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Governor approves Doctor’s Hospital application for enterprise zone status

A planned $150 million expansion of Doctors Hospital at Renaissance, with its first phase now underway, has been endorsed as a state enterprise zone project by Gov. Rick Perry, local state and city economic development leaders said Monday.

The designation, which was made possible by a law passed in the 1980’s by Sen. Juan “Chuy” Hinojosa, D-McAllen, could help the hospital qualify for as much as $2.5 million in state sales tax reimbursements.

Tracye McDaniel, executive director for the governor’s Economic Development and Tourism division, confirmed the state designation in a Nov. 30 letter released Monday by Hinojosa.

Doctor’s Hospital at Renaissance is one of the largest projects recommended by local communities to the governor’s office.
“It successfully competed for one of 85 projects that will be approved for state enterprise designations during the next two years,” said Hinojosa.  “When I worked on this major economic development legislation almost 20 years ago, I envisioned the state government using this law to help create thousands of jobs in South Texas.”
Perry, who is up for reelection, evidently gave his endorsement to the effort as well.

“We have reviewed and herby approve a Texas enterprise project designation for the application submitted on behalf of Doctor’s Hospital at Renaissance by the City of Edinburg,” McDaniel stated. “The Project (Doctor’s Hospital) has committed that 25 percent of the Project’s new employees are required to be economically disadvantaged individuals or enterprise zone residents.”
Five hundred of the 1,096 new jobs expected to be created by the hospital complex expansion qualify for as much as a $5,000 state sales tax refund per new job, which will be refunded to Doctor’s Hospital at Renaissance.

“This designation will not be at any cost to the city nor will the city lose sales taxes,” EEDC executive director Ramiro Garza reported to the EEDC board of directors. “Edinburg will benefit with an increase in the tax base and the creation of new jobs.”

The EEDC, which is the jobs-creation arm of the Edinburg City Council, discussed the enterprise zone designation and other issues during its Monday, December 19 special meeting, which was held in the International Trade and Technology Center at the University of Texas-Pan American.

The coveted enterprise zone designation follows key endorsements earlier this year from the Edinburg City Council and the EEDC board of directors  The two city governmental entities, led by Mayor Richard Garcia, unanimously approved  resolutions asking the governor to designate the ultra-modern medical center as an enterprise zone project.

The landmark economic development program was created in 1983 by then Rep.  and now Sen. Hinojosa and Sen. Hector Uribe, D-Brownsville.
The Texas Enterprise Zone Program is an economic development tool for local communities to partner with the state to promote job creation and capital investment in economically distressed areas of the state.
Local communities must nominate a company as an enterprise project to be eligible to participate in the Enterprise Zone Program, according to the governor’s office.

“Construction began earlier this year and will finish in the spring of 2007,” Garza said. “Doctor’s Hospital at Renaissance will create 1,096 full-time and 226 part time jobs over the next five years, with an estimated annual payroll of almost $59 million annually.” 

The enterprise zone designation has previously allowed Edinburg to retain and recruit businesses such as Merkafon Teleperformance, Edinburg Regional Medical Center, and Wright III Foods, he noted.”
Since each of those company’s designation as an enterprise project, a combined total of almost 1,900 jobs have been created with an estimated increase in the tax base of more than $55 million, Garza said.  The expansion of the medical center campus, which is expected to develop in phases over the next few years, is coming on top of almost $130 million in facilities already in operation at 5501 South McColl, just within the Edinburg city limits.

The expansion, which will include a hotel, medical offices, women’s and children’s hospital, nursing home, and cancer treatment facility, will take place on an empty site located right across McColl which is currently being prepared for the infrastructure needed to support the new facilities.

The $150 million expansion will include about $110 million in new construction, $31.2 million for medical machinery, $8.5 million for non-medical machinery, equipment, furniture, and fixtures, and $1.2 million for infrastructure improvements.

Edinburg first created its enterprise zone in the fall of 1989 for a seven-year term.

In 1998, the city received redesignation  from the state for an addition seven-year term.
According to the Texas Comptroller of Public Accounts, some of the highlights of the enterprise zone program include:
“Tax Code 151.429 allows a qualified business, designated by the Texas Department of Economic Development as an enterprise project that is designated prior to September 1, 2001, to obtain a sales tax refund of $2,000 for each new permanent job created or retained within the project. Projects apply for refunds to the Texas Comptroller’s Department. A maximum refund of $250,000 per year is allowed for each project.
The refund can be based on:
(1)  Sales tax paid on equipment or machinery sold to a project for use in the enterprise zone;
(2) Building materials sold to a project for use in remodeling, rehabilitating or constructing a structure in an enterprise zone;
(3)  Labor for remodeling, rehabilitating, constructing a structure in an enterprise zone; and
(4) Electricity and natural gas purchased and consumed in the normal course of business in an enterprise zone.
An enterprise project designated on or after September 1, 2001 may obtain a sales tax refund of $5,000 for each new permanent job created or retained.
The qualifying items for a sales tax refund are the same four items (1 through 4 above) and beginning on or after September 1, 2003, an enterprise project may also claim a sales tax refund on taxes paid for tangible personal property purchased and consumed in the normal course of business in the enterprise zone and taxable services. Refund claims can be made on taxes paid for purchases for these two additional qualifying items from September 1, 2001, but the right to claim the refund will expire on August 31, 2005.
If a business that qualifies as an enterprise project enters into a new construction contract to improve realty, the contract must be separated in order for the enterprise project to obtain the refund of taxes paid on the incorporated materials. The contractor owes tax and the equipment, consumable, etc. and the enterprise zone provisions will not apply. If the contract between the contractor and the enterprise project is lump-sum new construction, the enterprise zone exemption is lost.
Effective September 1, 2003, two higher levels of enterprise zone projects were authorized–double jumbo and triple jumbo, with higher refund thresholds.
Only purchases for use in a project’s qualified business site qualify for refund.
The refund amount per job was reduced from $5,000 to $2,500 for enterprise projects other than double and triple jumbo projects designated after September 1, 2001.
New jobs created must be intended to continue for a minimum of three years after the state incentive benefit is paid. 

Each fiscal year, the refund is based on the total amount of capital investment in the qualified business site.
For projects designated between September 1, 2001 and August 31, 2005, qualifying purchases are capital investments in tangible personal property and taxable services for use at the qualifying business site.
For projects designated on or after September 1, 2005, qualifying capital investments include machinery and equipment; labor and building materials used to remodel, rehabilitate, or construct a structure; and electricity and natural gas consumed in the normal course of business.

Enterprise projects can still carry forward credits, but those refunds and credits are now subject to the regular four-year statute of limitations.
Enterprise projects approved after September 1, 2003, cannot receive a refund before September 1, 2005.

The changes do not apply to defense readjustment projects or to enterprise projects designated before September 1, 2001, which are subject to the law in effect at that time.”

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