House Higher Education Committee Chairman Jim Murphy filed HB1556 to reform and reauthorize Chapter 313, the part of the tax code that allows school districts to participate in Economic Development incentives for large capital investments in Texas. It has been clearly demonstrated by data that without school district property tax incentives, Texas is at a significant disadvantage compared to states with which we compete for large capital investments. Chapter 313 has provided those incentives, but it has been far from perfect.
Chairman Murphy’s bill provides that the Comptroller of Public Accounts must certify that “but for the incentive” the project would not have come to Texas. The Comptroller must also certify that the investor will pay more in taxes over the 25-year life of the project than the amount of the incentive and that the school district will not be harmed by the incentive. Texas competes world wide for investments like the $17 billion Samsung chip plant being considered for Austin. Other states and other countries are talking to Samsung right now.
This bill provides for a limit on the value of assets placed on the tax roles for qualified investments for up to 10 years. This applies only to a portion of the Maintenance and Operating tax rate. The investor pays a part of the M&O rate and the full I&S rate. On $17 billion in value, Samsung will pay the school district roughly $17 million on the M&O rate and about $40 million on the I&S rate annually for the first 10 years. That’s $57 million a year in new money to the district during the period of the temporary reduction. After that the full market value will be on the tax rolls.
Chapter 313 has been widely criticized among the investment community for the excessive reporting required. This bill simplifies the reporting without sacrificing control and oversight. Under the current provision, the application is filed with the school district and the fees are up to the district, thus unlimited. This bill provides for the application to be made directly to the Comptroller and the fee is set at $50,000.
This bill also restricts the school district from extracting payments in lieu of taxes and revenue protection payments from the investor. This has been “free money” for districts because it is not counted in the district’s property tax money and therefore did not reduce the state payments to the districts. This change will increase Texas competitiveness with other states.
There is a widely held misconception that somehow the State of Texas pays the district funds lost by the temporary abatement. This would only be true if the investment would have been made without the incentive and remember that the Comptroller has to certify that without the incentive there would be no investment.
Texas needs school district participation in economic incentives to attract large investments of capital. This bill not only continues that successful incentive, but largely cleans up parts of the program that have needed an overhaul. It deserves your support.