HB2389: Special Purpose Agreements & Targeted Sales Tax Investments

The quirky layers of local government taxation are revealed by HB 2389, like when you stick a fork in tiramisu as a kid and realize that lady fingers aren’t actual fingers.The City of Houston has statutory authority to enter into contracts with special purpose districts, like MUDs. These contracts allow:

• The City of Houston can levy a 1% sales tax outside the city limits
• In exchange, the City will not annex the area for 30 years

There are as may as 200 of these contracts that generate revenue of $100M per year. 

HB2389 would require 1/2 of the sales tax collected in these areas under these contracts, must be spent on projects within 5 miles of the special purpose district’s boundaries. 

Opponents say:

• An agreement is an agreement (City of Houston)
• This is a way for Counties to get a piece of the revenue pie

Supporters Say:

• Citizens who live outside special purpose districts are hit with higher sales taxes when they shop in these areas (Ft. Bend Commissioner Meyers)

Houston Chronicle