ESD sales tax will impact cities

These campaign signs, which say they were paid for by the local firefighters association, were placed in the right of way at entrances to subdivisions outside the city limits Wednesday. The signs lack the state-required "Right of Way Notice" disclaimer for political signs.

These campaign signs, which say they were paid for by the local firefighters association, were placed in the right of way at entrances to subdivisions outside the city limits Wednesday. The signs lack the state-required “Right of Way Notice” disclaimer for political signs.


City officials in Liberty Hill and Leander say they are concerned about the impact of a 1 cent sales tax for the Williamson County Emergency Services District #4 as both cities grow their commercial base.

Voters in the Liberty Hill fire district, which closely mirrors the school district, will decide in Tuesday’s election whether to increase the sales tax by 1 cent to help fund the WCESD #4. Voters within the Liberty Hill city limits are not eligible to vote in the ESD election.

Local fire officials have said the estimated $300,000 in revenue would be used to support the addition of two new fire stations — one on Ronald Reagan Blvd. near Santa Rita Ranch and the other on CR 200 northwest of Liberty Hill.

If approved, the additional 1 cent tax will be assessed on purchases made in the fire district, but outside the city limits of Liberty Hill and Leander. If approved, customers will pay 1 cent more in sales tax than they do today.

In Texas, the sales tax is 8.25 cents. Of that 6.25 cents goes to the state and the remaining 2 cents can be used by cities and other taxing districts with voter approval.

In the area effected by the ESD tax election, 6.25 cents goes to the state and 1/4 cent goes to the Liberty Hill Public Library. If the tax proposal is approved, 1 cent would go to the ESD, leaving 3/4 cent unclaimed.

Liberty Hill city officials say that they have not publicly opposed the ESD tax, but its possible adoption next week could become an issue as the city grows.

If voters approve the ESD tax, and the City of Liberty Hill later annexes commercial property into its city limits, “the priority for the remaining ¾ cent is City, then EDC (Economic Development Corp.) and/or streets (Street Maintenance Fund). However, the latter two funds wouldn’t receive anything because the City levies one cent,” said Assistant City Manager Amber Lewis, who confirmed the information for The Independent with the City’s Attorney.

Property tax is now the primary funding source for the ESD, but the tax rate is capped by state law at $0.10 per $100 property valuation. ESD officials say they need more money to open additional stations, which they say are needed to keep up with population growth.

Leander City Manager Kent Cagle said Wednesday that the Leander City Council recently annexed into the city limits the last of the commercial property in its ETJ at the southeast and southwest corners of Ronald Reagan Blvd. and State Highway 29. The Reagan corridor is quickly becoming the fastest growing area in northwest Williamson County.

“I don’t think this (WCESD #4 sales tax) is huge for us because we have already annexed this (commercial) property into our city limits,” he said.

But, Cagle added that while the largest commercial areas along Reagan Blvd. are no longer subject to the ESD sales tax, should it pass, he believes the city could be impacted along Bagdad Road where some small and web-based businesses in its ETJ would begin generating revenue for ESD #4.

Liberty Hill City Manager Greg Boatright said the timing of Tuesday’s election was a consideration for city officials as the Council moved this month to involuntarily annex 313 acres along SH 29 into the city limits. While only 30 percent of those parcels are in use now for commercial purposes, the possibility is there for future commercial development.

Although discussions on the involuntary annexation preceded the announcement of the ESD Board’s vote to seek the sales tax, Boatright said the election was an important factor in Monday’s Council actions to approve voluntary annexation of two tracts along US Highway 183 — the BLW and Forman Financial tracts.

The Council also approved a site plan for the Stor & Save Development located at 14774 SH 29 (across from Elena’s Mexican Restaurant). The property, which will have storage units, RV storage, and office space for lease, was part of the City’s involuntary annexation approved last week.

Additionally, the Council approved a resolution authorizing a Chapter 380 Economic Development Program for the city.

In recent months, the City entered into a contract with the ESD to do the ESD’s financial accounting. The ESD is paying the City $26,000 annually for the service — a decision that came on the heels of an arrest and confession from the ESD’s former administrative assistant that she stole $42,000 from ESD taxpayers.

Boatright said the City is helping the ESD with its financials and he wants the two entities to have a cooperative relationship.

He said neither he, city staff, nor the City Council, has expressed opposition to the sales tax to the ESD Board of Commissioners or to the Fire Chief.

“I don’t want to burn bridges with them, but publicly discussing the effects of the sales tax on our city is important,” he said.

He said the ESD tax may not have an immediate noticeable impact on the City of Liberty Hill, but he could see it becoming a divisive issue in the future – especially if a big box retailer moves into the city’s ETJ.

“If a Lowe’s or another big box retailer were to come into our ETJ, and as part of a development agreement it would be annexed…a major tax generator would have a major impact,” Boatright said. “So that’s where a rub might come into play.”

While state law would allow the two tax collecting entities to divide the penny sales tax, Boatright said such a negotiation would be unlikely.

“They won’t want to give up their position, and I wouldn’t blame them for that,” he said. Boatright said the City appreciated that the ESD chose to put on the ballot only 1 cent of the sales tax as opposed to the 1 3/4 cents that was available.

“He (Fire Chief Anthony Lincoln) talked them (the ESD Board) down to 1 cent,” Boatright said.

Boatright and Cagle said the Legislature should re-examine the entire ESD structure on a state level.

“The Legislature refuses to raise the 10 cent cap (on ESD ad valorem tax), so they can say they aren’t raising taxes, but an ESD can do this,” Boatright said.

An ESD Board of Commissioners is appointed by County Commissioners rather than elected by voters.

“In general, the ESD situation (across Texas) is a mess,” Cagle said. “They are trying to provide a suburban level of fire protection in a mostly rural residential area. That’s why they continue to struggle.

“But it’s not the ESDs’ fault,” he added, speaking of emergency service districts in a general sense. “The Legislature set up a system where it (an ESD) was meant to cover a little rural or suburban area.

“These rural, suburban ESDs have created sprawl,” he added.

“If the Legislature wants them (ESDs) to have a suburban level of service, it needs to remove the cap from the property tax,” Cagle said.

He said he came from a rural area, and there was never the expectation that the fire service would be at the level provided by a municipal government.

Cagle suggested it would have been more prudent and cost effective for WCESD #4 to negotiate with the City of Leander for fire protection in the Reagan/SH 29 corridor where Liberty Hill’s fire district population is growing.

“It would make better sense if we contracted with the ESD to provide a higher level of service to those residents,” Cagle said.

He said the City of Leander will add a new fire station near the southwest corner of the intersection of SH 29 and Ronald Reagan. Although the station will not be visible from the intersection, it was negotiated by the City of Leander as part of a development agreement in the Wedemeyer Tract. An elevated water storage tank is already on site.

He said that new station won’t be built right away as there are two stations being built ahead of it, but within a few years it will be among the four new stations Leander is adding to the three stations already in service. Leander’s fourth fire station, which will begin construction in the coming days, will be located at Ronald Reagan and Crystal Falls Pkwy.

Cagle added that he had not been contacted by anyone from WCESD #4 regarding the proposed tax or other options to serve property owners in the area.

“The focus (of ESDs) is on building an empire as opposed to doing what’s best for the residents,” Cagle said. “The whole system is broken.”

Boatright said if the tax passes, it won’t discourage the City or the EDC from efforts to recruit new business to Liberty Hill.

“We will work to get them to locate within the city limits,” he said, adding the city would benefit from ad valorem tax.

Boatright said he doesn’t question the need for a second fire station.

“Along the Reagan corridor, the first two major services required are schools and emergency services,” Boatright said. “I don’t have quams about the need. But I think voters like to know what money is being spent on.”

A former county commissioner representing Liberty Hill, Boatright said he recalled when voters created the WCESD #4 years ago. Instead of adopting a lower ad valorem tax rate and increasing it as the service area demanded, the first tax rate was set at the state cap of $0.10 per $100 property value.

On Oct. 8, the ESD Board held a town hall meeting on the proposed sales tax increase. About 20 people attended, and several of those asked questions and expressed opposition to the tax. (Read the Story.)

Earlier that week, voters received direct mail informing them of the tax initiative. The ESD Board previously allocated up to $30,000 for a campaign to educate voters about the department’s needs. Because public funds were used for the campaign, fire department officials are prohibited from asking voters to vote yes on the tax. (Learn More about the ESD Sales Tax)