5/23/2025
Sunnyvale operates as a “Home Rule city,” which is a city in Texas with a population greater than 5,000, that has adopted a city charter1. Home rule cities can pass ordinances and laws unless specifically prohibited by state law, whereas a “General Law city” can only use the authorities specifically granted by state laws. To become a home rule city, the Town of Sunnyvale voted to adopt a Town Charter in May 2013.
Some of the most important powers home rule cities get are
- Tax authority: so-called “Type A”, “Type B”, and “Type C” cities are limited to taxing $1.50, $0.25, and $0.25 or $1.50 (depending on the population) per $100 of property value. A home rule city is limited to $2.50 per $100 of property value. Our town’s charter still limits Sunnyvale to $1.50 per $100 of property value, and the Town actually charges $0.4530.
- Ordinance-making and enforcement: home rule cities are able to make and enforce local ordinances as long as they are not inconsistent with state or federal law.
- Mandatory fees to support the town budget can be assessed as a special type of tax unrelated to property values. For example, the Town of Sunnyvale could assess a $5 charge against all homeowners and business owners on our monthly utility bills, and use that to finance the city’s police department or other non-utility services. This means the town has more flexibility in raising revenue than just increasing the number of rooftops and property assessed values.
- The ability to call for referendums and citizen initiatives (if allowed in the city charter) mean a home rule city could potentially call for a referendum to decide a specific ordinance (e.g., letting the town decide an issue about parks development via specific referendum rather than leaving it to the Town Council).
- If the city charter permits it, a home rule city’s citizens can petition the city council to order an election to recall members of the Town Council, as a way to increase accountability of Council members. Without that provision, the only way to remove an officer of the city is through Chapter 21 of the Local Government Code of the State of Texas, allows petitions through the district courts for 1) incompetency, 2) official misconduct, or 3) intoxication on or off duty.
- A home rule charter may impose term limits on city officers.
Because home rule cities have the power to enact ordinances that aren’t prohibited by the state, there is often a tension between large business interests and the local community interests, and some lobbying to get state legislators to preempt local ordinances through a blanket law. Some examples of “preemption laws” include ones that take away home rule cities’ powers of:
- Prohibiting a specific breed of dog (e.g., pit bulls, which City of Richardson had done in the 1980s).
- Prohibiting oil and gas drilling and fracking within a certain distance from the city (which Denton had banned within the city via a citizens’ initiative)–cities’ powers have been partially but not fully pre-empted by state law in 2015.
- Regulating “texting while driving” bans–the 2017 state legislature created a statewide ban that preempts local city ordinances.
- Taxing, regulating, or requiring permits for local rideshare companies like Uber or Lyft.
A home rule city’s expanded legal powers can help steer a town towards the type of economic growth and community it wants to become in Texas, especially when it’s paired with an economic development corporation’s powers to financially attract businesses and jobs.
4A and 4B Economic Development Corporations
The Development Corporation Act of 1979 allows cities to create Economic Development Corporations (EDCs) that have the purpose of encouraging growth in the local economy. Section 4A and 4B Economic Development Corporations are non-profit entities that can use voter-approved sales taxes to fund economic development activities, overseen by a board. Typically, this is a 0.5 cent portion of sales taxes for each EDC.
A Section 4A EDC primarily supports manufacturing and industrial development, and they can use the funds to spend on land, targeted structures, and improvements. For example, a 4A EDC can make infrastructure improvements that promote or develop local business, or offer to cover the costs of job training classes.
A Section 4B EDC can do everything a 4A EDC can do, along with other projects including quality of life improvements that give a 4B ECD much more flexiblity. For example, a 4B EDC can fund
- professional and amateur sports and athletics facilities
- tourism and entertainment facilities
- affordable housing
- water and sewage facilities
- parking and transportation facilities.
4B EDCs can also offer business incentives even if they don’t create or retain jobs. Many cities have 4B EDCs in Texas; near to us in Sunnyvale we have 4B EDCs in Heath, Forney, Grapevine, and Westlake.
Supporters of 4A and 4B EDCs argue that they help attract and retain valuable industries and businesses that might not otherwise come to the region, and that the cost of incentives EDCs offer is offset by the additional tax revenue they bring in the future.
Critics of 4A and 4B EDCs argue that these tools let local governments pick winners and losers in the marketplace.
In other words, without proper oversight, the Board of an EDC (especially a 4B EDC) could offer incentives to a business that has close relationships to certain board members, creating an environment conducive to “rent-seeking,” where companies or individuals manipulate the political process of the board for financial gain. It also puts other businesses at a clear disadvantage to overly favored companies or individuals, since everyone contributes to the sales tax subsidy while only a few receive the incentives.
Some free-market advocates would prefer to abolish the EDC model entirely and use the “Texas Model” of low taxes and limited government, i.e. a “Wild West” system, to attract businesses. This also has its drawbacks, because many valuable businesses need strong local services (e.g., good roads, clean water, reliable internet and telecommunications, an educated workforce) to thrive.
Sunnyvale Dissolved its 4A EDC
Sunnyvale had a 4A EDC until a voter initiative in November, 2019 (passed 1,047 votes for and 176 votes against) voted to dissolve it. This initiative was put forward by the Town Council (not the citizens), andtheir reasoning appearsto be that: 1) fewer than 10% of cities have both a 4A and 4B EDC, and more importantly 2) State Law in 2015 allowed towns to collect up to 2% sales taxes towards their General Fund without the need for EDCs–prior to that law, towns could only collect 1% for the general fund, then an additional 0.5% for each EDC could bring the total sales tax to 2%. The new initiative kept the overall sales tax the same, but now the Town of Sunnyvale gets 1.5% and the 4B EDC still gets 0.5%. Note: Heath, TX has so far decided to keep both their 4A and 4B EDCs.
The main reason behind this may have been budget pressure: in 2019 the State Legislature passed a measure that limits a city’s ad valorem (i.e., value-based, like property tax and sales tax) revenue growth rate to 3.5%, where it was previously 8%. For a town like Sunnyvale which was growing much faster than 8%, this meant the city’s revenues were not going to be able to keep up with expenses (roads, police, etc. to service all the people moving here). This move freed up approximately $1.8 million of existing funds they could tap immediately (those funds are expected to run out by 2027), and an estimated $879,509 in annual revenues.
4B EDC Remains Very Important to Sunnyvale
The 4B Economic Development Corporation will collect about $2.28 million in taxes in 2025 (or $1.75 million according to the Town’s overall budget book from January 2025). Moreover, it has an additional unassigned balance from prior years of $4,716,915. That’s bigger than the Town’s overall General Fund of $4,650,686 (which is mostly our town’s 90-day emergency fund), because for many years our town’s 4B EDC wasn’t even spending all the money they took in:
The big jump in 2024 seems to represent the Dallas County Rails to Trails Project grant, which brought “Permits, Fees, & Fine” income to $430,000, and we also saw a jump in our spending on parks and recreational improvements:
Regardless, this means our Town has accumulated a lot of money to spend on our town’s economic development and quality of life. Who is communicating the plan for this fund?
A portion of the fund (between $1.4 to $1.9 million) will be paid soon to the Tom Thumb grocery store, assuming it’s completed on time, as an economic incentive. From the 4B EDC’s only public meeting in 2024 (emphasis mine):
“Section 4.00 EDC Grant.
The EDC will pay to Company a one-time, lump sum economic development incentive
grant in an amount equal to the lesser of the amount of, i) design and construction hard and
soft costs that have been expended on the Infrastructure and Site Improvements, or ii) One
Million Four Hundred Thousand Dollars ($1,400,000) if the grocery store is open to the
public and conducting business by September 1, 2026. If the grocery store is open to the
public and conducting business on or before January 31, 2026, then
the EDC will pay to Company a one-time, lump sum economic development incentive
grant in an amount equal to the lesser of the amount of, i) design and construction hard and
soft costs that have been expended on the Infrastructure and Site Improvements, or ii) One
Million Nine Hundred Thousand Dollars ($1,900,000). Should Company fail to comply
with Section 2.02 and open the grocery store to the public and conduct business by
September 1, 2026, the EDC has no obligation to pay the grant. Upon determination the
Company has complied with Section 2.02, the EDC will pay the economic development
incentive grant to Company within one hundred twenty (120) days after receipt of the
Request for Grants provided”
The Town of Sunnyvale has an additional $1.6 million incentive if the store opens on time, bringing the total incentives our town is offering to $3 to $3.5 million. So Sunnyvale will pay Tom Thumb’s manager (Randall’s Food & Drugs LP, the Texas division of Albertsons that owns Tom Thumb and many other grocers) a significant amount of the design and opening costs. This seems reasonable: the Dallas City Council approved $5.8 million in tax incentives to get a Tom Thumb in their business district in 2023 before the company backed out, and Tom Thumb expects to spend over $6 million in opening costs.2 Also, while many food items themselves are not subject to sales tax in Texas, a lot of other items they sell will boost local sales taxes and the store will support a lot of economic activity nearby.
One last note we may dive into more later: because the developer is a longtime local resident, the plans for this Tom Thumb are substantially nicer and more upscale than other stores in the chain (see 6:30 minute mark of the April 4B meeting here). On its face this seems like a win for the town–although it’s not clear whether most local Sunnyvale residents plan to shop there, or if it will mostly serve a certain segment who can afford it.
Sunnyvale’s 4B EDC Board Was Taken Over By Town Council in 2023 (Temporarily?)
The Board of Sunnyvale’s 4B EDC is comprised of seven members who serve two-year, staggered terms. In March of 2023, the Town Council interviewed candidates for 4B and other town boards and commissions. There were four members on the 4B EDC with expiring terms; two of them had reached their term limit, a third person wanted to be re-appointed, and the fourth did not wish to be re-appointed. Instead, it appears the Town Council nominated themselves to serve on the 4B EDC board.
Currently, four of the seven members are also on the Town Council (and another just ran for Mayor):
- Saji George (mayor)
- Ryan Finch (council)
- Larry Allen (council)
- Mark Eldridge (council)
- K. Paul Cash
- Tina Chase
- Paddy Padmanabhan
The 4B EDC is supposed to meet once a month as needed, on the second Tuesday of each month at 5:30 PM. Most videos or agendas of these minutes are not posted publicly. However, in the April 22nd 2024 meeting, the mayor clearly appeared in control of the meeting, and other 4B Board members offered very little to the discussion.
Looking at the 4B meetings from before this takeover (which are mostly publicly available), it’s a big shift in tone. The more recent meeting seems very efficient in comparison. There was more discussion, but there was also more indecision. The town also has an Economic Development Advisory Committee (EDAC) which meets quarterly and advises the Town Council and Director of Economic Development. In theory, the EDAC could take the role 4B has historically played and still give residents a (non-enforceable) voice on the direction of our town. Then the mayor could use funds from both 4B and the town’s General Fund to bring more business activity to the town. Is this model better for the town?
In the short run, it seems like a great idea to have a strong mayor, with all branches of power in the town under their control. They can make deals quickly and they can bring the businesses they think are right to the town. But in the long run, we need those independent checks and balances. What happens if the mayor’s economic vision for the town becomes different from what we want?
For example: a lot of people in Sunnyvale value the schools but one of Mayor George’s agenda items from this election is to look at options for elderly communities in Sunnyvale. That’s probably going to bring more seniors to our town, who 1) are less likely to politically support the schools themselves, and 2) can now bring all of their grandchildren to attend Sunnyvale ISD schools. We are relying on the integrity of our Mayor and the responsiveness of our Town Council members (especially the ones who are also 4B members) to bring a development that’s good for the whole town.
Mayor George seems committed to listening to town residents, but what if we elect a different mayor in the future who has all these same powers, but a different agenda? It seems more prudent to train an effective, independent 4B Board that has its own perspective on the Town’s future. More ideas usually means some of those will be new, good ideas.
The Town Council met on April 7th, 2025 to interview candidates for the 4B and other town boards. The results of this meeting don’t appear on the Town website yet, but I’ve been told that Mayor Saji George has decided to step back from 4B and the 4B EDC is now majority-run by Sunnyvalers not on the Town Council. The 4B Board also had one regular member whose term is expiring, so when Saji’s replacement and the new member are announced I’ll update them here. Restoring 4B’s independence from Town Council puts an onus on the Board to be efficient and effective, but it’s a good long-term decision for the town.
- https://www.tml.org/DocumentCenter/View/244/Types-of-Texas-Cities-PDF is a great resource to read more. ↩︎
- These incentives are separate from the actual building costs, as the building itself is being constructed by the Salser Group (owned by Deric Salser of Sunnyvale), and will likely cost over $20 million, but Salser will recoup that investment through leasing the physical store to Tom Thumb. ↩︎
