This story is about a tax abatement program commonly referred to as Chapter 313, after its location in the Texas Tax Code. It is also referred to as the Texas Economic Development Act. The program creates an incentive for businesses - especially refineries - to negotiate reductions in the value of their property, which leads to lower revenues for the public schools in the districts where they are located.
The program expired recently. There is some interest in renewing it.
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. . . all of these projects — and hundreds more across Texas — have benefited from Chapter 313, a two-decade-old tax abatement program that critics have described as “free money for big business.” The enabling legislation expired on Dec. 31, but a flurry of last-minute proposals approved before the deadline may have irreversible effects for decades into the future. Crafted to lure businesses to Texas, Chapter 313 allowed companies to lock in a minimal property valuation for a proposed industrial project for 10 years in exchange for economic growth commitments and kickbacks to local school districts. Advocates for retaining the tax break liked to point out that renewable energy companies have made up the majority of Chapter 313 applicants in recent years.
In simple dollar terms, however, the petrochemical industry has been the program’s largest beneficiary — receiving abatements worth $7.6 billion in 2020 alone, compared to $2.1 billion for wind farm companies. A study by the nonprofit Central Texas Interfaith reveals that the top 10 beneficiaries of existing Chapter 313 agreements are all linked to the petrochemical industry like the companies expanding along the shore in San Patricio County, receiving annualized tax breaks from school districts worth more than $250 million. Opposition to the program, described by one group as a “colossal giveaway” to industry, grew so loud that, in a rare show of bipartisanship, Republican and Democrat legislators combined forces to block the law’s reauthorization in the 2021 session.
The program may not be that easy to get rid of. House Speaker Dade Phelan, R-Beaumont, has vowed to pursue revival of Chapter 313 in the 2023 session. But for now, Chapter 313 is dead. Proposals that remained in process as of Jan. 1 have been nullified.
During the lifespan of the program, the Texas comptroller was charged with reviewing and certifying Chapter 313 proposals, but in a weird twist of design, terms of these abatements were negotiated directly with local school boards, which also had final approval authority.
“There’s no accountability at the statewide level; nobody administers it,” said Bob Fleming, an organizer with the Metropolitan Organization of Houston who campaigned against Chapter 313 reauthorization back in 2021. “A bunch of local school districts make singular decisions based on what they think is in their interest. Nobody is looking out for the statewide interest. Local school districts are overmatched when the $2,000 suits walk into the room.”
The comptroller’s office did not respond to an interview request from Capital & Main.
“It’s a perverse incentive,” said Doug Greco, lead organizer at Central Texas Interfaith, one of the organizations that helped shut down reauthorization of Chapter 313 in the 2021 legislative session.
“We approach it on a school funding basis,” said Greco, who is already gearing up to fight any Chapter 313 renewal efforts in 2023. “It’s corporate welfare and the people who pay over time are Texas school districts.”
In 2020 alone, school boards awarded Chapter 313 abatements worth more than almost $11 billion over 10 years — money that would have otherwise gone to support statewide school funding.
Jobs for Texas, a coalition of powerful lobbying groups — including the Texas Association of Manufacturers, the Texas Oil and Gas Association, the Texas Chemical Council and the Texas Taxpayers and Research Association — had been consistently outspoken about the need to renew the incentive program, claiming that it has made the Lone Star State attractive to businesses that might have chosen to invest elsewhere.
For more:
- Wikipedia: Texas Tax Code Chapter 313.
- Texas Comptrollers Office: Chapter 313: Attracting Jobs and Investment.
- Understanding Chapter 313 – February 2021.
- Texas Schools for Economic Development: Introduction to Chapter 313 Agreements for Superintendents and Boards.
