88th LegislatureStatewide NewsTaxes & SpendingLegislature Prepares Replacement for Chapter 313, Abbott Opposes Including Renewables

That was the sentiment of a panel at the Texas Economic Development Council’s 2023 Summit — a panel that discussed one thing only: the likelihood of the Legislature reviving the now-defunct tax abatement program Chapter 313.

For 20 years, Chapter 313 of the Texas Tax Code allowed school districts to grant private companies a 10-year reduction in the taxable value of their property in exchange for moving their operations to the district’s jurisdiction.

It came with expectations of a long-term return of tax payments by the entity after the abatement expired. But over the years, it grew into more than just that.

A few years after its first passage, the Legislature added to the application process a job requirement — the creation of 10 jobs in a rural area and 25 in an urban or suburban one.

That addition was meant to reassert the program’s purpose: economic development.

But according to Robert Wood, a lobbyist who used to run the Texas Comptroller of Public Accounts Chapter 313 division, school districts waived that job requirement in upwards of 80 or 90 percent of applications.

Many of those are renewable projects, wind or solar farms that promise to create one qualifying, permanent job.

Since the Legislature declined to renew the program, opting to let it expire at the end of 2022, well over 450 applications were filed through the 313 program.

Of those, about 70 percent are renewable projects.

The first-year abatement total of those projects is $247 billion with an average annual reduction over the 10-year span of $217 billion. Those numbers do not include the applications dismissed by the comptroller and removed from its database.

The totals provided in initial applications also often prove to be wildly inaccurate — something Comptroller Glenn Hegar tried to flag and adjust for in late 2021, but for which he was profusely criticized — as the agreements attempted to project property valuations out over years and decades.

That post-session bum rush of applications was so large that the comptroller’s office dismissed many out of hand due to its stated inability to fully process all of them before the clock ran out on December 31, 2022.

This decision led to a group of renewable companies who’d applied for 313 abatements to sue the comptroller’s office to force the processing of the agreements before expiration; the Texas Supreme Court dismissed that suit two days into 2023.

At The Texan’s 88th Session Kickoff event in January, Lt. Governor Dan Patrick took credit for 313’s death, saying he greenlit the chapter’s expiration because of the program’s transparency issues and the proclivity of renewable companies to take advantage.

But since 313’s expiration, there’s been a lot of legislative buzz behind revival in some fashion — with some significant tweaks.

Each of the top three state Republicans — Gov. Greg Abbott, Patrick, and Speaker Dade Phelan (R-Beaumont) — have backed the idea of a new economic development incentive.

Abbott alluded to it in his 2023 State of the State address, saying, “[Texas’ economic success] has been aided by strategic economic development tools. To keep Texas the best state for business, our local communities need new economic development tools this session.”

With such political momentum behind that revival, it seems likely to happen. It’s now a matter of what’s dropped, kept, and added from the previous program.

For example, multiple House members have stated that allowing renewable projects into the program is a non-starter — and Patrick naming that as a reason for its death in the first place is a pretty stark indicator of where he lies on the question.

State Rep. J.M. Lozano (R-Kingsville) has filed a straight revival of 313 that includes renewable companies, too; other versions with different language are likely to be filed.

On Tuesday, Phelan announced the filing of a priority bill replacing 313 with a similar in nature but not identical in structure abatement program, including that it seems to exclude renewable companies. After the announcement, a bevy of business organizations came out with statements in favor of the proposal.

Phelan has long maintained that economic development incentives are crucial to continue attracting businesses to the state in the record fashion it has. True to form, Abbott announced on Wednesday Texas had won an eleventh consecutive “Governor’s Cup” — an annual award for the top performing state in terms of business attraction and job growth, presented by Site Selection Magazine. 

According to the magazine, Texas had 1,028 qualified projects during the previous year, more than double the second-place state. Since 2015, there have been 271 corporate relocations to Texas.

Asked about 313 and its potential replacement, Abbott said he does not believe its expiration will hurt the state in this competition because Texas still maintains its low tax, low regulation status. He also touted the House priority bill that would replace the 313 program as an improvement on the old version.

When asked for his position on renewable companies’ exclusion from the new version, Abbott said he agreed that they should not be included in the abatement program. “As I understand it,” he told The Texan, “there are already plenty of federal incentives for renewables, and we in Texas are focused on dispatchable generation to improve the power grid.”

Proponents of a revival state that even with the previous abuses, the program still played a role in bringing companies like Tesla and Samsung to the state — the latter of which, building a semiconductor manufacturing facility in Taylor, is the largest economic development deal in the state’s history.

Those opposed, including ideologically distinct think tanks Texas Public Policy Foundation and Every Texan, view the program as bloated, prone to abuse, and a sop to companies who would move to Texas otherwise, with or without the abatement.

Wood said at the economic development panel, “We need to be honest that some of these businesses would come anyway,” but then suggested that heavy hitters like Samsung and Tesla would not have moved their operations to Texas without it.

Texas Oil and Gas President Todd Staples said at the same panel, “Some may come anyway, but do you really want to gamble on the ones that are [coming here because of 313]?”

The issue has remained of high importance to Phelan, and now with the backing of Abbott, it’s tough to see the program’s most fervent opponents succeeding in keeping it in the grave.