Galveston voters to decide fate of millions in sales tax spending

Island voters on May 6 will encounter a ballot item that will determine whether many millions of dollars in sales tax revenue continues to be spent on such things as parks and street improvements or moved to the city’s general fund.

Since 1993, Type B sales, formerly known as 4B, has generated $110 million in funding specifically used for investments and split evenly under four silos — parks, beach renourishment, infrastructure and economic development. But those dedications could disappear and that portion of sales tax folded into the general fund if residents vote against a measure appearing on their May 6 ballots.

The money within the silos have been used to pay for such things as soccer and baseball fields, street improvements, park upgrades, beach remediation, airport projects and will be used as a local match for the replacement of the Pelican Island Bridge.

The Industrial Development Corp. administers the half-cent sales tax that voters approved in the 1990s.

The proposition will ask voters whether they’d like to keep a portion of sales tax money dedicated to investing in those resident-centered commitments, with early voting running from April 24-28, as well as on May 1 and May 2. Election Day is from 7 a.m. to 7 p.m. May 6.

The concept of splitting the money up in silos and dedicating it into something specific historically has been important to islanders. When the 4B sales tax was first introduced to voters in the late 1980s, voters were reluctant to see the tax revenues from that stream enter the city’s general fund.

“The first time this went to the voters it wasn’t approved,” Mayor Craig Brown said of a vote taken before the 1993 adoption of the provision.

“So, we reworked that, the language and how it was structured,” Brown said. “We set up these silos, and in 2009 we came back when it expired, so we had to come back to the community to see if they wanted to continue it.”

If voters approve the ballot item, the tax would be set aside for the four silos until council decides to halt it, Brown said.

Of the Type B designation expires in 2029, which would only occur if residents vote against the proposition, the collected money would go into the city’s general fund, where it would likely be used to pay ballooning law enforcement costs, Brown said.

While Brown believes that would be a worthwhile use of the money, he fears it would limit the potential uses for what was $7.2 million last year, he said. That annual collection number only has risen since 1993.

But Type B sales tax revenue investment is needed in the West End, which has been neglected for years in terms of infrastructure improvements, Marie Robb, city councilwoman representing Distirct 6, said.

“Without the tax, we wouldn’t be able to afford these things,” Robb said. “This way, we have half a cent earmarked for these specific silos. The only negative would be if this doesn’t pass.

“The important thing about this passing is that we’re removing the sunset, so we will be able to sell bonds. We can invest in infrastructure needs. If we were going to replace septic tanks with sewage in the West End, we could fund it with this.”

LOOKING LONG TERM

With the Type B expiration of April 1, 2029, Galveston officials worry about the opportunity to seek long-term bonds for major projects.

The Industrial Development Corp. committee is composed of four city council members and representatives from the Park Board of Trustees, the Galveston Regional Chamber of Commerce, 2228 Mechanic St., and Galveston Economic Development Partnership, 1700 Strand.

The committee is responsible for allocating the collected sales tax and voting on projects that fulfill one or more of the four silos’ missions to improve life for island residents. The tax dedication provides funds for projects that wouldn’t be possible if that money went into the general fund, Gina Spagnola, CEO of the Galveston Regional Chamber of Commerce, said.

“The Galveston Regional Chamber and GEDP are asking for your support to extend the half-cent Type B sales tax,” Spagnola said.

“Voting for the proposition does not increase your taxes, the city’s portion of the sales tax would remain at 2 percent,” she said. “And nearly 50 percent of the Type B sales tax is generated by visitors.”

The collected money often is matched with grants of up to 80 percent of project cost, Brown said. Since 1993, the Type B sales tax has generated $110 million, but — thanks to matching grants — what it brought residents over that time was worth hundreds of millions more, Brown said.

Just in the past 15 years, while collecting about $70 million and finding appropriate grants, the Industrial Development Corp. has been able to construct the Fort Crockett Little League Baseball Complex, Sandhill Crane Soccer Complex and Lasker Community Pool from the parks silo.

The committee has enacted annual beach surveys, sediment management updates and post-storm remediation from the beach nourishment silo.

It has funded a $600,000-a-year sidewalk and curb crew, the 27th Street corridor project and downtown improvements to the 23rd Street corridor from the infrastructure silo.

It paid to develop West Market Street that ushered in a new downtown district replete with watering holes and eateries, funded airport projects and set aside about $6 million to help fund the replacement of the Pelican Island Bridge from the economic development silo. Galveston will only have to pay $6 million of the $120-million project, the rest of which will be funded through grants, Brown said.

“If this vote fails, the Industrial Development Corp. will not be able to sell bonds, which is important for long-term and bigger projects, Keith Gray, executive director of the Galveston Economic Development Partnership, said.

“The sales tax, half is paid by the visitor, but it allows the residents to enjoy the benefits of the four silos all the time,” Gray said. “I think it’s important that it passes so we can do larger projects, longer-term planning.

“We are very much in support of this.”

TAX FACTS

Galveston’s sales tax rate, the percentage paid to the government on all retail sales, leases and rentals of most goods and most taxable services, is 8.25 percent. Of that 8.25 percent, 6.25 percentage points are dedicated to the state, 2 percentage points go to the city. Of the city’s 2-percentage-point share, 0.5 points, which amounted to about $7.2 million last year, goes to the Industrial Development Corp. to fund local projects under the four silos.

“Citizens constantly say, and rightfully so, ‘How are the funds being generated by sales tax helping the residents?’” Brown said “That money, $7.2 million, goes to the IDC and is allocated for projects that are beneficial to the residents here. That’s the importance of the IDC.

“They’re not projects generated primarily to support the visitors — it’s No. 1 to support the residents.”

The proposition appearing on Galvestonian ballots is:

“Adoption of the existing one-half of one percent sales and use tax for the following types of projects funded with the sales and use tax to be apportioned as provided and set forth: one-eighth of one percent for beach remediation projects along the Gulf of Mexico, including beach renourishment; one-eighth of one percent for projects related to recreation and community facilities including parks and park facilities; one-eighth of one percent for projects related to infrastructure improvements; and one-eighth of one percent for projects related to the promotion or development of new or expanded business enterprises, including the maintenance and operation of such projects.”