The House State Affairs Committee addressed an issue that several small county officials and school superintendents say prevents the over-taxing of constituents.

In a hearing Sept. 10, the committee heard testimony on the costs and benefits of tax-discounted projects approved by school districts.

Under the Texas Economic Development Act (known as “Chapter 313” of the Tax Code) public schools may limit appraised values for various economic development projects.

Robert Wood of the Comptroller’s office said Chapter 313 offers two vehicles which a school district can use: tax credit and value limitation. Businesses benefiting from either of the tax incentives must provide jobs at 110 percent of the usual salary and 80 percent of those jobs must provide health insurance.  Projects qualifying for the incentives must provide at least 25 jobs in non-rural cities and at least 10 in rural areas.

The incentive program is scheduled for a Sunset review in 2011.

Chairman Rep. David Swinford (R-Amarillo) said the incentive helps to offset the tax burden for companies that would otherwise move to a state with lower property tax rates.

“They [companies considering locating in Texas] might build where the income tax is high but where the property tax is low,” Swinford said, making reference to Texas’ tax structure that does not include a tax on income.

Without naming names, he noted several pre-Chapter 313 examples of the state losing companies to Oklahoma, including a horse slaughter facility and an oil and gas refinery.

“We were getting clobbered,” he said.

Swinford said he believes the incentives have kept the job creation rate in Texas high.

“I believe that’s why we’re so economically powerful in this so-called depression,” he said, noting his belief that the tax incentive is effective in recruiting large industries to rural communities.

He said several wind power generation companies have taken advantage of the incentive, and paid money to the school districts in lieu of taxes. Wes Jackson, an attorney speaking on behalf of the Wind Coalition of Texas, an industry-supported pro-wind power group, said there are 30 Chapter 313 applications filed by wind generation plants in Texas.

Oldham County Judge Donnie Allred testified that his county, whose seat and also largest city is Vega, population 800, once had a high tax rate of 78 cents per $100 property valuation just to keep essential services going, such as the jail and basic gravel roads. With the tax benefits of a wind generator plant, Allred said, the county was able to lower its tax rate for the upcoming fiscal year to 74.7 cents per $100.

“It’s an economic tool that may be able to keep some of us alive,” he said.

Matt Ramstein, superintendent of Wildorado ISD, a K-6 school district in Oldham County, echoed Allred’s comments. David Fort, superintendent of Dalhart ISD, said his district was able to pass a bond election for a new $19.4 million high school, thanks to a one-time payment from a company benefiting from the 10-year tax limitation.

David Allum, site manager for Hillmar Cheese Co., said the Dalhart incentive gave his company the additional push to locate in the Texas Panhandle rather than Idaho — even though a facility was provided by Idaho.

Bill Wiggins, superintendent of the Plemons-Stinnett-Phillips Consolidated Independent School District in Stinnet, said a similar incentive offered by his district to Conoco-Phillips helped to stabilize an existing business relationship, rather than bring in a whole new company.

Large cities have also reported benefits from Chapter 313. Mario Hernandez, president of the San Antonio Economic Development Foundation, noted a San Antonio-based Toyota manufacturing plant as a beneficiary of the tax incentive. He said the economic development climate in Texas is conducive to bringing in new manufacturing jobs.

“I couldn’t say that about Texas 10 years ago,” Hernandez said. “... Keep doing what you’re doing.”

Richard Perez, president and CEO of the Greater San Antonio Chamber of Commerce, said the Toyota plant has added 4,000 jobs. “I can tell you without a doubt in my mind that Chapter 313 has allowed us to get Toyota to San Antonio,” he said.

Dick Lavine, of the liberal-leaning Center for Public Policy Priorities in Austin, said his organization was concerned that the state is being denied tax revenue by school districts opting to offer the tax break. He argued that the state should be a party in any agreement between a school district and a corporation to benefit from a tax incentive.

“If you want local control, then this is a prime example of local control,” Swinford said earlier.

* * *

In other business, the committee briefly heard testimony on the pros and cons of developing a coherent state policy of offering incentives to local governments for activities relating to recruiting and hosting large events.

Rep. Dan Flynn (R-Van) said  with the Super Bowl coming to Arlington in 2011, nearby Metroplex cities  could benefit from trust funds reserved for special sporting events. The funds could be used in marketing or in making accommodations for a larger-than-usual crowd, he said.

Unlike the school district value limitations, most of the trust funds currently benefit cities with populations of 800,000 or more, though committee members discussed whether to lower the limit.

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