Arlington voters have the opportunity to approve a city sales tax increase on this year’s election ballot.
The sales and use tax special election, titled City of Arlington Proposition A, is for the increase of the current 8% sales tax to 8.25%. Texas allows up to 2% local sales and uses tax above the state rate of 6.25%. Arlington currently has 0.25% of local sales tax capacity available.
Mayor Jeff Williams said if approved, the increase will be directed to small businesses to help them expand and to attract more businesses to the city.
Arlington is the only one out of the ten largest surrounding area cities to not have an 8.25% sales tax. While cities such as Plano and Frisco have extra funds to grow small businesses, Arlington doesn’t, Williams said.
Originally discussed in a city planning session October 2019, the increase means the average consumer would pay $41.25 in sales tax on $500 of taxable goods. This is $1.25 more than the current rate.
In the recently approved 2021 fiscal year budget, the general fund’s revenues and transfers are projected at $249,092,627. The sales tax rate makes up 1% of the general fund.
Overall, sales tax revenue for the 2021 fiscal year is estimated at $60,942,107.
The 1% general fund sales tax revenue is currently divided in three parts: 0.5% is allocated for sports and community venues, 0.25% for street maintenance and 0.25% is unallocated, according to a sales and use tax special election presentation.
Projects undertaken with the sales tax increase would be authorized under Chapter 505 of the Texas Local Government Code, according to the sample ballot.
Arlington resident Jennifer Hurley said she and her husband are always leery when it comes to new taxes. After digging into what Chapter 505 would mean for the city, Hurley found the project authorization given by a sales tax increase could be problematic.
Chapter 505 grants the creation of a Type B corporation which, working with an economic development program, can carry out industrial development projects, according to section 505.102 of the Local Government Code.
A Type B corporation can also exercise the power of eminent domain with approval of the municipality’s governing body, according to section 505.105.
Hurley said this power of eminent domain paired with an unelected creation of the Type B corporation is concerning for historic homes in Arlington.
Eminent domain may not be used for taking private property for economic purposes unless the development is a secondary purpose to eliminate an existing affirmative harm on society from slum or blighted areas, according to section 2206.001 in the Texas Government Code.
Williams said there was no truth to the claim that the economic development program would use the funds for eminent domain.
The City Council would have to approve any action taken by the economic development program, he said.
Arlington resident Andy Prior has been vocal in his opposition to the sales tax increase since it was first proposed for the May ballot at the beginning of the year.
Prior, who is a financial adviser, said he spoke up at a City Council meeting in February, advising against a sales tax increase designated for an economic development program and the Type B corporation. At the time, he said the money should be used as the city’s safety net and designating it for economic development would take that away.
Now, with the impact of the COVID-19 pandemic on the economy, Prior said he doesn’t think it’s the time to raise taxes. The proposal is too vague and doesn’t specify what projects the money would be used for, he said.
Because the increase would be designated for an economic development program and the Type B corporation, Prior said the increase isn’t intended to help the city’s budget.
“If this sales tax increase was going to the general fund to make up for a deficit, then we could have that conversation,” he said. “None of this money whatsoever is going to help make up the hole in the city’s budget.”
While the sales tax increase wouldn’t fill a deficit in the general fund, it would go toward helping grow small businesses. By investing in small businesses with the extra funds, the city will bring in more money that can help lower property taxes, Williams said.
With the impact of the COVID-19 pandemic, the need to help small businesses with the extra funds has only been reinforced, he said.
“Small businesses don’t have the reserve that a lot of the larger businesses have,” Williams said. “[The pandemic] has increased the need for this sales tax.”