This week’s meeting in Port Acres was about drainage and flooding, but Port Arthur’s mayor also floated a new idea for increasing city tax revenue.

Mayor Derrick Freeman made passing reference to creation of a Municipal Development District to generate sales tax revenue from petrochemical companies located in Port Arthur’s extra territorial jurisdiction.

To create such a district, the city would have to call an election. The district boundaries would also need to be detailed. The city could not collect sales taxes in that area without establishing a Municipal Development District.

Freeman made the comment Tuesday night during a heated meeting about drainage and flooding with Port Acres residents. That neighborhood has sustained flooding twice since August.

“With this (MDD), we can finally do something about it,” Freeman said. “We need it because there’s no sales tax from refineries in the city of Port Arthur.”

He said some cities in Texas — Port Arthur is one — have only an economic development corporation to encourage development but not an MDD. Some cities have both.

Operating with just an EDC, the city can’t collect any sales tax from refineries outside the city limits without an MDD.

In December, the city was discussing Industrial District Agreements (IDA) with the following companies in their Extra Territorial Jurisdiction (ETJ) that could be affected: BASF Total Petrochemicals LLC, Total Petrochemicals & Refining USA, Inc.; BASF Corporation; Chevron Phillips Chemical Company LP; Chevron USA, Inc.; Flint Hills Resources Port Arthur; Praxair, Inc. (Motiva location); Praxair, Inc. (Valero location); Total Petrochemicals & Refining USA, Inc. and Total Par, LLC; Oxbow Calcining, LLC; The Premcor Refining Group, Inc. and GT Logistics LLC and Golden Triangle Properties.

An IDA is a partnership between the city and major industries that are in the Extra Territorial Jurisdiction of the city. Unless an IDA is made, the city will receive no property taxes from the industries.

“This is the only tool the city can use to receive sales tax from the ETJ Freeman said. “Our EDC is restricted to 4A economic activities — only incentives such as industrial warehousing or for jobs.”

An MDD, however, would generate tax dollars to bolster neighborhoods such as Port Acres that need infrastructure, such as drainage improvements. Even if Port Arthur became a 4B EDC, it would only allow the city to do projects such as perhaps build a new civic center or incentivize a retail operation in the area.

“It opens up funds,” he said.

Voters would have the ultimate say on an MDD. Freeman isn’t sure if there’s enough time to place that proposition on the May 2018 ballot, but perhaps it could be placed on the November 2018 ballot.

“It could get on there sooner or later,” he said. “I think it would pass. We would have to create a board for a nonprofit operation and create a budget, too.

“We want to do things other cities are doing right. We don’t have to reinvent the wheel.”

For example, he cited the city of Baytown, which has an MDD and is a growing city. Baytown, which has a population of about 80,000, also has budgeted several millions of dollars for its MDD.

Port Arthur could set a sales tax rate at one-eighth, one-fourth, three-eighths, or one-half of 1 percent of the cost of goods sold within the MDD that are subject to sales tax, according to the Texas Municipal League. The combined rate of all local sales taxes within the district, however, may not exceed 2 percent.

Whatever the rate would be, Freeman said there would be no tax increase for residents if they adopt the same rate as the Port Arthur EDC’s half-cent rate. There would be a tax increase, though, if one-eighth were added to the half-cent.

“We would be enlarging our area to get sales tax,” he said.

Bill McCoy, president of the Greater Port Arthur Chamber of Commerce, said he didn’t have much familiarity with MDDs, but said, “The city lives off of industry,” with $35 million of its $60 million annual budget coming from them. He added that the mayor’s plan presents a way for industry to pay for water and sewer problems in other areas of the city.

“There has been no meeting on this (implementing MDDs). Industry hasn’t mentioned it to me,” he said. “It’s a way to get more taxes. The president cut taxes and there are a lot of things going on. More taxes means less money for workers and less profits.”

McCoy thinks voters would pass MDDs if the issue was placed on the ballot and citizens within Port Arthur would support taxing people outside of the voting district.

“Citizens are willing to pass a tax as long as it’s not on them,” he said. “We have a lot of money already, but we don’t properly spend it. We need to plan correctly.”