Denton City Council members on Tuesday adopted an economic development plan that focuses on regional collaboration, growth, infrastructure, technology and sustainability.
“We began this process in February 2019,” said Jessica Rogers, director of the city’s economic development department. “We’ve had lots of roundtables, interviews and discussions. We’re really happy about where we’ve ended up.”
How to grow Denton through economic development has been an issue for years with the Denton City Council, particularly because this city is one of the fastest growing in America, according to research.
City Manager Todd Hileman said Denton has to compete with other cities that have economic development corporations.
“There are cities out there with 4Bs that are very desperate,” Hileman said. “They make decisions for different reasons than we do.”
What Denton can offer hinges on its revenue sources for economic development. It does not have a Type A or Type B economic development corporation, meaning it does not receive sales tax revenue to fund certain types of business projects. It is considered an important distinction in economic development because those corporations receive a portion of a city’s sales tax revenue to help fund business attraction.
According to the state comptroller’s office, Type A corporations fund industrial development projects such as business infrastructure, manufacturing and research and development. They also may fund military base realignment, public transportation and job-training classes. Type B corporations can do the same, in addition to spending money on parks, sports facilities, museums and affordable housing.
“Do we have a deal that we can support?” Hileman said. “It’s not quite as linear as you would think. It may be completely irrational to you, but to [the prospective business] it’s completely normal. We play those up as best we can. We don’t often know what we’re negotiating against.”
City Council member Paul Meltzer asked about the process of determining what Denton’s competitors are doing.
“Our goal is to move away from that concept,” Rogers said. “It’s really about making sure the projects we are incentivizing match” the policies of the city.
In Denton, the half-cent sales tax that state law allows to be used for economic development was appropriated by residents in 2004 for the Denton County Transportation Authority. That leaves the city with few options for funding projects.
The state sales tax rate is 6.25%. In Denton, the local rate is 2%, for a total sales tax paid by consumers of 8.25%. Of the city’s portion of 2 cents per taxable dollar, a half-cent of the revenue is allocated for DCTA. One cent goes into the general fund for operations, and the other half-cent is used for property tax relief.
According to city consultant TPI, the neighboring cities of Allen, Coppell, Flower Mound, Frisco, Grapevine, Lewisville, McKinney and Southlake have 4A or 4B corporations, totaling $187 million in revenue.
In Denton, officials may also use the city’s revenue from return on investment (ROI) from the utility fund and the general fund. According to the city, the ROI for the Electric Fund was increased from 3.5% to 6% through 2021-22.
The city’s 2020-21 budget projects more than $4.2 million in economic development revenue. Its total budget is about $1.4 billion, which includes a projection of more than $36.4 million in sales tax revenue in 2020-21.
Sales tax revenue accounts for 30% of the city’s budget.
In municipal government, incentives offered to a business could be anything from sales tax rebates afforded through Chapter 380 agreements to land acquisition. And in economic development, incentives are a competitive proposition.
In Denton, incentives include reducing property taxes for a set period if recipients meet criteria; sales tax rebates and job grants (Chapter 380 agreements) based on performance, job creation and city policy; infrastructure assistance to lessen the cost of water or wastewater improvements, and reinvestment and improvement zones.
According to the TPI study, the biggest threats to Denton are growth in neighboring cities, higher wages in other parts of the Dallas-Fort Worth area and outmigration of talent.