This month: MDD extends municipal sales tax to ETJs
Economic Development and Analysis
Region 4 – Ty Myrick
Ty Myrick is an economic development analyst for the Comptroller’s Economic Development and Analysis Division and the regional representative for North Texas. Region 4 encompasses 32 counties surrounding the Dallas-Fort Worth Metroplex, stretching from Hardeman County to Fannin County in the north and Navarro County to Hamilton County in the south.
Previously, Ty worked for the Texas Legislature and the Department of Housing and Community Affairs, as well as in the private sector for an Austin-based video game company. As a Comptroller’s office local government representative, he now provides assistance to local governments in the use of sales tax for economic development.
Ty also serves as a coordinator for the Comptroller’s Leadership Circle financial transparency initiative. Already, more than 150 cities, counties, school districts and special districts have received the Leadership Circle designation for their efforts to be accessible and transparent to their constituents.
If your local government entity is transparent and deserves recognition, send an e-mail to Ty Myrick at email@example.com for more information, or visit the Comptroller’s Texas Transparency website.
Partnering for Impact
MDDs – the super Type B?
Municipal Development Districts (MDDs) allow cities to impose a special dedicated sales tax to fund cultural, recreational and economic development projects similar to those authorized for Type B Economic Development Corporations.
MDDs were authorized by the 1997 Legislature when it added Chapter 377 to the Texas Local Government Code. While more than 460 Type B economic development corporations have been established, early legislation restricted creation of MDDs – just 14 exist in Texas. However, recent legislative changes have made MDDs available to all Texas cities, subject to the statutory maximum combined local sales tax rate of 2 percent.
Why create an MDD?
MDDs have several advantages for cities over Type B corporations. An MDD’s board of directors may have as few as four members, all of whom can be city council members or city employees. This helps small communities that find it difficult to recruit volunteers for the seven-member board required for Type B corporations, which must include at least three members from the general public.
The MDD also has fewer administration hurdles to overcome before funding a project. Unlike a Type B corporation, the MDD may fund a project immediately after approval without extensive publication procedures, public hearings and a 60-day waiting period.
Perhaps the biggest advantage of an MDD is the flexibility for establishing the district’s boundaries. The MDD is the only municipal sales tax that can be imposed in a city’s extraterritorial jurisdiction (ETJ). A Type B tax applies only within municipal limits; an MDD may include some or all of the city, a combination of city and its ETJ, or all or part of only the ETJ.
Adopting an MDD sales tax
To adopt an MDD, the city council must designate a proposed sales tax rate ranging from 0.125 percent to 0.5 percent, define the boundaries of the district and conduct an election within those boundaries to approve the district and tax rate. The city council may include wording in the election order that provides for the district’s jurisdiction to conform automatically to any future municipal or ETJ boundary changes, thus avoiding subsequent elections.
Super Type B?
The MDD provides all of the advantages of the Type B sales tax for economic development plus reduced administrative overhead and the ability to tax in a city’s ETJ. Unsurprisingly, some economic development professionals have dubbed an MDD the “Super Type B.” TR
|Cities with MDDs||Counties||Rate (%)|
|Aransas Pass||Nueces & San Patricio||0.5%|
|Ovilla*||Dallas & Ellis||0.25%|
* Municipal Development District sales tax applies in city and extraterritorial jurisdictions.