In the 2019 Texas Legislative session, an eerie effort was put forth to extend Chapter 313 of the Texas Property Tax Code into 2032 without any review or oversight. It essentially was a bill (HB 2129) introduced that was to have the Texas Legislature circumvent the Texas Legislature. Unfortunately in a bipartisan vote, it sailed through the Texas House of Representatives with only 27 of our state representatives questioning the validity of such a maneuver. Fortunately, calmer heads put such folly away so that 313 would get the scrutiny it needs under normal Texas Legislature rules in 2021.
What is Chapter 313? Chapter 313 was established in 2001 in the tax code as The Texas Economic Development Act. It allows school districts to defer for 10 years, the time before a new investment project within the district goes onto the tax roles at full market value. It essentially allows school boards to manipulate certain property values under the guise of economic development.
As if public school districts are not struggling enough to deliver on their sole responsibility to provide education to our children K-12? The Texas Legislature has chosen to burden the districts with regional economic development. Part of this is out of sheer laziness by the Texas Congress. School districts assess the largest single property tax payment a property owner makes, therefore, the legislature made ISDs manage economic development, too. “We’re the school board and I thought we were supposed to be educating our kids, but it seems like we’re in the middle of economic development,” Randy Eulenfeld, president, Gregory-Portland ISD said. “We will take this responsibility and do the best that we can.”
If that is the decision and direction of Texas, it raises serious questions as to what if any role remains for county commissions, city councils, chambers of commerce and economic development councils. Texas has chosen to provide such incentives directly from the State Treasury to companies deemed of sufficient economic development by the school board. If a company is considering an investment in a new build or expansion of a facility, who do they visit with first? The county judge, city mayor, president of the chamber or economic development council? No, their first call is to the school superintendent.
How has Texas arrived at a point where the Independent School District Superintendent is the primary point of a regions economic development? Because the Texas Legislature has so structured it (chapter313.org) and the school superintendent is the only one in this group with direct access to the State Treasury. Chapter 313 provides for school districts to get reimbursed for the levy loss from such property value manipulations. Having access to such largesse makes the county commissioners, city councils, chambers of commerce and economic development superfluous to regional economic development.
Another aspect of economic development was addressed in this legislature; per legislated responsibility, the review and renewal of Chapter 312 took place. Chapter 312 of the Texas Property Tax Code allows any taxing authority, other than school districts, the ability to grant property value limitations, aka abatements within their taxing jurisdiction.
There are no offsets for the levy loss from the state treasury, so whatever tax revenue is foregone stays within the authority granting such abatements. This provides for more oversight that promised job creation, and other commitments are fulfilled by the company receiving the abatement.
Even with such an incentive by the taxing authority to ensure accountability, Texas Public Policy Foundation and Center for Public Policy Priorities worked diligently to increase the transparency of these arrangements. No such transparency has been established for 313 abatements.
Who is able to obtain these lucrative school district abatements? This seems to be solely based on the ability of a company to hire the correct consultant. It is especially convenient if you can hire as your consultant an active school superintendent offering such consulting services to companies and school districts alike. Not sure how he credits his consulting hours back against his school district salary?
Fortunately for him, his Texas Senator not only condones the practice but considers it advantageous to the process. Advantageous. How? Ensuring taxpayers subsidize all of the capital investment the company is making? Texas is not open for business, the Texas Treasury is open for looting and the legislature is its pimp.
Testimony during this session at the Texas House and Ways Committee had lobbyists claiming that without these abatements, a desalination plant for Corpus Christi would be built in Louisiana. These claims were made with a straight face. If these lobbyists are willing to conduct themselves in such unethical behavior, the Texas taxpayer is in extreme peril from any tax relief.
If the goal of the Texas Legislature is to subsidize economic development by the taxpayers, so be it. But let’s end school boards surreptitiously manipulating school district property values for some and not yielding any relief for others who have spent a lifetime in the district. Let’s put elected county and city officials along with local chambers of commerce and economic development councils, chartered to generate local economic development, back in control of this process.
This column has been updated to include the correct name for the Center for Public Policy Priorities.