A month ago I wrote about a versatile Public Development Financing program, Texas Public Improvement Districts. In this blog I will discuss the two different types of PIDs allowed under Texas law. Under Chapter 372 of the Texas Local Government Code, the State of Texas allows for the creation of Public Improvement Districts (PID). As discussed in a earlier blog, PIDs are a flexible way for cities and counties to fund new infrastructure projects, repair existing infrastructure, revitalize an economically depressed area or incentivise industry and commerce to develop or revitalize an area. Chapter 372 contemplates the creation of two types of PIDs — Subchapter A and Subchapter C PIDs.
Subchapter A Public Improvement Districts
Subchapter A Public Improvement Districts generates the money need for public improvements through assessments. An assessment is a fee on the property inside the public improvement district used to pay for the improvements built within the district. The assessment may be apportioned in the following manner:
1. Equally per front foot or square foot;
2. According to the value of the property as determined by the governing body, with or without regard to improvements on the property; or
3. In any other manner that results in imposing equal shares of the cost on property similarly benefited. (Sec.372.015)
Subchapter A PIDs can provide all the improvements listed in the previous blog either on a “pay as you go” basis or by issuing “General Obligation and Revenue Bonds”. Bonds under Subchapter A are secured:
1. Income generated from the improvements financed under Subchapter A
2. Mortgages or deeds of trust on any real property purchased under Subchapter A or chattel mortgages, liens or security interest on any personal property appurtenant to the real property.
3. Grants, donations, revenue, or income received or to be received from the government of the United States or any other private or public source
An advisory board that develops and recommends an improvement plan to the governing body of the city or county governs Subchapter A PIDs. The board is advisory in nature and has no additional powers. The powers rest with the County or City elected officials to the extent that they may disagree with the advisory board. However, the advisory board must be made up of individuals or their agents who reside or own property within the boundaries of the PID.
SubchapterC Public Improvment Districts
Subchapter C Public Improvement Districts can only be created by counties and only in counties with a population of 825,000 or more. The Subchapter C PID was create for one specific project — the San Antonio PGA village, although other developers have requested that Bexar County and San Antonio approve similar Subchapter C PIDs for other areas, no others have been approved.
Subchapter C PIDs may be governed by a board of directors appointed by the county and have the powers and duties allowed under the statute.
Subchapter C PIDs can provide all the improvements listed in the previous blog either on a “pay as you go” basis or by issuing “Bonds”. Bonds under Subchapter C are secured:
- Income generated by assessments
- Income generated by any ad valorem, sales and use, or hotel occupancy tax
- Special fees, rental, or other revenue sources of the district
Subchapter C PID Board of Directors has the powers and duties:
1. County development districts under Chapter 383, except for Section 383.066
2. Road districts created by a county under Section 52, Article III, Texas Constitutions; and
3. Municipality or county under Chapter 380 and 381, or under Section 372.003(b)(9)
4. If consented by the municipality and county by resolution, delegate the powers to the board of road districts and to provide water, wastewater, or drainage facilities
5. Enter into development agreements
6. Enter into Economic Development Agreements by election of those in the district
7. Enter into contracts with any person, including the municipality or county
8. Create rules of enforcement
a. To administer and operate the district
b. For the use, enjoyment, availability, protection, security, and maintenance of district property
c. To provide for public safety and security
9. Establish fees for rental of district facilities
10. Establish rules for use of public roadways, open spaces, parks, sidewalks
11. Construct roads according to the construction standards, zoning and subdivision requirements of the municipality in whose corporate limits or extraterritorial jurisdiction the district is located.
12. Provide reimbursement to public utility for relocation, removal, extension, or other adjustment of utilities
13. District does not have eminent domain powers
14. District can not enter into tax abatements
15. With approval of commissioners’ court, a district can issue bonds. If the population is more that 1000 individuals in the district, bonds must be approved by a majority of the voters.
16. District can impose
b. Ad valorem tax, only with county approval and majority vote of voters in district
c. Sales and use tax, only with county approval and majority vote of voters in district
d. Hotel occupancy tax, only with county approval and majority vote of voters in district
Subchapter C PIDs are much more extensive and contain a greater number of funding sources for counties. However, they are currently available to Bexar County. Hopefully, in the 2009 Legislative Session, legislators from other counties can see the potential to provide economic growth in their communities and extend the use of these Subchapter C PIDs to other counties that can benefit from the available funding source for infrastructure development.