Houston Suburb Eyes Tax Increases to Lure Minor League Team, Art Museum

DALLAS - The Houston suburb of Sugar Land hopes to attract a minor league baseball team, an art museum, and a convention center-hotel to a 52-acre cultural entertainment district along the Brazos River.

The City Council is considering an election for November on a variety of funding options for the district, including an increase in the citywide hotel tax to 9% from 7%, a fee on parking and tickets sold in the district, and possible redirection of an existing 0.5% sales tax for economic development.

Sugar Land Development Corp. would be expanded to include the proposed district if voters approve the measure in November. The corporation, which was formed in 1993 as a municipal corporation that under state law can issue sales tax-supported debt for public projects, currently levies the 0.5% sales tax.

"The corporation has issued debt in the past, but at this point all we're asking is for additional financial tools," said Joe Esch, Sugar Land's executive director for business and intergovernmental relations. "Once we have those tools, we can negotiate a deal with private partners."

Sugar Land, which has a population of approximately 80,000, is located 20 miles southwest of Houston in Fort Bend County. The city's general obligation debt is rated Aa2 by Moody's Investors Service and AA by Standard & Poor's. The development corporation's sales tax debt is rated A1 by Moody's and A by Standard & Poor's.

The council was to decide Tuesday night on the proposed election date. The resolution excludes city property taxes from the financial options.

The 0.5% economic development sales tax is part of the city's 2% sales tax. Expanding the development corporation to include the entertainment district would allow those revenues to be used for work at the site, Esch said. The 0.5% tax generated about $9 million in fiscal 2007.

District-specific fees would include a $3 parking surcharge and a 10% tax on tickets for sports and entertainment events and museum admissions.

Venues in the district could include a minor league baseball stadium, an indoor concert hall with 6,500 to 7,000 seats, a festival site for large community events, an amphitheater with a capacity of up to 20,000 people, a convention center and hotel, an art museum, and a children's museum.

Esch said there are too many variables at this point to provide specifics on the cost of and financing for the cultural entertainment district.

"The baseball stadium could be one size if the team is not affiliated with a major league club, but it would have to be larger if the team is a AA or AAA club," he said. "The revenue stream could include naming rights, lease payments, and concessions, so it is difficult to say at this point if the corporation would issue bonds or how the financing would be structured.

"That's why we are asking that these tools be available to us when we begin talks with potential developers," Esch said. "We want to create the tools that will allow the city to negotiate a good deal."

A minor league team affiliated with a major league team could not be located at the proposed Sugar Land stadium without permission from the Houston Astros, whose territorial rights include Fort Bend County.

The proposed site is on the Brazos River, adjacent to the Sugar Land campus of the University of Houston.

If voters approve, Esch said, work in the cultural entertainment district would begin within a year.

"Under state law, when you increase the hotel tax you have to start work on the designated projects within one year," he said. "The first work we'd see would probably be the festival site, because it doesn't require a lot of infrastructure. It would probably be two years before we would complete the negotiations and get to work on the remainder of the projects."

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