Advocate Editorial Board opinion: Investments may ensure future prosperity
By the Advocate Editorial Board
June 18, 2012 at 1:18 a.m.
Economic growth has been a hot topic in Victoria and the Crossroads. Whether it's due to the Eagle Ford Shale, the hard work of residents, the national recovery or a combination of all three, one topic that always comes up, often with some confusion, is tax abatements.
There are some misconceptions and controversies in the community over tax abatements. Some people see it as a kind of free pass exempting the recipients from paying any taxes for several years. This is not the case.
So what is a tax abatement? According to Victoria City and County guidelines, a tax abatement is the full or partial exemption from ad valorem taxes on certain property. Which means the companies receiving abatements must still pay taxes on certain aspects of their business, including inventories and personal property. They also must pay the school district taxes.
The simplest explanation we can think of is an example given by city councilman Emett Alvarez. A tax abatement is an investment by the community into a project that will improve the economic future of the area.
Alvarez pointed to Caterpillar as the latest example in Victoria. By making a $5 million 10-year investment, Victoria has opened the way for $100 million in development on previously vacant land, as well as paving the way for at least 420 jobs. The people employed with Caterpillar will be buying homes and living in the Victoria area, which will mean more sales tax revenue for the county, as well as property taxes paid on the homes, not to mention all the money spent at local retail businesses and restaurants.
And while Caterpillar is certainly a large-scale look at what kind of investment tax abatements can provide, many tax abatements are made to businesses already in our area, but they must meet certain criteria. They must be in certain industries - such as manufacturing, distribution or other basic industries - and the abatement must result in at least 10 jobs being created along with an increase of at least $500,000 in the company's appraised value. Plus, all abatements come with conditions. If the companies do not meet the conditions set forth by the entity giving the abatement, they lose it.
We see abatements as a positive way for Victoria and other communities in the Crossroads to invest in their economic future. These are not blank checks written by local government to bribe businesses into coming to the area. If anything, they are deals made between the community and a business that helps both sides. The business is given a break on some of the taxes they would normally need to pay while they establish themselves in the area or make necessary improvements. The community gets a long-term return with the increases in jobs, as well as the business' investment in the community economy.
We applaud the Victoria City Council and any other governments who are willing to use tax abatements to grow their local economy. These investments are key to the success of the Crossroads.
This editorial reflects the views of the Victoria Advocate's editorial board.