LAFAYETTE — City-parish government will stop collecting an extra penny in sales tax that was imposed in a small area of north Lafayette in 2007 to spur an economic development project that never materialized, officials said this week.

The special tax, which has been collected in the northwest quadrant of the intersection of Interstate 10 and Interstate 49, was to be used to repay the cost of drainage improvements, roads and other infrastructure to attract a large entertainment and shopping center to the area.

Plans for that development were falling apart before the first penny of the new tax was collected, and no other firm prospects have emerged in the past three years.

The local law that put the tax in place had a sunset provision that called for it to expire if no bonds were issued for an economic development project by Oct. 1, said City-Parish Chief Financial Officer Lorrie Toups.

The special tax adds a penny on top of the normal sales tax rate of 8 percent.

The base rate of 8 cents has been treated as normal tax revenue, while revenue from the extra penny has gone into a trust fund and was to be dedicated to improvements related to an economic development project.

The initial plan was to borrow money for the infrastructure to attract the development and then pay that money back with tax revenue collected at the new development.

Instead, the tax has been collected only at the handful of businesses in the largely undeveloped area, including the Acadian Hills Country Club and a nearby liquor distributor.

The extra penny has generated about $530,000 since 2007, Toups said.

None of the money has been spent, but the City-Parish Council last year approved using some of the funds to pay for a $150,000 drainage project proposed by Councilman Jay Castille, who represents the area.

The local law that created the special tax requires that revenue be used for economic development projects.

Castille said the drainage project is appropriate because the improved drainage, which involves realigning a coulee, will make undeveloped land in the area more attractive to developers.

Castille also said the money will help improve drainage for some of the businesses were the tax has been collected, such as the Acadian Hills golf course, as well as city-parish government’s Moore Park.

City-parish officials have announced no plans for the remainder of the money generated by the special sales tax — about $380,000 after accounting for the pending drainage project.

Castille said he is still hoping to attract a large commercial development to the area, and the council could opt to re-impose special tax in the future if a prospect emerges.

A similar special taxing district had been created at the same time at the intersection of Louisiana Avenue and Interstate 10 to attract the large retail center that now sits at the intersection.

Money from the special tax collected there is used to pay back money spent for roadwork, drainage and other improvements that developers had requested.

Castille said the Louisiana Avenue/I-10 area, which was vacant land just a few years ago, is now home to 23 stores that employ about 676 people, and he hopes a similar development might one day emerge north of the I-10/I-49 interchange.

The expiration of the special tax at the I-10/I-49 interchange comes as proposals for special economic development taxes have been generating an increasing amount of controversy in Lafayette.

City-Parish President Joey Durel’s administration has shelved two proposals for special taxes in the past year after opposition mounted.

A proposal earlier this year would have imposed a new sales tax to help pay for a private luxury hotel and convention center at a development near River Ranch.

The tax would have been collected only at the development.

A proposal late last year would have imposed a new tax along several of the city’s major roads to help pay for improvements.

Opponents argue that the special taxing districts give an unfair advantage to new businesses over existing ones and have questioned state laws that allow the special taxes to sometimes be imposed without a vote of the people.

New taxes generally require voter approval, but there are exceptions for special districts created to spur economic development or to redevelop blighted areas.

Durel and others have defended the special taxes as a valuable economic development tool.