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Sen. Kevin Sparks | Facebook/Kevin Sparks

Senator skeptical of Chapter 313 renewal as Abbott calls for 'new economic development tools' support

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In his State of the State address, Gov. Greg Abbott (R-TX) called for the introduction of new economic development tools in this legislative session, according to the Lone Star Standard.

This has been interpreted as a call to bring back Chapter 313 tax abatement program, which had expired at the end of 2022. 

According to the Texas Comptroller's website, Chapter 313 was a program that permitted "public school districts to offer tax incentives for businesses that invest in their communities" and was 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."

Tax abatement programs in Texas have been called into question for their effectiveness in fostering economic growth. According to a recent report from the Houston Chronicle, Chapter 313 agreements have been found not to provide the promised job creation results and even allow recipients to pay less than minimum wage.

The report also states that two-thirds of the programs waiving job creation rules and up to 20% of those receiving abatements are able to retain them, despite failing to meet labor standards. In response, some experts suggest that it is time for officials to start over and make sure that any future initiatives are based on evidence gathered from past cases. 

In May 2021, two well-known Texas public policy think tanks, The Texas Public Policy Foundation (TPPF) and Every Texan, released a strongly worded joint statement opposing the renewal of Chapter 313, according to the Lone Star Standard. This program is designed to offer tax incentives to companies who locate or expand operations in certain properties in Texas.

However, the think tanks highlighted that while some companies have received the incentives they were promised, the majority of them have failed to create new jobs in return for their incentive packages. Furthermore, such incentives are resulting in an overall loss in tax revenue for local school districts.

Among the skeptics are State Sen. Kevin Sparks. When asked if he supported the reinstatement of Chapter 313 as-is, Sparks said, "No, in general, I would be really good if we didn't reinstate that at all."

When asked if he would support an altered version of Chapter 313, he said,  "Yeah, I would probably consider it."

In a recent editorial for the Houston Daily, Bill Peacock, former vice president of research at the TPPF, highlighted the use of Chapter 313 tax abatements to turn renewable energy investments into profitable ventures. According to Peacock, despite the fact that these sources of energy are often inefficient and unprofitable without the additional economic incentives provided by the government, these investments can be made profitable with the right set of tax breaks. 

Texas Rep. J.M. Lozano (R-Kingsville) has filed a bill, House Bill 2421, which would reinstate Chapter 313.

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