WHO IS RESPONSIBLE FOR ECONOMIC DEVELOPMENT CORPORATIONS?
-- the keyword is “elected.”

“The use of the sales tax for economic development purposes has been one of the most popular and effective tools used by cities to promote economic development. Since the authorization for the local option tax took effect in 1989, more than 586 cities have levied an economic development sales tax. These cities have cumulatively raised in excess of $573 million annually in additional sales tax revenue dedicated to the promotion of local economic development. Of these cities, 101 have adopted a Type A economic development sales tax, 367 cities have adopted a Type B economic development sales tax, and 118 cities have adopted both a Type A and a Type B sales tax.” (www.tml.org/p/EconomicDevelopmentHandbook2015_TML.pdf)

The above paragraph is taken from the first article of the linked Texas Attorney General’s 2015 Economic Development Handbook. The city of Coleman is one of the 118 cities that has both a Type A and a Type B sales tax.

But exactly what is an economic development corporation and who does that corporation answer to? The Handbook goes into detail to answer these questions. The information presented in this article relies on this Handbook, especially as it relates to who has the ultimate jurisdiction over EDC activity funded with our city sales tax dollar.

Some may believe the local EDCs operate much like a special tax district. It is true that Texas has many opportunities to elect special tax districts. Examples are: hospital tax districts, independent school districts, a jail district, an emergency services district, a water district, etc. Each of these special districts are elected by the voters and are funded by various tax revenue, the management of which is the responsibility of an elected board. Our local tax bill includes a hospital district tax and a school district tax.

Economic development corporations are not special tax districts. They do not have the right to call elections. They do not assess taxes as do special tax districts, nor do they have elected boards. Locally, each or our EDCs receives one-half of 1% of the 8.25% sales tax collected by the State Comptroller because the city has at some point in the past called for elections to allow this disbursal of city sales tax revenue to the EDCs.

Special tax districts have the right to call for elections and assess taxes. Economic development corporations do not have the power to call for an election or assess taxes, and the boards that manage the EDC are not elected. The board members of each EDC are appointed by the city council. The city council, including the mayor, are all elected. The Handbook places the final approval of all EDC activities under the purview of an elected city council.

“Regarding oversight procedures, both Type A and Type B boards pursuing projects are required to obtain city council approval of the project.” Handbook, p. 5-6

“Oversight of an Economic Development Corporation Section 501.073 of the 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 development corporation. Additionally, Section 501.054(b)(2) 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. Also, Section 501.401 of the Act gives the city authority to alter the structure, organization, programs or activities of the development corporation at any time. ..... Finally, the city council retains a certain degree of control over the corporation by virtue of its power at any time to replace any or all of the members of the board of directors of the development corporation.” Handbook, p. 42

Simply stated, the elected city council is ultimately responsible for the creation of an economic development corporation and for appointing the board members. The city council is the only elected body that has the responsibility of oversight of these EDCs. The city council has the power and duty to alter, modify or transform EDC activity by carefully reviewing financial statements and proposed budgets; the power and duty to scrutinize specific projects that will result in excess of a $10,000 expenditure; and the power and duty to replace any or all of the members of a board if they determine there is good reason considering the quality of work expected and fulfillment of the mission of each economic development corporation.

If the elected city council fails to live up to its responsibilities, the law gives the citizens who voted for the sales tax to fund an EDC corporation in the first place the opportunity to petition for the dissolution of that EDC which would eliminate that one-half percent of sales tax. Handbook, p. 31-32

All governmental entities that have the power to assess taxes are governed by an elected board. All other entities are governed by an appointed board and are the ultimate responsibility of the “authorizing unit,” in this case, the Coleman city council.