ESD proposes sales tax collection

A local proposition on November’s ballot is seeking sales tax revenue for the Elgin region’s emergency services district; however, this possibility is causing some concern for the City of Elgin.

This fall, the state is holding an election to vote on ten state constitutional amendments. Additionally, many local entities are holding elections on local propositions.

One such local proposition is on the ballot for voters within the Bastrop/Travis Counties Emergency Services District (ESD) No. 1, the district which funds and oversees emergency services such as fire and emergency medical services in the area surrounding Elgin. This includes the Elgin and McDade volunteer fire departments as well as Elgin’s paid medical first responders unit. The district covers about 181 square miles with an estimated population of 20,000, according to ESD board commissioner and treasurer Larry Foehner.

The proposition would allow the ESD to collect sales and use tax within its district, but outside of Elgin’s city limits, of up to two percent.

Currently, the property tax rate for the Bastrop/Travis Counties ESD is ten cents per $100 of assessed value. Due to Senate Bill 2 passed in the latest state legislature session, the district, like other entities such as municipalities and counties, are now held to a 3.5 percent or less tax revenue increase or be subject to a mandatory election.

The district is expecting a population increase in its boundaries of approximately 24,000 to 32,000 people due to thousands of new homes in new housing developments, which would double the population of the district. Foehner said the ESD knows they will likely need to build another station soon.

“It’s pretty evident about the explosion of population and housing that we’re going to have, and we’re trying to get ahead of it so we’re not behind the eight ball all the time,” he said. “We’re just trying to be be proactive instead of reactive. We’re trying to keep ahead of it and prepare for what’s coming, because along with the new stations will come more equipment.”

Currently, the ESD is working with a long-range planning survey company to take a look at everything in the district and come up with a plan for the future, Foehner said.

“We've contracted this company to do the survey for us, and they will tell us everything that we need to know, they'll give us a preliminary report and we'll go over it,” he said. “They will come back with a final report that covers everything from equipment to stations to manpower to human resources, and they also look at ways that we might be able to save money.”

Texas allows a maximum sales and use tax of 8.25 percent, 6.25 of which goes to the state. The remaining two percent is available to other political subdivisions, such as cities, counties, transit authorities and emergency services districts. Within the city limits of Elgin, this remaining two percent is divided up between the City of Elgin, which receives one percent; the Elgin Economic Development Corporation, which receives 0.5 percent; and Bastrop County, which receives 0.5 percent. As a result, the only sales and use tax available to the ESD would be outside of the city, which includes Elgin’s extraterritorial jurisdiction (ETJ).

However, this would effectively block the city from receiving any future revenue from sales tax in its ETJ, according to the city.

Within the boundaries of the ESD, several housing subdivisions are planned or being constructed near Elgin, which will result in thousands of new homes in the city’s ETJ and the ESD’s boundaries. This residential development is expected to drive retail and commercial development just outside of the city; if the proposition is successful, this sales tax would go to the ESD.

Elgin Mayor Chris Cannon said the city is also thinking about preparing for major growth in its ETJ and must deal with the same tax caps placed on it by the state legislature and SB2.

While property taxes are a large part of the city’s revenue, sales tax revenue “lightens the blow to property tax payers” by bringing in taxes from non-residents passing through Elgin, Cannon said. Using sales tax incentives, for example, by paying back a business their sales tax for building a road, is also a tool for the city to help attract new businesses and developments to the area.

“We have several tools in our chest, but the main one would be sales tax incentives, because they’re performance-based, so the taxpayers don’t give up anything without somebody else doing their part,” Cannon said. “I think this situation could, in the near future, hurt us in garnering things from Manor. It’s not going to help our competition to the west if they can go to Manor and get a more attractive deal than what the City of Elgin is able to do.”

Cannon said one of the frustrating things about the situation is the lack of communication between the city and the ESD about their plan to put this proposition on the ballot.

“There was never a public conversation … and it was only by accident that we stumbled upon knowing about this in the first place,” he said. “It should be our citizens’ concern that all of the entities that are using their tax money be talking to each other. Moving forward, we all need to be on the same page and work together, because we all serve the same people.”

The ESD's response can be found here.