The Future of Economic Development - The MDD
By Matthew Russell
Special to Leader-Press
In less than a month the citizens of Copperas Cove will be asked to vote on keeping its Economic Development Corporation (EDC) Type A construct or converting it into a Municipal Development District (MDD). The MDD’s mission is Economic Development, yet with a broader range of capabilities then an EDC type A or B. Over the years since the creation of the EDC (Type A&B), state legislators realized the EDC was excessively restrictive.
It hampers the efforts of local governments to create effective economic development.
In 2005, the state legislators created the MDD. They did so in order to provide local municipalities with a more comprehensive and flexible organization, an organization able to generate a multitude of economic development.
Prior to heading to the polls this November please consider the below facts.
- This year alone more than 40 Texas cities transitioned away from their EDC (Type A and Type B) and to the MDD.
- An MDD can do everything an EDC can do, and more.
- An EDC is limited to industry and Corporate development.
- An EDC cannot engage in bringing retail businesses into a community; it’s a Texas state law.
- The CCEDC has had difficulties in generating industrial or corporate organizations to come to our city.
- The EDC’s ability to support Copperas Cove economic development over the past decade has been abysmal.
- In the past three years, recent controls were placed over the CCEDC in spending in order to promote transparency, accountability and create a better CCEDC construct.
- An MDD does not have the same state report requirements as an EDC.
- A future CCMDD will have a written charter (By-Laws) in order to produce the same controls and reporting requirements to the City, and the State, as the current CCEDC.
- An MDD can create economic development across industry, Corporate and the retail business landscape.
Okay, that’s a quick list of things to think about. Everyone is busy and I completely understand the time it takes to research issues.
However, if you have time look at one of the newest MDDs on the street, in Brownwood, Texas. Brownwood voters went to the polls in a special election this past May and approved replacing their EDC with an MDD. You can visit the Brownwood City web site at:
www.brownwoodtexas.gov/191/Brownwood-Municipal-Development-Districtand, or just type in Brownwood Texas MDD, and scroll down to the above site. Find out what they think about their MDD and the future of their economic development.
Please review the below questions and answers concerning an MDD. They were printed by the City of Brownwood, Texas, for the citizens of Brownwood prior to their special election in May 2017.
In the next article I will provide you with answers to the below questions as they pertain to our city.
1. WHAT IS A MUNICIPAL DEVELOPMENT DISTRICT (MDD)?
A Municipal Development District is a special purpose district created for the purpose of generating economic development and growth opportunities within the boundaries of the district. The proposed Brownwood MDD boundaries are the city limits of Brownwood.
2. WHAT ARE THE DIFFERENCES BETWEEN A TYPE A ECONOMIC DEVELOPMENT CORPORATION (EDC) AND A MUNICIPAL DEVELOPMENT DISTRICT (MDD)?
The City currently has a Type A EDC. The Type A EDC is essentially limited to funding economic development projects that create or retain primary jobs associated with manufacturing and industrial companies. The MDD can fund these Type A projects, along with projects that promote or develop new or expanded business enterprises, which include retail businesses; projects that enhance professional and amateur (including children’s) sports, athletic, entertainment, tourist, convention and public park purposes and events; projects enhancing housing; and convention center facilities.
3. WILL THERE BE AN INCREASED TAX BURDEN IF THE TYPE A EDC IS DISSOLVED AND THE MDD IS CREATED BY THE VOTERS?
No, there will be no additional taxes imposed on the citizens. Currently, the Type A EDC is funded by a sales tax of one-half of one percent of sales and use tax. That sales tax will be dissolved and the MDD will be funded by the same sales tax of one-half of one percent. The sales tax will not increase over time.
4. HOW DO OTHER CITIES FINANCE THEIR ECONOMIC DEVELOPMENT PROJECTS?
More than 500 small and mid-size Texas cities have authorized the funding of economic development projects with a dedicated portion of sales tax. They chose from a variety of programs based on the needs and goals of their community.
5. HOW IS THE DISTRICT CREATED?
- create an MDD, a city must call an election through an ordinance that defines the proposed boundaries of the district (City Limits of Brownwood). The ballot at this election must be printed to allow voting for or against the proposition. In the ordinance calling the election, the city may specify that the district boundaries will automatically conform to future changes in the city’s boundaries. If the voters turn down creation of the district, a subsequent election to establish a district may not be held within a year of the first election.
6. WHAT WILL THE BALLOT LOOK LIKE WHEN I GO TO THE VOTING BOOTH?
Shall the City of Brownwood Economic Development Corporation (Type A) be terminated with the abolition of its sales and use tax for the promotion and development of new and expanded business enterprises at the rate of one-half of one percent, and concurrently, authorize the creation of the City of Brownwood Municipal Development District with the imposition of a sales and use tax within the incorporated City limits of the City of Brownwood, Texas, which boundaries shall automatically conform to any changes in the corporate boundaries of the City at the rate of one-half of one percent for the purpose of financing development projects beneficial to the district?
7. WHO WILL PAY FOR THE MDD?
Anyone making a purchase of taxable items in the Brownwood MDD will pay the sales tax including purchases made by individuals who live outside of the district shopping and eating in the district.
8. WILL THE SALES TAX RATE IN BROWNWOOD BE HIGHER THAN OTHER AREA CITIES BECAUSE OF THE TAX LEVIED BY THE BOUNDARIES OF THE MDD?
No. Again there is no change in the amount of tax collected, and the tax rates in surrounding cities are as follows: Early 8.25%, Abilene 8.25%, Austin 8.25%, Weatherford 8.25%, Comanche 8.25%, Fort Worth 8.25%, Lampasas 8.25%, Llano 8.25%, Stephenville 8.25%. If adopted the sales tax rate in the City of Brownwood will remain at 8.25% (including the 6.25% state sales tax). The rate will not increase and will remain consistent with surrounding communities.
9. WHAT WILL THE PROCEEDS FROM THE SALES TAX BE USED FOR?
State law authorizes expenditure of MDD funds for a variety of economic development activities including industrial and manufacturing projects, retail development projects, recreational and/or community facilities projects, housing projects and convention center facilities and related improvements.
10. WHO OVERSEES THE MDD?
A board of at least four directors governs the District. The Brownwood City Council will appoint the board. In addition, the City Council will adopt policies and guidelines that will govern the actions of the MDD board, including requiring that all actions of the board be subject to review by the City Council.
11. WHO DETERMINES HOW THE FUNDS ARE SPENT?
The MDD Board of Directors must adopt a budget for each year at a public meeting open to the public. Once the MDD Board approves the budget, the budget will be presented to the City Council for final approval.
12. CAN THE MDD SALES BE REPEALED?
The sales tax can be repealed if a majority of the registered voters in the district vote to repeal the sales tax.
13. HOW DO WE KNOW THE FUNDS WERE SPENT FOR THEIR AUTHORIZED PURPOSES?
State law requires the District to have an annual audit by an independent auditor. The audit and other District records are open to public inspection during normal business hours.
14. IF APPROVED, WHEN WOULD THE MDD BECOME EFFECTIVE?
If approved by vote in May, the creation of the MDD would become effective October 1, 2016.
15. HOW CAN I GET MORE INFORMATION ABOUT THE PROPOSED MDD?
The legislation governing MDDs can be found in Chapter 377 of the Local Government Code. Chapter 377 is available online at: http://www.statutes.legis.state.tx.us/Docs/LG/htm/LG.377.htm You may also contact the BMDD Executive Director via e-mail at firstname.lastname@example.org
Key points to take away: An EDC cannot contact, negotiate with, nor bring in a retail business. To do so would be against federal and state law. An EDC can only entertain industrial and corporate organizations.
The retail businesses you see in Copperas Cove are the direct results of the City Manager and the City Staff. Look around our city and count the industrial and corporate roof tops. I think we would be hard pressed to find any.
Thank you for allowing me to serve as one of your City Councilman. It would be my honor to have your support in the November election.
We are all in this together; Our Town, Our Future, Our Responsibility.
Councilman Place 7, City of Copperas Cove
The Views and opinions expressed in this article and /or electronic communication are my personal views and opinions and do not reflect the views and opinion of the City of Copperas Cove or that of the governing body of the City of Copperas Cove.