By Jett Whittington | The Alliance Gazette
Thursday, November 5, 2026
Second of three parts.
A Type A economic development corporation can help buy land for a qualifying factory, run a sewer line to it and train the people who will work there. The restaurant across the street does not qualify through the same primary-jobs route. Other project authority and exceptions have to be considered separately.
That distinction runs through the law. Type A is built mainly for industrial development, but its powers are not limited to a single kind of project.
What it is built for
Type A is the industrial recruiter. Its central role is to bring in and keep businesses that make or provide something here and sell it beyond the local economy.
The Comptroller describes Type A in terms of industrial development: business infrastructure, manufacturing, research and development, with job training and certain transportation projects alongside.
Type A is also the older and less common of the two types. At the end of fiscal 2025, the Comptroller counted 191 Texas cities with Type A corporations and 519 with Type B corporations. Those are not necessarily separate sets of cities; a city can have both.
Primary jobs, the hinge
Many Type A projects must create or retain what the law calls primary jobs. Understanding that term explains much of the project list.
Section 501.002 sets a two-part test for the usual definition. First, a majority of the company's products or services must ultimately reach regional, statewide, national or international markets, bringing new dollars into the local economy.
Second, the job must fall within one of the listed North American Industry Classification System sectors. Manufacturing, transportation and warehousing, wholesale trade, and specified scientific, professional and technical services are among them. Retail and food service are not.
Both conditions matter. A business can sell most of its output across the state and still fall outside this definition if its industry is not listed.
A separate provision covers jobs in NAICS 928110, National Security, for the statute's specified Armed Forces and military-base entries.
A manufacturing plant, regional distribution center or qualifying research business can provide primary jobs if it meets both tests. A typical restaurant, clothing store or local repair shop does not.
The distinction is between bringing new money into the local economy and mainly circulating money already there. It is not simply a test of whether a business crosses a county line.
What it can pay for
Three main categories help explain the ordinary project powers.
Projects tied to primary jobs. Section 501.101 covers land, buildings, equipment, facilities and improvements for purposes that include manufacturing and industrial facilities, research and development, military facilities, recycling facilities, distribution centers, regional or national corporate headquarters, and job-training facilities for colleges or universities. It also includes small warehouses capable of serving as decentralized storage and distribution centers. The project must create or retain primary jobs, and the board must find it required or suitable for developing, retaining or expanding the listed facilities.
Infrastructure for business development. Section 501.103 is separate and has no express primary-jobs requirement. It includes streets and roads, rail spurs, water and sewer utilities, electric and gas utilities, drainage, site improvements, and telecommunications and internet improvements. The board must find the work necessary to promote or develop new or expanded business enterprises.
This authority is wider than many people expect. A Type A corporation may help fund utilities and roads serving business development, subject to the purpose restrictions discussed below.
Job training. Section 501.102 includes job-training projects. When sales-tax revenue pays for training offered through a business, Section 501.162 requires a written commitment either to create new jobs paying at least the prevailing local wage for the occupation or to increase payroll to pay at least that wage. Training programs and college training facilities are distinct routes.
Other provisions address specialized projects. These three categories are a guide, not an exhaustive list.
Limits, with exceptions
Public facilities, when the facility is the main purpose. Section 504.103 generally bars a Type A project whose primary purpose is a transportation facility, solid-waste disposal facility, sewage facility, water service to the general public, or air- or water-pollution control facility.
Read that alongside the infrastructure authority. A sewer line serving a qualifying new plant can support business development; a town-wide sewage treatment plant does not qualify merely because businesses will use it. The project's primary purpose and any specific statutory exception matter.
Section 504.103(b) allows those facilities to benefit property the corporation acquired for a project with a different primary purpose.
Airports and ports. Section 504.103(c) makes three exceptions: a general aviation business service airport integral to an industrial park; a port-related facility supporting waterborne commerce; and qualifying airport-related facilities in certain border municipalities.
These are exceptions to Type A's usual restriction, not powers exclusive to Type A. Type B corporations can also undertake eligible Chapter 501 projects. Section 502.052 separately authorizes certain mass-transit facilities.
A Type A corporation may also contract with a private corporation to carry out an industrial-development program under Section 504.102.
Old debt. Section 504.104 bars a Type A corporation from assuming, or paying principal or interest on, debt that existed before the city authorized its creation.
Operating a business. Section 501.160 generally keeps the corporation in the role of lessor, seller or lender rather than business operator. It also permits arrangements required by a trust agreement securing the credit transaction, and operation of closed or realigned military installations or facilities and projects authorized by Section 501.106.
Local-serving businesses. Restaurants, stores and similar businesses generally do not qualify through the primary-jobs route. That is narrower than saying Type A can never fund a project benefiting them. Infrastructure authority and the additional-project routes described below need separate consideration.
The strings
Business incentives need performance agreements. Section 501.158 requires an agreement before a corporation provides a direct incentive to a business or makes a covered project expenditure on its behalf.
The agreement must include a schedule of additional payroll or jobs to be created or retained, the capital investment to be made, and repayment terms if the business misses its performance requirements. The statute does not set one universal repayment percentage; the agreement supplies the terms.
Marketing is capped. Section 504.105 generally limits promotional spending to 10 percent of corporate revenues. A narrow 25-percent exception applies to certain municipalities meeting the section's county, historical-population and military-proximity conditions.
The hippopotamus
In 2003, the Williamson County Attorney asked the Texas Attorney General whether the Hutto economic development corporation could use its promotional allowance to help pay for a fiberglass hippopotamus statue.
The answer explains how the promotional power works.
The Attorney General did not decide whether the statue qualified. Whether a particular expense serves a promotional purpose is a factual question for the board first, subject to judicial review and the city council's supervisory authority. The council may disapprove the expense.
Opinion GA-0086 did give the test: promotional spending must advertise or publicize the city for developing new and expanded business enterprises. Promoting the city generally is not enough.
The opinion also explained the arithmetic. The ordinary 10-percent limit applies to current annual revenues, not everything the corporation has ever collected. Funds specifically set aside for promotion in earlier years can still be spent; an ordinary accumulated balance is not automatically a promotional reserve.
Outside recruiters need a contract. Section 502.051 requires a board-approved written contract before the corporation gives compensation or anything of value to a nonemployee broker, agent or other third party involved in business recruitment or development. A violating corporation can face a civil penalty of up to $10,000, recoverable by the Attorney General.
Starting one, running one
Who can have one. Chapter 504 generally applies to a city in a county with 500,000 or fewer people. Other eligibility routes apply to certain cities below 50,000 people that meet specified multicounty or transit-related conditions. A city may authorize only one Type A corporation.
Funding it with the Type A sales and use tax requires voter approval. Section 504.256 prescribes the basic ballot proposition:
"The adoption of a sales and use tax for the promotion and development of new and expanded business enterprises at the rate of ______ percent."
Voters may approve a rate in increments of one-eighth of one percent, provided all applicable local sales and use taxes combined do not exceed 2 percent. Current law does not impose the old half-cent maximum on this tax.
A city can also ask voters to limit the tax to a set number of years or to a specific project, rather than leaving it open-ended.
The board has at least five directors. The city council appoints them and sets their terms, within a six-year maximum. It may remove any director at any time without cause. Directors are unpaid but may be reimbursed for actual expenses incurred in their duties.
One rural provision: if the city is in a county with fewer than 30,000 people, the board may hold meetings anywhere in the county rather than only within city limits.
The city stays in control. Section 501.073 requires city approval of the corporation's programs and expenditures and annual review of its financial statements. The city is entitled to the corporation's books and records at all times.
The project list can expand
Chapter 504 provides routes for a Type A corporation to undertake projects normally associated with Type B.
An additional-project election. Under Section 504.152, a city may ask voters to allow Type A sales-tax funds to support a specified project or category that qualifies under Chapter 505 but not Chapter 504. The ballot must clearly identify what voters are authorizing. If funds will pay maintenance and operating costs, it must say so.
A public hearing on the project's cost and impact must precede the election. Notice must be published in a newspaper of general circulation in the municipality where the project is located at least 30 days before the hearing. Section 504.153 says the notice should then be published weekly until the hearing. If voters reject the proposition, the same project or category cannot return to an election until the first anniversary of that vote.
A small-city ordinance. Under Section 504.171, a city with 7,500 or fewer people that has also authorized a Type B corporation may, by ordinance, allow its Type A corporation to undertake projects its Type B corporation may undertake. The city may revoke that permission later without preventing completion of projects already undertaken or eliminating related debt-repayment obligations.
Both routes point toward Chapter 505, the subject of Part 3. A specific proposal still has to satisfy the applicable law, local ballot limits and other binding requirements.
Changing it or ending it
Changing the rate. Under Section 504.258, a city may hold an election to raise or lower the rate in one-eighth-percentage-point steps, within the combined local cap. The council can call the election itself and must call one if at least 10 percent of registered voters petition for it.
Ending the corporation. Under Section 504.351, a petition from at least 10 percent of registered voters requires an election on termination. The prescribed ballot wording is "Termination of the (name of corporation)."
If termination passes, the corporation does not immediately disappear. Section 504.353 limits it to operations needed to pay its bonds and meet obligations incurred before the election, while disposing of assets toward those obligations. The remaining assets transfer to the city when the obligations are satisfied and the corporation terminates.
Tax collection ends after the last day of the first calendar quarter beginning after the corporation notifies the Comptroller that its final obligation has been satisfied.
Debt already owed survives the vote. That is the practical limit on how quickly the corporation can be wound down.
Sources
Texas Local Government Code, Chapters 501, 502, 504 and 505, current official online text, checked November 5, 2026.
Chapter 501: definitions (501.002); director expenses (501.062); city oversight (501.073); projects and training (501.101-103, 501.162); performance agreements (501.158); operation and exceptions (501.160).
https://tcss.legis.texas.gov/resources/LG/htm/LG.501.htm
Chapter 502: third-party recruitment and development contracts (502.051); certain mass-transit facilities (502.052).
https://tcss.legis.texas.gov/resources/LG/htm/LG.502.htm
Chapter 504: eligibility and creation (504.002-003); board and meetings (504.051, 504.054); contracts, project limits, old debt and promotion (504.102-105); additional projects (504.152-154, 504.171); tax elections, rates and limits (504.251-260); termination (504.351-353).
https://tcss.legis.texas.gov/resources/LG/htm/LG.504.htm
Chapter 505: Type B authority includes Chapter 501 projects (505.151).
https://tcss.legis.texas.gov/resources/LG/htm/LG.505.htm
Texas Attorney General Opinion GA-0086, July 9, 2003: Hutto statue, promotional purpose, city oversight and annual-revenue calculation.
https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2003/ga0086.pdf
Texas Comptroller, Economic Development Corporation Report, fiscal 2024-25, executive summary: Type A and Type B city counts.
Texas Comptroller, Type A and Type B projects; additional sales and use tax guidance.
https://comptroller.texas.gov/economy/development/sales-tax/edc/projects-ab.php
https://comptroller.texas.gov/taxes/sales/city-additional-tax.php
Texas Attorney General Opinion GA-0819, November 19, 2010, page 2: Type A and Type B legislative history.
https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2010/ga0819.pdf
