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 has published an online database that allows the public to look up deals in their communities. 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 Hegarsaid.
The incentive deals were written under a pair of 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 taxes 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 Round Rock Mayor Craig Morgan at a February 2020 comptroller hearing.
“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.”
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 included summaries of the agreements, though some are only brief descriptions such as “grant payments” or “to encourage economic development.” When local officials tried 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 ... 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.
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.
(c)2022 the Houston Chronicle. Distributed by Tribune Content Agency, LLC.
