San Marcos Mercury | Local News from San Marcos and Hays County, Texas

December 6th, 2010
Commentary: If it’s called ‘economic development,’ anything goes

Local Government Watch – San Marcos

Lewis Carroll, the fiction writer (and Oxford mathematics lecturer under his given name, Charles Dodgson), understood something profound about the operation of government and the actions of government officials, both elected and appointed. In his book “Through the Looking-Glass,” one of the characters, known as Humpty Dumpty said, “When I use a word, it means just what I choose it to mean – neither more nor less.”

The San Marcos city council and many other government officials create what may be kindly called legal fictions to do whatever they may want, when they want to do it. Such was the situation on Nov. 1, 2010, when the city council adopted a resolution approving an agreement “between the City of San Marcos, Texas and International Power America, Inc.,” which was an agreement not to annex certain land in the city’s extraterritorial jurisdiction (ETJ) for a number of years. However, the agreement attached to the resolution is with Hays Energy Limited Partnership (HELP) (which owns the land involved), not International Power America, Inc. But this error, which makes the agreement not approved and thus null and void, is not the sort of error Lewis Carroll’s Humpty Dumpty explained so well.

It is the agreement itself which creates a legal fiction. The agreement provides that HELP will build an extensive “photovoltaic solar power farm,” mostly on its property in the city’s ETJ (1/20th of the solar array will be in the city limits). The agreement provides further that the city will forego annexing the property into the city for seven years, and an additional three years, if the value of the facility reaches a certain level–$30 million.

The agreement provides that, “The City has determined that the Project (the building of a solar array) being a significant investment in alternative energy production, will create opportunities for economic development involving green industries and jobs while also advancing the City’s goal of supporting environmental protection.”  While the project may advance support for environmental protection, nothing in the agreement even hints at how it “will create opportunities for economic development involving green industries and jobs” beyond the construction of the project itself.

The sole purpose of the agreement is to keep HELP from having to pay taxes on its project for 7 to 10 years. It provides that “The City is authorized under chapter 380 of the Texas Local Government Code to offer certain economic development incentives for public purposes, including the promotion of local economic development and the stimulation of business and commercial activity in the City.”

However, that’s not what chapter 380 actually says.

Section 380.001 (the only part of chapter 380 that pertains to the City of San Marcos) provides that “The governing body of a municipality may establish and provide for the administration of one or more programs,” such as programs that can make loans and grants to promote economic development, and that use “municipal personnel” to administer the program. The word “program” is not defined by the statute, so under rules of statutory construction, the courts turn to the common meaning of the word. “Program” is generally understood as a plan or design or project to accomplish a particular goal or goals by carrying out operations such as those enumerated in chapter 380. This agreement between the city and HELP does nothing of the kind. It provides only for the city’s forebearance respecting the annexation of the land in question. There is no “program” for any staff to administer beyond receiving quarterly reports from HELP on the progress of the solar array’s construction.

Such forebearance is not an economic development “program.”  It is merely an agreement not to take a lawful action that would require a business partnership (HELP) to owe taxes to the city. There is nothing about “economic development incentives for public purposes” in chapter 380, though the chapter does permit certain cities when dealing with a corporation created “under the Development Corporation Act of 1979” to make grants of public money to the corporation. HELP is not such a corporation and is not qualified for such grants even if grants had been included in the agreement.

The parts of Chapter 380, Local Government Code, that apply to the City of San Marcos are as follows:

“§ 380.001 LOC. GOV’T Economic Development Programs
(a) The governing body of a municipality may establish and provide for the administration of one or more programs, including programs for making loans and grants of public money and providing personnel and services of the municipality, to promote state or local economic development and to stimulate business and commercial activity in the municipality. For purposes of this subsection, a municipality includes an area that:
(1) has been annexed by the municipality for limited purposes; or
(2) is in the extraterritorial jurisdiction of the municipality.

(b) The governing body may:
(1) administer a program by the use of municipal personnel;
(2) contract with the federal government, the state, a political subdivision of the state, a nonprofit organization, or any other entity for the administration of a program; and
(3) accept contributions, gifts, or other resources to develop and administer a program.”

Contrary to the city’s interpretation of Chapter 380, the city’s forebearance in annexing the land is not authorized by section 380.001 of the Local Government Code, though it may be authorized by some other law.

What the agreement attempts to accomplish is to forbid the annexation and subsequent taxation of $30 million in improvements on the land. If the $30 million is taxed at construction cost, the city is giving up the right to receive about $159,000 when the photovoltaic array is completed, although a small part of the array will be located on property currently in the city limits. It is difficult to imagine that paying $159,000 in taxes seven to ten years from now would be an economic impediment to the building of the solar array on property owned by HELP and already tied in to LCRA transmission lines.

What does the city get out of this unauthorized and illegal agreement? So far as I can tell, the city does not get permanent jobs. Maybe there will be a few temporary jobs created during construction of the solar array, although those jobs could be filled by a contractor from elsewhere. The agreement says nothing about this matter. The city would not have an opportunity to annex the land and collect taxes for a seven to 10-year period. We don’t get to purchase the electricity at wholesale cost directly from the producer. That opportunity is given to LCRA, which will then sell power to the city at an increased cost. What we do get is the exciting prospect of telling people that there is a photovoltaic array at the edge of our city limits, and we are proud some private company built it because it is a smart and environmentally responsible thing to do.

I am a long-time supporter of alternative energy. I am pleased that HELP wants to build a solar array and make money from the abundant sun we have in the San Marcos area. But I don’t see any reason why the property should be exempt from annexation and taxation just because someone wants to give an unwarranted and unneeded bonus to an existing business that wants to expand. Once again, this is not free enterprise, but corporate welfare–a way for the private sector to get public benefits that it doesn’t really need.

If the city doesn’t get living-wage jobs from a project, and it doesn’t get taxes, and it doesn’t get tourism, all it gets is bragging rights to having the first solar array in central Texas located near the city. That’s not much to justify giving up $159,000 a year in tax revenue, while good citizens pay their taxes. The city gets no cash from this deal, only the cachet of having a solar array in its backyard. But workers in San Marcos need more than a city with prestige. They need permanent living-wage jobs. They won’t get them from HELP’s new project.

© Lamar W. Hankins, Local Government Watch–San Marcos

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5 thoughts on “Commentary: If it’s called ‘economic development,’ anything goes

  1. Why not change every single city street light to a solar powered light. Then we don’t have to use up so much land and the city can keep wasting electricity all night with their street lights as well as keeping city workers busy changing out the bulbs and wiping off dead insects and dirt from the top of the solar arrays. Also we would end up paying less taxes in the long run cause the city will use less electricity. Every new home being constructed should be required to have a solar panel on its roof.

  2. Thanks to Lamar Hankins meticulous research (once again) my questions are answered and it is more convoluted than I thought.

    The brief research I did estimated that a 20 mw solar array has previously employed up to 4 people and only one managerial position. The others are making blue collar wage or less and might be part-time or work sharing.

    The citizens of Hays County and San Marcos will benefit very little from this deal. I think City Council is suffering from an inferiority complex. I am being flippant but we need to see leadership that knows the true value of our city and takes a more discriminating look at planning its future.

  3. So, did all of your city council vote in favor of this? Did anyone express opposition & if so, were they ignored? Did the city lawyer tell the council that this deal was OK?

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