The future of Austin metro without Chapter 313 tax incentives..

[Aaron Gordy]

It will expire at the end of next year and was not renewed by Texas State Legislature, recently. In a nutshell, Chapter 313 allows a school district to offer a cap of up to 10 years-between 10 and 100 million of the taxable property value of new manufacturing or renewable energy projects. It helped to bring Tesla and Samsung to the Austin metro. Samsung got approved for it by Manor ISD in 2005 and 2012 which spurred massive development in the northeast quadrant of the city. Del Valle ISD approved it for Tesla and will save Tesla approximately 50 mil over 10 years.  

What does that mean? The Austin metro will have less of a competitive advantage for big corporations to move to the metro after 2022. That has been a card that the metro has been playing for decades. Very interesting! 

Texas State Congress is supposedly reconvening for a special session but is unlikely to consider this case. 

Only time will tell of the consequences. 

[Chris Schorre]

Hi Aaron,

 An interesting topic. I've always wondered how much of an "incentive" these tax breaks really are to corporations. Tesla, as you note, received $46.4MM in tax breaks from Del Valle but is that what really attracted them to Austin for their $1+ billion facility? If they had not been offered the incentive would they have gone elsewhere? I am suspicious of the idea that the tax break is the driving factor for a company to consider Austin. If that were the case the companies would post an RFP on their website and let all states and counties participate in an auction of sorts. Of course, no companies do that because their primary focus is the local labor pool, proximity to customers/suppliers, educational system and so on. So my personal feeling is that companies often dangle the idea that they might go elsewhere to get more incentives (who wouldn't use that negotiation tactic?) when the decision has mostly been made internally. I am not an economist and have no background in how incentives work but I don't think letting Chapter 313 incentives lapse will take Austin off the table for many companies who see the myriad other benefits the Austin metro offers.