Killeen council discusses potential changes to KEDC

While they stopped short of criticizing the organization, Killeen City Council members on Tuesday agreed that the city’s economic development corporation needs to do more.

But officials couldn’t agree on how to accomplish that.

“As a council member, I am representing 30,000 people,” Councilman Michael Boyd said. “I believe the city should move forward to hiring its own economic development director and … work with whatever staff is available. I think it would be appropriate at this time.”

Under its current structure, the Killeen Economic Development Corporation has received $362,527 each of the last two fiscal years from the city’s water and sewer and general funds. Its staff includes CEO John Crutchfield and Vice President Phyllis Gogue and includes a nine-member board.

However, the council’s options to restructure KEDC are limited, City Manager Kent Cagle said.

“There are just a few types of structures for economic development, (including) creating a city department in the general fund with a number of employees who are paid out of the general fund. We don’t have the ability to do a Type A or Type B sales tax. A lot of EDCs in Texas are funded by Type A or Type B, but that is not done here because we are maxed out at 2 percent.”

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%.

“Those discussions are off the table,” Cagle said. “Bell County has a half-cent sales tax, and our local sales-tax rate must be less than 2% to adopt Type A or Type B. Changing that (sales tax) would require a countywide election to repeal (it), and each taxing entity would have to do an election for some use of that or not at all. That would be incredibly difficult.”

If council members were to restructure the EDC, Cagle said the most ideal situation would be to hire an economic development director.

“But you’d still need three to four employees, and it would just be a city department at that time.”

Even if that is the option council members choose, the amount of money budgeted for KEDC operations is too little, Councilman Ken Wilkerson said, calling it “laughable.”

“We want better economic development in Killeen,” Wilkerson said. “If you feel like it’s okay, then leave it like it is. Go forth and prosper. But we’re not getting much juice for the squeeze, so something has to change.”

Boyd said the council “should take a different approach.”

“But we wouldn’t disband KEDC. The council would have that discussion on whether we want to hire someone else.”

When Wilkerson called the KEDC’s city funding “laughable,” he was referring to incentive packages offered by economic development corporations across Texas to attract business and industry that would bring high-paying jobs and contribute to a larger tax roll.

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.

“KEDC is doing the best they can, and we are seeing results,” Boyd said. “I do think it is worth considering revising the board for KEDC if we choose not to hire a director. This goes back to what all can we do to be the most successful. I am not against KEDC’s efforts.”

Councilman Riakos Adams said he favors hiring an economic development director.

“Instead of giving money to (KEDC) staff, that could go toward a director. I still see the director maintain the things the volunteers are able to do on a day-to-day basis. We are still that overall governing body. I think we can figure out a way to clean it, massage it and make it work.”

With a new fiscal year approaching, council members made no decision on how or whether to restructure KEDC during Tuesday’s workshop.

“We either go all the way with KEDC or go with our own staff,” Mayor Debbie Nash-King said. “We don’t even have a plan. Whatever the council decides, I’m for it.”

As for the chamber, any changes to how the EDC is structured are 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.