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MDD vs. EDC: Copperas Cove voters to decide

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COPPERAS COVE — One city commissioner said the change from an Economic Development Corporation to a Municipal Development District is the tool needed to make the city vibrant again.

A former EDC chairman said an EDC is good, but a MDD is bad.

A city manager in another Texas town said the MDD has worked well in his city.

In other words, everyone has an opinion on whether Copperas Cove should change from an EDC to an MDD.

Voters will get a chance to express their opinions in the Nov. 7 election.

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Twin Liquors

Twin Liquors held a grand opening Thursday, Oct. 5, 2017, in the Five Hills Shopping Center. Manager Margie Stenson, a Copperas Cove resident, cuts the ribbon while owner David Jabour, right, looks on.

Proposition A as worded on the ballot calls for the “Authorizing the creation of the Copperas Cove Municipal Development District and the imposition of a sales and use tax at the rate of three-eighth percent for the purpose of financing development projects beneficial to the district.” If passed, the MDD would not be funded until the EDC was dissolved. That would take a separate election, more than likely in May. There would not be an increase in taxes. If the MDD is passed, and the EDC is dissolved, tax money from the EDC would be transferred to the MDD.

Under the current Texas structure, the sales tax is 8.25 percent, of which the state gets 6.25 percent. The remaining 2 percent amount is considered the local option. The economic development portion is three-eighth of 1 percent of sales and use taxes.

EASY AS ALPHABET SOUP

Getting to a vote has not been easy. The relationship between the city and EDC has been contentious in the last year. EDC employees were changed to city employees in November. An ad hoc committee was formed during summer 2016 and recommended the change and ballot language for an MDD in July 2017.

Councilman David Morris was on the committee.

“When the EDC was formed (in the 1990s), that was the only kind of economic development available,” Morris said. “This is a great tool to add to our tool bag for economic development.”

DIFFERENCES

Some of the differences under a MDD:

Boundaries for tax collection can be expanded beyond the city limits; City council members could be included on an MDD board of directors.

The MDD does not require public hearings, performance agreements or elections, although bylaws could be created to tackle some of those issues.

MDD projects would include all the projects from a type B economic development and community development plus a convention center facility, a civic center building, hotel or auditorium.

Comparison: Economic Development Corporation vs. Municipal Development Corporation

Economic Development Corporation Municipal Development District
A corporation which administers the sales and use tax Not a corporation, it is a district and political subdivision of the state and city
Has bylaws No articles of incorporation
Not a political subdivision Authorized to adopt rules to govern the operation of the district and its employees and property
Boundaries: City limits Boundaries of the MDD: 1) within all or part of city limits; 2) within all or part of the city limits; and extraterritorial jurisdiction; or 3) within all or part of extraterritorial jurisdiction
Tax: State law authorizes cities to adopt a sales tax to fund the corporations Tax: May impose a sales and use tax with certain restrictions
At least five board members, appointed by city council Governed by a board of at least four directors; appointed by the council
May be removed by city council at will May be removed by city council at will
Terms not to exceed 6 years Staggered 2-year terms
Qualifications not specified by statute Director must reside within boundaries of the city or the MDD
All expenditures authorized require approval by city council Established a development project fund by resolution to pay costs of planning, acquiring, establishing, developing, construction or renovating a project, and for operating and maintaining a project
Subject to open meetings laws Subject to opens meetings laws as a political subdivision
Meetings to be held in the city or county Meetings to be held in the city
Public hearings are not required for Type A projects. Readings are required by city council if project expenditure is $10,000 or more No publications, public hearings, performance agreements or elections required
Intended for manufacturing and industrial development projects that create or retain primary jobs For the purpose of finance development projects beneficial to the district
Authorized projects include: manufacturing and industrial facilities; research and development facilities; military facilities; recycling facilities; distribution centers; small warehouse facilities; primary job training facility by institutions of higher education; regional or national corporate headquarters; sewage or solid waste disposal facilities; and air or water pollution control facilities Authorized projects include: Manufacturing and industrial facilities; research and development facilities; military facilities, including closed or realigned military bases; transportation facilities (including but not limited to airports, ports, mass commuting facilities, and parking facilities); sewage or solid waste disposal facilities; recycling facilities; air or water pollution control facilities; distribution centers; small warehouse facilities capable of serving as decentralized storage and distribution centers; primary job training facilities for use by institutions of higher education; and regional or national corporate headquarters facilities; and other projects. MDD’s may provide land, buildings, equipment, facilities, and improvements found by the board of directors to promote or develop new or expanded business enterprises that create or retain primary jobs.
*Source: Brownwood City Manager Guy Andrews, Texas Local Government Code

PROS, CONS

Former EDC Chairman Marc Payne is opposed to an MDD and said the EDC is best for the city.

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Marc Payne

Marc Payne

The primary purpose of the EDC is to create or retain primary jobs.

Payne said the EDC is the solution for Cove.

“The only reason the EDC may not be eliminated is if the MDD fails and is not voted in,” Payne said. “That would be the best-case scenario for the citizen.”

Payne said the MDD model is not transparent and relatively new.

“It was originally set up to serve cities of 10,000 or less in population,” Payne said in an email. “The MDD does not have to report to the state, city or citizens, thus, some small cities have been forced to return to an EDC because of the misappropriations of funds.”

Morris said the bylaws would be set up by the council — a group that has been tough on accountability with various groups the last few years. He said the council discovered the EDC was not sending in state reports for two years and quickly changed that practice.

“We as a council will help form their (MDD’s) bylaws, but require all of the same (EDC) reports to the state,” Morris said. “Other than changing a couple of initials, I want to see the same accountability and standards in spending the money we currently have.”

Morris said having an MDD allows the city to have “quality of life projects” helping to attract businesses and people to Cove.

He said an MDD board of directors would have five to nine members under a paid executive director. The executive director would report to the city.

Councilman Matt Russell said more than 40 governmental units have changed to MDD’s in the last few years.

Azle City Manager Tom Muir has been under a MDD for two years. The city has a population of just over 12,000 people. He said Azle has two councilmen on a seven-person board.

“I am indifferent as to the makeup of the board, but some feel that having the council serving as the board provides more accountability to voters,” Muir said in an email. “Of course, there is the argument that having the board made up entirely of citizens better involves the community.”

He believes the MDD format can fit nearly every community.

“I am still getting used to it (MDD), but I find it more flexible and beneficial to the community as a whole than an EDC,” Muir said.

Brownwood City Manager Guy Andrews said changing to a MDD was a matter of preference and city size and demographics were factors. He did not offer an opinion one way or another, but did provide a chart explaining the differences between the two styles.

On Nov. 7 and maybe into May, Cove voters will get the last word in this battle over economic development control.


EDC TO MDD: TIMELINE OF EVENTS

It has been nearly three years since the Copperas Cove City Council started talking about changing its Economic Development Corporation to a Municipal Development District. During that time, there was a lot of friction between the city of Copperas Cove and the EDC. Eventually, EDC employees would be under the Cove city manager.

On Nov. 7, voters in Copperas Cove will have the opportunity to create an MDD under Proposition A — authorizing the creation of the Copperas Cove Municipal Development District and the imposition of a sales and use tax at the rate of three-eighth percent for the purpose of financing development projects beneficial to the district.

The city currently has an EDC and that would need to be dissolved at a second election in May should the proposal pass. The MDD would remain unfunded until the EDC would be resolved.

Here is a pathway the City took to get to this point:

March 18, 2014: The City of Copperas Cove audit committee discussed the City’s 2013 audit report. At the same meeting, then City Councilman Jim Schmitz requested a future agenda item for the City Council and Copperas Cove Economic Development Corporation to explore having the EDC contract with the city allow the city’s finance department to assist with their bookkeeping. Over the next several months discussions occurred between the EDC executive director and the city manager regarding this matter.

Sept. 16, 2014: The City Council consensus was to prepare an agreement for the city to conduct the accounting of the EDC.

Oct. 6, 2014: The city manager discussed the options with the city’s finance and budget directors, as well as the legal aspects of such an arrangement with the attorney.

Nov. 4, 2014: City Attorney Charlie Zach presented various economic development entities and sales taxes during a Copperas Cove City Council special meeting. He offered background and history of the current EDC, findings and activity and action options.

June 2015: The financial services agreement was presented to the EDC board during the June 2015 board meeting.

Oct. 22, 2015: The EDC board took action on the bylaws approved by the City Council. Section 1 included the requirement for the city to hire an economic development accountant as a fulltime position for the city.

May 3, 2016: City Attorney Zach gave a presentation to the council on the potential conversion of the EDC to an MDD, which requires voter approval.

June 7, 2016: An ad hoc committee was selected for the purpose of evaluating the city transitioning from an EDC to an MDD. The seven-person committee included Cove Budget Director Ryan Haverlah, Cove Financial Director Velia Key, city secretary Mariela Altott, EDC Chairman Marc Payne, EDC member Diane Dressel, City Councilmen David Morris and George Duncan.

October 2016: Four current EDC employees were slated to become city employees as of Oct. 1, but many of the technical details in the move had not been hashed out. Payne was appointed as the new chairman.

Nov. 21, 2016: Monica MacKay, the interim executive director of the EDC resigned. She had served as the interim director since January, previously working as the EDC’s director of business development. City Manager Andrea Gardner said Oct. 20 that all employees who currently hold roles with the EDC would be given until Jan. 7, 2017, to decide whether to stay in the roles or move on, according to a story in the Killeen Daily Herald..

June 18, 2017: Board members voted 5-2 to place language on the November 2017 ballot adding a Municipal Development District proposal. If passed, a future election could ask to dissolve the EDC.

jsteers@kdhnews.com | 254-501-7464

(1) comment

centexdave

While in the early years Cove's EDC was a boondoggle, lately it has been functioning very well. I hope this MDD is disapproved for the simple reason that the city will have way too much control and, believe me, won't be forthcoming. This is just another power grab by Chancellor Andrea Garner.

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