Reacting to the Hays County Emergency Services District No. 5 (ESD 5) calling of a Sales and Use Tax election in the unincorporated areas of Kyle, council members sanctioned a massive expansion of the city in an effort to minimize the possibility of losing out on sales tax revenues in its extra-territorial jurisdiction (ETJ).
ESD 5 commissioners rejected an interlocal agreement on July 24 that would have granted 100 percent of sales tax revenues to Kyle that were produced in areas the city annexed in the future. Subsequently, ESD 5 commissioners called for a 0.5 percent Sales and Use Tax election in the city’s ETJ, though the board could have asked for the whole 1.5 percent sales tax up for grabs.
Hoping to retain sales tax revenues produced in future growth corridors in Kyle’s ETJ, council members, in split votes last week, approved the annexation of over 3,000 acres scattered along the city’s borders.
“Typically we wouldn’t come at (annexation) in such haste,” Assistant City Manager James Earp told council members. “This is a reaction to the Emergency Services District Number 5 calling their sales tax election for November.”
“For any of the area that is in our non-incorporated area of the city, if the (ESD 5) sales tax election were to pass, we would lose the ability to capture the sales tax in that area up to the amount the voters authorize,” he said.
But for some council members, the process is advancing without due diligence and without a plan.
“I think that we’re moving it too fast,” Council Member Ray Bryant said. “I think that we need to talk to the citizens. I think we need to hear more from the citizens.”
Kyle Planning Director Sofia Nelson said there was not an official annexation plan in place and that city staff produced the annexation map for council review based on council direction in a prioritization meeting earlier this year. She said at the Aug. 6 council meeting that the total property values of the proposed annexation areas were not known.
“I understand that this is a sped up process, a lot of discussions on annexation in cities across Texas and the U.S. can last for years before action is taken, this specifically was sped up because of the possibility of action by the ESD to have their sales tax election in November, and indeed they are having one,” Mayor Lucy Johnson said. “And it is, I believe, our job to make sure that we are maximizing our future potential tax base before we consider the tax bases of other government entities.”
ESD5, who through the Kyle Fire Department provides fire suppression service to Kyle and its ETJ, has had budgetary troubles and finds itself handicapped by the lack of resources. State law caps the ESD’s property tax collection at .10 cent per $100 of valuation, and the board has been looking for other revenue sources.
But sales tax collections were not the lone concern for Council Member Samantha LeMense.
“We don’t have enough police right now, as is, unless y’all have a money tree somewhere that I’m not aware of that we can use for budget time, I think this will put a stress on our police department,” LeMense said. “In regards to the ESD argument, the ESD has only requested .5 (percent), not 1.5 (percent), so I think that’s thrown out the window, because we will get money from these properties eventually, we don’t have to do it now.”
LeMense also was concerned with how the city can provide water services to the newly annexed areas if the infrastructure is not in place.
Even still, a majority of council voted to move forward with the annexation of 3,063.6 acres.
“Yes, it was a reaction to some degree to the ESD,” said Council Member David Wilson. “Our last annexation was in 2009. It’s time for us to move forward, as cities do, with annexation.”
“Should a council member have a desire to provide additional funds to the ESD for whatever reason, I think that they ought to put it on the agenda and have an amount and what they want to buy for the fire department and move forward with it… But as far as the sales tax is concerned, we need that for our infrastructure. We don’t need to be giving away sales tax,” he said.
Understanding the important service the fire department produces, Johnson said the council’s first priority is ensuring the city’s ability to provide service, such as police service, to Kyle residents now and in the future.
“By identifying areas of potential future commercial growth (and annexing them), we’re helping ensure that we will have the tax base necessary to provide police services as best as we possibly can in the future,” Johnson said. Kyle is able to annex 30 percent its land area, which would allow for the annexation of about 3,600 acres, Nelson said.
Public hearings on the proposed annexations are scheduled for Sept. 10 and Sept. 17.
