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Database Tracks Local Gov Spending on Corporate Tax Incentives

Hundreds of cities and counties across Texas are spending tax dollars on 2,700 incentive deals seeking to boost the local economy, new data shows, under a state program that operates with no limits and little oversight.

(TNS) — Hundreds of cities and counties across Texas are spending tax dollars on more than 2,700 incentive deals seeking to boost the local economy, new data shows, under a state program that operates with no limits and little oversight.

The Texas Legislature passed a law last year requiring local officials to report incentive agreements to the state comptroller's office, which published an online database last week that allows the public to look up deals in their community. It's the most comprehensive effort by a state agency to pin down how many of these local agreements exist and provide details of each contract to the public.

"This new tool is a continuation of my agency's commitment to giving taxpayers a user-friendly view into how government is treating their hard-earned tax dollars," Texas Comptroller Glenn Hegar said.

The incentive deals were written under a pair of obscure Texas laws known as Chapter 380, for cities, and Chapter 381, for counties.

An investigation published last year by the Houston Chronicle found that both laws were passed during the recession of the 1980s without the typical safeguards that lawmakers placed on other economic incentive programs. The laws impose no limits on each deal, require no job creation and mandate no penalties for noncompliance.

Cities and counties didn't have to report their agreements to any kind of clearinghouse, making a broad analysis of the program nearly impossible. The new disclosure requirements offer the first statewide look at how frequently the laws, which allow limitless grants or loans of public funds, are used across Texas.

The database shows these laws have become the preferred economic development tool for local governments: There were more than 3,100 active incentive contracts in Texas as of Sept. 1, 2021, when the new disclosure law went into effect. Of those, 375 have since expired.

That's far more than other types of incentives in Texas that reduce property taxes for up to 10 years. Chapters 380 and 381, by contrast, can discount any tax or fees businesses pay indefinitely.

The newly published database shows hundreds of agreements exceed the 10-year cap imposed by other incentive programs: 718 deals were 11 years or longer; 68 were longer than 30 years.

Round Rock's 60-year agreement with Dell Technologies is the longest in Texas. Since 1993, the city has paid more than $164 million in sales tax rebates to the computer giant and plans to continue paying incentives until the year 2053.

Dell generated $101 billion in revenues during the most recent fiscal year that ends in January, and earned $4.6 billion in profit.

Local officials that offer incentives to companies under Chapter 380 defend the practice, saying it's a vital tool to attract and retain employers.

"When deciding where to locate its headquarters in the early 90s, Dell could have gone anywhere," said Craig Morgan, Round Rock's mayor, at a February 2020 comptroller hearing in Austin.

"It stayed in Texas — an action that, over the past 25 years, has generated over $1.5 billion in direct sales-tax revenue to the state of Texas. $1.5 billion," he said. "Talk about fruitful."

Missing details

It's still difficult to say exactly how much all the deals are collectively costing taxpayers. The database doesn't capture every detail about the agreements, including their financial value. Lawmakers required that copies of the agreements and a description of their "focus or scope" be disclosed — but not their cost.

Local governments did include summaries of the agreements, though some are only brief descriptions such as "grant payments" or "to encourage economic development." When local officials did try to provide extensive details, they often were stymied by the database itself: Descriptions are capped at 600 characters, including spaces.

It's also difficult to determine which companies are benefiting the most from these local incentive programs.

Recipient company names are listed but not addresses, parent companies or contacts. Such information could help the public determine whether one company is getting many tax breaks under different names.

These disclosures are among the items that the nonprofit Good Jobs First, an incentives watchdog group, lists in model legislation it urges state and local governments to adopt.

"It's great that there's some kind of disclosure now on which companies are getting these tax breaks and from what localities, but this is a missed opportunity," said Kasia Tarczynska, Good Jobs First's senior research analyst. "It's still impossible for a resident of Texas to really understand where their money is going and for what purpose."

Local officials clearly had to type in a summary of each deal, Tarczynska added, so simple changes to the database could require those people to enter the maximum incentive amount and information about job creation and wages.

In all, 279 cities and 63 counties sent agreements to the comptroller, with cities submitting more than 80 percent of all deals.

The Chronicle investigation last year found no shortage of blockbuster deals — 40-year incentives to resorts and corporate headquarters; 100 percent property tax rebates for decades; a $50 million grant to an entertainment venue.

And the database holds plenty of household names with multiple agreements: Amazon, which generated $470 billion in revenues and $33 billion in profits in 2021, had more than a dozen deals. Other large companies with five or more deals included HEB, Costco, Buc-ee's, Texas Instruments, Samsung and General Motors.

Creative deals

Many cities also use the local incentive laws to offer a large volume of small, far more targeted tax breaks.

Indeed, local officials broadly praise Chapter 380 and 381 for offering them crucial flexibility to spur economic development, including not only big-ticket subsidies but small-scale improvements not suited for more standard 10-year tax abatements.

"Part of the attraction of (Chapter) 380 is it's not just limited to property tax," said Marty Wieder, Grand Prairie's economic development director, in an interview last fall. A city can offer sales tax rebates, hotel occupancy tax incentives, or smaller, up-front grants, he said. The ability to do "creative agreements" is key.

Still, Weider said, local officials should demand a strong return on their investment of taxpayer funds. "These have got to be defended," he said. "We're the government closest to the people. Our citizens are people our council members see day in and day out."

Colleyville found a creative way to provide incentives to local retailers: The city mailed "gift cards" to all 25,000 residents, and invited them to use them at local shops. Business owners who accepted the cards as payment then were reimbursed — through numerous tiny Chapter 380 grants — by the city.

Many cities reported deals related to the construction of new housing or improvements to existing homes, with much of this activity concentrated in North Texas.

Richardson reported 290 deals, the most of any government. More than 200 of them were part of that city's long-running program giving developers or homeowners a tax break for improving residential properties. Most of the 94 deals in Farmers Branch were part of a similar effort.

Other towns, including Bryan and Sulphur Springs, approved dozens of deals waiving the permitting fees for homebuilders.

Government entities face a $1,000 penalty for failing to comply with the reporting requirements. The law requires the comptroller to notify local officials about the omission, and they have 30 days to fix the problem.

Comptroller spokesman Kevin Lyons said tips from the public will likely play an important role in helping state officials find holes in the data.

"Obviously, we don't know the entire universe," Lyons said. "There could be a town in Hudspeth County that has a 380 agreement, and we wouldn't know about it unless they report it to us."

Lyons said anyone who notices a missing incentive deal can report the omission to the comptroller's office by calling 844-519-5672.

© 2022 the Houston Chronicle. Distributed by Tribune Content Agency, LLC.