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Back into your pocket: Local sales tax helps cities pay for services, transit, economic development
By Conner Hammett, chammett@starlocalnews.com
It is not a secret that most purchases in the state of Texas are subject to an 8.25 percent sales tax rate. But a lesser-told story is exactly how those tax dollars are spent on the local level.
Sales tax is collected by retailers and service providers from customers at the time of purchase. The merchant then sends this money to the state, where 6.25 percent of every dollar is kept for the state's general fund. These funds pay for state roads, education and public services.
Up to 2 percent of the rate is sent from the state to local taxing entities, which can include cities, counties and special-purpose districts. Most cities levy at least 1 percent in sales tax for their general funds, which are used to pay for police, fire service, roads, parks and libraries.
In 1983, Plano was one of the first 14 cities to approve an additional 1 cent of its sales tax rate to help fund DART service.
Plano Mayor Phil Dyer credits the city buying into DART - and the subsequent establishment of a DART rail station in Downtown Plano - as a large component of the city's downtown revitalization, which has brought dozens of retailers, restaurants and upscale housing developments to the area over the past decade.
"I think it's also been a great statement to the corporate world that Plano does recognize that transportation is a big issue and we are a regional player and a regional partner in this," he said of the city's involvement with DART. "... I think that's helped to attract businesses not only downtown, but around the city, because I think being that kind of a community, that [it] is a regional partner on these big, big issues, sends a great message to companies that are looking to relocate."
When the city of Allen chose to ask voters for a similar increase sales tax in 1998, it took a different approach. Half of the additional 1 cent funds the Allen Economic Development Corporation, while the other half funds the Community Development Corporation.
The Economic Development Corporation helps recruit new businesses, offering incentive packages to corporations and other job creators in exchange for relocating in the city. The Community Development Corporation provides additional funding to public projects not covered by normal capital funds, such as parks amenities.
Both the EDC and CDC have been instrumental in the city's tremendous growth rate over the past decade, said City Manager Peter Vargas.
"I think it's had a very positive impact, because if you look at the businesses that are located in Allen, many of those are recruited here through the efforts of EDC as well as the city," Vargas said, "and if you look at the amenities we have in this community, a lot of those can be directly attributed to the community development corporation."
The revenue that funds such public benefits comes from one place, Dyer said - everyday people spending money in their own cities.
"Every dollar that is spent in Plano that throws sales tax into that fund just helps us deliver great quality services and helps us to keep the property tax rate low," Dyer said. "... Obviously we're a relatively affluent community, so the retail sector wants to be here. We want to be a place that's an easy place for retailers to do business."
For information on local businesses in the city of Allen, visit the Allen-Fairview Chamber of Commerce website at www.allenchamber.com.
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