The Huntsville City Council is considering an ordinance establishing a formal policy to grant Chapter 380 incentives to attract new businesses to Huntsville.

Council discussed the proposed ordinance at its first reading Tuesday night during its regular session.

Chapter 380 of the Texas Local Government Code allows cities to offer incentives — such as grants, loans, the donation of in-kind city services and sales tax rebates — to promote economic development. Chapter 380 programs must benefit the public by stimulating the local economy. Those benefits include an increase in the city’s tax base and lower unemployment rates through creation of additional jobs.

City Manager Bill Baine characterized the proposed ordinance as a “straw man” designed to prompt discussion of a formal economic development mission and strategy and attendant ordinances. He acknowledged that the incentives that can be offered through a Chapter 380 program have been controversial among council members and city residents but said that the city’s legal counsel had advised setting up a formalized way in which the city would offer incentives for economic development.

“It’s important to start this journey of a thousand steps,” Baine said. After having been engaged in failed negotiations with hotels that were considering Huntsville, Baine said he told the mayor and the Walker County judge the city needed economic development tools.

“I’m not asking to replicate Conroe or give money away,” he said. “Each of you (council members)  will have a different idea about where the threshold (for the use of incentives) should be. That’s the reason we brought (the ordinance) to you... All I’m asking for is a hook to hang some beef on.”

A majority of council reacted favorably to the idea after being reassured by Aron Kulhavy, director of public works, that even with an ordinance in place, incentives would “not be set in stone,” and the council could consider entering into a Chapter 380 agreement on a case by case basis. Dissent or discomfort with the ordinance focused on either it was comprehensive or its value in realizing benefits to the community and existing businesses.

Mayor J. Turner recommended further study on the proposed ordinance, saying he wanted a clear correlation between the incentives and the value of the public benefit provided by the new businesses taking advantage of them. “It’s like looking at this with one eye open,” Turner said. “We need two parts to the equation.”

Council member Wayne Barrett agreed that the city needs “a comprehensive economic development policy and program,” and welcomed discussion on it, but, he said,  “I don’t think this is the best first step for a number of reasons.”

Barrett said he disagreed with a program weighted heavily with 380 incentives when such incentives should be “only one tool in our toolbox.”

“I’d like us to take a step back and address economic development in…ways that are more comprehensive than just 380 agreements,” he said.

Council member Jack Wagamon said the proposed ordinance would not give the city economic development tools that it didn’t already have. Wagamon also said he was concerned that such that 380 programs are not sufficiently set up with metrics to verify that the incentives a city offers actually yield the benefits in sales tax revenue increases and lower unemployment that they’re supposed to. It’s just as conceivable, he said, that incentives to new businesses harm existing businesses, a possible consequence the proposed ordinance does not address.  

“Maybe I’m the only conservative left here,” Wagamon said in arguing against “subsidies” to new business that “cannibalize existing businesses” and produce no real benefit to the public.

“You can’t have a one active slide-rule calculation of what our 380s are doing... If 380s worked, we would have alabaster cities undimmed by human tears,” Wagamon said. “...Sales tax incentives make for weak businesses, a weak country and a weak community.”

Council member Dr. Tom Cole immediately followed with: “ I think we should have a moratorium on the 380s until the depression we’re in eases. I’m very suspicious of these sales tax rebates, especially in current economic conditions.”

Council member Lydia Montgomery said she did not see that Chapter 380 programs posed any threat because the proposed ordinance would not obligate the city to offer incentives. “We’d be looking for something that would benefit Huntsville, Texas...It would just give us the tools to be more competitive...I don’t see it as a threat because we would have full control over it,” she said. “In my view, I see it as a positioning tool to move forward in the future.”

Barrett argued that the proposed ordinance doesn’t make Huntsville more competitive because “it doesn’t give us any more freedom than we already have.” The city needs to decide what categories of industry it wants to attract and its strategy for going after these industries, he said.

“I wouldn’t want to appear to be upset — because I’m not upset — or against economic development but this doesn’t get us going in the direction I think we should be going,” Barrett said. “But I’m ready to get going.”

Council member Don Johnson echoed Baine — “These are all good points, but what I’m hearing is the need to have some sort of motivation to get going...Let’s start the process.”

Council member Olson said he hadn’t yet heard from the discussion what the proposed ordinance would provide that the city doesn’t already have available to it. Olson also wanted “a concrete floor” on economic development — a benchmark to use in judging the growth associated with economic development efforts.

Baine responded that having an ordinance in place is a means of attracting interested companies in and of itself. When companies look around for a place to locate, “they look to see what ordinances you have in place in comparison with what other (cities) have.”

Olson replied, “In other words it’s a flashing sign that says, ‘Huntsville is open for business.’”

In other business Tuesday night, Baine gave the council an extensive summary of his goals for 2011 based in part on city staff assessment of risks the city will face in the coming year. Perhaps most notable is the aging condition of the Trinity River Authority plant, which provides surface water to the city, and 80-year-old water distribution infrastructure that needs to be replaced. Baine compared the TRA plant to an old car with 300,000 miles on it and said he was concerned about the potential for catastrophic failure of the plant.

Other issues are the need for street repairs, additional police and firefighters, restoration of Fire Station No. 2, construction of an additional ball field, among other issues.

The city budgeted flat revenues for fiscal year 2011, and necessary capital improvements will present challenges, he said. “We’ll have to fix it,” Baine said of the water distribution system that will need to be repaired “and you’ll have to give me the money.”

In other action, the council unanimously voted to renew the lease with Huntsville Aviation at the Huntsville Regional Airport at a savings of $10,000 over the 25-year life of the amended lease. A new hangar is being constructed on the property to replace aging structures. Council also did first readings of proposed ordinances that would create no-parking zones on 11th Street between Avenue J and University; 15th Street and Avenue I; and 16th Street and Sycamore — all for reasons of public safety.

Council approved the refinancing of various types of bonds for a combined gross savings of about $305,000.

The council approved the appointments of newly elected and existing council members to council committees. Wagamon and Olson will join Mayor pro tem Mac Woodward and Barrett on the finance committee. Montgomery, Johnson and council member James Fitch will join Cole on the personnel committee. Fitch will join Wagamon on the communications committee. Fitch also will be assigned to the public safety communications committee. Woodward, Olson and Turner will serve on a committee reviewing the council’s rules of procedure, pro forma after an election and at least a month-long process.

In an 8 to 1 vote, the council also agreed to waive fees for utility connections at a new facility for the Community Organization for Missionary Endeavor, known as COME. COME, located behind the senior center on Highway 75 North on land donated by Walker County, is the only local organization that provides local residents with utility payment assistance. There was little discussion by council about the request to waive utility connection fees. Baine, however, warned council members that they might be setting a precedence that the other 239 nonprofits in Huntsville will want to take advantage of.

“We have decided this (COME’s request) serves a public need and fits the guidelines we’ve established and that we deal with every year,” Woodward said.

Cole cast the dissenting vote.