by MOSES LEOS III
Emergency Services District (ESD) No. 8 officials are scratching their heads over the city of Buda’s recent annexation – a move that leaves ESD 8 in the lurch for a potentially significant amount of expected sales tax revenue.
On April 30, over 650 acres of land were annexed into the city limits.
Buda Fire Chief Clay Huckaby, who hopes voters will support Proposition 1, said, “I didn’t think they were going to annex as fast as they did.”
Proposition 1, if passed, would allow ESD 8 to increase the amount of Sales and Use Tax revenue they receive in unincorporated areas of Buda. Currently, businesses outside the city limits have a sales tax of 7.25 percent. Of that, ESD 8 collects 0.5 percent revenue, bringing in $867,000 a year for ESD 8.
Inside the city, the tax rate is 8.25 percent.
Only voters who reside outside Buda, but within the 75-square mile coverage area of ESD 8 are eligible to vote on the proposition.
Before the annexation, ESD 8 would have raised an additional $1,047,601 in revenue. Now, that amount will be significantly less, though formal estimates are not yet available, according to Huckaby.
“I think our estimate brought to light how much money was out there,” he said. “Of the one million dollar estimate, I could not even speculate how many businesses we lost [to annexation].”
The fight over sales tax revenue in unincorporated areas outside the Buda city limits is not new. Rewind to 2011 when ESD 8 first introduced the same proposition. At the time, the Buda City Council and the city’s Economic Development Corporation (EDC) felt they were sideswiped by ESB 8’s efforts to grab the additional sales tax in those unincorporated tracts of land. The lack of communication between the parties left some council members feeling betrayed by ESD 8.
What followed was animosity, name calling, political mudslinging and allegations of tanking elections. Perhaps as a result, the proposition failed to garner the support of voters.
In February, Huckaby, representing ESD 8, met with Buda City Manager Kenneth Williams and Mayor Todd Ruge along with the city’s EDC staff to discuss a more agreeable compromise to the sales tax issue.
What transpired was an inter-local agreement. In it, the three parties agreed to allow ESD 8 to take the full 1.50 percent revenue. However, if the city annexes land in the future, any sales taxes from existing or new businesses would be shared. The parties agreed that should the measure pass and sales taxes are raised to 8.25 percent, each entity will split 1.50 percent three ways, with each gaining 0.5 percent.
According to Ruge, the inter-local agreement will help the city grow and prosper, as well as help all parties involved.
“The inter-local agreement gives the city a chance to build infrastructure with it, to build the city out,” Ruge said. “It also gives the ESD a chance to grow. We need to make sure they are not caught short-handed.”
Huckaby also understands the rapid growth of the area and the need for cohesion between the parties.
“It is imperative the city of Buda and Hays County ESD #8 /Buda Fire Dept. work together as the city and the ESD grows,” Huckaby said in a recent email. “Growth is coming to our area regardless. The city of Buda and the ESD must work together to be able to provide the best possible services to the citizens and businesses of Buda and surrounding areas.”
Yet Huckaby said he hoped for at least a year or two of the additional sales tax revenue at the full 1.5 percent rate. The monies would have helped the department reduce the amount on Capital Improvement and Debt Services Loans, purchase additional fire trucks for large structures and add more staff to reduce response times. According to Huckaby, keeping property taxes from rising was a key factor in supporting Proposition 1.
Yet Buda’s faster than expected annexation left ESD 8 feeling there was a lack of communication, this time in reverse. Huckaby said he received no heads up that Buda was going to annex property, no discussions with the mayor or city manager prior to the city council meeting. He did receive a letter informing him of their intent but it was too late to do much about it.
“They have the right to go through with annexation. They can do that,” said Huckaby. “We will just maintain our 0.5 percent.”
Ruge said that the timing of the annexation was "coincidence," that information was avaible on the city website and on packets.
Now that the expected tax revenue will be reduced, Huckaby said ESD 8 will need to make decisions about how to raise the rest of the funds needed to accomplish their goals.
“If (Proposition 1) passes, we will need to reassess what revenue we do get” Huckaby said. “People just need to realize that some things we planned on having will not happen as fast.”
Despite the loss, Huckaby hopes Proposition 1 passes.
Election Day is May 11.
