The Texas House of Representatives approved House Bill (HB) 4242 last week in an effort to kick the can down the road regarding Chapter 313 property tax abatements, according to a think tank analyst.
“What they accomplish is to avoid making a hard decision now because it's becoming increasingly well-known what the problems of the program are,” said Dick Lavine, a senior fiscal analyst at the liberal think tank Every Texan. "It's a very complex program and rewriting it on the fly in the last three weeks of the session, when a million other things are happening, is too difficult.”
In one line, House Bill 4242 extended the ability of school districts to offer property tax abatements to businesses by two years until 2024 despite opposition from both liberal and conservative groups. The vote was 112-29 in favor.
“Tax abatements are mainly unnecessary,” Lavine told the Lone Star Standard. “These companies come here because we have oil and gas, the pipelines and the coastline, or because we have wind and transmission lines. We're protected from competition because we're not part of a national grid.”
Petrochemical, wind and solar companies are often the types of companies that benefit, according to Lavine.
“Wind and solar are the greatest numbers of projects but by far the greatest amount of lost school property tax revenue is from manufacturing and most, not all, of the manufacturing is somehow related to petrochemical,” Lavine said.
In 2019, the Texas comptroller of public accounts reported that renewable energy businesses--mostly wind and solar farms--received 57% of all Chapter 313 abatements but only provided 9.6% of the jobs created. Further, only 8% of job commitments and 27.6% of committed investment under 313 commitments come from wind and solar farms yet those renewable energy businesses receive 37% of the tax benefits, according to the Texas Public Policy Foundation.
“This is set up for manufacturing and renewable energy companies,” Lavine said. “Those are the ones that qualify. If you don't fit into that category, if you're a service industry or a headquarters, you may get some other break from a city or county but you don't qualify for a school tax break through Chapter 313.”
Chapter 313 contributes to inequality in school district financing, according to Cutter Gonzalez, former energy project campaign manager and policy analyst with TPPF.
"Wealthy districts negotiated significantly more agreements on average than their property-poor counterparts," he said. "The system, as designed, encourages this imbalance. The result is that the state has to look elsewhere to find money to send to poorer districts."
Formerly known as the Center for Public Policy Priorities, Every Texan released a joint statement along with TPPF opposing the extension of Chapter 313 in the Texas Code that allows school districts to offer property tax abatements to big businesses.
"These tax breaks do not deliver the promised benefits, shift school funding costs, and waste tax dollars,” the statement reads.
A report by the Washington Center for Equitable Growth, authored by Nathan Jensen, casts doubt on whether Chapter 313 is an effective tool for attracting economic development to the Lone Star State. As previously reported, the report concluded that only 15% of renewable energy projects would have moved their developments outside of Texas if they did not receive subsidies.
“If HB 4242 is not approved, then the Chapter 313 program will expire on Dec. 31, 2022,” Lavine added. “If the program dies, all the existing agreements are still effective and will continue on. The controller issues a biennial estimate of the cost of tax exemptions and for the current biennial, it's $1.9 billion. For the next biennial, it's $2.1 billion. These are locked in exemptions and forgone tax revenue regardless of what happens to the bill.”
Lavine said HB 4242 has not yet been assigned to a Senate committee.
Charles McConnell, executive director of the Center for Carbon Management in Energy and Sustainability at the University of Houston, told the Houston Republic that Chapter 313 is one of several tools that Texas uses to "encourage the investments and the deployment of renewables — both wind and solar". He points out that the way renewables often operate means they would not be profitable without government subsidies and other handouts. Texas' reserve margin has dramatically decreased as a result of subsidizing renewable energy projects, he added.
