An extension of the Texas Economic Development Act, more commonly to referred to as Chapter 313, has died on the Senate floor.
House Bill 4242, authored by Texas Rep. Morgan Meyer (R-Dallas) and sponsored by Rep. Brian Birdwell (R-Granbury), proposed with the intention to postponed the Chapter 313 tax abatement expiration date until Dec. 31, 2024. Without its advancement by Senate, it will expire Dec. 31, 2022.
According to a Texas comptroller release, Chapter 313 "allows public school districts to offer tax incentives for businesses that invest in their communities" and is designed to "attract new businesses by offering them a 10-year limitation on their appraised property value for a portion of the school district property tax. In exchange for the value limitation, the business agrees to build or install new property and create jobs in the school district."
Although the intended goal of Chapter 313 is to help school districts by bringing in businesses and jobs, to create more revenue and district taxes for schools, this rarely happens as most companies end up undercutting the program's job and wage goals, The Houston Chronicle reported.
According to Texas comptroller data, no company receiving the Chapter 313 tax abatements in west central Texas created the 10 jobs required under law but opted for receiving job creation waivers to avoid penalty.
"The investigation also found that lawmakers repeatedly undercut the program’s job and wage goals, creating a system in which nearly two-thirds of projects get minimum job-creation rules waived and one-fifth keep their subsidies despite paying workers less than the local prevailing wage," the Houston Chronicle reported. "The investigation found that tax breaks granted under Chapter 313 are projected to save companies more than $10 billion in school property taxes over the 10-year life span of each deal, with no limits on the program’s exponential growth."
During one of the Senate Committee on Natural Resources and Economic Development debates on extending Chapter 313 through HB 4242, members said the two-year renewal time of the bill will better be spent reforming the program, mainly used by gas and oil and green energy companies, to make it better, the Houston Chronicle reported.
“We’ve had a few decades of experience with this program, and it’s been clear throughout this session that there’s a lot of problems with it and that it’d be better to start with a clean slate,” said Birdwell, the committee’s Republican chairman, as reported by the Chronicle. “Two years is enough time given how much experience we have, all the information we have and all the studies that have been done to go back and look and see, ‘What else can we do?’”
Chapter 312 and 313 tax abatements cause taxpayers to subsidize renewable energy projects in Texas that cost hundreds of millions of dollars each year, a Texas Comptroller biennial report stated. According to America's Power, renewable energy companies have received subsidies totaling nearly $100 billion in Texas alone under the Chapter 313 program.
According to a previous Texas Business Daily article, Jason Isaac of the Texas Public Policy Foundation has tied wind and solar generation subsidizing by the government to increased electricity costs. Isaac said the best future for Texans is allowing consumers to decide what sources of energy are best and to "allow the free market to function.”
Since the inception of the program, Gov. Greg Abbott has been skeptical of the tax abatements a Texas comptroller report said. In 2015, Abbott vetoed the expansion of the program and said it causes "serious concerns exist about its oversight, its transparency, and its value to the taxpayers.”
Some analysts believe the best solution to dealing with Chapter 313 abatements is to simply start from scratch and utilize past evidence of inefficiencies and wasteful subsidies to better inform a new program, the Houston Chronicle reported.