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February 27th, 2012
Kyle considers economic development sales tax


Wooing businesses to locate or expand in Kyle takes something City Manager Lanny Lambert said he doesn’t have: Cash.

Lambert said economic development is critical for a city the size of Kyle; however, he said most companies want an incentive that includes money, infrastructure, tax breaks, or a combination of several such enticements.

Many cities across the state have something called a 4B corporation. It’s basically an economic incentive fund paid for by typically half of one cent of local sales tax.

“I’ve never worked in a city that didn’t have a 4B corporation,” Lambert said.

Prior posts for Lambert include Abilene, Lufkin, Brownsville and most recently, Leon Valley.
Legislation from 1979 – the Development Corporation Act – gave cities the power to finance new and expanded business enterprises through economic development corporations. These EDCs come in two flavors: A and B. Type A EDCs are typically created to fund industrial development projects, while Type B’s can also fund parks, museums, sports facilities and affordable housing.

Kyle’s neighbor to the north, Buda, has a 4B corporation, while San Marcos does not. However, San Marcos does have the Greater San Marcos Partnership – a public/private collaboration to market the city to potential investors and developers.

What would it take to get a 4B corporation in Kyle?

“Because it’s a tax issue, the voters would have to make the decision,” said Diana Blank, Kyle economic development director.

To divert a half penny of sales tax revenue from Kyle’s general fund, city leaders say they’d have to raise property taxes to maintain the same level of services.

Every half cent of sales tax brings in roughly $140,000. The current property tax rate is 46 cents per $100 valuation. If voters approve the diversion to 4B and vote to raise property taxes, Lambert estimates another 6- or 7-cent increase per $100 valuation.

Blank said having the funds from an EDC would make the job of attracting business to Kyle much easier. What she has to work with now is tax-based incentives such as abatements and rebates.

Lambert wants to hold a community visioning this spring to get input from residents on how they want the city to look and grow in the future.

With the likelihood of bond elections this year for four major road projects, along with water utility rate increases and the need for a new police station, this may not be the year for the 4B.
In reality, Lambert and Blank agree it will be several years before something like this would be in place.

Some recent good news for the city’s coffers came at last Tuesday’s council meeting: the general and utility funds are both operating in the black. Unfortunately, the city’s utility business continues to lose money.

Asking voters to raise property taxes to pay for economic development is something Lambert says will be an issue for another day.

KIM HILSENBECK reports for the Hays Free Press where this story was originally published. It is reprinted here through a news partnership between the Free Press and the San Marcos Mercury.

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One thought on “Kyle considers economic development sales tax

  1. Well, here’s what I’ve seen everywhere I’ve lived.
    1. Growth in neighborhoods bring people.
    2. People require “services” – roads, sewer, water, etc.
    4. City development people claim they need “development” in order to have sufficient tax money to provide services.
    5. Development brings some jobs, and jobs bring new people to live in the city – and that brings us back to #1.

    Sooner or later the city gets “developed out” and further growth of residential and retail isn’t reasonable. So then what happens? Decline of neighborhoods, ugly declining strip malls, and maxed out tax rates. This result of this process is a bad thing except for business owners who profit from growth, and city staffers who want more power. Growth looks like a healthy thing until it falls in on itself.

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