Legislative Update: Texas Schools for Economic Development

August 3, 2020 — Welcome to all who have an interest in the intersection of economic development and Texas public-school finance. Our goal at TSED is to effectively advocate on behalf of school districts across the state who benefit from Chapter 313 Agreements, and to help superintendents, school districts, and interested businesses speak with a unified voice in Austin.

Last session, your significant interests in the Tax Code were threatened. TSED legislative counsel worked to secure the following legislative victories:

• Ensuring that the Chapter 313 tax value above the limitation amount is specifically excluded when the state calculates the current year taxable value of property in the school district.
• Mandating that revenue protection payments under a Chapter 313 agreement are based on the district’s taxable value of property for the proceeding tax year.
• Extending Chapter 313 (which works in tandem with Chapter 312) for another 10 years.
• Preserving supplemental payments for school districts.

During the upcoming session, goals of the TSED legislative counsel are to:

1. Extend Chapter 313 tax incentive authority until at least calendar year 2029, aligning with the Chapter 312 expiration year; and
2. Ensure that the ISDs using such incentives will not be financially harmed in the state’s education funding formula.
3. Preserve supplemental and revenue protection payments to school districts.

The statutory authority to enter into Chapter 313 tax limitation agreements expires at the end of calendar year 2022. If legislation is not passed to extend Chapter 313, there will be no more agreements. Further, efforts are presently underway by some in industry to severely limit school districts from maximizing their benefits. So, that expiration date needs to be extended via good, clean legislation during the next legislative session.

Also, now more than ever, you want to maintain and protect your district’s fair share in the Foundation School Program formula.

Background. Last year via HB 3143, the state statute authorizing cities and counties to grant tax incentives for economic development was extended for another 10 years. Simultaneously, HB 3 ensured that Independent School Districts using such incentives to spark jobs and business investment would not be financially harmed in the state funding formula. Now, select legislators are revisiting the related Tax Code provisions.

Some seek to limit or abolish Chapter 313 tax incentive authority for ISDs, in advance of the next legislative session that starts in January 2021. For example, this year two Senate committees are required to jointly receive stakeholder input and perform a specific study:

“Study the use of local tax abatements allowed under Chapter 313 of the Texas Tax Code. Make recommendations to promote transparency and enhance the effectiveness of tax abatements, capital investment incentives, and similar programs.”

Strategic Objectives. TSED will work to successfully achieve three central goals: (1) Extend Chapter 313 tax incentive authority until at least calendar year 2029, aligning with the Chapter 312 expiration year; (2) Ensure that ISDs using such incentives will not be financially harmed in the state’s education funding formula; and (3) Preserve supplemental and revenue protection payments for school districts.

Current Example — Tesla. Due to the burdensome regulatory and tax environment in California, Tesla, the automobile company, is considering building its next manufacturing “Gigafactory” plant in either Oklahoma or Texas. The plant will be at least 4 million square feet and create about 5,000 high wage jobs. Del Valle ISD, located in Southeast Travis County, recently approved a plan to offer Tesla tens of millions of dollars in Chapter 313 property tax breaks over 10 years to incentivize building the new plant in the school district. Likewise, Travis County approved a minimum of $14 million in tax breaks.

If the district did not offer the incentive, Tesla would locate in another state and the undeveloped district property would generate a mere $2 million in school taxes during the next 25 years. If Tesla does locate in Del Valle ISD with the district’s incentive plan, Tesla will pay just over $100 million in property taxes to Del Valle ISD during the next 25 years. That is a great win-win deal for all stakeholders, even before describing the STEM opportunities that can be created and the economic multiplier effect throughout Texas. Under existing law, Del Valle ISD will lose no local revenue, and may receive supplemental payments from Telsa to enhance the District’s programs.

Please Do Your Part

As always, the board of directors and staff at Texas Schools for Economic Development will closely monitor Chapter 313 legislation, public policy, and related matters that are of interest to you.

If you have not yet joined TSED, please do so today. This money is used to advocate on your behalf. Membership dues are .5% of your annual supplemental payment from your 313 Agreement, or .50 cents for each $100 in supplemental payments received by the District. For districts that have existing agreements but have not yet begun to receive supplemental payments, a $500 membership fee is suggested for 2020. To request an invoice for membership dues, please contact Kayler Williams at or at (713) 965-7623.