City staff outlined a statutory process and short timetable to wind up the Crockett Economic and Industrial Development Corporation (EDC) after voters approved dissolving the corporation and reallocating a half-cent sales tax to ad valorem tax relief.

Staff said the EDC wind-up is governed by Chapter 11 of the Business Organizations Code and Chapter 501 (and related sections) of the Local Government Code and that the city and the EDC must adopt a plan of termination and distribution of assets by resolution. That plan must identify and account for all EDC assets, address how outstanding obligations incurred before the election will be met, and include arrangements for assignment of debts and contracts to the city where appropriate.

“The sales tax that is currently allocated to the EIDC must continue to be collected for the EIDC until sufficient funds are collected to satisfy the outstanding obligations of the corporation,” a city presenter said. Staff told council there is a 60-day window to prepare the plan and file a certificate of termination with the Texas Secretary of State, and that the city must also provide notice to all known claimants, including any parties with lawsuits, loans, leases or service contracts.

Staff emphasized one high-priority creditor: the U.S. Department of Agriculture. City staff said they have scheduled meetings with USDA to clarify loan-covenant language and to determine whether USDA will permit assignment of its loan(s) to the city. If USDA declines or if covenant conditions are not met, staff warned USDA could demand immediate repayment and call the loans.

Staff said they are coordinating with the state comptroller to determine exactly when sales-tax collections will transfer from payments intended to satisfy EDC obligations to the new ad valorem tax relief allocation, noting that monthly remittances vary and the plan must base transfers on a fixed amount that is sufficient to meet the EDC’s liabilities.

City staff said employees of the corporation will be notified that their employment ends upon approval of the plan of termination and distribution of assets by the EDC and the city council. Staff added the wind-up will require assigning several obligations from the corporation to the city and arranging for future payments under those obligations.

No final resolution was adopted at the Nov. 18 meeting; staff said they will bring draft resolutions and the plan of termination to upcoming EDC and council agendas and that the city’s special counsel is drafting the paperwork to meet statutory timelines.