Statewide NewsTaxes & SpendingTexas Comptroller Sued by Renewable Companies to Force Approval of Chapter 313 Applications

Stetson Renewable Holdings, Ogallala Renewable Project, Monte Alto Windpower, and Yellow Rose Solar Project petitioned the Texas Supreme Court to order Comptroller Glenn Hegar to approve the pending applications before his agency.

Between the four, 15 different 313 abatements have been filed with 11 by Stetson. Most of the 15 applications were filed with the comptroller in May this year.

The lawsuits allege that the comptroller failed to comply with the 90-day requirement to process the applications set by state law.

“Even though the local school districts agree with [the companies] that their projects would be good for Texans, the Comptroller issued denial letters to Relators explaining that, because he did not meet his statutory deadline, he could not issue the requested Certificates for Relators’ Projects,” their petition reads.

“For projects that are timely approved, there is no question that the applicants and school districts will receive the benefit of Chapter 313’s incentives in future years, which will result in added economic benefits for all associated with the projects.”

Petitioners say they were sent letters from the comptroller’s office in mid to late November stating that no further action would be taken on their respective applications. The letter, included in the plaintiffs’ filing, reads in part: “Due to the lapse of the 90-day period, the Comptroller has been unable to provide an economic impact evaluation and therefore, we cannot issue a certificate.”

“There is no option under the statute for the Comptroller to refuse to conduct the evaluation at all for an eligible application because, for whatever reason, he failed to do so within prescribed 90 day period,” they add.

Hegar hit back against the petitions, saying in a statement, “This is a frivolous attempt to get the Texas Supreme Court to force my office to put even more resources toward the program in the final two weeks of its existence.”

“My office had the difficult task of managing a workload that has more than tripled in the last six months of the year,” he added. “We have taken measures to responsibly allocate the necessary resources to comply with the law, and I commend my team for the effort it has put forth this year.”

“The Legislature could have provided express transition authority that would have allowed us to continue reviewing and approving applications after the first of the year so long as the applications were filed before the program’s expiration date. But the Legislature did not provide such transition authority.”

The agency gave applicants a recommended date of June 1 to get applications in so it had enough time to work through as many as possible before 313’s expiration date. The office has a small group of employees to comb through the hundreds of applications submitted this year.

Chapter 313 of the tax code allows school districts to hand out tax breaks to companies building operations in their jurisdiction. The agreements, which reduce the taxable value of the entity’s property, typically last for 10 years before phasing back toward full taxation. Created in the early aughts, Chapter 313 is meant to attract business to the state and with them jobs for Texans.

Companies negotiate directly with school districts for the initial approval of the abatements, the paperwork for which is then filed with the comptroller tracking the estimated taxable property values and promised number of jobs. But those projections, even a few years into the agreements, often prove inaccurate over their lifespans due to the limited ability to predict future valuations and tax rate decisions by local governments.

Because of these inaccuracies, Hegar tried to revamp the data collection process aimed at making the published data more reliable and accessible. But that proposal was abandoned after criticism from media members and think tanks opposed to the program.

After receiving the applications, the comptroller is then tasked with conducting an economic impact assessment for each prospective agreement.

Additionally, the job requirement — 25 in an urban or suburban area, 10 in a rural area — is often waived entirely by the locality. For example, Ogallala promised in its application to create one job.

Last year, the program was up for renewal but legislators could not agree on a plan forward, putting it on a path toward sunsetting. An attempt to extend 313 for 10 years and expand its benefits to additional capital projects for existing facilities — not just for wholly new operations — failed in the Texas House, and then a two-year extension of the program faltered in the Senate.

“Even though my office will certify more than 300 projects this year alone, it was apparently not enough,” Hegar continued. “Despite receiving billions of dollars in property tax abatements over the life of the program and potentially billions more in approved incentives just this year, these companies and their attorneys are asking Texas taxpayers to shoulder even more despite the Legislature’s decision to discontinue the program.”

Since the 2021 regular session concluded without a renewal of Chapter 313 — starting the proverbial shot clock with its expiration set for 11:59 p.m. on December 31, 2022 — 466 applications for abatements under the program have been filed with the comptroller.

The total number filed this year sits at 393 as companies, a large portion of which are renewable energy projects, rushed to get their deals grandfathered in before the clock runs out. Throughout the program’s entire 20-year history, slightly more than 1,000 agreements have been filed with the comptroller.

A revival of Chapter 313 is primed to be among the more notable legislative fights in next year’s session. Texas House Speaker Dade Phelan (R-Beaumont) has repeatedly expressed his support for reviving the program in some form, while advocacy groups and ideologically opposite think tanks Texas Public Policy Foundation and Every Texan are united behind preserving the death of the tax break.