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Texas can trace its economic development roots to 1979, when the legislature passed the Development Corporation Act, allowing municipalities to create privately-funded nonprofit Economic Development Corporations to support economic growth. These entities were given access to public funds in 1987, when a constitutional amendment narrowly passed “providing for the creation of programs and the making of loans and grants of public money … for the public purposes of development and diversification of the economy of the state.” Soon after, the legislature created local sales taxes intended subsidize private economic development agreements entered into by local EDCs.

Agreements reached upon by these entities largely occur behind closed doors and away from public scrutiny. Since 1999, Sections 551.087 and 552.131 of the Texas Open Meetings Act and Public Information Act, respectively, have been providing secrecy to these deliberations, shutting out taxpayers, journalists, and watchdog organizations. The negotiations are essentially shielded from public information act requests.

One effort to restrain EDC spending of taxpayer money came via HB 3838 by State Rep. John Smithee during the 84th session. His bill would have restricted some EDCs from making expenditures of more than $50,000 without public input and provided full disclosure on investor and owner interests in deals cut with the EDCs. Smithee’s bill was heard in the House Committee on Economic & Small Business Development, chaired by State Rep. Angie Button (R-Richardson), but never received further action.

State Rep. Matt Schaefer also filed HB 1249, designed to tie the hands of EDCs when it comes to spending taxpayer dollars, but it died in the same committee. State Sen. Brian Birdwell filed SB 1254 to remove the open meetings and public information exceptions that EDCs enjoy, however, that effort failed to secure a hearing in the Senate Business & Commerce committee.

It remains to be seen whether legislators will shine a greater light on spending by EDC’s and provide more transparency for taxpayers this session.

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