This month:
Sales tax available to ESDs if voters approve, local rate currently less than 2 percent
Local Government Tools that Made the Difference
Sales Taxes
ESDs can tax in areas with cap space
The 2007 Legislature gave Emergency Services Districts, created under Chapter 775 of the Health and Safety Code, additional flexibility to adopt a sales tax. If part of an ESD’s jurisdiction overlaps a city that charges a sales tax, it doesn’t rule out an ESD sales tax in part of the district or even different rates for tax due to the ESD depending on where a sale occurs.
The ESD’s directors may identify all or part of the territory where the sales tax rate is below the 2 percent maximum local rate and call an election to raise the sales tax in that portion of their district. If the sales tax election is successful, the result would be a district where the ESD sales tax varies by location within its jurisdiction.
Partnering for Impact
Emergency Service Districts have multiple funding options.
In the late 1980s, local emergency services providers faced a funding shortfall as the populations they served grew, while the numbers of available volunteers declined because many residents made long commutes to their full-time jobs outside of the emergency service district’s area.
The Texas Legislature authorized communities to create Emergency Services Districts (ESD) to fill a need for additional local funding when it adopted Chapters 775 and 776 of the Health and Safety Code in 1989. Eligible services include rural fire prevention and control, emergency medical services (EMS) and other local emergency services. Today there are more than 250 ESDs operating in Texas.
ESDs may be funded by a property tax not to exceed 10 cents per $100 valuation, sales and use tax, or both. The maximum rate for the property tax is established in the same election that creates the ESD. The board of directors sets a rate each year that is subject to the statutory limit and the rate established by the voters.
A separate election is required for an ESD to adopt a sales and use tax. This tax is subject to a maximum rate of 2 percent when combined with the rates of all sales and use taxing entities with territory in the ESD’s jurisdiction.
It is important that existing ESDs cooperate with other sales taxing entities in their service area when planning elections to adopt or increase the sales and use tax rate. State law ranks ESDs below other sales taxing entities. For example, if an ESD and a city hold successful elections to adopt a 0.5 percent sales tax and the current combined local rate is 1.5 percent, only the city election is valid. The ESD would receive no additional sales tax revenue.
As cities continue to expand into ESDs’ areas, cooperation is the key to assure that both cities and emergency services providers can raise the funds necessary to keep their communities successful and safe. TR