AUBREY — Officials in Aubrey are asking voters in May to expand the city’s sales tax collection beyond the city limits by using a tool few municipalities are using to collect revenue from future development.
The city is looking to dissolve its economic development commission and form a municipal development district, or MDD, which allows the city to collect sales and use tax to be used to construct various development projects.
Aubrey voters will have the chance to decide on whether a district should be created in the upcoming May 10 election.
The districts, which are rare in Texas and fairly new to Denton County, can collect sales and use tax within the city and its extraterritorial jurisdiction boundaries.
“Essentially, we’ll be expanding our sales tax collection to the [extraterritorial jurisdiction] and expanding our ability to help with economic development projects out into the [extraterritorial jurisdiction] as well,” Aubrey city planner Chantel Kirkland said.
There are currently only 24 MDDs in Texas and four in Denton County, according to the state comptroller’s office.
Cross Roads was the latest Denton County municipality to create an MDD, with residents voting 122-66 to approve the district in May. Other MDDs in Denton County have been approved by Lakewood Village, Corral City and Oak Point municipal development districts.
If approved, Aubrey’s district would become the fifth MDD in the county.
Each district has a sales tax rate of a quarter-percent, the collections from which can be used to construct convention centers, parking lots and infrastructure. It can also be used to purchase land or equipment and make improvements that are for the creation or retention jobs.
An MDD is an economic development tool for cities that is similar to economic development and community development corporations, Kirkland said.
“The major difference being that MDDs can be applied to a city’s extraterritorial jurisdiction,” Kirkland said. “So, basically, that’s what we’re looking at doing, potentially terminating our [economic development corporation] and forming an MDD, which applies to both our city limits and our [extraterritorial jurisdiction].”
Kirkland said the city doesn’t have any estimates yet on how much the district would generate because the MDD will include areas that have little or no commercial development.
“The impact now won’t be significant,” she said. “It’s the future we’re trying to get ready for.”
Local officials in Aubrey and in nearby cities anticipate that areas along U.S. highways 377 and 380 will experience growth soon spurred by the plans of commercial and residential developers to build large developments along those highways.
If approved by voters, the Aubrey City Council would appoint at least four directors to serve two-year, staggered terms.
The board would then establish a development project fund, according to the state’s Local Government Code.
According to the Local Government Code, an MDD is authorized to impose a sales and use tax but not a property tax. The district also has the power to issue revenue bonds and refunding bonds.
The MDD created by Cross Roads will generate about $150,000 this fiscal year, and officials are hoping it will continue to grow, Cross Roads Mayor Steve Smith said.
Roadway construction, sewer infrastructure and public safety are a few areas in which the city plans to improve by using revenue from the MDD.
“The improvements will help us attract and support new commercial developments, which mean additional growth and revenue for the city,” Smith said. “The district is a great tool because it means we can take on projects without taking on debt.”
The MDD is one type of district that some municipalities have begun to explore, but there are others. In Pilot Point, city officials have begun talks to possibly pursue a similar taxing district to capitalize on developments that are expecting to sprawl near the city.
“It’s a new concept and districts can be beneficial to area cities,” Smith said. “We decided to pursue the MDD because we felt it was the best choice for us.”
JOHN D. HARDEN can be reached at 940-566-6882 and via Twitter at @Jdharden.