Killeen City Council to consider changes to EDC structure

Killeen officials on Tuesday are expected to consider revisions to how the city’s economic development corporation is structured, but that doesn’t mean changes are imminent.

“Looking at that presentation, I think we are trying to break down different options,” Killeen City Councilman Jose Segarra said. “The city has an agreement with the (Greater Killeen Chamber of Commerce), so we basically outsource the KEDC. But is outsourcing the only thing? I think the way we have it is the best.”

Each of the last two fiscal years, Killeen has budgeted $362,527 from its water and sewer and general funds for the Killeen Economic Development Corporation.

“They get to use that money to offer incentives,” Segarra said. “We probably offer more than what we take in while trying to bring in companies. We compete with other cities.”

Under Texas law, economic development corporations may use their funding for Chapter 504 agreements ­­— the statute in the Local Government Code that allows them to offer financial packages to help secure prospective business.

“As an EDC, you put out all these feelers and it’s a waiting game,” Segarra said. “You are trying to grab a business and, sometimes, it is a process.”

The EDC’s mission “is to promote the development of commercial, industrial and manufacturing enterprises to promote and encourage employment and the public welfare,” according to its website. “Members of KEDC are also charged with the responsibility of working closely with the Killeen Industrial Foundation and the Greater Killeen Chamber of Commerce.”

Segarra is a former Killeen mayor and once an EDC board member.

“We try to be as competitive as possible,” he said. Incentives could include “rebates or tax incentives, such as when a business is doing a build-out.”

A common Chapter 504 agreement involves tax abatements that typically range from five to 10 years, exempting all or a portion of the increase in value of real or personal property.

‘We don’t run EDC’

Killeen Mayor Debbie Nash-King said the EDC could divert a portion of sales-tax revenue to help fund the EDC. But that would mean creating a Type A or Type B corporation, both of which would require voter approval.

“One of the council members proposed for (City Manager Kent Cagle) to come back with different ways that KEDC is structured,” she said. “It may be that the city of Killeen funds the EDC all the way, or it could be that sales taxes go toward KEDC. We don’t run KEDC. We just give them funding to bring businesses to our area.”

Cagle did not return a message seeking comment, and EDC Executive Director John Crutchfield was not available. Janell Ford, the Killeen’s executive director of communications, declined to comment.

“Our policy is that we don’t discuss items with media/the public before it’s presented or discussed with council,” she said in an email. “All will be public at the council meeting, though.”

According to the Texas comptroller’s website, Type A sales-tax revenue is “primarily intended” for manufacturing and industrial development. EDCs using that form of funding may use revenue to pay for land, equipment, buildings and “targeted infrastructure and improvements” for certain projects.

As a Type B corporation, the EDC may use sales-tax revenue for the same Type A projects, in addition to funding for sports, tourism and entertainment facilities, convention centers and public parks and related infrastructure. Revenue may also be used for public-safety buildings, to demolish existing structures and “general” municipality-owned improvements.

A Type A or Type B designation would allow Killeen voters to decide whether to use a fraction of the city’s optional 2% local sales tax to fund economic development.

In 1990, voters elected to impose the 2% local sales tax, with 1.5% used to offset city property taxes. The other 0.5% was allocated to Bell County. At 8.25% sales tax, the city has maxed out its rate under state law. The state’s sales-tax rate is 6.25%.

Chamber agreement

As for the chamber, any changes to how the EDC is structured is likely to impact that organization as well. In September 1987, the city reached an agreement with the chamber requiring it to:

Plan, organize and direct the city’s “economic development program.”

Coordinate the economic development activities of various stakeholders.

Liaise with the Governor’s Office of Economic Development and other organizations.

Prepare and administer a budget and work program for economic development.

Maintain an economic development website.

Initiate and maintain contact with business prospects to promote their location in Killeen.

Develop and present programs to business prospects regarding opportunities in Killeen.

Conduct public information programs regarding development activities.

The chamber has more than 700 members and associates that pay monthly or annual membership dues that range from $100 per month to $3,600 per year.

As part of its agreement with the city, the chamber is required to submit monthly financial, board and “consolidated economic development” reports, along with a report that “tracks the performance measures, financial accounting responsibilities, and action plan established by the agreement.”

According to that agreement, the city’s money can be spent on day-to-day operations, supplies, salaries, office rentals, travel expenses and administrative costs.

“It’s kind of a partnership,” Segarra said. “And I think it’s a smart way to do it.”

Other than seeking voter approval to create a Type A or Type B EDC, the City Council could choose to create its own department of economic development.

“What I have heard in the past is we could have the city run it,” Segarra said. “We would do it ourselves, but it would be much more costly.”

That option would likely mean hiring more staff at City Hall and diverting current resources to an additional city department.

The EDC and chamber are in the same building — the old Santa Fe Depot — on Santa Fe Plaza Drive in downtown Killeen.