Legislation has opened the door for qualifying Texas counties with populations of fewer than 45,000 to seek voter approval for a sales tax to fund a county assistance district to generate revenue for specified uses including economic development and road and highway projects.
Qualifying Counties
Prior to the 79th Legislature’s House Bill 1937 (HB1937), only Rockwall and Waller counties were qualified to create such an assistance district due to specific eligibility requirements including population. To now qualify, a county must have a population of less than 45,000 and meet one of the following criteria: the county must contain a territory that is included in a transit authority governed by Chapter 451 or 452 of the Texas Transportation Code, or must not contain a city that has created a 4A or 4B development corporation.
At press time, approximately 58 counties were eligible to create this district, according to the Texas State Comptroller’s Office.
Under the law, a county assistance district may include all or any part of the county, so long as the combined rate of local sales taxes within the district does not exceed 2 percent at any location when combined with all other local sales and use taxes.
Spending the Money
Counties may spend their assistance district sales tax revenues on building, maintaining or improving roads or highways, and for law enforcement and detention services. Other allowed uses include maintaining or improving libraries, museums, parks and recreational facilities.
HB1937 also allows county assistance districts to use sales tax revenues to promote economic development and tourism. This prompted Crane County officials to look into forming a county assistance district.
“We’ve experienced a population decline through the 1990s and feel we need to take action to stimulate our economy,” said Crane County Commissioner Jack Damron. “We’ve looked at local sales tax as an option for an economic development funding tool, but before passage of HB1937, the only sales tax option was for a 4A/4B city sales tax.”
Damron said county officials felt adopting a 4A or 4B sales tax would not be fair, as it would only tax the customers of businesses within the city, not those out in the county. While the county is not planning on adopting a 4A or 4B sales tax, it is considering holding a county assistance district sales tax election in late 2006.
“[A county assistance district] would be a much fairer means of funding economic development,” Damron said.
Election Day
A commissioners court may order an election for creating a county assistance district and imposing a sales tax to fund the district at a rate of up to a half of 1 percent.
If voters approve it, the commissioners court of the county creating the district serves as its governing body.
Jim Allison, general counsel for the County Judges and Commissioners Association of Texas, said HB1937 lets some counties offer an additional funding option to voters.
“County assistance districts can provide needed relief to our over-burdened property taxpayers,” Allison said. “We hope that the Legislature will expand this useful tool to additional counties in the next session.”
For more information about the county assistance district sales tax, call the Comptroller’s Local Government Assistance Division at 1-800-531-5441, ext. 3-4679.
By Bob Bearden, Texas State Comptroller’s Office
