, the applicant whose signature appears
below affirms its intent and commitment to comply in full with Section 2264.052 of
the Government Code and certifies that it does not and will not knowingly employ
an undocumented worker during any time period associated with the public
subsidy for which the application is being submitted. The applicant further certifies
its understanding and agreement that if it is convicted of a violation of 8 U.S.C.
Section 1324a(f), providing for civil and/or criminal penalties for engaging in a
pattern or practice of knowingly hiring or continuing to employ unauthorized aliens,
it shall repay the amount of the public subsidy with interest, at the rate and
according to the terms of the agreement signed under Section 2264.053 of the
Government Code, not later than the 120th day after the date the city notifies the
business of the violation.
ARTICLE XIX
The Agreement embodies the complete agreement of the parties hereto,
superceding all oral or written pervious and contemporary agreements between
the Parties, which relate to matters in this Agreement.
SIGNED AND AGREED to by LPDC and Recipient on the dates indicated
below.
LA PORTE DEVELOPMENT CORPORTION
__________________________
Richard Warren, President
___________________
Date
ATTEST
___________________________
Secretary of the Corporation
9
10
Gantstein Esquire, LLC, a Texas Domestic Limited Liability Company
By:
_________________________________
_________________________
Date
ATTEST
________________________________
11
Chart of Cannibalization Analysis
Increase in Calendar Year
Aggregate Retail Sales ($Ms) Cannibalization ($Ms) Pipeline Grill's Taxable Sales ($Ms)
055
145
235
325
415
505
Chart of Cannibalization Analysis
Increase in Calendar Year
Aggregate Retail Sales ($Ms) Cannibalization ($Ms) Pipeline Grill's Taxable Sales ($Ms)
066
156
246
336
426
516
Chart of Cannibalization Analysis
Increase in Calendar Year
Aggregate Retail Sales ($Ms) Cannibalization ($Ms) Pipeline Grill's Taxable Sales ($Ms)
022
112
202
302
402
502
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Grant Award)/Grant Award + (# of Full Time Positions x
6. Grant Award/Annual PILOT or Tax Revenue.
-
((Annual PILOT or Tax Revenue
13.
Notes:
THURSDAY, FEBRUARY 5,
LEGAL/PUBLIC NOTICES
$9.50 per column inch
LIQUOR LEGAL NOTICES
$10.50 per column inch
LEGAL/PUBLIC
SERVICES
HELP WANTED
Houston Yacht Club
RETIRED
NOTICES
LAWYER/Is Now Taking Applications For
Housekeeping
JUDGE
May be subject to background check/drug test.
Available To
To Place Legal and Public Notices:
Please Apply In Person Wednesday – Sunday
Prepare Wills,
Email editor@bayareaobserver.com or Call 281-907-3140
Powers of Attorney.
3620 Miramar, La Porte
Living Wills etc,
281-471-1255
City of La Porte Solicitations:
Probate Wills &
Estates,
Now Hiring
The City of La Porte Sealed Bid #15006 – D Street Ditch Outfall Improvements will be ac
-
Authorized To
cepted until 2:00 p.m. on Tuesday February 17, 2015, at the City Hall Information Desk,
Air Technician Turnaround Attendant
Perform Marriage
located at 604 W. Fairmont Pkwy., La Porte, TX 77571. Solicitations will be opened and read
Perform Marriage
Perform Marriage
Ceremonies
immediately following the closing hour. For information to register and bid, visit: www.pub
Total Safety is Hiring Air Technicians for the 2015 Turn
-
-
Will Come
licpurchase.com. For questions, contact purchasing@laportetx.gov.
-
To Your Home
around experience, stable work history, must also possess
NOTICE OF PUBLIC HEARING
a valid drivers license with a good driving record. Apply
Reasonable Rates
online at www.totalsafety.com/careers Job #14-0623 Ap
-
Joe M. Pirtle
ON SPECIAL CONDITIONAL USE
ply Today; Get Hired Tomorrow!
Telephone & Fax
PERMIT # 14-91000003
(281) 942-9268
CAREGIVER IN LA PORTE
Notice is hereby given that the La Porte City Council will conduct a public hearing at 6:00
P.M. on the 23rd day of February, 2015, in the Council Chambers of the City Hall, 604 West
PERSONAL CARE HOME
GET FREE VENDING MAFairmont Parkway, La Porte, Texas, in accordance with the provisions in Section 106-171 of
-
the City of La Porte’s Code of Ordinances, and the provisions of the Texas Local Government
CHINES! All Cash-New Con
-
Caregiver in small pleasant La Porte Personal Care Home.
Code.
cept. No Competition, Ground
Only 4 residents. Other caregivers. Previous elder care ex
-
Floor Opportunity, Part or Full
The purpose of the public hearing is to receive public input on Special Conditional Use Permit
perience in a facility. Meals included. Full or Part-Time.
#14-91000003, requested for a 6,250 square foot tract described as Lots 1 and 2, Block 789,
Time, Protected Territories. Full MUST LIVE IN OR NEAR LA PORTE.
Town of La Porte. Medders Construction Inc. is seeking approval of a Special Conditional Use
Details Call Now, 1-866-668-
Permit to allow for the development of the site as an off-site parking lot with awning cover for
References, drug & criminal background check.
6629: WWW.TCVEND.COM.
their main facility located across W. C Street at 311 S. 16th Street. The subject site is located at
Visit www.rosegardenpersonalcarehome.com
RUN YOUR OWN Medical
Visit www.rosegardenpersonalcarehome.com
the southeast corner of S. 16th Street and W. C Street and is zoned GC, General Commercial.
E-mail: rosegardenpch@aol.com.
alert company. Be the only
Per Section 106-441 of the Code of Ordinances, a Special Conditional Use Permit is required
Fax: (281)-867-5701 or call (281)-470-6000.
distributor in your area! Excelfor the development of “off-site parking.”
Call Bob Andrews between 1:00 and 4:30 daily.
-
lent income opportunity. Small
Following the public hearing, the City Council will act upon the public hearing item and con
-
investment required. Limited
duct other matters pertaining to the Council.
Houston Yacht ClubHouston Yacht Club
available, start today, 1-844-
Citizens wishing to address the Council pro or con during the public hearing are required to
225-1200.
Is Now Taking Applications For
sign in before the meeting is convened.
Maintenance
CITY OF LA PORTE
ATTENTION DRIVERS
Patrice Fogarty, City Secretary
Experience Preferred
New Kenworth trucks! APU
May be subject to background check/drug test.
equipped, earn up to 50¢ cpm
In compliance with the Americans with Disabilities Act, the City of La Porte will provide for
Ask For Will
reasonable accommodation for persons attending public meetings. To better serve attendees,
Please Apply In Person Wednesday – Sunday
requests should be received 24 hours prior to the meetings. Please contact Patrice Fogarty,
rider/pet program. CDL-A re
3620 Miramar, La Porte
-
City Secretary, at 281.470.5019.
quired. 1-877-258-8782, www.281-471-1255
ad-drivers.com
NOTICE OF PUBLIC HEARING
Curran House
AVERITT EXPRESS New Pay
International
Parents
Increase For Regional Drivers!
LA PORTE DEVELOPMENT
40¢ to 46¢ CPM + Fuel Bonus!
Seeking Sandblasters/Coat-
Dedicated couple needed
CORPORATION BOARD (TYPE B BOARD)
Also, Post-Training Pay In
ers. Must be able to pass
-
for full-time live-in position
crease for Students! (Depending
Safety Council Classes,
caring for up to 10 children.
Notice is hereby given that the La Porte Development Corporation Board (Type B Board)
on Domicile) Get Home EVBasic Plus, Drug Testing, &
One parent may work off-
on Domicile) Get Home EVon Domicile) Get Home EV-
Notice is hereby given that the La Porte Development Corporation Board (Type B Board)
of the City of La Porte, Texas will conduct a public hearing at on the
5:00 p.m.13th day of
campus. Part-time positions
be able to travel out of state
of the City of La Porte, Texas will conduct a public hearing at 5:00 p.m.13th day of
April, 2015, in the Council Chambers at City Hall, 604 West Fairmont Parkway, La Porte,
available. Must be able to
CDL-A required. 1-888-602-
for long periods of time.
April, 2015,
in the Council Chambers at City Hall, 604 West Fairmont Parkway, La Porte,
Texas. The purpose of the public hearing is to receive public input on a proposed project by
pass criminal background
Texas. The purpose of the public hearing is to receive public input on a proposed project by
7440 Apply @ AverittCareers.Must have TWIC card to
the La Porte Development Corporation in an amount not to exceed $300,000.00, to promote
check and have a good driv-
the La Porte Development Corporation in an amount not to exceed $300,000.00, to promote
com EOE - Females, minorities, apply. Fax resumes
ing record.
other related improvements for infrastructure at property at 10003 Spencer Hwy, on behalf of
protected veterans, and individ
281-339-9994
Please call
-
other related improvements for infrastructure at property at 10003 Spencer Hwy, on behalf of
Gantstein Esquire, LLC.
uals with disabilities are encour
or Email:
281-471-9622
-
aged to apply.
hhummer@curranintl.com
or email
Persons wishing to address the Board pro or con shall be required to sign in before the meet
-
Persons wishing to address the Board pro or con shall be required to sign in before the meet
or apply in person at
ing is convened.
jjeter@
MAKE A CHANGE this Fall.
4610 Vicksburg Lane
boysandgirlsharbor.org
PAM has owner operator and
CITY OF LA PORTE
Dickinson, TX 77539
for more information or to
company driver. Team positions
Patrice Fogarty, TRMC
between 9am - 3pm
Patrice Fogarty, TRMC
City Secretary
available based out of Laredo,
Mon-Fri
TX. Laredo, TX to Detroit, MI.
A quorum of City Council members may be present and participate in discussions during this
Off 2 days per week. Idea candi
A quorum of City Council members may be present and participate in discussions during this
-
NEEDING PASTURE for cows. Advertising
meeting, however, no action will be taken by Council.
date will live in 50 mile radius
of Laredo TX; Irving, TX; North
This facility has disability accommodations available. Requests for accommodations or inter
or wheat. Cattlemen’s II. Call Works!
-
This facility has disability accommodations available. Requests for accommodations or inter
Little Rock, AR; Memphis, TN;
pretive services at meetings should be made 48 hours prior to the meeting. Please contact the
Gene Hommel, 1-806-669-8766
pretive services at meetings should be made 48 hours prior to the meeting. Please contact the
Indianapolis, IN: Detroit, MI.
or 1-806-856-5984.
-
Let Our Readers
tion.
Call PAM; 1-855-899-6916 or
See Your Business
SAWMILLS FROM ONLY
pamjobs.com
$4397.00. Make and save money
with your own bandmill. In stock
YOUR PARTNER in excel
SPRING SPLURGE
The
-
ready to ship. FREE Information/
lence. Drivers needed. Great
Bay Area
DVD: www.NorwoodSawmills.
home time $650 sign-on bonus!
CRAFTS & VENDORS FAIR
com 1-800-578-1363 Ext.300N
All miles paid 1-800-528-7825
Observer
BAKE SALE & CONCESSIONS
or www.butlertransport.com
SCHOOL/TRAINING
MEDICAL BILLING TRAIN
SATURDAY, FEBRUARY 28TH, 10AM - 4PM
-
25 DRIVER TRAINEES Call
EES needed! Train to process
NEEDED! Learn to drive for
FREE ADMISSION
medical billing and insurance
Josie Smith
Stevens Transport! No experi
BAYSHORE BAPTIST CHURCH
-
claims from home! No experi
-
ence needed! Paid CDL train
11315 SPENCER HWY, LA PORTE, TEXAS
ence needed! Online training
-
281-702-1935
ing! New drivers can earn $800
program! HS Diploma/GED
SPACES ARE STILL AVAILABLE
per week! 1-866-861-1323,
and PC/Internet needed! 1-888-
CONTACT 281-471-0332
drive4stevens.com
926-6073
REAL ESTATE
HANDGUN CLASSESPHARMACY
This is an Unaudited Statement.
City of La Porte
La Porte Development Corporation Fund Projections
(Section 4B Sales Tax)
FY 2014-15FY 2015-2016FY 2016-2017FY 2017-2018
Estimated Beginning Funds$ 3,313,389$ 1,657,240$ 2,298,280 2,092,855
Plus Year to Date Revenues:
1/2 Cent Sales Tax 2,208,630 2,252,803 2,297,859 2,343,816
Interest Income 4,500 4,590 4,682 4,775
Release of District 23 175,000
Release of Project Nebula/Ineos 700,000
Total Revenues 2,388,130 2,957,393 2,302,540 2,348,591
Equals Total Resources 5,701,519 4,614,633 4,600,820 4,441,446
Less Year to Date Expenditures:
Payroll 100,367 103,378 106,479 109,674
Supplies 3,000 3,075 3,152 3,231
Services & Charges (Memberships, Training, Advertising, Legal, Utilities) 331,427 339,713 348,205 356,911
Capital Outlay - - -
*
Debt Service Transfer 1,083,817 680,668 698,519 1,026,610
Total Expenditures 1,518,611 1,126,834 1,156,356 1,496,425
Estimated Year to Funds Before Commitments$ 4,182,908$ 3,487,799$ 3,444,465$ 2,945,021
Commitments
Project Nebula/Ineos**$ 700,000
Richard Industrial Group 10,000
ACT Independent Turbo Service, Inc. 260,000 166,000 $ -
Current Prospective Projects 875,000 325,000 $ 325,000 -
Debt Service Reserve 680,668 698,519 $ 1,026,610 1,037,783
$ 2,525,668$ 1,189,519$ 1,351,610$ 1,037,783
Adjusted Year to Date Funds$ 1,657,240$ 2,298,280$ 2,092,855$ 1,907,238
Previously Funded Projects (Funding in Fund 015 - General CIP Fund)
BudgetExpendituresBalance
Enhancement Grants 300,000 81,570 218,430
Total 300,000 81,570 218,430
*Debt Service Payments for Library, Bay Area Boulevard & Canada Road and Ballfields.
**EDC Coordinator awaiting termination letter.
C:\\attachedFiles\\10000120\\uploaded\\1432127967_at.xlsxPage 1
REQUEST FOR LA PORTE DEVELOPMENT CORPORATION AGENDA REQUEST FOR LA PORTE DEVELOPMENT CORPORATION AGENDA
ITEMITEM
June 1, 2015June 1, 2015AppropriationAppropriation
Agenda Date Requested:Agenda Date Requested:
N/A N/A
Scott D. Livingston Scott D. Livingston Source of Funds:Source of Funds:
Requested By:Requested By:
Account Number:Account Number:
Economic Development/Tourism Economic Development/Tourism
Department:
Amount Budgeted:Amount Budgeted:
Report:Resolution:Resolution:Ordinance:Ordinance:
Amount Requested:Amount Requested:
Exhibits:
Budgeted Item:Budgeted Item:YESYESNONO
1. Bylaws as amended March 20151. Bylaws as amended March 2015
2. 4B Excerpt from Attorney General Economic 2. 4B Excerpt from Attorney General Economic
Development HandbookDevelopment Handbook
SUMMARY & RECOMMENDATIONSSUMMARY & RECOMMENDATIONS
This item has been placed on the agenda by Board member Woodard. The purpose of the item is to discuss the This item has been placed on the agenda by Board member Woodard. The purpose
of the item is to discuss the
following:
1.Consider areas where the Board may wish to amend La Porte Development Corporation ByConsider areas where the Board may wish to amend La Porte Development Corporation By--Laws, as Laws,
as
approved March 2015; and approved March 2015; and
2.Authority, roles, responsibilities, and duties of the Board of the La Porte Development Corporation, per the Authority, roles, responsibilities, and duties of the Board of the La Porte
Development Corporation, per the
By-Laws; and Laws; and
3.Authority, roles, responsibilities, and duties of the La Porte City Council regarding its oversight over the Authority, roles, responsibilities, and duties of the La Porte City Council
regarding its oversight over the
Board of the La Porte Development Corporation per the ByBoard of the La Porte Development Corporation per the By--Laws; andLaws; and
4. Any other topic as it relates to the By 4. Any other topic as it relates to the ByLaws of the La Porte Development Corporation.Laws of the La Porte Development
Corporation.
4. Any other topic as it relates to the By 4. Any other topic as it relates to the By--Laws of the La Porte Development Corporation.Laws of the La Porte Development
Corporation.
All Board-approved recommendations for amendments to the Byapproved recommendations for amendments to the By--Laws must be submitted to the City Council for Laws must be submitted to
the City Council for
approval.
Action Required by the La Porte Development Corporation:Action Required by the La Porte Development Corporation:
Consider approval or other action authorizing staff to submit any proposed revisions and/or amendments to the Consider approval or other action authorizing staff to submit any proposed
revisions and/or amendments to the
La Porte City Council for approval.La Porte City Council for approval.
Approved for the La Porte Development Corporation AgendaApproved for the La Porte Development Corporation Agenda
Corby D. Alexander, City ManagerCorby D. Alexander, City ManagerDateDate
BYLAWS
OF THE
CITY OF LA PORTE
DEVELOPMENT CORPORATION
These bylaws govern the affairs of the CITY OF LA PORTE DEVELOPMENT
CORPORATION (the "Corporation") a nonprofit corporation organized under Article
5190.6, Section 4B, Vernon’s Annotated Texas Civil Statutes, as amended (the 'Act').
ARTICLE I
PURPOSES
General Purposes
1.01.The Corporation acts on behalf of the City of La Porte, Texas in furtherance of
the public purposes of the Act and may engage in any project authorized under Section
2(10) or Section 4B of the Act.
Powers
1.02.The Corporation has all the powers both express and implied, granted to
corporations governed by Sec. 4B of the Act and by the Texas Non-profit Corporation
Act.
ARTICLE II
OFFICES
Principal Office
2.01.The principal office of the Corporation in the State of Texas is located at 604
West Fairmont Parkway in La Porte; Harris County; Texas. The Corporation may
provide for additional offices or change the location of any office.
Registered Office and Agent
2.02.The Corporation shall comply with the requirements of the Act and maintain a
registered office and registered agent in Texas. The registered office may, but need
not, be identical with the Corporation's principal office in Texas. The Corporation may
changethe registered office and the registered agent as provided in the Act.
ARTICLE III
BOARD OF DIRECTORS
Management of the Corporation
3.01.The affairs of the Corporation shall be managed by the Board of Directors.
Number, Qualifications and Tenure of Directors
3.02.The Board of Directors shall consist of seven members appointed by the City
Council of the City of La Porte, Texas, for staggered two year terms of office. Not less
than three (3) directors shall be persons who are not employees, officersor members of
the governing body of the City of La Porte, Texas. Each director must reside within the
City of La Porte, Texas.
The Board of Directors shall appoint a President and Vice-President by October 1of
each year. The President shall be the presiding officer for meetings and the
Vice-President shall act in the President's absence.
Vacancies
3.03.A vacancy occurring upon the Board of Directors shall be filled for the unexpired
term by appointment by the City Council of the City of La Porte, Texas.
Annual Meeting
3.04.The annual meeting of the Board of Directors shall be held during the month of
Marchof each year. The Board of Directors shall designate the time and location of the
annual meeting.
Regular Meetings
3.05.The Board of Directors may provide for regular meetings by resolution stating the
time and place of such meetings. The meeting shall be held within the City of La Porte,
Texas, at a location designated by the Board of Directors.
Special Meetings
3.06.Special meetings of the Board of Directors may be held at the request of the
President or any three Directors. A person or persons calling the meeting shall fix the
time and location of the meeting.
The person or persons calling a special meeting shall notify the secretary of the
Corporation of the information required to be included in the notice of the meeting. In
addition to the posting of a meeting notice in accordance with these bylaws, a copy of
each such meeting notice shall be delivered to each director not less than seventy-two
hours before the time of the meeting. A meeting notice shall be deemed delivered to
any director when deposited in the United States mail addressed to the director at his or
her address as it appears on the records of the Corporation.Such additional notice
may be waived in writing by a director at any time either before or after the time of the
meeting and such additional notice shall be deemed waived by attendance.
Notice of Meetings
3.07.The Corporation shall be considered a "governmental body" within the meaning
of Texas Government Code, Sec. 551.001, and notice of each meeting shall be given in
accordance with the provisions of Texas Government Code, Chapter 551 (The Texas
Open Meetings Act).
Quorum
3.08.Four (4) Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors. The presence of a director may not be established by
proxy. No business shall be conducted, nor shall any action be taken by the Board of
Directors in the absence of a quorum.
Duties of Directors
3.09.Directors shall exercise ordinary business judgment in managing the affairs of
the Corporation. In acting in their official capacity as directors of the Corporation,
directors shall act in good faith andtake actions they reasonably believe to be in the
best interests of the Corporation and which are not unlawful and shall refrain from
actions not in the best interest of the Corporation or which would be unlawful. A
director shall not be liable if, in the exercise of ordinary care, the director acts in good
faith relying on written financial and legal statements provided by an accountant or
attorney retained by the Corporation.
Duties of President
3.10.The president shall be the chief executive officerof the Corporation. The
president shall supervise and control all of the business and affairs of the Corporation.
When the execution of any contract or instrument shall have been authorized by the
Board of Directors, the president shall execute same except where such power is
expressly delegated to another officer of the Corporation. The president shall perform
other duties prescribed by the Board of Directors and all duties incident to the office of
president.
Actions of Board of Directors
3.11.The Board of Directors shall try to act by consensus. However, the vote of a
majority of directors present at a meeting at which a quorum is present shall be
sufficient to constitute the act of the Board of Directors.
Proxy Voting Prohibited
3.12.A director may not vote by proxy.
Removal of Directors
3.13.The Board of Directors and each member thereof serves at the pleasure of the
City Council of the City of La Porte, Texas, which may remove any director at any time,
either with or without cause.
Committees
3.14.The Board of Directors may by resolution establish one or more special or
standing committees. Such committees shall have the powers, duties and
responsibilities established by the Board. The committees shall keep regular minutes
of their meetings and report the same to the Board of Directors when required.
Compensation of Directors
3.15.The directors shall not receive any salary or compensation for their services.
Directors may be reimbursed for their actual expenses incurred in theperformance of
their duties. Travel expenses shall be reimbursed under the City's travel policy.
Attendance
3.16.Regular attendance at the Board meetings is required of all directors. Three (3)
consecutive unexcused absences from meetings of the Board shall cause the position
to be considered vacant. Four (4) unexcused absences in a twelve (12) month period
shall also cause the position to be considered vacant.
Ex-Officio Members
3.17.The City Council may appoint Ex-Officio members to the Board ofDirectors as it
deems appropriate. These representatives shall have the right to take part in any
discussion of open meetings, but shall not have the power to vote in the meetings.
Ex-Officio members shall serve a term of one calendar year.
ARTICLE IV
OFFICERS
Officer Positions
4.01.The officers of the Corporation shall be a secretary who shall be the City
Secretary or Assistant City Secretary of the City of La Porte, Texas and a treasurer who
shall be the Finance Director of the City of La Porte, Texas. At the option of the City
Council these officers may also serve simultaneously as voting Directors to the Board.
Terms of Officers
4.02.The officers of the Corporation shall serve as long as they are employed by the
City of La Porte, Texas
Removal of Officers
4.03.Any officer may be removed by the City Council of the City of La Porte, Texas at
any time, with or without good cause.
Vacancies
4.04.A vacancy in any office may be filled by the City Council of the City of La Porte,
Texas for the unexpired portion of the officer's term.
Secretary
4.05.The Secretary shall:
Give all notices as provided in the bylaws or as required by law.
Take minutes of the meetings of the Board of Directors and keep the minutes as
part of the corporate records.
Maintain custody of the corporate records, authenticate corporate documents
and affix the seal of the Corporation as required.
Keep aregister of the mailing address of each director and officer of the
Corporation.
Perform duties as assigned by thepresident or Board of Directors.
Perform all duties incident to the office of secretary.
Treasurer
4.06.The treasurer shall:
Have charge and custody of and be responsible for all funds and securities of
the Corporation.
Receive and give receipts for moneys due and payable to the Corporation from
any source.
Deposit all moneys in the name of the Corporation in banks, trust companies, or
other depositories as provided by these bylaws.
Write checks and disburse funds to discharge obligations of the Corporation.
Maintain the financial books and records of the Corporation.
Prepare financial reports at least annually.
Perform other duties as assigned by the Board of Directors.
Prepare an annual budget.
Perform all duties incident to the office of treasurer.
Compensation of Officers
4.07.The officers shall not receive any salary or compensation for their services.
Officers may be reimbursed for their actual expenses incurred in the performance of
their duties. Travel expenses shall be reimbursed under the City's travel policy.
ARTICLE V
TRANSACTIONS OF THE CORPORATION
Contracts
5.01.The Board of Directors may authorize any officer or agent of the Corporation to
enter into a contract or execute and deliver any instrument in the name of or on behalf
of the Corporation. This authority may be limited to a specific contract or instrument or
it may extend to any number and type of possible contracts and instruments.
Depository Bank
5.02.All funds of the Corporation shall be deposited with the City's depository bank.
Potential Conflicts of Interest
5.03.The members of the Board of Directors are local public officials within the
meaning of Texas Local Government Code Chapter 171. If a director has a substantial
interest in a business entity or real property which is the subject of deliberation by the
Board of Directors, the director shall file an affidavit with the secretary of the
Corporation stating the nature and extent of the interest. Such affidavit shall be filed
prior to any vote or decision upon the matter by the Board of Directors, and the
interested director shall abstain from any vote or decision upon the matter.
Council Approval
5.04TheBoardofDirectors shallobtainpriorCityCouncilapprovalofallrealestate
acquisitions,realestateleasesexceeding oneyearand/or any other leases exceeding
one year;all bondissuesorotherdebtextendingbeyondoneyear; and, contracts,
expenditures,ordebtsover$15,000.00.TheBoardofDirectorsshallhavetheauthority
toenterintoallotherbudgeted transactionswithoutprior or additional City Council
approval. Notwithstanding the foregoing, the Board of Directorsshall have the
authority to approve all budgeted Enhancement Grant expenditures for an amount
equal to or less than $25,000, without prior or additional approval of City Council.
AmendmentstotheCorporation’s budgetmustbeapprovedbytheCityCouncil.
Purchasing
5.05. Contracts for goods or services entered into by the Corporation and requiring the
expenditure of $50,000.00 or more shall be subject to competitive bidding and/or or
competitive proposal procedures as established in Chapter 252 of the Texas Local
Government Code, for municipal purchasing.
ARTICLE VI
BOOKS AND RECORDS
Required Books and Records
6.01.The Corporation shall maintain:
Correct and complete books and records of account.
The Corporation's books and records shall include a file endorsed copy of all
documents filed with the Texas Secretary of State relating to the Corporation,
including, but not limited to, the Articles of Incorporation, any articles of
amendment, restated articles, articles of merger, articles of consolidation, and
statement of change of registered office or agent.
A copy of the bylaws and any amended versions or amendments to the bylaws.
Minutes of the proceedings of the Board of Directors.
A list of names and addresses of the directors and officers of the Corporation.
A financial statement showing the assets, liabilities, and net worth of the
Corporation at the end of the three most recent fiscal years.
A financial statement showing the income and expenses of the Corporation for
the three most recent fiscal years.
All rulings, letters, and other documents relating to the Corporation's federal,
state and local tax status.
The Corporation's federal, state and local information or income tax returns for
each of the Corporation's three most recent tax years.
Annual budget which is approved by City Council.
Records Open to Public
6.02.The Corporation shall be considered a "governmental body" within the meaning
of the Texas Government Code, Sec. 552.003 and all records of the Corporation shall
be made available to the public for inspection or reproduction in accordance with the
requirements of the Texas Government Code, Chapter 552 (The Texas open Records
Act).
Audits
6.03.The Corporation's books are required to be audited by the City's independent
auditor on an annual basis. Cost of the audit will be paid by the Corporation.
ARTICLE VII
PERSONNEL
7.01.Any full-time or part-time personnel positions that the Corporation may establish
will be subject to the personnel policies of the City. The City Manager has full authority
in personnel matters.
ARTICLE VIII
AMENDMENTS TO BYLAWS
8.01.The bylaws may be altered, amended, or repealed by the affirmative vote of four
or more members of the Board of Directors with the consent of the City Council of the
City of La Porte, Texas or shall be altered, amended or repealed at the direction of the
City Council of the City of La Porte.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Legal Authorities Governing Construction of Bylaws
9.01.The bylaws shall be construed in accordance with the laws of the State of Texas.
All references in the bylaws to statutes, regulations, or other sources of legal authority
shall refer to the authorities cited, or their successors, as they may be amended from
time to time. It is expressly provided that the provisions of the Development
Corporation Act of 1979 applicable to corporations governed under Section 4B of that
Act are incorporated within these bylaws by reference. In the event of any conflict
between the applicable provisions of such Act and these bylaws, then the applicable
provisions of such Act shall control.
Legal Construction
9.02.If any bylaw provision is held to be invalid, illegal or unenforceable in any
respect, the invalidity, illegality or unenforceability shall not affect any other provision
and the bylaws shall be construed as if the invalid, or unenforceable provision had not
been includedin the bylaws.
Headings
9.03.The headings used in the bylaws are used for convenience and shall not be
considered in construing the terms of the bylaws.
Seal
9.04.The Board of Directors shall provide for a corporate seal. Such seal would
consist of two concentric circles containing the words “City of La Porte Development
Corporation”, and “Texas” in one circle and the “incorporated” together with the date of
incorporation of the Corporation in the other circle.
Parties Bound
9.05.The bylaws shall be binding upon and inure to the benefit of the directors,
officers and agents of the Corporation and their respective heirs, executors,
administrators, legal representatives, successors and assigns except as otherwise
provided in the bylaws.
Fiscal Year
9.06.The fiscal year of the Corporation shall begin on the first day of October of each
year and end of the last day of September of the following year.
Effective Date
9.07.These bylaws, and any subsequent amendments hereto, shall be effective of
andfrom the date upon which approval has been given by the Board of Directors and
the City Council of the City of La Porte, Texas.
th
Adopted this 9day of February, 2015.
_____________________________________
President of the Board
CERTIFICATE OF SECRETARY
I certify that I am the duly elected and acting secretary of the CITY OF LA PORTE
DEVELOPMENT CORPORATION, and the foregoing Bylaws constitute The Bylawsof
the Corporation. These Bylaws were duly adopted at a meeting of the Board of
Directors held on the 9thday of February, 2015, and approved and ratified by the City
Council of the City of La Porte, Texas, at a meeting held on the 9thday of March,2015.
Signed this ____ day of ____________, 2015.
_____________________________________
Secretary of the Corporation
ECONOMIC DEVELOPMENT HANDBOOK 2008
I. The Sales Tax for Economic Development
federal income tax return, but they should obtain a determination to that effect when they file
their Form 1023 with the IRS. If the development corporation has unrelated business income, it
will have to file a federal tax return and may have to pay tax on that income. An entity can obtain
a Section 501 (c) (3) determination even though it also considers itself exempt under Section
115. The Section 501 (c) (3) exemption is usually relied upon when a written determination from
the IRS is desired by the development corporation. Some bond counsel may insist that if this
type of entity issues bonds, it would only be eligible to issue Section 501 (c) (3) bonds, which are
more expensive to issue than governmental bonds. Contributions to this type of entity are
generally tax deductible.
Federal Tax Code Section 501 (c) (4) and 501 (c) (6)
Federal Tax Code Section 501 (c) (4) and 501 (c) (6) exempts the income of corporations
organized and operated as community development organizations and business leagues. To
obtain a written determination that an organization is exempt under this provision, a Form 1024
must be filed with the IRS. This type of exemption is not difficult to qualify for, but does not
have as many advantages as the other IRS code sections discussed earlier. The only major benefit
of a Federal Tax Code Section 501 (c) (4) and 501 (c) (6) designation is that it generally allows
the exemption of the income of the development corporation from federal taxation. Development
corporations qualifying under these sections should not have to file an annual federal income tax
return (unless they have unrelated business income) if they receive a determination to this effect
from the IRS when they file their Form 1024. Contributions to this type of organization are not
considered deductible as charitable contributions. These organizations also cannot issue tax
exempt bonds unless they also qualify under Federal Section 115.
Section 4B Economic Development Sales Tax
Eligibility to Adopt a Section 4B Tax
A city may impose the Section 4B tax, with voter approval, if the new combined local sales tax
144
rate would not exceed 2 percent and if the city fits into one of the following categories:
the city would be eligible to adopt a Section 4A sales tax (see earlier Section on
Eligibility to Adopt a Section 4A Tax);
the city is located in a county with a population of 500,000 or more and the current
combined sales tax rate does not exceed 8.25 percent at the time the Section 4B tax is
145
proposed; or
the city has a population of 400,000 or more and is located in more than one county, and
the combined state and local sales tax rate does not exceed 8.25 percent.
144
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(a)(1) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code
Ann. § 505.002 (Vernon Supp. 2008), effective April 1, 2009).
145
Id. (to be codified at Tex. Loc. Gov’t Code Ann. § 505.002(1)(B) (Vernon Supp. 2008), effective April 1, 2009).
2008 Economic Development Laws for Texas Cities • Office of the Attorney General
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I. The Sales Tax for Economic Development
An eligible Section 4B city includes a city “that is located in a county with a population of
500,000 or more,” and the Act also provides that an eligible city includes a city “located in a
county with a population of 500,000 or fewer.” Consequently, every Texas city appears to be
eligible to adopt a Section 4B sales tax provided the city’s combined local sales tax rate does not
146
exceed two percent. Further, it should be noted that participation in a rapid transit authority
does not invalidate a city’s ability to adopt a Section 4B tax if adoption of the tax would not
147
place the city above its statutory cap for the local sales tax rate. If the city is not certain
whether it fits into one of the above categories, the city can call the Local Assistance Section of
the State Comptroller’s Office at (800) 531-5441, ext. 3-4679 for a confirmation of its eligibility.
If the city is eligible to adopt a Section 4B tax, it may propose a tax rate equal to one-eighth, one-
148
fourth, three-eighths or one-half of one percent. The city may not adopt a sales tax rate that
149
would result in a combined rate exceeding two percent.
146
Id.§§ 4B(a)(1)(A), 4A(a)(1) (to be codified at Tex. Loc. Gov’t Code Ann. §§ 504.002 and 505.002 (Vernon
Supp. 2008), effective April 1, 2009).
147
See also id.§ 4B(n-1) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.257 (Vernon Supp. 2008), effective
April 1, 2009).
148
Id.§ 4B(e) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.252(b) (Vernon Supp. 2008), effective April 1,
2009).
149
Tex. Tax Code Ann. § 321.101(f) (Vernon 2002), Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(f) (Vernon Supp.
2008) (making Chapter 321 of the Tax Code applicable to a 4B tax) (to be codified at Tex. Loc. Gov’t Code Ann. §
505.256 (Vernon Supp. 2008), effective April 1, 2009).
2008 Economic Development Laws for Texas Cities • Office of the Attorney General
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I. The Sales Tax for Economic Development
Cities that have Passed a Section 4B Tax (339 Cities)
Alamo Corinth Hart Lorena Point Southlake
Alba Corral City Hawkins Los Fresnos Ponder Spearman
Hawley Lott Port Aransas Spur
Alvarado Cotulla
Alvord Crandall Helotes LufkiPort Isabel Stafford
Angleton Crawford Henrietta Luling Port NechesStanton
Archer City Cross Plains Hickory Creek Lumberton Portland Sterling City
Arcola Crowley Hico Mabank Post Stinnett
Argyle Cuero Highland Village Malone Poth Stockdale
Athens Cuney Hill Country Village Manvel Prarie View Stratford
Aubrey Dalworthington-Gardens Hollywood Park Marble Falls Presidio Strawn
Avinger DalhartHondo Marfa Princeton Sudan
Balmorhea Dayton Howe Mathis Queen City Sullivan City
Bandera Dickinson Hubbard Maypearl Quinlan Sundown
Bangs Domino Hudson McAllen Quitaque Sweeny
Bartonville Douglassville Hughes Springs McCamey QuitmanTaft
Bastrop Driscoll Huntington McGregor Rankin Teague
Bay City Dublin Hurst McLean Redwater Thorndale
Meridian Refugio Throckmorton
Bedford Dumas Hutchins
Bee Cave Duncanville Iraan Merkel Richland Hills Tomball
BeevilleE. Tawakoni Industry Mesquite Richmond Trenton
Bellville Eden Ingleside Mexia Rio Grande City Trinidad
Benbrook Electra Italy Miles Rio Vista Trinity
Benjamin Elgin Itasca Mineola Rising Star Troup
Bertram Emory Jacksboro Mission River Oaks Turkey
Big Lake Encinal Jacksonville Montgomery Robstown Tyler
Big Sandy Ennis Jefferson Morgan’s Point Rocksprings Universal City
Bishop Euless Jewett Morton Rollingwood Van
Bonham EvermanJunction Mount Enterprise Roma Los SaenzVan Horn
Bovina Fate Karnes City Mount Vernon Ropesville Venus
Rosenberg Victoria
Breckenridge Flower Mound Keller Muenster
Brenham Floydada Kemah Nassau Bay Rosebud Wake Village
Brookshire Forest Hill Kemp Navasota Round Rock Wallis
Brownsboro Forney Kenedy Nederland Round Top Watauga
Buda Frankston Kennedale Needville Royse City Waxahachie
Buffalo Freeport Kerens Nevada Runaway Bay Webberville
Buffalo Gap Fritch Kerrville New Braunfels Sachse Webster
Bullard FrionaKrumNew Deal San Angelo Weimar
BurkburnettGainesville La Grange N. Richland Hills San Benito W. Columbia
Caddo Mills Galveston La Joya Oak Leaf San Juan W. Tawakoni
Caddo Mills Galveston La Joya Oak Leaf San Juan W. Tawakoni
Cameron Giddings La Porte Oak Ridge San Saba Westworth Village
Cameron Giddings La Porte Oak Ridge San Saba Westworth Village
Canton Glen Rose Laguna Vista Oak Ridge North Sansom ParkWharton
Canyon Goldthwaite Lake Jackson Odem Santa Anna Wheeler
Carmine Goliad Lake Worth Olton Santa Fe White Deer
Centerville Gonzales Lampasas Orange Savoy White Oak
Chandler Gordon Lavon Ovilla Schertz White Settlement
Chico Grand Saline League City Oyster CreekSchulenburg Whiteface
Cibolo Grapevine Leonard Palestine Seabrook Windcrest
Clarendon Grapeland Lewisville Palmer Seagoville Windthorst
Cleburne Groesbeck Lexington Pampa Sealy Winnsboro
Clifton Groom Liberty Pantego Seminole Winona
Clute Groves Liberty Hill Paradise Seven PointsWolfforth
Clyde Gruver Lincoln Park Pasadena Shenandoah Yantis
Colleyville Gun Barrel City Little Elm Pearland Shepherd Yoakum
Columbus Gunter Live Oak Pecos Silverton Yorktown
Conroe GustineLlano Pflugerville Snook
Converse Haltom City Lockhart Pilot Point Sonora
Coppell Hamilton Lockney Pittsburg South Houston
2008 Economic Development Laws for Texas Cities • Office of the Attorney General
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I. The Sales Tax for Economic Development
Cities that have passed both a Section 4A and a Section 4B Tax (104 Cities)
Albany Cedar Hill Frisco Justin Newton Sugar Land
Allen Cedar Park Fulshear Keene Nocona Sunnyvale
Alton Celina Georgetown Knox City Northlake The Colony
Anna Center Godley Krugerville Orchard Tioga
Anson Cisco Gorman La Feria Paducah Trophy Club
Aspermont Collinsville Grandfalls Lake Dallas Pottsboro Tye
AtlantaCrystal City Grandview Lancaster Progreso Van Alstyne
Balch Springs DeSoto Groveton Linden Red Oak Westlake
Beasley Donna Hallettsville Little Elm Rio Hondo Whitesboro
Bells Edcouch Harlingen Magnolia Roanoke Whitewright
Blue Ridge Elsa Haslet Mansfield Roaring Springs Wichita Falls
Bowie Escobares Hearne Matador Robert Lee Willis
Bremond Fairview Heath McKinney Roscoe Wortham
Bronte Farmersville Hempstead Melissa Saint Jo Wylie
Brownsville Ferris Iowa Park Miami Sanger
Burleson Floresville Jarrell Midland Seagraves
Calvert Fort Stockton Joaquin Midlothian Sinton
Carthage Franklin Joshua Murphy Somerset
Section 4B Projects
The Development Corporation Act provides a wide variety of purposes for which Section 4B tax
proceeds may be expended. Section 4B tax proceeds may be spent on land, buildings, equipment,
facilities, expenditures, targeted infrastructure and improvements for items that fit the definition
of “project” under Sections 2(11)and 4B(a)of the Act. It is important to emphasize that any
activities of a development corporation must always be in furtherance of and attributable to a
150
“project.” Further, the definition of “project” was significantly amended by House Bill 2912 in
151
the 2003 Legislative Session. Changes made by the bill apply only to a project that is
undertaken or approved after the effective date of the bill, June 20, 2003. Any projects
undertaken or approved before the effective date of House Bill 2912 are governed by the law that
152
was in effect on the date the project was undertaken or approved.
The 2005 Legislative Session also made some amendments to the definition of “project.” House
th
Bill 2928 loosened some of the restrictions that were imposed by the 78 Legislature for certain
4B corporations. There are some projects that a section 4B corporation can do that do not require
153
them to create or retain primary jobs.
Section 4B Projects Which Must Create or Retain Primary Jobs
In 2003, the Texas Legislature amended the definition of “project” in Section 2(11) and Section
154
4B(a)(2)(B) to require that certain projects result in the “creation or retention of primary jobs.”
150
Op. Tex. Att’y Gen. No. JC-0118 (1999) (concluded that Section 4B sales tax proceeds could only be used for
project costs).
151th
Tex. H.B. 2912, 78 Leg., R.S. (2003).
152
Id.
153th
Tex. H.B. 2928, 79 Leg., R.S. (2005).
154th
Tex. Rev. Civ. Stat. Ann. art. 5190.6, §§ 2(11) (as amended by Tex. H.B. 3440, 80 Leg., R.S. (2007)),
4B(a)(2)(B) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.101 and 505.155 (Vernon
Supp. 2008), effective April 1, 2009).
2008 Economic Development Laws for Texas Cities • Office of the Attorney General
40
I. The Sales Tax for Economic Development
Accordingly, most Section 4B projects must now create or retain primary jobs. Yet not all
projects contain this requirement. “Primary job” is defined to mean a job that is “available at a
company for which a majority of the products or services of that company are ultimately
exported to regional, statewide, national, or international markets infusing new dollars into the
local economy;” and meet any one of a certain enumerated sector numbers of the North
155
American Industry Classification System (NAICS). The enumerated sector numbers are:
111 Crop Production
112 Animal Production
113 Forestry and Logging
11411 Commercial Fishing
115 Support Activities for Agriculture and Forestry
211 to 213 Mining
221 Utilities
311 to 339 Manufacturing
42 Wholesale Trade
48 and 49 Transportation and Warehousing
51 (excluding Information (excluding movie theaters and drive-in theaters)
51213 and 512132)
523-525 Securities, Commodity Contracts, and Other Financial Investments and Related
Activities; Insurance Carriers and Related Activities; Funds, Trusts, and Other
Financial Vehicles
5413, 5415, 5416, Scientific Research and Development Services
5417, and 5419
551 Management of Companies and Enterprises
56142 Telephone Call Centers
922140 Correctional Institutions; or a job that is included in North American Industry
Classification System (NAICS) sector number 928110, National Security, for
corresponding index entries for Armed Forces, Army, Navy, Air Force, Marine
Corps and Military Bases.
For more information on the North American Industry Classification System, please visit:
http://www.census.gov/epcd/naics02/naicod02.htm.
A Section 4B corporation may do the projects listed under Section 2(11) of the Development
Corporation Act of 1979, Article 5190.6, which encompasses the land, buildings, equipment,
facilities, expenditures, targeted infrastructure and improvements (one or more) that are for the
creation or retention of primary jobs that are found by the board of directors to be required or
suitable for any of the following projects:
155
Id.§ 2(17) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.002(12) (Vernon Supp. 2008), effective April 1,
2009).
2008 Economic Development Laws for Texas Cities • Office of the Attorney General
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I. The Sales Tax for Economic Development
Manufacturing and industrial facilities.
Research and development facilities.
Military facilities.
Transportation facilities (including but not limited to airports, hangars, airport
maintenance and repair facilities, air cargo facilities, related infrastructure located on
or adjacent to an airport facility, ports, mass commuting facilities and parking
156
facilities).
Sewage or solid waste disposal facilities.
Recycling facilities.
Air or water pollution control facilities.
Distribution centers.
Small warehouse facilities.
Primary job training facilities for use by institutions of higher education.
Regional or national corporate headquarters facilities.
Additionally, Section 4B corporations may provide land, buildings, equipment, facilities and
improvements found by the board of directors to promote or develop new or expanded business
157
enterprises that create or retain primary jobs, including a project to provide:
Public safety facilities.
Streets and roads.
Drainage and related improvements.
Demolition of existing structures.
General municipally owned improvements.
Any improvements or facilities that are related to any of those projects and any other
projects that the board in its discretion determines promotes or develop new or
expanded business enterprises that create or retain primary jobs.
Section 4B Projects Which Are Not Required to Create or Retain Primary Jobs
Some section 4B projects do not require the creation or retention of primary jobs. The following
categories are also authorized Section 4B projects pursuant to Section 2(11) of the Act.
Job training classes.
Certain job training required or suitable for the promotion of
development and expansion of business enterprises can be a permissible project. Section
4B corporations may spend tax revenue for job training classes offered through a
business enterprise only if the business enterprise commits in writing to certain
conditions. The business enterprise must agree to create new jobs that pay wages at least
equal to the prevailing wage for the applicable occupation in the local labor market area;
or agree to increase its payroll to pay wages that are at least equal to the prevailing wage
158
for the applicable occupation in the local labor market area. The creation or retention
156th
Id. art. 5190.6, § 2(11)(A) (as amended by Tex. H.B. 3440, 80 Leg., R.S. (2007)).
157
Id.§ 4B(a)(2)(B) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.155 (Vernon Supp. 2008), effective April 1,
2009).
158
Id. § 38(b) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.162 (Vernon Supp. 2008), effective April 1,
2009).
2008 Economic Development Laws for Texas Cities • Office of the Attorney General
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I. The Sales Tax for Economic Development
of primary jobs is not a mandatory requirement for funding permissible job training
classes.
Certain infrastructural improvements which promote or develop new or expanded
business enterprises.
“Project” also includes expenditures found by the board of
directors to be required or suitable for infrastructure necessary to promote or develop new
or expanded business enterprises limited to streets and roads, rail spurs, water and sewer
utilities, electric and gas utilities, drainage, site improvements and related improvements,
telecommunications and Internet improvements, and beach remediation along the Gulf of
159
Mexico. Accordingly, Section 4B corporations may assist with limited infrastructural
improvement that the board finds will promote or develop new or expanded business
development. The funding of these infrastructural improvements does not have to be
conditioned upon the creation or retention of primary jobs.
Career centers.
Certain career centers can also be provided land, buildings, equipment,
facilities, improvements and expenditures found by the board of directors to be required
or suitable for use if the area to be benefited by the career center is not located in the
160
taxing jurisdiction of a junior college district.
Commuter Rail, Light Rail or Motor Buses.
A Section 4B corporation, as authorized
by the corporation’s board of directors, may spend tax revenue received under the Act for
the development, improvement, expansion or maintenance of facilities relating to the
161
operation of commuter rail, light rail or motor buses.
Additionally, Section 4B(a)(2)(A), (C), (D), and (E) of the Act specifically permit expenditures
of Section 4B tax proceeds for land, buildings, equipment, expenditures and improvements
suitable for the following types of projects:
Professional and amateur sports and athletic facilities
. Professional and amateur
sports and athletics facilities, including stadiums and ballparks are permissible Section
162
4B projects.
Entertainment, tourist and convention facilities.
Entertainment, tourist, and
convention facilities, including auditoriums, amphitheaters, concert halls, museums and
163
exhibition facilities are permissible Section 4B projects.
159
Id. § 2(11)(C) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.103 (Vernon Supp. 2008), effective April 1,
2009).
160
Id.§ 2(11)(D) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.104 (Vernon Supp. 2008), effective April 1,
2009).
161th
Id. art. 5190.6, § 38A (as added by Tex. S.B. 1089, 80 Leg., R.S. (2007)).
162
Id. § 4B(a)(2)(A) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.152) (Vernon Supp. 2008), effective April
1, 2009).
163
Id.
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I. The Sales Tax for Economic Development
Public parks and related open space improvements.
Public parks, park facilities and
164
events, and open space improvements are permissible Section 4B projects.
Affordable housing.
Projects required or suitable for the development and expansion of
“affordable housing” as defined by federal law (42 United States Code Section 12745)
165
are permissible Section 4B projects.
Water supply facilities.
Any water supply facilities, including dams, transmission lines,
well field developments, and other water supply alternatives can be permissible Section
166
4B projects. Nonetheless, to undertake a water supply facility, a majority of the
qualified voters of the city voting in an election called and held for that purpose must
167
approve the water supply project. The ballot proposition for the election shall be
168
printed to provide for voting for or against the proposition:
“The use of sales and use tax proceeds for infrastructure relating to
(insert description of water supply
facility).”
Water conservation programs.
Water conservation programs, including incentives to
install water-saving plumbing fixtures, educational programs, brush control programs,
and programs to replace malfunctioning or leaking water lines and other water facilities
169
can be permissible Section 4B projects. As with water supply facilities, to undertake a
water conservation program, a majority of the qualified voters of the city voting in an
170
election called and held for that purpose must approve the water conservation program.
The ballot proposition for the election shall be printed to provide for voting for or against
171
the proposition:
“The use of sales and use tax proceeds for infrastructure relating to
(insert description of water
conservation program).”
164
Id.
165
Id.§ 4B(a)(2)(C) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.153 (Vernon Supp. 2008), effective April 1,
2009).
166
Id. § 4B(a)(2)(D) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.154 (Vernon Supp. 2008), effective April 1,
2009).
167
Id.§ 4B(a-5)(1)-(2) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.304 (Vernon Supp. 2008), effective April
1, 2009).
168
Id.§ 4B(a-5)(1) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.304 (Vernon Supp. 2008), effective April 1,
2009).
169
Id. § 4B(a)(2)(E) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.154 (Vernon Supp. 2008), effective April 1,
2009).
170
Id.§ 4B(a-5)(1)-(2) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.304 (Vernon Supp. 2008), effective April
1, 2009).
171
Id.§ 4B(a-5)(1) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.304 (Vernon Supp. 2008), effective April 1,
2009).
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I. The Sales Tax for Economic Development
th
Further, the 79 Legislature gave certain section 4B corporations the ability to undertake projects
involving airports, ports and sewer or solid waste disposal facilities without the requirement of
creating or retaining primary jobs.
Airport Facilities.
Section 4B corporations located within twenty-five (25) miles of an
international border, with a city population of less than 50,000 or an average rate of
unemployment that is greater than the state average rate of unemployment during the
preceding twelve (12) month period may assist with land, buildings, facilities,
infrastructure, and improvements required or suitable for the development or expansion
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of airport facilities. Additionally, section 4B corporations may undertake a project
which is required or suitable for the development or expansion of airport facilities,
including hangars, airport maintenance and repair facilities, air cargo facilities, and
related infrastructure located on or adjacent to an airport facility, if the project is
undertaken by a corporation created by an eligible city; (i) that enters into a development
agreement with an entity in which the entity acquires a leasehold or other possessory
interest from the corporation and is authorized to sublease the entity’s interest for other
projects authorized by this subdivision; and (ii) the governing body of which has
authorized the development agreement by adopting a resolution at a meeting called as
173
authorized by law.
Airports, Ports, and Sewer or Solid Waste Disposal Facilities.
Section 4B
corporations located in a city wholly or partly in a county that is bordered by the Rio
Grande, has a population of at least 500,000, and has wholly or partly within its
boundaries at least four cities that each have a population of at least 25,000 (Hidalgo
County) may provide certain assistance with infrastructure necessary to promote or
develop new or expanded business enterprises, including airports, ports and sewer or
solid waste disposal facilities, provided section 4B sales tax revenues do not support the
174
project.
Lastly, certain section 4B corporations have been given a broader latitude in deciding what types
of projects that they can do with the requirement of creating or retaining primary jobs, but they
must meet the requisite conditions.
Revenue Requirement.
Section 4B corporations that have not generated more than
$50,000 in revenues in the preceding two (2) fiscal years may provide land, buildings,
equipment, facilities, and improvements found by the board of directors to be required or
suitable for the development, retention, or expansion of business enterprises, provided the
city council authorizes the project by adopting a resolution following two (2) separate
175
readings conducted at least one (1) week apart.
172
Id.§ 2(11)(D) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.104 (Vernon Supp. 2008), effective April 1,
2009).
173th
Id. art. 5190.6, § 4B(a)(2)(G) (as added by Tex. H.B. 3440, 80 Leg., R.S. (2007)).
174
Id.§ 2(11)(E) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.105 (Vernon Supp. 2008), effective April 1,
2009).
175
Id.§ 4B(a)(2)(F) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.156 (Vernon Supp. 2008), effective April 1,
2009).
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I. The Sales Tax for Economic Development
Population Requirement.
A Section 4B corporation in a city with a population of
20,000 or less may provide land, building, equipment, facilities, expenditures, targeted
infrastructure, and improvements found by the board of directors to promote new or
expanded business development, provided that for projects which require an expenditure
of more than $10,000 the city council adopts a resolution authorizing the project after
176
giving the resolution at least two (2) separate readings.
Landlocked Communities.
For Section 4B corporations located wholly or partly in a
county with a population of two million or more (Dallas and Harris County) that has
within its city limits and extraterritorial jurisdiction fewer than 100 acres that can be used
for the development of manufacturing or industrial facilities in accordance with the
zoning laws or land use restrictions of the city, the term “project” also includes
expenditures found by the board of directors to be required for the promotion of new or
177
expanded business enterprises within the landlocked community.
Undertaking Projects Located Outside of the City
Section 23(a)(1) of the Act provides that an economic development corporation may undertake
projects outside of the city limits with permission of the governing body that has jurisdiction
over the property. In other words, if the corporation wants to undertake a project that is located
completely in the city’s extraterritorial jurisdiction or beyond, it should get approval from the
governing body of the county, the county commissioners court. The language of the Act,
however, does not seem to require this approval if the project is located at least partially within
the boundaries of the city. If the project is located completely within the jurisdiction of another
municipality, the corporation would need approval of the city council for that municipality.
Use of Section 4B Tax for “Sports Venue” Facilities
As previously noted, Section 4B tax monies may be used to fund projects relating to professional
and amateur athletic facilities. Under Texas law, there is additional statutory authority for
178
funding an athletic facility that qualifies as a “sports venue.” Special statutory provisions
apply to projects involving such a “sports venue.” A facility qualifies as a “sports venue” if it is
176
Id § 4B(a)(3) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.158 (Vernon Supp. 2008), effective April 1,
2009).
177
Id.§ 4B(a)(4) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.157 (Vernon Supp. 2008), effective April 1,
2009).
178
Id.§ 4B(a-3), (a-4) (to be codified at Tex. Loc. Gov’t Code Ann. §§ 505.201 and 505.202 (Vernon Supp. 2008),
effective April 1, 2009). (Under Section 4B(a)(2) of the Development Corporation Act, a Section 4B corporation
had authority to expend funds on sports and athletic facilities even before the addition of Section 4B(a-3) and (a-4).
One question raised by these sections to Section 4B is whether those sections would require that a Section 4B
corporation follow the procedures for engaging in a “venue project” every time the 4B corporation chooses to
undertake a project that falls under the definition of that term. Currently, it does not appear that either a Texas court
or the Texas Attorney General’s Office has opined on that issue.)
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I. The Sales Tax for Economic Development
an arena, coliseum, stadium or other type of area or facility that meets all of the following three
179
criteria:
1.The primary use or primary planned use of the facility is for one or more professional or
amateur sports or athletics events.
2.A fee for admission to the sports or athletics events is charged or is planned to be
charged, except that a fee need not be charged for occasional civic, charitable, or
promotional events.
3.The facility is not and will not be owned and operated by a state-supported institution of
180
higher education.
Texas law specifies that any money authorized by the voters to be spent on a “sports venue and
related infrastructure” may be spent on any on-site or off-site improvements that relate to a
sports venue and that enhance the use, value, or appeal of the sports venue, including areas
adjacent to it. This would include any expenditures reasonably necessary to construct, improve,
renovate, or expand the sports venue. The law specifically lists the following uses as examples of
permissible “related infrastructure”: stores, restaurants, concessions, on-site hotels, parking
facilities, area transportation facilities, roads, water or sewer facilities, parks, and environmental
181
remediation. These facilities must relate to and enhance the sports venue.
A city may submit to its voters a ballot proposition that would authorize the use of Section 4B
tax monies for a specific sports venue project or category of projects, including any
infrastructure related to that project or category. Such a ballot proposition could contain language
enabling the Section 4B corporation to use any Section 4B tax money already collected to
support the sports venue project. Before an election to authorize the use of the Section 4B tax for
a sports venue, a public hearing must be conducted. At that hearing, the city’s residents must be
informed of the cost and impact of the proposed project or category of projects. It appears that
179
Id § 4B(a-4)(2) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.201(2) (Vernon Supp. 2008), effective April
1, 2009).
180
Note that the definition of “sports venue” in Section 4B of the Development Corporation Act differs from that
contained in Section 4A of the Act. Unlike Section 4A, Section 4B defines a “sports venue” to exclude a facility that
is or will be owned and operated by a state-supported institution of higher education. This language was added at the
request of the City of Corpus Christi. The city was concerned that the sports venue amendments to Section 4B might
later be interpreted to require all Section 4B projects related to a sports venue to undergo the election process
outlined in the sports venue amendments. The Section 4B corporation in the City of Corpus Christi was already
planning a joint effort with Texas A&M University to construct a baseball facility and wanted to be sure that the
new sports venue legislation would not interfere with that project. Therefore, the language in question was added to
the definition of “sports venue” to ensure that the new legislation would not apply to the Corpus Christi project. See
letter dated October 3, 1997, from Mr. Jeffery A. Leuschel (attorney representing Corpus Christi) to Mr. Jim
Thomassen (Chief of the Public Finance Division of the Office of the Attorney General of Texas). This letter cites
Rep. Berlanga during the House Floor debate on the amendment adding the language in question. During that
debate, the letter quotes Rep. Berlanga as stating, “... the City of Corpus Christi is in ... the process of moving
forward with an election -- this will grandfather us in under 4B.”
181
Tex. Rev. Civ. Stat. Ann. art. 5190.6, §§ 4B(a-3)(1), 4B(a-4)(1) (Vernon Supp. 2008) (to be codified at Tex. Loc.
Gov’t Code Ann. §§ 505.202 and 505.201(1) (Vernon Supp. 2008), effective April 1, 2009) and Tex. Loc. Gov’t
Code Ann. § 334.001(3) (Vernon 2005) (defines “related infrastructure”).
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I. The Sales Tax for Economic Development
the hearing may be conducted at any time before the election takes place, but the city is required
to publish notice of the hearing in a newspaper of general circulation in the city at least 30 days
182
before the date set for the hearing. The notice must include the time, date, place, and subject of
the hearing and must be published on a weekly basis until the date of the hearing. Accordingly,
the city will need to schedule its public hearing early enough so that it can provide at least 30
days notice of the hearing.
In an election to approve the use of Section 4B sales tax monies for a sports venue, the law
requires that a specific sports venue project or category of projects be clearly described on the
183
ballot. The description must be clear enough for the voters to discern the limits of the specific
project or category of projects to be authorized. State law does not indicate what constitutes a
clear description or how to indicate the limits of the specific project. At a minimum, the ballot
proposition should clearly indicate the types of projects anticipated. Additionally, if Section 4B
monies are to be used to pay the maintenance and operating costs (and not just initial
construction cost, etc.) of a sports venue project, then the ballot proposition must state that
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fact.
A city may have the voters consider the use of Section 4B funds for a sports venue at the same
election in which the voters are considering the creation of the Section 4B tax itself. Also, a city
may arguably have the voters consider authorizing the use of Section 4B funds for several
th
different sports venue projects or categories of projects at the same election. Before the 79
Legislative Session, the initial authorization of the Section 4B tax would be considered by the
voters as a separate ballot proposition. Similarly, any sports venue project must be considered by
the voters as a separate ballot proposition. However, with the passage of House Bill 3195, it
would seem that authorizing the Section 4B tax and the consideration of several sports venue
185
projects can be considered by the voters in a combined ballot proposition. But, a city is not
required to combine these issues into one ballot proposition. A city that pursues such a combined
proposition should consult with its local legal counsel and with the State Comptroller’s Office on
this issue. State law requires that any sports venue election be held on a uniform election date. If
a sports venue project or category of projects fails to win voter approval, the city must wait at
least one year before holding another election on that particular project or category.
Use of Section 4B Tax Proceeds for Training Seminars
Certain Section 4B economic development and city officials are required to complete a training
186187
seminar. The officials must complete a seminar once every 24 months. At least one person
from each of the following are required to attend a seminar each 24-month period:
182
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(a-3)(3) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code
Ann. § 505.203 (Vernon Supp. 2008), effective April 1, 2009).
183
Id. § 4B(a-3)(2) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.202 (Vernon Supp. 2008), effective April 1,
2009).
184
Id.
185
Tex. Tax Code Ann. § 321.409 (Vernon Supp. 2008).
186
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 39 (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code Ann. §
502.101 (Vernon Supp. 2008), effective April 1, 2009).
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I. The Sales Tax for Economic Development
the city attorney, the city administrator or city clerk; and
the executive director or other person who is responsible for the daily administration
188
of the corporation.
The corporation is authorized to use Section 4B sales tax proceeds to pay for the costs of
189
attending a seminar. The certificates of completion are issued by the person, entity, or
organization providing the training seminars, on a form approved by the Comptroller’s office.
190
The Comptroller’s Office may impose an administrative penalty in an amount not to exceed
191
$1,000 for the failure to attend the seminar.
Public Hearing Requirement for Expending Section 4B Tax Proceeds
Previously, a Section 4B corporation was required to hold at least one public hearing on any
proposed project, including a proposal to expend funds on maintenance and operating expenses
192
of a project. However, in 2007, the Act was amended to provide that a corporation created by
an eligible city with a population of less than 20,000 is not required to hold a public hearing
193
under this subsection if the proposed project is defined by Section 2 of this Act. If a public
hearing is required, the hearing must be held before the corporation expends any Section 4B
funds on the project. There is nothing in the Act that prohibits the Section 4B corporation from
holding one public hearing to consider a group of Section 4B projects. After the projects have
been considered at a public hearing and 60 days have passed since the first public notice of the
nature of the projects, the development corporation is free to make expenditures related to the
projects pursuant to the adopted budget.
Public Notice Requirement and the 60-Day Right to Petition
194
The public has a right to gather a petition objecting to a particular Section 4B project. The
petition must be submitted within 60 days of the first published notice of a specific project or
type of project and must be signed by more than 10 percent of the registered voters of the city.
State law does not indicate what would constitute the first published notice of a project. A city
should ensure that it provides 60 days notice of the specific project or the category of projects.
187
Id. § 39(b) (to be codified at Tex. Loc. Gov’t Code Ann. § 502.101 (Vernon Supp. 2008), effective April 1,
2009).
188
Id. § 39(b)(1) & (b)(3) (to be codified at Tex. Loc. Gov’t Code Ann. § 502.101(a)(1)&(2) (Vernon Supp. 2008),
effective April 1, 2009).
189
Id. § 39(d) (to be codified at Tex. Loc. Gov’t Code Ann. § 502.101(d) (Vernon Supp. 2008), effective April 1,
2009).
190
Id. § 39(h) (to be codified at Tex. Loc. Gov’t Code Ann. § 502.103 (Vernon Supp. 2008), effective April 1,
2009).
191
Id. § 39(c) (to be codified at Tex. Loc. Gov’t Code Ann. § 502.103(b) (Vernon Supp. 2008), effective April 1,
2009).
192
Id. § 4B(n) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.159 (Vernon Supp. 2008), effective April 1,
2009).
193th
Id. Art. 5190.6, § 4B(n) (as amended by Tex. S.B. 1523, 80 Leg., R.S. (2007)).
194
Id. §§ 4B(a-1), 4B(a-2) (to be codified at Tex. Loc. Gov’t Code Ann. §§ 505.160 and 505.303 (Vernon Supp.
2008), effective April 1, 2009).
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I. The Sales Tax for Economic Development
If a petition is pursued by the public, the petition can ask that the city hold an election on the
issue before that specific project or type of project is undertaken. If the petition is submitted in a
timely manner and an election is required, the corporation may not undertake the project until the
voters approve the project at an election on the issue. If the voters disapprove the project at the
election, the Section 4B tax proceeds may not be used for that purpose.
It is important to note that a petition cannot force an election on a project if the voters have
previously approved the specific project or that general category of projects at an earlier election
called under the Act. Cities that know what types of projects they want to undertake may be well
advised to specifically list each of these types of projects in the ballot wording when the Section
4B tax is first considered by the voters. If the city includes each of these types of projects in the
original ballot proposition, it can assert that the public has already approved that type of project
at a prior election. In this scenario, the city arguably would not be required to call an additional
election even if a petition were submitted regarding the project.
Specific Costs of a Section 4B Project That May be Funded
Cities must understand what general categories are available for expenditures. Additionally, they
need to know what types of specific expenditures are contemplated within each of these
categories. For assistance in understanding what is permitted under the Act, cities should review
the definition of the term “cost” under Section 2(4) of the Act. Section 2(4) of the Act defines
what costs may be applied to a Section 4B project. It states in pertinent part that costs for a
project may include:
Land and facility improvements:
the cost of acquisition, construction, improvement,
expansion of land, buildings and acquisition of right-of-way.
Machinery and supplies:
the cost of machinery, equipment, inventory, raw materials
and supplies.
Financial transaction costs:
the cost of financing charges, certain interest prior to and
during construction, and necessary reserve funds.
Planning costs:
the cost of research and development, engineering and legal services,
development of plans and specifications, surveys and cost estimates; and other expenses
necessary or incident to determining the feasibility and practicability of undertaking the
project.
Brownfield cleanup costs:
Should the Texas Governor’s office or Texas Commission on
Environmental Quality encourage or request a section 4B corporation to use sales tax
proceeds to cleanup contaminated property, the corporation may not undertake the project
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I. The Sales Tax for Economic Development
until the use is approved by a majority of the qualified voters of the city voting in an
195
election called and held for that purpose. The ballot proposition is as follows:
“The use of sales and use tax proceeds for the cleanup of
contaminated property.”
Due to the definition of the term “project” and of the term “cost” contained in the Development
Corporation Act, a strong argument can be made that any expenditure by a Section 4B
corporation, other than job training classes, must be related to the acquisition or physical
improvement of land, buildings, equipment or facilities. Of course, an expenditure could also
include administrative or planning costs associated with such an acquisition or improvement.
Administrative Expenses of a Section 4B Project Maintenance and Operating
Expenses
Section 2 (4) of the Act states that the cost of a project may also include administrative and other
expenses that are incident to placing the project into operation. The law provides that these
expenses could include administrative expenses for the acquisition, construction, improvement,
expansion and financing of the project. It is this authority that could be cited for the hiring of
administrative staff to implement the work of the Section 4B development corporation with
regard to its projects. Accordingly, cities that perform some of the administrative functions for
the corporation could cite this authority for reimbursement from Section 4B funds for
administrative costs related to projects that city staff oversee. Additionally, Section 4B(b)
specifically permits a Section 4B corporation to contract with other private corporations to carry
out industrial development programs or objectives. Effective June 20, 2003, should a Section 4B
corporation contract with a broker, agent or other third party for business recruitment, a written
contract approved by the board of directors is required for any payment of a commission, fee, or
196
other thing of value to the third party. Failure to enter into a written contract could result in a
civil penalty not to exceed $10,000.
Additionally, Section 4B(a-2) states that the costs of a publicly owned and operated project may
include the maintenance and operating costs for the project. The Act, however, allows the voters
to object to such an expenditure by submitting a petition of 10 percent of the registered voters of
the city. The public has 60 days from the date when notice is first given that the tax will be used
for this purpose to submit the petition. Such a petition would ask the city to hold an election to
approve the payment of maintenance and operating costs for projects. An election is not required,
however, if the voters had previously approved the use of Section 4B tax proceeds for this
purpose at an earlier election under the Act.
Cities that are aware that they want to use Section 4B tax proceeds to pay the maintenance and
operating costs of projects would be well advised to list this type of expenditure on the ballot
when the Section 4B tax is considered by the voters. By including this provision in the original
195
Id. § 4B(p) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.305 (Vernon Supp. 2008), effective April 1,
2009).
196
Id. § 41 (to be codified at Tex. Loc. Gov’t Code Ann. § 502.051 (Vernon Supp. 2008), effective April 1, 2009).
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I. The Sales Tax for Economic Development
ballot proposition, the city can assert that the public has already approved this type of
expenditure at a prior election. Accordingly, if the city uses such a ballot provision, it cannot be
required to hold an additional election even if a petition is submitted regarding these costs.
Promotional Expenses
In the 2001 Legislative Session, the Texas Legislature clarified the use of Section 4B proceeds
for promotional expenses. Now, Section 4B(b) limits Section 4B corporations to spending no
more than 10 percent of the corporate revenues (Section 4B tax proceeds) for promotional
197
purposes. Yet, the Attorney General has concluded a promotional expenditure “must advertise
198
or publicize the city for the purpose of developing new and expanded business enterprises.”
Further, a corporation is limited to spending not more than 10 percent of its current annual
revenues for promotional purposes in any given year. Nonetheless, unexpended revenues
specifically set aside for promotional purposes in past years may be expended along with 10
199
percent of current revenues without violating the cap. Additionally, a city council may
200
disapprove a promotional expenditure. If there is some question as to whether a particular
expenditure should be considered a promotional or an administrative expense, the development
corporation should consult with its local legal counsel.
Debt Obligations
The Section 4B development corporation may issue bonds, notes and other contractual
201
obligations to fund its projects. Prior to September 1, 2001, a Section 4B corporation’s bond
th
and other obligations could not exceed $135 million. This limitation was removed in the 77
202
Legislative Session. Further, a bond or debt instrument of the corporation is not an obligation
203
of the city, nor is it backed by the city ad valorem tax rate. The tax proceeds received by the
Section 4B corporation may be used to pay the principal and interest on the bonds and any other
204
related costs. The Legislature has not addressed whether a Section 4B development
corporation is prohibited from paying principal or interest on a debt if the debt existed before the
date the city created the Section 4B corporation.
197
Id. § 4B(b) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.103 (Vernon Supp. 2008), effective April 1,
2009).
198
Op. Tex. Att’y Gen. No. GA-0086 (2003) at 2.
199
Id. at 6.
200
Id. at 3-5.
201
Tex. Rev. Civ. Stat. Ann. art. 5190.6, §§ 23(a)(6) - (a)(7) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t
Code Ann. §§ 501.155 and 501.201 (Vernon Supp. 2008), effective April 1, 2009).
202
Id. § 4B(h) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.104 (Vernon Supp. 2008), effective April 1,
2009).
203
Id. § 22 (to be codified at Tex. Loc. Gov’t Code Ann. § 501.207 (Vernon Supp. 2008), effective April 1, 2009).
204
Id. § 4B(h) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.104 (Vernon Supp. 2008), effective April 1,
2009).
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I. The Sales Tax for Economic Development
Initiating an Election to Approve a Section 4B Tax
An election to adopt a Section 4B economic development sales tax may be initiated by either:
city council approval of an ordinance calling for an election on the imposition of the
205
tax; or
a petition signed by a number of qualified voters that equals at least 20 percent of the
voters who voted in the most recent regular city election. If the city council receives such
a petition, it is required to pass an ordinance to call an election on the imposition of the
206
tax.
Most cities simply pass the ordinance calling for a Section 4B sales tax election on their own
motion, and do not wait for the election to be initiated by a petition of the voters. When the city
orders an election on the sales tax for economic development, it must follow all applicable
requirements for special elections contained in the Texas Election Code, the Municipal Sales and
Use Tax Act (Chapter 321 of the Texas Tax Code), and any other Texas statutes regarding
elections. Notably, the following requirements must be followed:
Potential Election Dates.
The election must be held on a uniform election date as
provided by Chapter 41 of the Election Code. In the 2005 Legislative Session, the Texas
Legislature changed the May election date and reduced the number of uniform election
dates from 4 to 2. The current uniform election dates are:
the second Saturday in May; or
207
the first Tuesday after the first Monday in November.
Time Frame for Ordering the Section 4B Election.
The city should order the election
at least 62 days prior to the date of the election, unless the election is the general election
208
for state and county officers. If the election is the general election for state and county
officers, then the city should order the election at least 70 days prior to the date of the
209
election. The Tax Code requires only that the city order the election at least 30 days
210
before the date of the election. Nonetheless, it is advisable to provide at least 62 or 70
days notice, since this is the requirement applicable to most other special elections in
Texas, and it allows time to comply with other Election Code requirements, such as early
voting. Additionally, the special election must be submitted for “pre-clearance” to the
205
Id. § 4B(f) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.256 (Vernon Supp. 2008), effective April 1, 2009)
(stating that Chapter 321 of the Texas Tax Code governs the imposition of a 4B tax) and Tex. Tax Code Ann. §
321.401(a) (Vernon 2002) (an election may be called by the adoption of a city ordinance by city council).
206
See Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(f) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code
Ann. § 505.256 (Vernon Supp. 2008), effective April 1, 2009) (stating that Chapter 321 of the Texas Tax Code
governs the imposition of a 4B tax) and Tex. Tax Code Ann. § 321.401(c) (Vernon 2002) (requiring that the city
council pass an ordinance calling for a sales tax election if a petition is presented). See Tex. Elec. Code Ann. ch. 277
(Vernon 2003 & Supp. 2008) for requirements for petition signatures.
207
Tex. Elec. Code Ann. § 41.001(a) (Vernon Supp. 2008).
208
Id. § 3.005.
209
Id. § 3.005 (c).
210
Tex. Tax Code Ann. § 321.403 (Vernon 2002).
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I. The Sales Tax for Economic Development
U.S. Department of Justice. Additionally, the Legislature added a provision noting the
Election Code provision “supersedes a law outside this code to the extent of any
211
conflict.”
Notice to be Provided for a Section 4B Election.
The city must publish notice of the
212
election at least once in a newspaper of general circulation in the city. The notice must
be published no more than 30 days and no less than 10 days before the date of the
election. The notice must state the nature and date of the election, the location of each
polling place, hours that the polls will be open, and any other early voting and election-
related information required by law. The notice must also include the wording of all the
ballot propositions. The entire notice must generally be provided both in English and in
213
Spanish.
Prohibition from Electioneering.
The city is prohibited from expending public funds or
public resources to influence the results of an election, commonly referred to as
214
“electioneering.” A city may publish fact sheets to inform the public of the applicable
statistics and proposed plans for the use of the tax. However, city stationery, city funds
and city staff (during the work day) may not be used to urge the public to vote one way or
the other.
Additionally, in certain cases a court may find that a city has “made a contract” with the voters to
use money for a specific purpose if the city has indicated to the voters through informational
215
materials or by other means that the money would be used for that purpose. Therefore, a city
will want to be careful not to represent that money from the economic development sales tax will
be used for a particular project unless the city intends to be legally limited by that representation.
Other Procedural Requirements
. The city must follow all other procedural
requirements under the Election Code for special elections. For further information about
the requirements contained in the Election Code, contact the Secretary of State’s Office,
Elections Division, at (800) 252-8683. For further information about the prohibition
against expenditure of public funds to influence the results of an election, contact the
Texas Ethics Commission at (800) 325-8506.
Ballot for a Section 4B Tax
Current law does not provide any required wording for the ballot for a Section 4B sales tax for
economic development. Nonetheless, cities should use great care to include wording that
describes all of the categories of projects that the city may want to have the development
211
Tex. Elec. Code Ann. § 3.005 (b) (Vernon Supp. 2008).
212
See id. Ch. 4 (Vernon 2003 & Supp. 2008) (general requirements for providing notice of an election).
213
Seeid. Ch. 272.
214
Id. § 255.003 (Vernon 2003).
215
See San Saba County v. McCraw, 108 S.W. 2d 200 (Tex. 1937); Black v. Strength, 246 S.W. 79 (Tex. 1922);
Devorsky v. La Vega I.S.D., 635 S.W.2d 904 (Tex. App. -- Waco 1982, no writ); Wright v. Allen, 257 S.W. 980
(Tex. Civ. App.-- Dallas 1923, writ ref’d). But see San Antonio I.S.D. v. Hudson, 92 S.W.2d 527 (Tex. Civ. App. --
San Antonio 1936), affirmed, 95 S.W.2d 673 (Tex. 1936). See also Op. Tex. Att’y Gen. No. JC-400 (2001) at 4-5.
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I. The Sales Tax for Economic Development
corporation pursue. For example, if a city includes only “the promotion of industrial and
manufacturing programs and the development of city parks” in its ballot proposition, the city will
be able to expend the Section 4B tax to accomplish only these two purposes.
In addition, the city should consider including a provision in the wording of the Section 4B ballot
that would clearly indicate that the Section 4B tax proceeds may be expended on the
“maintenance and operations expenses for any of the above described projects.” Including such a
provision will clarify that the Section 4B tax proceeds may be used for the upkeep and day-to-
216
day costs of any public facilities or programs undertaken with the Section 4B tax. It is possible
to use Section 4B proceeds for maintenance and operating costs of a project even if this use is
not specifically included in the ballot proposition for the Section 4B tax. However, Section 4B
tax proceeds may not be used to pay for maintenance and operating costs of a project unless the
city publishes notice of this proposed use. If within 60 days of this notice, the proposed use is
challenged by a petition of more than 10 percent of the voters, the city is required to hold an
election to obtain voter approval of the use of Section 4B proceeds for maintenance and
operating costs.
In Attorney General Opinion JC-400 (2001), the issue considered was whether a Section 4B
corporation could expend Section 4B sales tax proceeds to fund certain public park projects.
217
“Project” is defined to include “public park purposes” and “parks and park facilities.” Yet,
public park projects were not specifically enumerated in the city’s ballot originally adopting the
Section 4B sales tax. The city’s Section 4B ballot had provided, in part, that sales and use tax
proceeds could “be used and applied in the manner and to the purposes authorized by Section 4B
of the Act, including but not limited to ... .” Additionally, park projects were authorized under
Section 4B when the city’s sales tax election was held. The conclusion reached by the Attorney
General was that 4B sales tax proceeds could be spent on the public park project. The city’s
Section 4B ballot language proposition had not limited the use of sales tax proceeds to the
specified projects. Rather, it had indicated that projects other than those itemized could be
218
funded with Section 4B sales tax by including the phrase “including but not limited to.”
In 2001, the Texas Legislature expanded the definition of “project” to include water supply
219
facilities and water conservation programs. Permissible water projects could include dams,
transmission lines, well field development, other water supply alternatives, incentives to install
water-saving plumbing fixtures, educational programs, brush control programs, and programs to
216
Id. § 4B(a-2) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.303 (Vernon Supp. 2008), effective April 1,
2009).
217
Id. § 4B(a)(2)(A) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.152 (Vernon Supp. 2008), effective April 1,
2009).
218
Op. Tex. Att’y Gen. No. JC-400 (2001) (The city of Sonora’s ballot adopting the 4B sales tax read as follows:
“The adoption of an additional one-half of one percent sales and use tax within the City pursuant to the provisions of
Article 5190.6, V.A.T.C., with the proceeds thereof to be used and applied in the manner and to the purposes
authorized by Section 4B of the Act, including but not limited to public facility improvements, commercial facilities,
infrastructural improvements, new and expanded business enterprises, and other related improvements, facilities to
furnish water to the general public, sewage and solid waste disposal facilities and maintenance and operating costs
associated with all of the above projects.” JC-400 at 4).
219
Tex. Rev. Civ. Stat. Ann. art. 5190.6, §§ 4B(a)(2)(D) - (E) (Vernon Supp. 2008) (to be codified at Tex. Loc.
Gov’t Code Ann. § 505.154 (Vernon Supp. 2008), effective April 1, 2009).
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I. The Sales Tax for Economic Development
replace malfunctioning or leaking water lines and other water facilities. However, for a Section
4B corporation to undertake a water supply facility project or a water conservation program, a
majority of the qualified voters of the city voting in an election called and held for that purpose
220
must approve the water supply project or the water conservation program.”
If a city were to include every type of project authorized under a Section 4B tax, and if it also
chose to include the above wording with regard to maintenance and operations expenses, the
ballot for a Section 4B tax could be worded as follows:
“The adoption of a Section 4B sales and use tax at the rate of (insert one-
eighth, one-fourth, three-eighths, or one-half, as appropriate) of one percent
to undertake projects as described in Section 2(11) and Section 4B of Article
5190.6 of Revised Civil Statutes, including but not limited to projects for the
promotion of professional and amateur athletics and sports including
stadiums, ball parks, auditoriums, projects related to entertainment,
convention, tourist, and exhibition facilities, amphitheaters, concert halls,
and public parks, park facilities and events, open space improvements,
military facilities, including closed or realigned military bases, primary job
training facilities for use by institutions of higher education, research and
development facilities, regional or national corporate headquarters facilities,
museums and related stores, restaurant, concession, and automobile parking
facilities, related area transportation facilities, and related roads, streets, and
water and sewer facilities, recycling facilities, and projects to promote new or
expanded business enterprises that create or retain primary jobs, and public
safety facilities, streets and roads, drainage, and related improvements,
demolition of existing structures, development and expansion of affordable
housing, and targeted infrastructure and any other improvements,
expenditures, or facilities that are related to any of the above projects and
any other project that the board determines will promote new or expanded
business enterprises that create or retain primary jobs, and the maintenance
and operations expenses for any of the above described projects.”
The actual wording used on the ballot must indicate what rate is proposed for the Section 4B
221
sales tax. The voters then vote for or against the proposition. The wording of the above ballot
incorporates virtually all of the categories for expenditures currently provided under Section 4B
of the Act. It also allows for the payment of maintenance and operations expenses on any of the
above described projects. A city could change the ballot wording to take out any categories that
are not related to the goals the city has for its economic development program. In any case, the
ballot wording must clearly indicate that the tax to be adopted is a Section 4B sales tax. Cities
should be sure to have their local legal counsel review any proposed ballot wording prior to its
use in an election proposition.
220
Id. § 4B(a-5) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.304 (Vernon Supp. 2008), effective April 1,
2009).
221
Id. § 4B(e) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.254 (Vernon Supp. 2008), effective April 1,
2009).
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I. The Sales Tax for Economic Development
It is important to note that a city may make a contract with the voters by means other than the
222
language contained in the ballot proposition. Regardless of how broadly a city words the
proposition to create a Section 4B tax, the use of that tax money may be limited to certain
specific uses if the city represents to the voters through informational materials or by other
means that it intends the tax money to be subject to such limits. Therefore, a city will want to be
careful not to represent that money from the economic development sales tax will be used for a
particular project unless the city intends to be legally limited by that representation.
Project and Time Limitations on Section 4B Ballots
As noted earlier, there is no required wording for a Section 4B tax ballot. Accordingly, there is
no special wording that must be used to limit the use of the Section 4B tax to certain projects. If
a city wants to limit the use of Section 4B tax proceeds to certain projects, it may choose to list
only the types of projects it desires on the ballot. In 2007, the Act was amended to provide
certain authorization to expand the types of projects undertaken if subsequently approved by the
223
eligible voters.
Additionally, in 2007, the Act was amended to provide that an eligible city may also allow the
voters to vote on a ballot proposition that limits the length of time that a sales and use tax may be
imposed. An eligible city that imposes a tax for a limited time under this subsection may later
extend the period of the tax’s imposition or reimpose the tax only if the extension or reimposition
is authorized by a majority of the qualified voters of the city voting in an election called and held
224
for that purpose in the same manner as an election held under Section 4A(n) of this Act.
Combined Proposition to Reduce or Abolish a Section 4A Tax and Adopt a
Section 4B Tax
As of September 1, 1999, a city may offer a combined ballot proposition that would reduce or
abolish an existing Section 4A tax and at the same time approve the creation of a Section 4B
225
tax. That is, the city can have the voters approve or reject both items together by one “yes” or
“no” vote. However, a city is not required to combine these two issues into one ballot
proposition. It is not clear under the Act what statutory wording would be used in the ballot
proposition for this type of combined proposition. A city that pursues such a combined
proposition should consult with its local legal counsel and with the Texas State Comptroller’s
Office on this issue.
222
See San Saba County v. McCraw, 108 S.W. 2d 200 (Tex. 1937); Black v. Strength, 246 S.W. 79 (Tex. 1922);
Devorsky v. La Vega I.S.D., 635 S.W.2d 904 (Tex. App. -- Waco 1982, no writ); Wright v. Allen, 257 S.W. 980
(Tex. Civ. App.-- Dallas 1923, writ ref’d). But see also, San Antonio I.S.D. v. Hudson, 92 S.W.2d 527 (Tex. Civ.
App. -- San Antonio 1936), affirmed, 95 S.W.2d 673. See also, Op. Tex. Att’y Gen. No. JC-400 (2001) at 4 &5
discussing “contract with the voters” cases.
223th
Id. art. 5190.6, § 4B(e-2) (as added by Tex. S.B. 1523, 80 Leg., R.S. (2007)).
224th
Id. art. 5190.6, § 4B(e-2) (as added by Tex. S.B. 1523, 80 Leg., R.S. (2007)).
225
Id. § 4B(e) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.255 (Vernon Supp. 2008), effective April 1,
2009).
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I. The Sales Tax for Economic Development
A city can still choose to have the voters vote on repealing or reducing a Section 4A tax and
226
adopting a Section 4B tax as separate ballot propositions. If the city separates the items onto
separate ballot propositions, it is possible that one, both, or neither of the items would be
approved at such an election. A city that chooses to provide these options to the voters would use
the ballot wording suggested earlier for each of these items. In no case, may a city offer ballot
227
propositions that, if passed, would cause the city to exceed its two percent local sales tax cap.
Combined Proposition of a Section 4B tax and Other Municipal Sales Taxes
th
The 79 Legislature passed House Bill 3195 that now allows cities to have combined ballots
228
propositions to lower, repeal, raise or adopt various municipal sales taxes. This would include
the Section 4B tax. If a city wants to lower the Section 4B tax and create a sales tax for property
tax relief, the city could combine the ballot propositions instead of having separate ballot
propositions. If the combined ballot proposition does not pass, then there will be no effect on
those sales taxes.
Increasing, Reducing or Abolishing a Section 4B Tax
Section 4B Corporations Created Before September 1, 1999
For a Section 4B corporation created before September 1, 1999, there is no statutory authority
that allows a Section 4B tax to be increased or decreased after its initial adoption.
The city could use its power by resolution under Section 34 of the Act to terminate or dissolve
the development corporation. If the city takes such an action, the corporation and the tax would
continue only for the time period necessary to pay off any outstanding debt.
There also is no authority for the voters to abolish a Section 4B tax prior to the payment of all
outstanding bonds and other forms of indebtedness. However, once all of the debt is paid, the
voters, through an action in district court, could arguably seek to compel the dissolution of the
229
corporation and a termination of the collection of the tax.
Section 4B Corporations Created on or after September 1, 1999
For a Section 4B corporation created on or after September 1, 1999, Texas law provides that a
city must hold an election on the issue of dissolving the corporation if a proper petition is
226
Id.
227
Seeid. § 4B(f) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.256 (Vernon Supp. 2008), effective April 1,
2009) and Tex. Tax Code Ann. § 321.101(f) (Vernon 2002). (However, there may be a limited exception to this
principle for certain taxes to support a sports venue. See Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(a-3) and (a-4)
and consult with local legal counsel if it appears that this exception may be applicable).
228
See Tex. Tax Code Ann. § 321.409 (Vernon Supp. 2008).
229
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(i) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code Ann.
§ 505.258 (Vernon Supp. 2008), effective April 1, 2009).
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I. The Sales Tax for Economic Development
230
submitted to the city council. Such a petition must request an election on the dissolution of the
section 4B corporation and be signed by at least 10 percent of the registered voters of the city.
The petition must also meet any other legal requirements that may be applicable, including the
general petition requirements found in chapter 277 of the Texas Election Code. The election
must be held on the first regular uniform election date that falls more than 44 days after the
231
petition is filed with the city. At the election, the ballot must be printed to read as follows:
“Dissolution of the _______ (name of corporation).”
If a Section 4B corporation is dissolved pursuant to an election of this nature, then the
corporation will continue to operate long enough to pay off all its debts and obligations.
Once the corporation’s debts and obligations are paid off, the corporation is dissolved and its
property must be transferred to the city. The city must then notify the Comptroller, who must
stop collecting the Section 4B sales tax by the last day of the first calendar quarter that begins
after the city has notified the Comptroller.
Reporting Results of a Section 4B Tax Election
The Election Code requires that, no earlier than the eighth day and no later than the eleventh
232
day after an election, the governing body of the city must canvass the ballots and enter the
resolution or ordinance declaring the results of the election into the minutes of a meeting. The
233
resolution or ordinance must include the following:
The date of the election;
The proposition on which the vote was held;
The total number of votes cast for and against the proposition; and
The number of votes by which the proposition was approved.
If the proposed change in the tax rate is approved by a majority of the qualified voters of the city
voting at an election on the issue, the city may levy the approved tax. The city secretary must, by
certified or registered mail, send the State Comptroller a certified copy of the resolution or
ordinance and a map of the city clearly showing the city’s boundaries. After receiving the
documents, the Comptroller has 30 days to notify the city secretary that the Comptroller’s Office
will administer the tax.
230
Id. § 4B(o) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.352 (Vernon Supp. 2008), effective April 1,
2009).
231
Id. § 4B(o)(2) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.353 (Vernon Supp. 2008), effective April 1,
2009).
232
Tex. Elec. Code Ann. § 67.003(a) (Vernon Supp. 2008). But see Tex. Tax Code Ann. § 321.405 (Vernon 2002)
(which gives the city 10 days to canvass an election on the proposed adoption of a Section 4B sales tax. It is not
clear whether the Election Code provision or the Tax Code provision is controlling on this issue. Therefore, it is
recommended that cities follow the stricter provisions of the Election Code and canvass the election between eight
and 11 days after it has taken place).
233
Tex. Tax Code Ann. § 321.405 (Vernon 2002).
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I. The Sales Tax for Economic Development
If the election fails, the city must wait one full year before bringing the issue to the voters
234
again. However, the Election Code allows the city to hold a subsequent election on the
corresponding uniform election date that occurs approximately one year later, even if the date
235
falls several days before a full year has elapsed.
Effective Date of Section 4B Tax
The change in the sales tax rate becomes effective one full calendar quarter after notice of the
election has been provided to the State Comptroller. The new tax rate applies to purchases on or
after the first day of that calendar quarter as provided under Section 321.102(a) of the Tax Code.
May Election:
Send notice to the Comptroller no later than the last week in June. On
October 1, the new tax rate will take effect. The city will receive its first payment in
December.
November Election:
Send notice to the Comptroller no later than the last week in
December. On April 1, the new tax rate will take effect. The city will receive its first
payment in June.
If the city adopts a Section 4B sales tax and at the same election adopts a sales tax for property
tax relief, both taxes will not take effect until the following October 1 (assuming at least a
236
complete calendar quarter has passed since the election). If a complete calendar quarter had
not passed since the election, the tax would not take effect until the following October 1.
Allocation of the Sales Tax Proceeds by the Comptroller
Once the sales tax is effective, the Comptroller remits the sales tax proceeds from the increase in
the rate to the municipality with its other local sales tax proceeds. The Municipal Sales and Use
Tax Act (Chapter 321 of the Tax Code) governs the imposition, computation, administration and
237
use of the tax, except where it is inconsistent with the Act.
The city, upon receiving its local sales tax allotment from the Comptroller, must remit any sales
tax for economic development to the industrial development corporation responsible for
238
administering the tax. However, the proceeds of a sales tax for property tax relief, if adopted,
239
would remain with the city.
234
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(f) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code Ann.
§ 505.256 (Vernon Supp. 2008), effective April 1, 2009), and Tex. Tax Code Ann. § 321.406 (Vernon 2002).
235
Tex. Elec. Code Ann. § 41.0041 (a) (Vernon 2003).
236
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(f) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code Ann.
§ 505.256 (Vernon Supp. 2008), effective April 1, 2009) and Tex. Tax Code Ann. § 321.102 (b) (Vernon 2002).
237
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(f) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code Ann.
§ 505.256 (Vernon Supp. 2008), effective April 1, 2009).
238
Id. § 4B(g) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.301 (Vernon Supp. 2008), effective April 1,
2009).
239
Tex. Tax Code Ann. § 321.101(b) (Vernon 2002) (Additional sales and use tax is for the benefit of the city.)
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I. The Sales Tax for Economic Development
Creation of a Section 4B Development Corporation
240
A development corporation may be initiated either by the city or by a group of citizens. In
either case, the development corporation must be created by a group of at least three persons who
are at least 18 years old and qualified voters of the city. The group must file a written application
with the city requesting approval of an industrial development corporation. The city may not
charge a fee for consideration of the application. If the city determines that the corporation
should be created, the city must approve the corporation’s articles of incorporation by ordinance
or resolution. The articles of incorporation must indicate what purposes the corporation can
promote on the city’s behalf. The articles of incorporation must also state that the corporation is
241
to be governed by Section 4B of the Act.
If a city collects a sales and use tax under both Section 4A and Section 4B, the city must create
separate corporations and boards of directors for Section 4A and Section 4B. However, members
of the board of directors of one corporation may serve on the board of directors of the other
corporation. A city may not create more than one corporation to implement the Section 4A tax or
242
more than one corporation to implement a Section 4B tax.
The articles of incorporation for all development corporations must contain the items required
243
under Section 6 of the Act, and must be approved by the municipality’s governing body. The
244
city, at its sole discretion, may amend the articles of incorporation at any time.
The articles of incorporation must be filed in triplicate with the Secretary of State’s Office
pursuant to Section 7 of the Act. Upon the issuance of the certificate of incorporation, the
corporate existence of the development corporation begins. After the issuance of the certificate
of incorporation, the board of directors of the corporation must hold an organizational meeting to
245
adopt the bylaws and to elect officers. The initial bylaws must also be approved by resolution
246
of the governing body of the city. The first meeting of the board of directors of the corporation
should be held pursuant to the requirements of Section 12 of the Act.
There does not appear to be any authority for an entity formed under the Act to dissolve and turn
over all its assets directly to a Section 4B corporation. Rather, any corporation created under the
Act that wished to dissolve would be required to turn over all of its assets either to the city that
247248
created it or to a Section 4A corporation.
240
See Tex. Rev. Civ. Stat. Ann. art. 5190.6, §§ 4(a) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code
Ann. § 501.051 (Vernon Supp. 2008), effective April 1, 2009).
241
Id. § 4B(b) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.004 (Vernon Supp. 2008), effective April 1,
2009).
242
Id. §§ 4A(b)(1), 4B(b) (to be codified at Tex. Loc. Gov’t Code Ann. §§ 504.003(b) and 505.003(b) (Vernon
Supp. 2008), effective April 1, 2009).
243
Id. § 4(a) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.051 (Vernon Supp. 2008), effective April 1, 2009).
244
Id. § 17(b) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.302 (Vernon Supp. 2008), effective April 1,
2009).
245
Id. § 12 (to be codified at Tex. Loc. Gov’t Code Ann. § 501.063 (Vernon Supp. 2008), effective April 1, 2009).
246
Id. § 13 (to be codified at Tex. Loc. Gov’t Code Ann. § 501.064 (Vernon Supp. 2008), effective April 1, 2009).
247
Id. § 36(c) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.406 (Vernon Supp. 2008), effective April 1,
2009).
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I. The Sales Tax for Economic Development
Directors of a Section 4B Development Corporation
249
A Section 4B corporation is governed by a seven-member board of directors. The seven
directors are appointed by a majority vote of the city council at an open meeting. Unlike Section
4A corporation boards, the Act does place qualifying criteria for a person who serves as a
director on the Section 4B board. Prior to September 1, 1999, Texas law required a Section 4B
director to be a city resident. Today there are two exceptions to this residency requirement.
First, in a city of less than 20,000 in population, a Section 4B director may either be a resident of
the city, a resident of the county in which the major part of the area of the city is located, or
reside in a place that is within 10 miles of the city’s boundaries and is in a county bordering the
250
county in which a major portion of the city is located. Second, the Act provides that a person
may serve on a Section 4B board if that person was a Section 4A director at the time that a
Section 4A corporation was dissolved and the 4A corporation was replaced with a Section 4B
251
corporation. Since the directors of a Section 4A corporation are not required to be residents of
the city, this change in the law would allow a non-resident to serve as a Section 4B director in
this limited circumstance.
State law also limits the number of Section 4B directors who are also city officers or employees:
it states that no more than four of the seven directors may also be elected city officials or city
employees. The directors serve without compensation, but they must be reimbursed for actual
252
expenses. A director serves at the pleasure of the city council for a term of two years;
however, the city council may vote to remove a director at any time without having to specify
cause.
A majority of the board (four members) constitutes a quorum. The industrial development
253
corporation board of directors is subject to both the Open Meetings Act and the Public
254
Information Act. Additionally, the Act requires the board to conduct all of its meetings within
255
the city limits. It is worth mentioning that the Open Meetings Act generally applies when a
256
quorum of a governmental body is present and discusses public business. However, it does not
apply to purely social gatherings or to the attendance of public officials at conferences or training
248
Id. § 4A(l) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.407 (Vernon Supp. 2008), effective April 1,
2009).
249
Id. § 4B(c) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.051(a) (Vernon Supp. 2008), ffective April 1,
2009).
250
Id.
251
Id. § 4B(e-1) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.052 (Vernon Supp. 2008), effective April 1,
2009).
252
Id. § 11(a) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.062(d) (Vernon Supp. 2008), effective April 1,
2009).
253
Id. § 11(b) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.072 (Vernon Supp. 2008), effective April 1,
2009).
254
Id. § 14A (to be codified at Tex. Loc. Gov’t Code Ann. § 501.072 (Vernon Supp. 2008), effective April 1, 2009).
255
Id. § 4B(c) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.055 (Vernon Supp. 2008), effective April 1,
2009).
256
Tex. Gov’t Code Ann. § 551.001(4) (Vernon Supp. 2008).
2008 Economic Development Laws for Texas Cities • Office of the Attorney General
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I. The Sales Tax for Economic Development
if no formal actions are taken and if the discussion of public business is only incidental to the
257
social function, convention, workshop, ceremonial event or press conference. At one of its
first meetings, the board is required to elect a president, a secretary and any other officers that
the governing body of the city considers necessary. The corporation’s registered agent must be a
resident of Texas, and the corporation’s registered office must be within the boundaries of the
258
city.
General Powers and Duties of Section 4B Development Corporations
Section 4B industrial development corporations have the following general powers and duties:
Power to Expend Tax Proceeds.
The development corporation has the power to expend
the proceeds of the economic development sales tax for purposes authorized by the Act.
All such expenditures must be made pursuant to a majority vote of the governing body of
259
the board, pursuant to oversight by the city. In Texas Attorney General Opinion JC-
0488 (2002), the Attorney General noted the city’s spending of sales tax proceeds was
260
“contrary to the Act.” Rather, it is for the corporation to expend the Section 4B tax
proceeds for the purposes authorized by the Act, subject to city council approval.
Powers of a Nonprofit Corporation.
The corporation shall have and exercise all powers
and rights of a nonprofit corporation under the Texas Nonprofit Corporation Act (Article
1396-1.01 et seq.), except to the extent such powers would be in conflict or inconsistent
261
with the Development Corporation Act.
262
Financial Transaction Powers.
The corporation shall have the power to sell, to lease,
263264
to make secured and unsecured loans, and to sue and be sued. Further, in Attorney
General Opinion JC-109 (1999) it was noted that when an economic development
corporation sells real property, the corporation is not required to comply with the notice
and bidding requirements contained in chapter 272 of the Local Government Code. The
265
Section 4B corporation must obtain fair market value when selling real property.
257
Id. § 551.001(4)(B)(iv).
258
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(c) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code Ann.
§ 505.056 (Vernon Supp. 2008), effective April 1, 2009).
259
Id. § 23(a)(13) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.054(b)(2) (Vernon Supp. 2008), effective
April 1, 2009).
260
Op. Tex. Att’y Gen. No. JC-0488 (2002) at 3.
261
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 23(a) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code Ann.
§ 501.054(a) (Vernon Supp. 2008), effective April 1, 2009).
262
Id. § 23(a)(1)-(5) (to be codified at Tex. Loc. Gov’t Code Ann. §§ 501.159, 501.153, and 501.154) (Vernon
Supp. 2008), effective April 1, 2009).
263
Id. § 23(a)(6) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.155 (Vernon Supp. 2008), effective April 1,
2009).
264
Id.§ 23(a)(9) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.060 (Vernon Supp. 2008), effective April 1,
2009).
265
Op. Tex. Att’y Gen. No. JC-0109 (1999) at 2.
2008 Economic Development Laws for Texas Cities • Office of the Attorney General
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I. The Sales Tax for Economic Development
Status as a Nonstock Corporation.
The corporation is a nonprofit, nonmember, non-
266
stock corporation.
Exemption from Federal, State and Local Taxation.
Generally, projects owned by the
Section 4B corporation are exempt from local property taxation under Section 11.11 of
the Tax Code, pursuant to Article 5190.6, Section 4B(k). In terms of state taxation,
Section 4B corporations, pursuant to Section 32 of Article 5190.6, are considered public
charities within the tax exemption of Article VIII, Section 2, of the Texas Constitution.
Upon request, the State Comptroller’s Office Section has treated Section 4B development
267
corporations as exempt from state and local sales tax and the state franchise tax. In
order to request these exemptions, corporations submit a copy of the their articles of
incorporation to the Exempt Organizations Section of the Office of the State Comptroller.
If a development corporation has qualified for federal exemptions prior to applying for
state exemptions, a copy of the determination letter from the Internal Revenue Service
should be sent to the State Comptroller’s Office at the time the corporation submits its
articles of incorporation. However, development corporations are exempt from state and
local sales and state franchise taxes regardless of their tax exempt status with the Internal
Revenue Service. The articles of incorporation and any IRS determination letters should
be submitted with a cover letter containing the development corporation’s daytime phone
number, charter number and tax identification number.
The Comptroller’s address is: Texas State Comptroller, Exempt Organizations Section,
P.O. Box 13528, Austin, TX 78711-3528.
To determine whether other state or local taxes are applicable to the development
corporation or its activities, individuals may wish to visit with local legal counsel. For
more information about tax exemptions, contact the Texas Comptroller’s Office Tax
Assistance at (800) 252-5555.
It is important to note that the Texas Legislature in 1999 changed the law with regard to
the tax exempt status for property of Section 4B corporations that were created after
268
September 1, 1999. Generally, a city may create a Section 4B corporation without
imposing the accompanying economic development sales tax. As of September 1, 1999,
if a city creates such a corporation, the property tax exemption will no longer apply to the
ownership, leasehold or other possessory interest in Section 4B corporation property that
is held by anyone other than the Section 4B corporation itself. For instance, a Section 4B
project facility that is leased out or owned by a private entity will be subject to ad
valorem property taxation if the Section 4B corporation is not supported by a voter-
approved Section 4B sales tax. If the Section 4B corporation is supported by a Section 4B
sales tax, then the project would generally retain its property tax exempt status.
266
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 5 (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code Ann. §
501.052 (Vernon Supp. 2008), effective April 1, 2009).
267
Tex. Tax Code Ann. §§ 151.341, 171.074 (Vernon 2002).
268
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4B(k) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code Ann.
§ 505.161 (Vernon Supp. 2008), effective April 1, 2009). See also, Op. Tex. Att’y Gen. No. GA-0522 (2007).
2008 Economic Development Laws for Texas Cities • Office of the Attorney General
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I. The Sales Tax for Economic Development
Duty to Comply with Open Meetings Act and Public Information Act.
The
corporation and its board of directors are subject to the Open Meetings Act and the Public
269
Information Act .
Limited Eminent Domain Power.
The city council must approve the corporation’s
270
exercise of eminent domain power. When the corporation exercises eminent domain
power, it must do so in accordance with the procedures set forth in the laws applicable to
the eligible city.
Limited Tort Liability Protection.
The corporation and its directors and employees are
not liable for damages arising out of the performance of governmental functions of the
271
corporation. The corporation is considered a governmental entity for purposes of the
Texas Tort Claims Act.
Limited Power to Own or Operate Project.
Generally, the corporation does not have
the power to own or operate any project as a business entity other than as a lessor, seller
or lender. However, the corporation does have all the powers necessary to own and
operate a project as a business if the project is part of a military installation or military
facility that has been closed or realigned, including a military installation or facility
closed or realigned under the Defense Base Closure and Realignment Act of 1990 (10
272
United States Code Section 2687).
Ability of Home Rule City to Provide an Economic Grant of Money to the
Development Corporation.
The Act generally prohibits a city from lending its credit or
granting any public money or thing of value to an economic development corporation. In
other words, a city may not provide any funding or services to a development corporation
unless the city is fully reimbursed for the value of the expenditure. If a city and an
economic development corporation enter into a contract for the provision of city services,
such as accounting services, the economic development corporation must provide
273
consideration in exchange for city services.
274
In 2001 the Texas Legislature did create an exception to this general rule. A home rule
city is now authorized to grant public money to a Section 4A or Section 4B corporation
under a contract authorized by section 380.002 of the Texas Local Government Code.
The Section 4A or Section 4B corporation is required to use the grant of city money for
the “development and diversification of the economy of the state, elimination of
269
Tex. Rev. Civ. Stat. Ann. art. 5190.6, §§ 11(b), 14A (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t
Code Ann. § 501.072 (Vernon Supp. 2008), effective April 1, 2009).
270
Id. § 4B(j) (April 1, 2009 to be codified at Tex. Loc. Gov’t Code Ann. § 505.105 (Vernon Supp. 2008), effective
April 1, 2009).
271
Id. § 4B(m) (to be codified at Tex. Loc. Gov’t Code Ann. § 505.106 (Vernon Supp. 2008) effective April 1,
2009).
272
Id. § 23(b) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.160 (Vernon Supp. 2008), effective April 1,
2009).
273
Op. Tex. Att’y Gen. No. JC-0109 (1999) at 3-5.
274
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 21 (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code Ann. §
501.007 (Vernon Supp. 2008), effective April 1, 2009).
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I. The Sales Tax for Economic Development
unemployment or underemployment in the state, and development and expansion of
275
commerce in the state.”
Ability of City to Provide City Insurance Coverage and Retirement Benefits to
Development Corporation Staff/Officers.
An economic development corporation may
276
participate in the following types of insurance coverage from the city: health benefits
coverage, liability coverage, workers’ compensation coverage and property coverage.
These coverages can be obtained under the city’s insurance policies, the city’s self-
funded coverage, or the coverage provided under an Interlocal Agreement with other
political subdivisions. Health benefits coverage may be extended to the economic
development corporation’s directors and employees and their dependents. Workers’
compensation benefits may be extended to the corporation’s directors, employees and
volunteers. Liability coverage may be extended to protect the corporation and its
directors and employees. The new law also allows economic development corporations to
obtain retirement benefits under the city’s retirement program and extend those benefits
to the corporation’s employees. An economic development corporation may not obtain
any of these insurance coverages or retirements benefits unless the city consents. The law
does not specifically address whether a development corporation must reimburse the city
for any insurance or retirement benefits that are provided. However, a strong argument
can be made that the development corporation must reimburse the city for any costs for
such coverage due to the above noted limitation on the city from providing anything of
value to the development corporation. If a city chooses to extend such benefits to the
development corporation board or staff, it should consult with local legal counsel.
Reverse Auction Procedures for Purchasing.
Reverse Auction Procedures is a method
of purchasing where suppliers of services or goods, anonymous to each other, submit bids
to provide their services or goods. The bidding is a real-time process usually lasting
either one hour or two weeks. The bidding takes place at a previously scheduled time
277
period and at a previously scheduled Internet location. Economic development
corporations are now authorized to use reverse auction procedures, as defined by section
278
2155.062 (d), Government Code, for the purchase of goods or services.
Performance Agreements
Section 4B corporations cannot simply provide gifts of sales tax proceeds. The Texas Attorney
General has noted expenditures of sales tax proceeds must be made pursuant to a contract or
other arrangement sufficient to ensure that the funds are used for the intended and authorized
275
Tex. Loc. Gov’t Code Ann. § 380.002(b) (Vernon 2005).
276
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 23(c)-(d) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code
Ann. § 501.067 (Vernon Supp. 2008), effective April 1, 2009).
277
Tex. Gov’t Code Ann. § 2155.062 (d) (Vernon Supp. 2008).
278
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 23(e) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code Ann.
§ 501.074 (Vernon Supp. 2008), effective April 1, 2009).
2008 Economic Development Laws for Texas Cities • Office of the Attorney General
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I. The Sales Tax for Economic Development
279
purposes. In 2003, legislation was passed requiring certain written performance agreements.
The Texas Legislature now requires Section 4B corporations to enter into a written performance
agreement with a business enterprise when corporations provide funding or make expenditures
280
on behalf of a business enterprise in furtherance of a permissible Section 4B project. This
performance agreement between the corporation and the business enterprise at a minimum must
contain the following: (1) a schedule of additional payroll or jobs to be created or retained; (2)
the capital investment to be made by the business enterprise; and (3) the terms under which
repayment must be made by the business enterprise to the Section 4B corporation should the
281
business fail to meet the performance requirements specified in the agreement.
In 2007, the Texas Legislature passed House Bill 1196, which requires that both governmental
entities and economic development corporations put certain language in any written agreement
involving public subsidies to businesses, which would include those given by 4B corporations.
The language must specify that the business does not and will not knowingly employ an
undocumented worker (which statement must also be any application for the subsidy). The
language must also require repayment of the subsidy with specified rate and terms of interest if
the business is convicted of federal immigration violations under 8 U.S. Code Section 1324a(f),
not later than the 120th day after receiving notice of the violation from the public entity or
economic development corporation.
Requirement for Third-Party Contracts for Business Recruitment
Section 4A and 4B corporations are required to enter into written contracts approved by the
board of directors when the corporation uses a third party for certain business recruitment efforts.
The written contract requirement does not apply to the payment of an employee of the Section
282
4A or 4B corporation. Nonetheless, should the corporation pay a commission, fee, or other
thing of value to a broker, agent, or other third party for business recruitment or development, a
283
written contract is required. Failure to enter into a written contract with a third party recruiter
284
could result in a civil penalty up to $10,000. The Texas Legislature authorized the Office of
the Attorney General to commence an action to recover the penalty in Travis County district
285
court or in the county district court where the violation occurred.
279
Op. Tex. Att’y Gen. Nos. JC-0118 (1999) at 9 (“Expenditures for even project costs must be pursuant to a
contractual or other arrangement sufficient to ensure that the funds are used for the purposes authorized.”); LO 97-
061 (1997) at 4-5; LO 94-037 (1994) at 3.
280
Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 40(a) (Vernon Supp. 2008) (to be codified at Tex. Loc. Gov’t Code Ann.
§ 501.158 (Vernon Supp. 2008), effective April 1, 2009).
281
Id. § 40(b) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.158(b) (Vernon Supp. 2008), effective April 1,
2009).
282
Id. § 41(a) (to be codified at Tex. Loc. Gov’t Code Ann. § 502.051 (Vernon Supp. 2008), effective April 1,
2009).
283
Id. § 41(b) (to be codified at Tex. Loc. Gov’t Code Ann. § 502.051 (Vernon Supp. 2008), effective April 1,
2009).
284
Id. § 41(c) (to be codified at Tex. Loc. Gov’t Code Ann. § 502.051(b) (Vernon Supp. 2008), effective April 1,
2009).
285
Id. § 41(d) (to be codified at Tex. Loc. Gov’t Code Ann. § 502.051(c) (Vernon Supp. 2008), effective April 1,
2009).
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I. The Sales Tax for Economic Development
Incentives to Purchasing Companies
In 2003 the Texas Legislature addressed purchasing companies and their ability to receive an
286
incentive from a Section 4A or 4B corporation. Section 4A and 4B corporations may not offer
to provide an economic incentive to a business whose business consists primarily of purchasing
taxable items using a resale certificate and then reselling those same items to a related party. A
related party means a person or entity which owns at least eighty percent (80%) of the business
287
enterprise to which sales and use taxes would be rebated as part of an economic incentive.
Oversight of Section 4B Development Corporations
Section 21 of the Development Corporation Act provides that the city shall approve all programs
and expenditures of the development corporation and shall annually review any financial
statements of the corporation. It further provides that at all times the city will have access to the
books and records of the corporation. Additionally, Section 23(a)(13) of the Act states that the
powers of the corporation shall be subject at all times to the control of the city’s governing body.
And finally, Section 34 of the Act gives the city authority to alter the structure, organization,
programs, or activities of the development corporation at any time. This authority is limited by
constitutional and statutory restrictions on the impairment of existing contracts. Additionally,
bond covenants may also restrict the restructuring or dissolution of an economic development
corporation.
Section 4B Development Corporation Is Not Considered a Political
Subdivision
State law typically imposes certain requirements or conditions upon political subdivisions such
as cities. A frequent concern is whether state law requirements imposed upon cities also applies
to Section 4A or Section 4B economic development corporations. Section 22 of the Act states, in
part, that an economic development corporation “is not intended to be and shall not be a political
subdivision or political corporation within the meaning of the constitution and the laws of the
state.” Accordingly, a statute’s use of the term “political subdivision” does not include a Section
4A or Section 4B economic development corporation.
The Attorney General has considered whether certain statutes apply to economic development
corporations and has concluded that the Texas conflicts of interest statute, chapter 171 of the
288
Local Government Code, does not apply to an economic development corporation. Chapter
272 of the Local Government Code, governing the city sale of real property, is not applicable to
289
economic development corporations. Nor is the prevailing wage law contained in chapter 2258
of the Government Code applicable to a worker employed by or on behalf of an economic
286
Id. § 42 (to be codified at Tex. Loc. Gov’t Code Ann. § 501.161 (Vernon Supp. 2008), effective April 1, 2009).
287
Id. § 42(a) (to be codified at Tex. Loc. Gov’t Code Ann. § 501.161(a) (Vernon Supp. 2008), effective April 1,
2009).
288
Op. Tex. Att’y Gen. No. JC-0338 (2001) at 2.
289
Op. Tex. Att’y Gen. No. JC-0109 (1999).
2008 Economic Development Laws for Texas Cities • Office of the Attorney General
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I. The Sales Tax for Economic Development
290
development corporation. Nonetheless, Section 4B corporations should consult their local
legal counsel when considering the application of a particular statute.
Annual Reporting Requirement for 4B Corporations
Section 4C of the Act, added during the 1997 Legislative Session, requires both Section 4A and
Section 4B economic development corporations to submit an annual, one-page report to the State
Comptroller’s Office. The report must be submitted by February 1 of each year and must be in
the form required by the Comptroller.
The report must include the following:
A statement of the corporation’s primary economic development objectives.
A statement of the corporation’s total revenues for the preceding fiscal year.
A statement of the corporation’s total expenditures for the preceding fiscal year.
A statement of the corporation’s total expenditures during the preceding fiscal year in
each of the following categories:
administration
personnel
marketing or promotion
direct business incentives
job training
debt service
capital costs
affordable housing
payments to taxing units, including school districts
A list of the corporation’s capital assets, including land and buildings (for example,
industrial parks, recreation and sports facilities, etc.).
Any other information required by the Comptroller.
If a corporation fails to file the required report or to include all the required information, the
Comptroller may impose a $200 administrative penalty against the corporation. However, before
imposing such a penalty, the Comptroller must provide written notice to the corporation of its
error in filing the report. That notice must include information on how to correct the error. Once
it has received notice, the corporation has 30 days to correct its reporting error before the
Comptroller may impose the $200 penalty. The form may be submitted to the Comptroller’s
Office by mail or by fax at (512) 475-0664.
For more information on filing the required form, contact the Texas Comptroller’s Office at
(800) 531-5441, extension 3-4679.
290
Op. Tex. Att’y Gen. No. JC-0032 (1999).
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I. The Sales Tax for Economic Development
291
Federal Taxation of Section 4A and Section 4B Development Corporations
A development corporation created under Section 4A or Section 4B of the Act may qualify for
exemption from federal income tax under at least three different Internal Revenue Code sections.
The following is a summary of these Code sections, their purposes, and some of their advantages
and disadvantages. A development corporation will want to consult with its accountants and
legal counsel to determine which, if any, of these exemptions apply to its operations.
Federal Tax Code Section 115
Federal Tax Code Section 115 exempts income that an entity receives from the exercise of an
essential governmental function that accrues to a political subdivision. Organizations similar to
Section 4A and Section 4B development corporations have been determined to be exempt under
this section. Additionally, the Internal Revenue Service (the IRS) has informally indicated that it
would grant an exemption for income of a development corporation that involves the
performance of a governmental function (e.g., funding public infrastructure improvements). If a
development corporation otherwise qualifies under this federal tax code section, it does not have
to apply to the IRS to be exempt under this provision. A Federal Tax Code Section 115
exemption is usually relied upon when a qualifying entity does not desire a written determination
letter from the IRS. Development corporations with this type of exemption may issue tax-exempt
bonds for governmental purposes as specifically provided by Texas statute. Most bond counsel
will not require an IRS determination for the issuance of tax-exempt bonds. Most entities
described in this section also do not have to file an annual federal income tax return.
Contributions to Section 115 entities are generally tax deductible. If a development corporation
wants a formal written determination from the IRS that it is exempt under this Section, such a
determination can be obtained by filing a private letter ruling request with the Washington Office
of the IRS.
Federal Tax Code Section 501 (c) (3)
Federal Tax Code Section 501 (c) (3) exempts the income of corporations organized and
operated exclusively for charitable purposes. Charitable purposes have in the past been found to
include efforts by entities to lessen the burdens of government by performing duties previously
undertaken by the government. To be exempt under this provision, the development corporation
must file Form 1023 with the IRS requesting this exemption. This process is much less expensive
than obtaining a written determination under Section 115 (discussed earlier). Most development
corporations that qualify under Section 501 (c) (3) are not required to file an annual federal
income tax return, but they should obtain a determination to that effect when they file their Form
1023 with the IRS. If the development corporation has unrelated business income, it will have to
file a federal tax return and may have to pay tax on that income. An entity can obtain a Section
501 (c) (3) determination even though it also considers itself exempt under Section 115. The
Section 501 (c) (3) exemption is usually relied upon when a written determination from the IRS
is desired by the development corporation. Some bond counsel may insist that if this type of
291
This material on federal taxation of development corporations was written by James P. Plummer and Jeffrey
Kuhn with the law firm of Fulbright and Jaworski in San Antonio, Texas.
2008 Economic Development Laws for Texas Cities • Office of the Attorney General
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I. The Sales Tax for Economic Development
entity issues bonds, it would only be eligible to issue Section 501 (c) (3) bonds, which are more
expensive to issue than governmental bonds. Contributions to this type of entity are generally tax
deductible.
Federal Tax Code Section 501 (c) (4) and 501 (c) (6)
Federal Tax Code Section 501 (c) (4) and 501 (c) (6) exempts the income of corporations
organized and operated as community development organizations and business leagues. To
obtain a written determination that an organization is exempt under this provision, Form 1024
must be filed with the IRS. This type of exemption is not difficult to qualify for, but it may not
have as many advantages as other IRS Code sections. The only major benefit of a Federal Tax
Code Section 501 (c) (4) and 501 (c) (6) designation is that it generally allows the exemption of
the income of the development corporation from federal taxation. Development corporations
qualifying under these sections should not have to file annual federal income tax returns (unless
they have unrelated business income) if they receive a determination to this effect from the IRS
when they file Form 1024. Contributions to this type of organization are not considered
deductible as charitable contributions. These organizations cannot issue tax exempt bonds unless
they also qualify under Federal Section 115.
2008 Economic Development Laws for Texas Cities • Office of the Attorney General
71
REQUEST FOR LA PORTE DEVELOPMENT CORPORATION AGENDA REQUEST FOR LA PORTE DEVELOPMENT CORPORATION AGENDA
ITEMITEM
June 1, 2015June 1, 2015AppropriationAppropriation
Agenda Date Requested:Agenda Date Requested:
N/A N/A
Scott D. Livingston Scott D. Livingston Source of Funds:Source of Funds:
Requested By:Requested By:
Account Number:Account Number:
Economic Development/Tourism Economic Development/Tourism
Department:
Amount Budgeted:Amount Budgeted:
Report:Resolution:Resolution:Ordinance:Ordinance:
Amount Requested:Amount Requested:
Exhibits:
Budgeted Item:Budgeted Item:YESYESNONO
SUMMARY & RECOMMENDATIONSSUMMARY & RECOMMENDATIONS
This item has been placed on the agenda for discussion purposes at the request of Board member Ojeda. Ms. This item has been placed on the agenda for discussion purposes at the request
of Board member Ojeda. Ms.
Ojeda has requested that the Board discuss possible meeting norms or rules of order for staff and Board Directors Ojeda has requested that the Board discuss possible meeting norms or
rules of order for staff and Board Directors
of the La Porte Development Corporation to honor in discussing topics, transacting business, and, in general, of the La Porte Development Corporation to honor in discussing topics, transacting
business, and, in general,
conducting meetings. conducting meetings.
Action Required by the La Porte Development Corporation:Action Required by the La Porte Development Corporation:
Consider approval or other action authorizing staff to document rules and/or a policy for meeting norms, which the Consider approval or other action authorizing staff to document rules
and/or a policy for meeting norms, which the
Board may wish to adopt.Board may wish to adopt.
Approved for the La Porte Development Corporation AgendaApproved for the La Porte Development Corporation Agenda
Corby D. Alexander, City ManagerCorby D. Alexander, City ManagerDateDate
This is an Unaudited Statement.
City of La Porte
La Porte Development Corporation (038) Fund Summary
(Section 4B Sales Tax)
Previous
ReportFY 2014-15FY 2013-14
Unaudited Beginning Fund Balance 9/30$ 3,322,635$ 3,322,635$ 2,768,155
Plus Year to Date Revenues:
1/2 Cent Sales Tax 217,072 649,604 569,498
Interest Income 1,380 1,958 2,007
Total Revenues 218,452 651,562 571,505
Equals Total Resources 3,541,087 3,974,197 3,339,660
Less Year to Date Expenditures:
Payroll 22,739 38,226 26,704
Supplies 110 441 411
Services & Charges (Memberships, Training, Advertising, Legal, Utilities) 117,326 127,013 78,950
Capital Outlay - - 32,083
*
Debt Service Transfer 270,954 451,590 395,227
Total Expenditures 411,129 617,271 533,376
Estimated Year to Date Fund Balance as of 2/28/2015$ 3,129,958$ 3,356,926$ 2,806,284
Commitments
Project Nebula/Ineos**$ 700,000
Richard Industrial Group 10,000
ACT Independent Turbo Service, Inc. 426,000
Debt Service Reserve 1,083,817
$ 2,219,817
Adjusted Year to Date Fund Balance$ 1,137,109
Projection Through Year End
Adjusted Year to Date Fund Balance$ 1,137,109
Plus: Estimated Sales Tax 1,559,026
Plus: Transfer from CIP for District 23 Street Paving (recinded by 4B) 175,000
Less: Estimated Operational Costs (269,113)
Less: Debt Service Transfers (632,227)
Projected Year End Fund Balance$ 1,969,795
Sales tax revenues for Fiscal Year 2015 are estimated to be $2,208,630. (2.5% growth over FY2014)
Previously Funded Projects (Funding in Fund 015 - General CIP Fund)
BudgetExpendituresBalance
Façade Grants 300,000 81,570 218,430
Total 300,000 81,570 218,430
*Debt Service Payments for Library, Bay Area Boulevard & Canada Road and Ballfields.
**EDC Coordinator awaiting termination letter.