Fort Worth Independent School District trustees were offered a deal they couldn’t resist. Trustees approved a tax abatement to a solar energy company that could bring millions to the district in coming years.
Hanwha Q Cells Americas Holdings Co. promised it would invest $1.3 billion in the location it decides to build its solar panel manufacturing facility, according to Fort Worth ISD’s release.
Trustees approved a Chapter 313 agreement, a 10-year tax abatement agreement that could mean millions in property tax savings for the company if it moved to the area. The agreement is one tactic to lure large companies to Fort Worth and the state. Lawmakers approved the Economic Development Act in reaction to Fort Worth losing Intel to another state. Kim Brimer, a former state lawmaker from Fort Worth, created the incentive.
But now, for the first time in 20 years, Texas lawmakers did not renew the multibillion dollar tax break program.
Some believe the incentive program is responsible for bringing billions of dollars to Texas cities over the years, while critics say the impact is being conflated by the energy industry and trade groups. Now, as the 2023 legislative session approaches, Texas lawmakers will decide whether to revive the program or lay it to rest.
As the program ends Dec. 31, the Texas Comptroller’s Office is being overwhelmed with hundreds of applications, and two companies have taken the issue to court. If a company’s application is approved before the deadline, businesses can receive savings for 10 years.
Currently, there are 633 active Chapter 313 agreements, according to the Texas Comptroller’s Office. A wave of companies are applying for the tax breaks as the program expires, including Tesla, in Austin, which would save the company $16.2 million.
Chris Strayer, with the Fort Worth Chamber of Commerce, said Chapter 313 is critical for economic development in Fort Worth and Texas.
“It’s not something we utilize all the time, but when we do need it, we need it,” Strayer said. “And so it just puts us in a competitive position with the other states who do have something like that.”
Ray Perryman, president of the Perryman Group, said without an incentive such as Chapter 313 to help offset property taxes, it will be harder to make deals with companies that want to bring large projects to the state.
“Basically … any time you hear one of the headlines about your big company looking at putting a multibillion dollar plant somewhere in Texas … we’re going to have a much more difficult time attracting some of those, because again, our cost numbers just won’t work out,” Perryman said.
Criticisms of 313
Nathan Jenson, a professor of government at University of Texas-Austin, said Chapter 313 originated after Texas lost a number of deals with companies such as Intel, which was about to come to Fort Worth. High property taxes deter capital intensive operations like data centers and automobile production, he said, and Chapter 313 was supposed to incentivize those companies to move to Texas. Instead, mostly petrochemical companies applied for the program, he said.
In a study by Jenson that analyzed 257 firms that received Chapter 313, nearly half of all projects were wind energy, and 26% were related to oil and gas – an industry that is already geographically restrained. Jenson estimates 85% of the companies were moving to the areas anyways even without a 313 – 90% applied for additional incentives.
“The idea was we can compete for Intel,” Jenson said. “But in the end, it’s Shell that we’re mostly incentivizing. So … early on, criticism of the program was: This is a poorly targeted program.”
Another criticism, Jenson said, is that school districts make more money approving a Chapter 313 than taxing the company coming into the area — which encourages school boards to say yes at all times. School districts can request supplemental payments from firms which often add up to more than 40% of tax benefits.
“You kind of want a school district to be really careful and say, I don’t know we’d rather tax, but they might not come,” Jenson said. “And make a hard choice to save taxpayer money. But in this case, you know, it’s set up for a yes vote.”
Tobi Jackson, president of Fort Worth ISD’s board of education, said she views incentives, such as the 313 given to Hanwha, on a case-by-case basis.
“I believe our willingness to work with any corporation, if it is in the best benefit of the future needs of the city, county and North Texas, as well as most importantly, our students, then that’s a win,” Jackson said.
Jackson said the school district has offered two Chapter 313 to companies in the past year.
Tony Bennett, CEO of the Texas Association of Manufacturers, agrees with Jenson that the program needs to be more targeted. He said the program could use more transparency with documentation of what the company’s project brings to the community. However, he disagrees with Jenson’s findings about whether the companies would come to the state without a 313, citing the loss of companies such as electric vehicle manufacturer Rivian, which went to Georgia.
“(Companies) know what the incentives are in other states and other countries,” Bennett said. “And we understand very well what it takes to be competitive, globally.”
Most members of the Texas House and Senate have acknowledged the need for incentives to stay competitive with the rest of the country and world, he said.
Lawmakers look to create new incentive
Lawmakers seem determined to either revive or create a new incentive program for the state. Several lawmakers tried to propose amendments to the program. Rep. Brian Birdwell, R-Granbury, proposed a law that would make green energy companies ineligible for Chapter 313 incentives. Ultimately, lawmakers did not find a consensus and let the program expire.
District 30 Rep. Drew Springer, R-Muenster, said lawmakers were looking for a big reform of the incentive program, but that did not happen.
He said the 313 program is dead and will not come back.
“We just didn’t want to extend a broken piece of policy,” Springer said.
Springer said he plans to file a bill that would replace the incentive, and said most of his colleagues in the statehouse also consider replacing the program as a priority. If they don’t replace the program this session, it could set the state behind, he said.
“The devil is always in the details. Because the problem is we’re coming right off the back of knowing what we really really didn’t like on 313s,” Springer said. “And so we have to make sure that when we throw that one out when we build something completely new, we don’t bring anything that was bad off the other program.”
Seth Bodine is a business and economic development reporter for the Fort Worth Report. Contact him at firstname.lastname@example.org and follow on Twitter at @sbodine120.