Changes Proposed For City’s Enterprise Zone Program, Video Gaming Facility Policies

Sulphur Springs City Council this week approved on final reading a reinvestment zone and a rezoning request, as well as a reinsurance contract, a resolution appointing 3 to the Tax Increment Financing Reinvestment Zone Board, and on first reading two ordinance amendments.

Video Gaming Facility Ordinance

Sulphur Springs Police Chief Jason Ricketson asked the City Council to consider approving Ordinance No. 2810, which would amend Ordinance No. 889, which has remained on the books unchanged since 1982. This would simply update the definitions and authorized locations for videogaming facilities, premises and devices within the city.

Ricketson said the city has over the 10-15 years experience a growing problem with 8-liner machines in businesses, the kind that look similar to slot machines. A number of businesses have opened them, and officials have shut them down because they were operating illegally.

During that time, the business owners have worked with lawyers to try to find ways to circumvent the law regarding gambling.

“Over the last several years, we’ve had owners of these businesses try to figure out ways to circumvent the law, try to find loopholes in the law. They have found a few loopholes. They have some lawyers and some backing on their side. That’s why when you see a lot of these, it’s still a growing problem in Texas. To me it’s still illegal, it’s gambling, but some lawyers and prosecutors see some loopholes in that,” Ricketson said.

Ricketson said the city had a videogaming ordinance, but the definitions of videogames have changed significantly since the Ordinance was enacted in 1982 and do not reflect the machines now in use. The proposal presented to the council modernizes the definitions of video gaming facilities, premises and businesses, and establishes lawful limitations for locations and advertisements of video gaming businesses within the city limits of Sulphur Springs.

Ordinance No. 2810, as proposed, defines gaming facility, gaming facility premises and video gaming device as follows:

  • Gaming Facility” – The premises of a business which is licensed to house, or offer for play, video gaming devices within this city.
  • “Gaming Facility Premises” – Land, together with all buildings, improvements, equipment, and personal property located thereon which is controlled by an applicant or licensee and associated with video gaming activities authorized by this article.
  • “Video Gaming Device” – Computers and other types of electronic machines or devices of any kind or character which are operated by, or upon, the payment of any form of consideration, including but not limited to paper currency, coins, legal tender, metal slugs, tokens, electronic card or checks, and which is used or capable of being used or operated for amusement and/or pleasure, including, but expressly not limited to versions of machines or devices commonly referred to as a slot machine and/or eight-liner machine which awards the player a ticket voucher as defined herein. This term expressly excludes gambling devices as defined by Texas Penal Code chapter 47, coin-operated music machines, pay toilets, pay telephones, coin-operated rides for children, and all other coin-operated machines which dispense or vend merchandise, commodities, confections or music or which award non-cash merchandise.

City staff noted that modern videogaming businesses have the ability to offer patrons the ability to gamble or for the patron to profit in various ways. They also offer numerous ways for patrons to pay, including credit card, online currency and subscriptions, many of which are required to have age restrictions or require oversight from government agencies. While the city doesn’t disallow lawful use of modern video gaming businesses, because of the above “special considerations” city officials argue the video gaming businesses should be restricted in their physical proximity to certain facilities and areas, which “warrant protective attention for citizens.”

Video gaming facilities, according to Ordinance 2810 as proposed, that meet licensing requirements would be allowed, provided they are located within a commercial zoning district and are a minimum of 1,500 feet from 10 designated locations: child care facility; church or place of worship; dwelling; hospital; building in which alcoholic beverages are sold; public facility; public park; school; existing licensed sexually-oriented businesses; or any area zoned Single Family-10 (single-family dwelling district 10,000 square feet), Single-Family 6 (Single-Family Dwelling Attached Dwelling District), Multi-Family Dwelling District or other residential zoning classification.

The City Council at the Aug. 2, 2022, regular meeting approved on first reading Ordinance 2810, amending the city’s video gaming ordinance. The policy must be read and approved a second time by the City Council at an upcoming meeting before it can become official.

Texas Enterprise Zone Program Ordinance

Sulphur Springs-Hopkins County Economic Development Executive Director Roger Feagley asked the City Council to consider approving Ordinance No. 2808, which would amend Ordinance No. 2395, which the city adopted in 2003 related to the City’s participation in the Texas Enterprise Zone Program. The amendment would expand the list of local incentives offered and nominate Ashoka Steel Mills LLC to the Office of the Governor, Economic Development and Tourism, through the economic development bank as an enterprise project.

“It’s the ordinance that established the reinvestment zone policy. You have one that’s now 20 years old. They have new guidelines and new rules. Basically, what we are doing is we are updating what we had from years past to make it applicable today,” Feagley said, noting that a consultant and two others who are putting the Ashoka project together.

Basically, the Texas Enterprise Fund Program is designed to allow companies to recoup the 6.25% sales tax they pay, but does not affect eh 2% sales tax the community collects. Thus, Feagley said, the policy would allow Ashoka to recoup the state’s portion of the sales tax, but not the city’s portion of sales tax collected in regard to the project.

City Manager Marc Maxwell noted the program was used when Lowe’s set up a store in Sulphur Springs several years back, but will be updated as required with the new rules and guidelines.

The proposed ordinance states that Ashoka meets the criteria for the designation:

  • Ashoka would engage in active conduct of a trade or business at a qualified business site, with at least 35 percent of the business’ new fulltime employees will be residents of an enterprise zone, economically disadvantaged, veterans or meet other qualifying employment criteria;
  • The enterprise project would contribute significantly toward the achievement of City plans for development and revitalization of the area; and
  • A high level of cooperation between public, private and neighborhood entities would continue.

Place 5 Councilman Gary Spraggins made a motion, which Sellers seconded, to approve on first reading as proposed Ordinance No. 2808. The motion receive unanimous approval from the council. A public hearing will be conducted and the proposed ordinance will be presented again for Council consideration during a special called City Council meeting at noon, Tuesday, Aug. 23, for second and, if granted, final approval so it can be submitted by the Sept. 1 deadline. It is recommended it be submitted tot he state a few days prior to Sept. 1 to ensure it arrives on time.

Even approval, however, does not guaranty the business set up an operation in Sulphur Springs. The city is one of two cities in the competing for the project; Tulsa, Oklahoma is the other, Feagley noted.

D6 Reinvestment Zone

A reinvestment zone was approved on second and final reading for D6 which will allow the business to apply to the hospital district for a tax incentive for an upcoming expansion of the Sulphur Springs operations, which will in the near future include the corporate headquarters, which are moving from Portland, Oregon to Texas. The zone is located in Lot 1 of Pinnacle Business Park in Sulphur Springs.

Approving Ordinance No. 2806 granting the reinvestment zone in no way commits the city or any other taxing entity to approving any tax incentives within the area; it simply creates a zone so that taxing entities that require a reinvestment zone for such purposes may consider a tax incentive such as a tax abatement or economic development agreement for the business located within the reinvestment zone.

Arbala Road Rezoning Request

The request by Andrea and Malachi Sandoval to rezone 0.93-acre of a larger tract located at 1659 Arbala Road from single family to light commercial was approved. This paves the way for a new coffee shop type business to be constructed at the corner of Wildcat Way and Arbala Road. The zoning change made on second reading and final approval of Ordinance No. 2807 on Aug. 2 is consistent with the intended plan for that area, according to city staff.

Employee Health Insurance Program

Assistant City Manager/Finance Director Lesa Smith noted that the City had gone out for proposals for the employee health insurance program, as is done annually and receive bids. Bidders were Blue Cross, American Fidelity and Highmark (HM) Life.

The city continues a partially self-funded program of health insurance for its employees. For at least the past 10 years, the city has requested proposals for reinsurance coverage only. The city will keep Blue Cross as the claims administrator, using the Blue Choice Network.

The reinsurance proposals are a result of the types and amounts of claims the city has each year. Last year, medical claims were over $463,000 and prescriptions were over $394,000, bringing the total amount of claims to over $857,000. This year, medical claims are up but prescription claims are down from last year, but still high. Overall, medical claims are estimated at $916,000 and prescription claims were estimated at $305,000, for a total of $1.22 million. Budget claims were just over $1.05 million for Fiscal Year 2022 after a budget amendment in June. That’s with 3 months of FY 2022 to go and nearly a full months of the health insurance plan year (which ends Aug. 31, 2022).

Although HM Life had the lowest total fixed cost at $362,731, city staff recommended awarding the contract to Blue Cross, who’s bid was second with $380,142, for reasons other than that bottom line, including the contract term. Under Blue Cross’ claims contract, any claims that may have billed incorrectly will come back to the city; without a claims contact, the city would be on the hook for that, Smith explained. Under HM Life’s claims contract, the business would only cover anything incurred 12 months back, so there’d be more risk going with HM Life even at an $18,000 savings.

Reimbursement times was another factor considered in the recommendation. The city requested proposals for a specific stop loss attachment point of $80,000, the same as this year. Stop loss attachment point means that for each covered participant the city would pay up to that amount of Internal Services fund for the year. Anything over $80,000 comes back to the city for covering individuals claims. Since Blue Cross is a plan administrators, there would be an automatic reimbursement on anything over the $80,000 mark, while HM Life could take a 1-2 months or longer to get through their review process.

The City Council agreed to award the reinsurance contract to Blue Cross Blue Shield, as recommended by city staff.

Tax Increment Financing Reinvestment Zone Board

The City Council too passed Resolution No. 1308 appointing three members from among the council to serve as on the Board of Directors of City of Sulphur Springs Tax Increment Financing Reinvestment Zone #1, with two to serve as directors and one to serve as chair of the board, and to provide an effective date.

City Manager Marc Maxwell explained that a TIFRZ in the city is managed and controlled by the City Council based on recommendations of the Board of Directors for that Zone. The downtown TIFRZ #1 consists of the three City Council members they appointed, one of whom chairs the Board, as well as one director from Hopkins County Hospital District and one from Hopkins County. Directors serve a 2-year term and the board chair serves 1-year in that position.

The TIFRZ #1 has not been active since the summer of 2017, and appoints from that board have long expired. Resolution No. 1308 appoints the three city members to the board to get the annual board meetings back on track. Board members are to expect to meet in the next 1-2 months, then again annually in January, with additional meetings scheduled only as needed.

The City Council selected John Sellers and Gary Spraggins to serve as directors, and Oscar Aguilar to serve as chairman of the board, effective immediately.

Sulphur Springs City Council

Author: KSST Contributor

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