Texas must have an economic development program to compete for jobs and investment
Chairman Todd Hunter’s Texas Jobs & Security Act (CSHB 5) will keep Texas competitive and bolster our state’s economic security by helping to reestablish our global manufacturing dominance, reshore our supply chain, and ensure electric grid reliability. The limited, temporary property tax discounts included in the new economic development program CSHB 5 creates are imperative because we must use economic development tools that other states and countries are using to attract new capital investments and the long-term benefits they bring.
Capital costs, including property taxes, are a key consideration when companies are deciding where to locate their projects. The global competition for major projects is fierce and other states and countries are deploying their own tax discounts and incentives. Over the last year, Texas lost several multibillion-dollar deals, including Rivian to Georgia, Intel to Ohio, and Micron to New York.
Local officials in Texas are already reporting the impact of being without a competitive economic development incentive program. Williamson County Judge Bill Gravell, who was key in securing a multi-billion-dollar Samsung plant in his county, noted that some major projects are now taking a pass on considering Texas. He observed, “Where we were at the top of list because of workforce, quality of life, water and electricity, I think we're now at the bottom of the list because that tool has been taken out of our tool belt.” Caldwell County Judge Hoppy Haden said of competition for projects from other states, “If they're incentivizing and we're not, guess where they're going to go?"
CSHB 5 has been carefully crafted and includes several provisions that protect the interests of the state and participating school districts. The limited-time property tax discounts are exclusive to school maintenance and property taxes. Participating companies must still pay all I&S tax (debt service), sales and use, franchise, inventory, payroll, and other taxes so state and local tax revenue increases on day one.
In addition, projects must be clear “wins” for Texas as the comptroller must find that the project will generate more tax dollars than the amount that will be discounted during the incentive period. Even at the reduced value, the taxable value of the property will be higher than it was prior to the investment, creating a net gain under every circumstance. Companies must also demonstrate the incentive is a determining factor in their decision to invest here. That is, without the incentive, these properties would remain undeveloped.
The program includes strong accountability provisions that require a company to return any tax savings should the project not meet the terms of the agreement. Terms in every agreement include mandatory job creation requirements, with the exception of electric grid reliability projects.
Schools are protected because school finance formulas guarantee the district will receive the same amount of revenue per student with the project and agreement as it would have without. On top of that guaranteed funding, the bill contains a provision whereby the industry project shares a portion of its tax savings through an incentive formula with the school district. This will ensure that districts are better off financially with the project. As a part of the application fee, the project will pay for a school district to hire school finance experts to do a financial impact statement prior to approval so the district will know ahead of time if it is in its best interest to approve the agreement.
The legislation represents an opportunity to strengthen our economic resilience, something Texans strongly support. A recent survey showed that Texas voters overwhelmingly agree that limited, temporary property tax discounts make sense when exchanged for long-term revenue and economic development. Research also demonstrates that voters feel strongly that Texas should enhance its supply chain to promote economic independence and national security. In fact, 84 percent agree that we are too reliant on other nations for the products we need.
We must do more to attract manufacturing and investment to Texas. The modern, transparent, and accountable economic development program in CSHB 5 is the solution and our Legislature must act this session before more opportunities pass us by.
Tony Bennett is the president and CEO of the Texas Association of Manufacturers.
This article originally appeared on Corpus Christi Caller Times: Texas must have an economic development program to compete for jobs
