In 20 years, the city of Tyler's half-cent sales tax has poured millions of dollars into the economy. It has funded large infrastructure projects, but its passage was not a landslide.
The tax was approved in November 1995 by a margin of 438 votes, with 4,466 voters in favor of the measure and 4,028 against it, according to the city. Proponents of the measure ran a full campaign for its approval.
"We had a hard-fought campaign," said state Sen. Kevin Eltife, who was serving on the city council in 1995. "I think we won 52 percent to 48 percent."
Tyler's half-cent sales tax is used exclusively to fund capital improvement projects. Voters approved the tax in November 1995. In its 20 years, the city has completed 106 projects for a total price tag of $188 million — all without issuing any bonded indebtedness to its residents.
Eltife led the fight for the tax passage, on the heels of a recently failed campaign by the Tyler Economic Development Council. The EDC's proposition to voters was to use the dollars as incentives for businesses to relocate to Tyler.
Eltife said after the campaign was voted down, he and other city leaders began looking at how to put the city on a "pay as you go" plan, and began running numbers on using the half cent tax purely for capital improvements. At the same time, they began streamlining city services and cutting costs.
"We put together a 15-year infrastructure plan for the city," Eltife said. "We (said, ‘here are) the future needs of the city. How do you want to pay for it? We have a plan to pay cash and not do anymore bond elections.'"
City council members then put together a contract pledging they would pay cash for improvements, decrease the property tax rate and take on no general obligation debt. The entire council signed it.
The Smith County Taxpayers Association actively campaigned against the increase.
"They were very vocal and against it," Eltife said. "We had debates in town — several debates. We ran a full-blown campaign, with campaign material. It was a tough campaign because we were trying to convince taxpayers to raise their taxes, but I think we have lived up to all of the promises we made."
The main opposition was on what the city would do with the money.
"The point at the time was, ‘when has any government said they will reduce your taxes and actually done it,'" said former mayor and city councilman Joey Seeber. "Those three things we pledged were tremendous. Think about $10 to $12 million to spend on public improvements, and at the same time reducing the property tax rate by 60 percent — that's unheard of."
Eltife was on his last council term when the sales tax increase passed in November of 1995. That following May, he was elected to his first term as mayor.
"I was leading the campaign and pushing hard to pass it," Eltife said. "People said, ‘this will hurt your ability to run for mayor. Residents will not pass a tax increase, and you'll be damaged politically.' I said, ‘I don't care about the politics. This is the right thing to do.'"
Eltife's first mayoral race was indeed centered on the half-cent sales tax.
Leo Berman, who moved to Tyler in 1990 and later became a longstanding Texas Representative, ran against Eltife. Ironically, the pair later became close friends and worked together in the Texas Legislature.
"I was against it initially," Berman said. "My reservation was making the people of Tyler pay an extra half cent for any product they bought. I didn't like raising any kind of tax."
Eltife defeated Berman at the polls. Twenty years later, Berman said the half-cent sales tax was a blessing for the city.
"It worked out to be an outstanding tool for Tyler," he said. "There is barely a city or state that can match our financial standing right now."
THE THREE PROMISES
When the half-cent sales tax was proposed, the city promised its residents three things: it would reduce the tax rate, eliminate general obligation debt and pay cash for future projects.
At the time of passage, Tyler was $30.15 million in debt with a tax rate of 53.36 cent per $100 of property valuation.
Seeber said the city simply kept making the scheduled payments on its debt until it was gone. Slowly, the separate bonds were paid off, knocking the tax rate down.
"We didn't set aside any extra funds, and as we paid them off we were able to reduce the tax rate," he said.
The city paid about $4 million a year on its debts until it became debt-free in 2008.
Then, Tyler officials threw a party at the Tyler Pounds Regional Airport, which was built using half-cent funds. City officials ceremoniously ripped up bank notes.
The maintenance and operations side of the city's tax rate also was decreased annually, in part from streamlining efforts within departments.
In 1995, the MNO portion of the tax rate was 34.907 cents per $100 valuation. The rate hit a low in 2008 at 19.6684 cents, and is currently 22 cents per $100 property valuation.
City leaders tout the tax rate is one of the lowest in the state.
"The half-cent sales tax has been instrumental in creating a positive business environment in Tyler," Mayor Martin Heines said. "By allowing us to pay off all of our tax-supported debt and pay cash for many infrastructure projects, we have been able to lower the tax rate by 60 percent, which is good for the taxpayer and attracts businesses to our community."
The city's total taxable value has increased by about $4.4 billion over the last two decades.
The city's tax rate is so low that revenues could not pay for the fire department, Assistant City Manager Susan Guthrie said. The bulk of the city's revenue comes through sales taxes, she said.
"We just now started bringing in the amount of money we brought in when we started reducing the tax rate, and that's with all this growth," Ms. Guthrie said. "The way we look at that is, money goes back in the consumers to spend and stimulate the economy."
Tyler's average home value also has increased over the last two decades by about $88,500, but taxpayers are paying less in taxes than they did in 1995 for a more expensive home — a decrease of about $45 per year.
The average home value in 1995 was $73,155. With a tax rate of 53.36 cents per $100 valuation, the average homeowner paid about $390 in city taxes each year.
In 2014, the average home was valued at $161,724. At the city's current tax rate of 22 cents per $100 valuation, the average homeowner can expect to pay about $355 in city taxes annually.
Half-cent sales tax revenues have affected the daily routine of every Tyler resident including road construction and repairs, new parks and state of the art fire stations.
The list of projects completed through half-cent sales tax dollars includes the construction of three fire stations, expansion of the current police department and the creation of a south Tyler police substation to break ground this year.
The funds improved quality of life in the city through the construction of Faulkner Park, the Glass Recreation Center and the Fair Parking Garage downtown, as well as through improvements to the Children's Park, Pollard Park and the Tyler Municipal Rose Garden.
Millions of dollars were poured into transportation, including the construction of Earl Campbell Parkway, the Grande Boulevard extension and the Cumberland Road extension that is currently under construction.
It has paid for traffic signal upgrades, fiber optics, long-range studies, sidewalks and more.
"I never, ever dreamed of all the projects (that could be done) once it was passed," said Precinct 4 Smith County Commissioner Jo Ann Hampton, who was on the Tyler City Council in 1995.
The city isn't completely debt-free, but the current notes are not repaid through bonds. They're strictly revenue bonds.
Tyler has about $70.2 million in revenue-supported debt, according to the Texas Comptroller.
The principal difference is revenue supported debt is not secured through property taxes. That sort of debt is generally not required to receive voter approval and is paid through various ways, including sales taxes, fees, tolls or municipal utility charges, according to the comptroller.
In Tyler's case, the revenue-backed debt was used for water and sewage projects. The list includes, but is not limited to, expanding water and sewer infrastructures to the area of North Broadway Avenue and Loop 323, and extending the same services to U.S. Highway 69 and Interstate 20. The city also bought land for a future water treatment facility, Ms. Guthrie said.
The projects are paid back through the sale of water to Tyler residents and wholesale sales to other cities, she said.