Chapter 313 in Texas puts energy fight in the school yard
The Texas House and Senate are considering changes to the Texas Economic Development Act, commonly known as Chapter 313, that stakeholders say could strangle the state’s chances to compete for new energy-related projects.
The 16-year-old Chapter 313 law allows school districts to waive a portion of a company’s property tax bill for up to a decade in exchange for a deal to move significant operations within the school district’s boundaries.
Industries eligible for a Chapter 313 school property tax treatment include manufacturing, R&D, renewable electricity generation and other advanced energy projects, data centers and other projects exceeding the state’s $1 billion investment threshold.
To be eligible for a Chapter 313 break, the Texas Comptroller’s Office must certify that the tax reduction is a determining factor in the company’s decision to invest in Texas and that the project will generate more new tax revenue than the amount of tax benefits the project receives.
So far, that doesn’t seem to have been a problem. Local school districts have signed 311 such agreements through 2015, according to a comptroller’s report, with the lifetime investment of those deals estimated to be almost $146 billion.
“Chapter 313 has brought more than $80 billion in investment to the state, created more than 50,000 jobs and added $2 billion in personal income” thus far, said Suzanne L. Bertin, executive director of the Texas Advanced Energy Business Alliance (TAEBA), during a recent Advanced Energy Economy webinar.
Take wind power for example. Chapter 313 helped kick start the development of wind energy capacity in Texas, where most wind projects receive a tax abatement.
Several bills have been filed to eliminate or modify Chapter 313. Bertin said that TAEBA is working to oppose them. The bills are:
– Senate Bills (S.B.) 1026 and 1027, which would create barriers to renewable generators being able to access the law’s incentives;
– House Bill (H.B.) 445 and S.B. 277, which are directed specifically at wind facilities located near military facilities; and
– S.B. 600, which would eliminate the tax altogether. Texas state Sen. Konni Burton authored the bill to repeal the law.
“Lawmakers should oppose these proposals because Chapter 313 is the state’s single most important economic development program. Without it, the state cannot compete for many new industrial and energy-related projects,” the leaders of several manufacturing lobbying groups wrote recently.
Chapter 313 is also a transparent economic development program, wrote Tony Bennett, president and CEO of the Texas Association of Manufacturers; Dale Craymer, president of the Texas Taxpayers & Research Association; and Hector Rivero, president and CEO of the Texas Chemical Council, in an April 22 op-ed for the Longview News-Journal in Longview, Texas.
“To be considered for a reduction, a project must file an application detailing the scope of the project, its investment, hiring and the tax benefits it seeks, and an annual report to determine if it is still eligible and a progress report every two years—even after it is operational. These reports are open records and available on the comptroller’s website,” they wrote.
Such transparency provides the public with assurances about a new project, while Chapter 313 helps a new project “overcome Texas’ crippling property taxes” by giving it temporary tax reductions on a portion of their investment, they wrote.
Naysayers comment
Opponents to Chapter 313 say the tax abatements it has created are a form of corporate welfare and they complain that state regulators should more closely watch businesses to make sure they create the jobs they promised to create in return for the tax breaks.
“The fundamental flaw with the program is that, although the credits were a determining factor for several companies that moved to the state, roughly 90 percent of companies that received the credit would have relocated to Texas regardless of whether the program existed,” Nathan Jensen, a government professor and researcher at the University of Texas at Austin, wrote in a recent op-ed.
In a nutshell, said Jensen, Texas has actually given away tax dollars that otherwise could have been used for public services.
Earlier this month during a hearing before the Texas House Ways and Means Committee, Lt. Col. Matthew Manning, director of operations at Sheppard Air Force Base in Wichita Falls, offered his support for H.B. 445. Manning asked the legislators to help limit wind developers from receiving Chapter 313 tax credits if they plan to construct a wind farm within 34.5 miles of a Texas military base.
Reportedly, this has been an ongoing request from military leaders in Texas since 2011.
State Rep. James Frank’s H.B. 445 would limit tax credits for wind projects built within 30 miles of a military installation largely due to their negative impact on aviation.
There are four weeks left in the Texas legislative session.
