13-Ordinance calling Special Election-abolish ed sale tax and adopt street repair tax

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Item No. 13 memorandum TO: City Council John Godwin, City Manager FROM: Stephanie H. Harris, City Attorney SUBJECT: Ordinance calling special election to abolish the sales and use tax for economic development and to adopt a sales and use tax for street repair and maintenance DATE: July 19, 2017 BACKGROUND: At the June 26, 2017 meeting, Council passed a motion "to have a special election in November to ask the citizens if they wanted to terminate the quarter cent economic development tax and adopt a quarter cent municipal sales and use tax for street maintenance." In consultation with Leonard Schneider of Liles Parker, PLLC, Kingwood, Texas, I have drafted the attached Ordinance calling the special election, setting forth the proposition and ballot language, and making other provisions related to the special election. The Texas Legislature recently passed a bill, effective immediately, which allows for the repeal or reduction of one sales tax and the adoption of another sales tax to be presented to the voters as a single proposition, thus avoiding the potential loss of the quarter cent sales tax to another governmental entity. It also avoids the situation in which a proposition to repeal the Type A tax fails but the street tax proposition passes, which would put the City over the legal allowable rate for sales tax collections. Should the combined proposition pass, the City would notify the Comptroller's office of the results but tell the Comptroller to not implement the street maintenance tax until further notice from the City that the PEDC debt has been extinguished. This means the sales and use tax for the PEDC will continue to be collected after the election in an amount sufficient until all the PEDC financial obligations were paid. Thereafter the City would notify the Comptroller's office that the Type A sales and use tax should stop and the collection of the street maintenance tax begin. It is possible that this process could take several years, but the Comptroller's office has confirmed that this is permissible. STATUS OF ISSUE: An ordinance calling the election must be passed prior to Monday, August 21St. BUDGET: Cost of the special election, estimated by the City Clerk to be $12,373.99. RECOMMENDATION: Adopt ordinance calling for November 7, 2017 to abolish the quarter cent economic development sales tax and to adopt a quarter cent street maintenance tax, and making further provisions related to same.