GUNTER, Texas (KTEN) — After accusing the previous Gunter city administration of spending more than $1.7 million that wasn't theirs to spend, the mayor is now working with city council members on a plan to pay it back.

Residents and officials came together at a council meeting Thursday to the discuss the fate of the city's Economic Development Corporation due to the city's financial troubles.

Mayor Karen Souther said an audit found previous city officials had collected sales tax revenue from Gunter's extraterritorial jurisdiction for 35 months.

That resulted in a $1.7 million debt, and the state is demanding that the funds be repaid.

"The 35 months we're collecting what's not ours, we lowered the tax rate 21 percent because of it," Souther said. "That's a problem, because the state does not allow us to increase the tax rate more than 3 percent in a year."

One proposed resolution is dissolving the Economic Development Corporation and switching to a Municipal Development District. If changed, MMD could bring in more tax revenue.

"EDC is a corporation; this is a district, so we can expand our boundaries a bit," Souther said. "We can recoup some sales tax that's already existing and bring that in to help the city with development, projects, and other things that we desperately need."

Council members decided to table the decision about the fate of the Economic Development Corporation until its next meeting.