Gov. Greg Abbott says Texas will revamp economic development program after property tax incentive expires

Gov. Greg Abbott speaks after receiving a Governor’s Cup award from Site Selection magazine at the Texas Governor’s Mansion in Austin on March 1, 2022. The award draws attention to states’ job creation efforts and capital investments. Credit: Eddie Gaspar/The Texas Tribune

Gov. Greg Abbott on Wednesday sought to reassure business leaders that state lawmakers would act during this legislative session to improve the state’s economic development tools after letting a popular corporate tax-break program expire last year.

He also said Texas was already feeling the impact of losing the program, recently missing out on a “massive” corporate project to New York.

Addressing the Greater Arlington Chamber of Commerce, Abbott appeared to give his most extensive public comments yet on the future of economic development in Texas after the end of the so-called Chapter 313 program. Abbott nodded to the politically charged nature of the topic by bringing it up as the “elephant in the room.”

“Chapter 313 is gone, and that said, there is a desire in the Capitol to make sure Texas does remain No. 1 for economic development,” Abbott said, “and we’re working on — and others in the Capitol are working on — to ensure that we will have economic development tools going forward that may not exactly replicate 313” but will keep Texas No. 1 for economic development.

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Abbott did not detail what those new tools would be, but his comments are a boost to business leaders who are trying to bring back Chapter 313 in some form. The program was intended to lure large companies to Texas by discounting local school district property taxes for them, but it had become beset with bipartisan accusations of “corporate welfare.” In 2021, the state Senate declined to consider a bill extending the program, the first time in its 20-year history that legislators decided not to renew it.

Abbott briefly alluded to the debate over the program in his State of the State speech Feb. 16, saying “local communities need new economic developments tools this session.” That comment and his remarks in Arlington align him with state House Speaker Dade Phelan, R-Beaumont, who is prioritizing a Chapter 313 revival. But they face a large hurdle from Lt. Gov. Dan Patrick, who presides over the Senate and bragged last month that he “killed” Chapter 313 in 2021 because it “had been misused.”

Abbott said Wednesday that the expiration of Chapter 313 factored into the recent decision by Micron to build a new computer chip factory in upstate New York instead of Texas. Abbott said it made Texas “lose to one of the worst states for business in America.”

“We were in running for … a massive semiconductor manufacturing facility, and we lost to New York for one reason: New York had a better benefits package,” Abbott said. “The CEO of Micron was basically begging me because he really wanted to do business in Texas. … We gave every penny that we could give, and New York literally offered billions of dollars more that we could not keep up with.”

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Abbott was not as outspoken about Chapter 313 when it was on the chopping block in 2021. He was noncommittal, for example, when asked in November 2021 if he would call a special session to renew the program.

Under the program, businesses could apply to the local school district for a 10-year discount on their property tax bills in exchange for building or expanding in the community and, in a number of cases, creating new jobs. There was little downside for school districts to approve the tax breaks, because any foregone revenue for public schools was made up for by the state. But conservatives denounced it as a corporate giveaway and some liberals argued it left less money on the table for other state services, such as health care or public safety.

The issue remains politically touchy, especially among Republicans who have long debated what kind of role — if any — the state should play in incentivizing business relocations. Abbott’s 2022 primary challenger, Don Huffines, quickly criticized Abbott’s comments in Arlington, tweeting that “corporate welfare stands in the way of tax relief for Texas families and free market competition for Texas companies.”

A coalition of Chapter 313 opponents also fired back Wednesday, noting the program siphoned away property-tax revenue that could otherwise fund public education.

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“This program is literally sucking the blood out of our school funding system and state budget, yet lobby groups continue to try to bring it back from the grave like Dracula,” read a statement from the Texas chapter of the Industrial Areas Foundation.

Abbott seemed well aware of the program’s tattered reputation Wednesday. He jokingly told business leaders in Arlington that if they are talking with lawmakers this session about the topic, “never bring up the numbers 313. It leaves a bad taste in peoples’ mouth.”

Last week, over 150 business groups, including the head of the Greater Arlington Chamber of Commerce, wrote to lawmakers calling for a “new, transparent, and accountable economic development policy.” They did not use the term Chapter 313.

The program officially expired on Dec. 31, 2022, the last date that the comptroller’s office had to enter companies into the program. The office was overwhelmed with applications in the final months of the program, and two renewable energy firms sued after their applications got denied amid the late rush. The Texas Supreme Court declined to intervene.

This article originally appeared in The Texas Tribune.