League City has the lowest sales tax rate in Galveston County at 8 percent, hurting its odds of attracting big companies with good jobs, one group said.
Some business leaders are calling for a quarter-cent sales tax to pay for economic development projects, something surrounding cities have been doing for years as they grab for new employers.
A League City Regional Chamber of Commerce task force that has met for a year suggested earlier this month that the city government would benefit from such a tax to lure desirable corporations to the area.
But League City voters have turned down previous attempts at the extra sales tax. The measure failed in elections in 1994, 1997, 2007 and 2015.
VOTERS SAID NO
The Texas Legislature authorized cities to levy certain optional sales taxes to promote economic development and improve the quality of life. Cities can charge quarter-cent taxes.
In League City, those includes its existing 4B corporation that voters approved in 1994 to promote and develop amateur sports facilities.
What League City doesn’t have is a new, local option sales tax that would be used only to promote and invest in economic development projects.
If League City voters approved such an option, the city could create a more robust economic development program and get a financial return on that investment, Economic Development Director Scott Livingston said.
But 53 percent of voters in 2015 said no.
Revenues from the increased sales tax would have helped lower the burden on residential taxpayers, proponents at the time said.
Had the proposition passed, nonresidents who shop in League City would have played a part in helping pay for economic development projects and economic growth, supporters had argued.
In 2007, 57.6 percent of voters rejected the quarter-cent tax. In 1997, 62 percent of voters opposed it. And in 1994, 59 percent of voters said no to the tax.
The city could invest the sales tax revenue in a wide variety of projects from creating high-paying jobs to supporting city services and infrastructure, proponents argue.
NEEDS AND DESIRES
The money could be used for providing places to live, work, shop, eat and play, Livingston said. The potential projects could stimulate entrepreneurship, innovation, research and development and education, he said.
The city council, the economic development board of directors, city officials and residents would have input and control over the investment of the sales tax revenue, Livingston said.
Using a quarter-cent sales tax for economic development projects could be a smart move, League City Mayor Pat Hallisey said.
“We have some major projects, and we have to figure out how to pay for them,” Hallisey said.
A sales tax proposal failed in 2015 in part because Mark Rohr, who was city manager at the time, didn’t explain it well to people, Hallisey said.
Tom Linklater, chairman of the chamber’s economic development committee, is a staunch supporter of the concept.
“It’s vital to League City’s growth and development in the future,” Linklater said. “Not having it puts us at a disadvantage when competing with other cities.”
INVESTING IN WORDS
League City is not just the only city in Galveston County that doesn’t charge the quarter-cent sales tax, it’s the only one in the area, Linklater said.
But as much as he and others want the tax, voters would still get the final say. Convincing them to support something they’ve been against since at least 1993 is going to take work.
“It’s a misunderstanding,” Linklater said. “We have to do a better job explaining how it works and what it does.”
One key strategy the task force plans to employ is changing the vocabulary. The task force is stressing the word investment over incentive, and it is suggesting that the city stop using the word incentive when talking about attracting businesses.
The one-quarter cent sales tax funds spent on economic development perks, likewise, would be called investments, Linklater said.
“Everything has to have a return,” he said.
Even though League City voters turned down the one-quarter cent sales tax at least four times, many of them have no problem paying the same sales tax when they shop or dine in other places.
“They pay it whenever they go outside League City,” Linklater said. “When they go to Webster or Kemah, they pay for their economic development.”
Sometime they may inadvertently be paying the extra quarter-cent tax in League City, business owner Ronnie Richards said.
“Many times, local businesses are already unknowingly charging 8.25 percent sales tax already, I’ve found,” Richards said.
Richards, who owns Butler’s Courtyard, 122 N. Michigan Ave., found another League City company was charging him the higher rate.
“Unfortunately, this didn’t help League City, and the state kept the overpayment,” Richards said.