Published Dec 11, 2020 by Steven Will
While Texas has a great reputation as an overall business friendly state, higher property taxes create a challenge to attracting large industrial facilities. In fact, major industrial facilities in Texas can pay some of the highest property taxes in the nation, amounting to hundreds of millions of dollars in increased operating costs over the many decades of facility operations. These costs make it that much more difficult to recruit the very companies Texas needs: manufacturers, advanced energy, and large industrial projects. These facilities often offer among the highest-paying jobs in the nation. In the Houston MSA, the average manufacturing job pays an average of $89,685. Other states are aggressively competing to win these projects, which makes reauthorization of Chapter 313 critical to the Texas economy and the Houston region.
The goal of Chapter 313, also known as the Texas Economic Development Act, is to attract large, capital-intensive businesses, high-paying jobs and expand the property tax base. The program targets manufacturing, R&D, advanced energy and computer centers. Created in 2001, the measure provides a 10-year abatement on school maintenance and operations property taxes, which comprise roughly 50% of a business’ property tax burden in most areas of the state. After that 10-year period expires, the property goes fully onto the ISD tax rolls. Businesses must comply with job creation requirements, demonstrate the property will generate more in total tax revenue over a 25-year period than it will receive from the 313 agreement and show the 313 agreement is a determining factor in the applicants’ decision to invest in Texas. The Texas Comptroller has final approval over all 313 project applications.
As of September, 2020, 545 of these projects are underway across Texas, with 104 in the 12-county Houston region represented by the Partnership. Per Texas Comptroller Glenn Hegar, an estimated $183.7 billion has been invested in Texas as of August 31, 2018, and 12,498 jobs have been created. This does not count the additional jobs created in those facilities along with the investments and jobs created by companies which came here to purchase and supply the awardees. Furthermore, companies receiving Chapter 313 agreements continue to pay sales taxes and other property taxes to all other local entities throughout the life of the project. The requirements of the application process help to ensure the awards only go to those projects which would otherwise have located outside of Texas.
Chapter 313 is up for reauthorization in the upcoming state legislative session. The Partnership, along with businesses, chambers of commerce and economic development organizations across the state are working diligently with our elected officials to ensure that the program continues. You can learn more about the Chapter 313 program at keeptexasfirst.com. We encourage you to contact your elected official and let them know you support continuation of this essential program.