De Leon Industrial Development Corporation Inc.
Overview of a Type A Corporation
- The City governing body and Board of the IDC oversee the Type A Corporation.
- The IDC Board is made up of five (5) members with no statutory criteria for selection.
- It is required to have the approval from the City governing body for all projects, passing the budget, amending the budget and approving the end-of-year expenditures.
- The Board is subject to the Texas Open Meetings Act and the Texas Public Information Act.
II. Differences of Type A and B Corporations and MDDs
The De Leon Industrial Development Corporation is a Type A Corporation.
A: Types of projects permitted are more restrictive – manufacturing and industrial activity primarily, with limited ability to assist retail. Type A corporation can fund Type B projects if authorized by election.
B: Can do everything a Type A can do, plus fund community development initiatives: sports facilities, parks, entertainment and tourist facilities; events; affordable housing, and retail businesses.
MDD(Municipal Development District): Often referred to as a “Super B”; can do everything a Type A and B can do, plus convention centers or related facilities. Not a corporation, but a political subdivision of the State.
Please see the attached comparison of Type A, Type B and MDD economic development entities.
III. Local Implementation
- Type A sales and use tax of .25 % approved by voters on May 3rd, 2003.
- Adopted by Council on May 8th, 2003.
- Resolution was passed on April 8th, 2003 providing the creation of the IDC Board, approved the Articles of Incorporation and named the initial Board.
- Board’s first meeting and election of officers was April 8th, 2003.
- Board meets once a month, on the 3rd Wednesday of the month unless otherwise determined by the board.
IV. Powers and Duties
- Generally has all powers and duties of a non-profit corporation except to extent are limited by or inconsistent with the Economic Development Corporation act.
- To undertake any lawful action not inconsistent with the Act.
- Shall undertake the promotion and development of industrial and manufacturing enterprises.
- To contract and be contracted with.
- To purchase, lease, sell and mortgage real estate.
- To issue obligations for or otherwise finance all or part of the cost of one or more projects defined under the Act.
- May exercise all powers granted under the Act consistent with its Articles of Incorporation, the By-Laws and the resolutions, orders and ordinances of the City Council.
- Receive Type A funds and funds under Chapter 380.002(b) & (c) of the Local Government Code.
- Acquire, construct, improve, maintain, equip and furnish projects.
- Sell, lease and make secured or unsecured loans.
- When selling, not subject to bidding requirements of the Local Government Code but must receive fair market value for the property unless an incentive is provided.
- Grant lessee option to purchase.
- Donate, exchange, convey, sell or lease real or personal property to an institution of higher education.
- Issue bonds to defray all or part of cost of project; specific requirements.
- Mortgage or pledge any or all of its projects.
- Sue or be sued in corporate name.
- Have a current registered agent and said agent must be on file at the Secretary of States’s office.
- Have corporate seal.
- Make and alter by-laws consistent with law and Articles of Incorporation, with approval of City Council.
- Cease activity and terminate existence by dissolution if approved by the majority of the voters voting in the election to terminate the existence of the IDC.
- Expend proceeds of the Economic Development Tax for purpose authorized by statute, costs of which can be made to include the following:
- Targeted infrastructure: cost of acquisition, construction, improvement and expansion of land and buildings. Includes but not limited to paving or paying for local advertisement of the business. b. Machinery and supplies: the cost of machinery, equipment, inventory, raw materials and supplies.
- Financial transaction costs: cost of financing charges, interest prior to and during construction and necessary reserve funds.
- Planning costs: cost of research and development, legal services, development of plans and specifications, surveys and cost estimates; and other expenses necessary or incident to determining.
- Cleanup costs: the cost of cleaning up contaminated property ONLY IF approved by voters; statutory wording for ballot.
- All such expenditures must be part of an approved project or for promotional expenses.
- Project is defined as follows:
- Manufacturing and industrial facilities.
- Can expend funds for administrative expenses necessary to put a project into operation.
- Can expend funds for administration of the EDI – staff and EDI operation overhead.
- Can expend funds for required training for Economic Development Officials.
- Can contract with other entities for provision of services or to carry out projects.
- Can obtain health insurance, liability coverage, workers comp coverage, property insurance coverage for directors and employees through City; City must properly be reimbursed.
- Not subject to competitive bidding requirements; may use reverse auction procedure for purchasing or any other lawful method.
- Enforce agreements or mortgages.
- Expend funds except as authorized by statute; must be associated w/project or for promotional expenses.
- Expend funds for maintenance and operating expenses of an ongoing project.
- Own or operate any project as a business except as lessor, seller or lender (is an exception related to closed military facilities)
- Receive anything of value from City other than designated funds or funds granted to the IDC under a Chapter 380 Agreement, w/o reimbursing City.
- Exercise power of eminent domain except via action of the City Council.
VI. Accounting and Auditing
- Non-Profit Corporation Act accounting and fiscal responsibility provisions apply.
- Corporation By-Laws require keeping records of account and for an annual financial audit.
- Statute requires:
- Annual report to State Comptroller’s office by February 1st each year; form and content specified in statute.
- Regular reporting to City (Sections 21 and 23).
- Annual Franchise Tax No Tax Due Report to the State Comptroller’s office by May 15th of every year.
- Annual “Year Ending Financial Report” to City Council with annual budget approval.
1. Chapter 502.101, Title 12 of the Local Government Code provides that once in every 24 month period the following persons shall attend a training seminar regarding the operation of a corporation: a. The Municipal Attorney, City Administrator or City Clerk (City Secretary is the legal definition of City Clerk) b. The corporation's executive director or other person responsible for the corporation's daily administration.2. Due to the fact that an Economic Development Corporation is subject to the Open Meetings Act, the act’s training requirements also apply to the Corporation. After being sworn in, every member of the Board is required to take the Attorney General’s online training for Texas Open Meetings Act and Texas Public Information Act, except if the City designates the City Secretary as the records custodian for the IDC and the City Secretary takes the course then the requirement to take the training for the Texas Public Information Act may be relieved. This applies to re-appointed officials as well – not just newly-appointed officials. However, once the official has taken the course, the official does not have to retake the course upon reappointment.
IX. Oversight by City Council
- Appointment powers:
- Discussed above, “…serve at the pleasure of the governing body.”
- Approval of projects;
Section 21 of DCA requires that the City governing body:
- Approve all programs and expenditures of the EDI.
- Review financial statements of the corporation annually.
- Access to books and records:
Section 21 of the DCA requires that the City shall annually review financial statements of the corporation and will have access to the books and records of the EDI at all times.