Citizens Should Track Streams of Influence in City Politics, Part 1

Note: Using influence within the law is not wrong. Using money to affect politics within the law is not wrong. Using our taxpayer dollars to help certain people and businesses without transparent or fair processes is a murky mess that should be avoided at all costs. 

Useful websites, like OpenSecrets.org, track federal-level campaign contributions to federal candidates. Political action committee (PAC) donations, lobbying group donations, and dark money donations meant to influence politicians should be out in the open. Most people want to know who is donating to whom and whether those donations could be leading to any paybacks that include beneficial legislation, government contracts, public/private partnerships, or other tangible rewards. We want to know—and we should want to know—if our federal dollars are benefiting certain people over others. 

Why do we suddenly stop wanting to track streams of influence in our own cities? Or worse, why do some get offended if questions are even asked about who is influencing whom and to what end? Is it less polite to want transparency closer to home because people we know might start to get uncomfortable or offended? 

Below is an illustration of how campaign contributions and connections among various people, politicians, and groups could lead to, at the very least, problematic optics. 

Tupps is a small brewery that has been open for business for five years in McKinney, Texas. At the time of their most recent application to the local community development corporation in July of 2020, Tupps had about 18 full-time employees and 20 part-time employees that were self-reported on their application. So far in our illustration, Tupps looks like any struggling five-year-old small business. 

 

What makes Tupps a perfect case study right now is because of all the questions about the deal and all the defensiveness as to why there would even be questions. It could also be because it is city council election time. These sorts of disagreements generally bubble up at these moments. 

In the span of five short years, Tupps has benefited from multiple city funding opportunities that other small businesses most probably have not gotten: 

• $27,000 loan and forgiveness if they hire 11 full time workers. This deal was from the McKinney Economic Development Corporation (MEDC) using sales tax dollars. Contract was signed in November of 2014. See here for info 
  
  
• $20,000 loan and forgiveness if they hire 6-8 full time workers. Again, this deal was from the MEDC. Contract was signed July of 2015. See here for info
  
  
• $600,000 loan and forgiveness from the MEDC for equipment in 2020 paired with a larger incentive listed below 
  
  
• $11.3 million lease with option to buy deal with the McKinney Community Development Corporation (MCDC), funded with our sales tax dollars, to relocate and build a very expensive brewery center with no parking lot (see next incentive below) on land the city bought in 2019 (so they could most likely sell it to the MCDC for this deal). Tupps is not required to put any of its own money into this deal. Tupps is only required to create around 5 full time jobs by the end of the forty year lease. Since the land is owned by the MCDC, there will be no property tax revenue. See here for info
  
  
• ~$3.5 million from the Tax Increment Reinvestment Zone #1 (TIRZ#1) so the city could use its eminent domain powers to take away affordable housing and pay for the relocation of the low-income occupants. This was done so Tupps could have a parking lot. Look in the plans for Tupps, there is no parking lot on the site plan. See here, here, and here  

How many other incubating businesses have gotten this kind of long-term monetary hand-holding from the city of McKinney? If not, why not? 

Tupps, it turns out, is well-connected. Three of the board members of Tupps are prominent business owners and residents of McKinney. We do not know how long they have been board members or how much of a stake they have in Tupps because the MCDC does not require those sorts of relevant details in their application packets. 

If any city is giving a business large amounts of citizen money and is going into a long-term lease agreement with them, the board members of the business, how long they have been on the board, and what their stake and/or investment is in the business should be a mandatory part of the application process. 

Those three board members are also members of municipal PAC that has been in operation for as long as Tupps has had its doors open—since 2015. Their PAC, the McKinney Team, is focused on endorsing city council candidates and school board elections. 

To be continued in part 2

TIRZ #1 Funds to Pay for TUPPS Parking Lot?

On January 5th, 2021, the city of McKinney, City Council, and the TIRZ #1 board (made up mostly of City Council members) will most likely approve the use of nearly half of TIRZ #1 available funds for the new TUPPS brewery parking lot--$3.5 million dollars of the $6.8 million dollar TIRZ #1 fund balance. 

It has taken nearly ten years for the TIRZ #1 to amass its current balance minus paying administration fees and helping to pay for smaller downtown business repairs, etc.  Is a parking lot for a brewery (please see the trailer park eminent domain action here) worth it? Several other major city-led economic development deals didn't use TIRZ #1 funding that should have, like the downtown parking garage and the apartments/shopping with city garage parking underground. 

Here is the cost breakdown from the legislative text:

FINANCIAL SUMMARY: · The City is requesting up to $3,500,000 in TIRZ funds for the East Louisiana Parking Project. These funds will cover the following costs: 

• o Property Purchase - Approximately $1,900,000 
• o Relocation Expenses - Estimated $500,000 
• o Parking Lot Design - Estimated $115,000 
• o Parking Lot Construction - Estimated $985,000 

· TIRZ #1 Fund Balance - 

• o The TIRZ #1 Fund currently has a balance of $6.8 million

Here's the plan for the east side of downtown including the very expensive parking lot:

McKinney’s Airport/Downtown Reality

City of McKinney 2019 Community Opinion Survey regarding commercial airport flights

The results of the 2019 National Citizen Survey for McKinney and city Budget Survey show that citizen opinion on the airport is conflicted. However, the new City Council goals for 2019 show the airport continues to stay as a top 5 priorities. This means more and more money will be put into the airport. 

In the annual Budget survey on the city of McKinney's website, the airport has been listed as the bottom priority of 10 priorities for at least the past two years. For the 2019 National Citizen Survey, 48% of paper survey respondents and 38% of online respondents strongly favor offering commercial airline services in McKinney (out of about 340 who actually responded). About 70% of those who support commercial service would be fine with low-budget carriers like Spirit or Frontier (see p. 27 of the opinion survey). Maybe those who support commercial airline services believe we would all benefit financially from such an arrangement. 

The complex revenue bubbles (TIRZ traps) the airport, downtown, and their surrounding areas are under mean that the general fund will not see the tangible results of any success in any of those areas past the low amounts the general fund already gets each year as long as the two TIRZ remain in place:

• No matter how successful the downtown TIRZ #1 area gets, that area will only give the general fund about $2.6M in sales, use, and property taxes a year maximum.
• No matter how business explodes, the airport TIRZ #2 area will only give the general fund about $1.2M in sales, use, and property taxes a year maximum.

TIRZ1 & TIRZ2 on the right and left of Hwy 5

The rest of the profits in the downtown and airport areas stay in their TIRZ funds to be used only on their respective TIRZ areas for very specific projects (not for things like fire, police, or other city services). The TIRZ funds are controlled by appointed City Council members and representatives of the county and ISD.

Let’s say that the McKinney airport starts commercial low-budget flight services and commercial business multiplies in the industrial zones located all around the airport. One would think that our dreams of a higher commercial tax base that could lower our residential property tax burden would be realized. One would think that the whole city would directly benefit from successful downtown and airport areas. Unfortunately, the rest of the city will only benefit indirectly, if anything. Maybe more people rent apartments or go to the grocery stores outside of the TIRZ areas. Maybe there is a prestige that makes people feel good.

For more, click here.

Parking Garage Funding and the Downtown Vision

Because of the downtown garage bond failure in 2015, the city cannot take out loans or bond for a garage for 3 years. When a developer offered to carry the loan, build the garage, and take a profit from it, the City jumped at the offer. Last April, City Council voted to approve Option C for the garage because it wouldn’t require the closing of Herndon. The old City Council thought it would negatively impact Thomason Tire which uses Herndon as part of its business too much.

Since a majority of downtown’s sales tax and property tax earnings are put into the TIRZ #1 instead of going into the general fund, the monetary success of downtown is largely kept downtown. Every year, no matter how successful downtown is, the rest of the city only get the base amounts from 2010 which were not very high: property tax of about $1,223,602 and sales tax of about $1,396,598.

All the property and sales tax made over those base amounts is put into the TIRZ #1 to be used on TIRZ #1 improvement projects alone, like a parking garage. The TIRZ #1 will last until 2040, unless it is reauthorized for longer. See below for the TIRZ #1 balances.

The cost of Option C (not closing Herndon) was $7.5M. The rough funding structure of Option C was that TIRZ #1 would pay $3M and the other $4.5M would come from the general fund. The general fund would pay the majority.

The new plan of Option Herndon Closing would cost $1.23M more for about 100 extra parking spots for a total of $8.73M. Where is the additional funding coming from? 

If the additional costs come out of our general fund balances—which was suggested at the 9/5 City Council meeting—TIRZ #1 might still only pay $3M, while the general fund would pay the balance of $5.73M.

Why doesn’t the City or City Council want to use more of the TIRZ #1 money for a parking garage that will clearly help the TIRZ #1 area revitalize? They want to keep a lot of the funding for the Highway 5 project. However, those plans continue to be on hold because TxDOT might extend SH 121 in a way that would impact Highway 5.

The Highway 5 revitalization plans are in the Town Center Study and TxDOT’s State Highway 5 Corridor Master Plan of 2014.

If you look at the picture below, this is the Town Center Illustrative Vision for downtown from 2014. Note that Herndon is not closed in this vision. However, there’s no Thomason Tire or any of the old businesses on Highway 5. There are just a lot of brown “Lofts/Office Over Retail.” The highlighted street is Herndon. Thomason Tire and the location of the garage are circled in light blue.