New state database details local tax incentives

Much of the Lone Star State’s recent economic boom has come on the back of generous local tax incentives used to lure companies to the state, but the full cost of such giveaways was largely kept in the dark — until now.

Overall, cities and counties across Texas have more than 2,700 active incentive deals with companies exempting them from taxes to varying degrees. It’s a state program that operates with no limits and little oversight, says the Houston Chronicle.

The incentive deals were authorized under a pair of state laws — known as Chapter 380, for cities, and Chapter 381, for counties — passed during the recession of the 1980s. An investigation last year by the Chronicle found that both laws did away with earlier regulations that lawmakers placed on such economic incentive programs, in a bid to drive the state’s recovery after the oil glut kneecapped its economy.

Several market crashes and a global pandemic later, the Texas legislature passed a law last year requiring local officials to report incentive agreements to the state comptroller’s office. While the law does not impose limitations or regulations on incentive deals, it’s the most comprehensive effort to date by a state agency to pin down just how many of these local agreements exist and provide details of each contract through a publicly available database.

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“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 Hegar said.

With the new database, analysis of incentive deals in the state of Texas — the preferred economic development tool for local governments— is finally possible. As of September 1, 2021, when the new disclosure law went into effect, there were more than 3,100 active incentive contracts in Texas — 375 of which have since expired.

Whereas most states impose a 10-year cap on most corporate incentives, Texas does not. The comptroller’s database showed that 718 deals have lasted 11 years or longer, and 68 have gone on longer than 30 years. The oldest — between Dell Technologies and the city of Round Rock — is a 60-year agreement. Round Rock taxpayers paid more than $164 million in sales tax rebates to the computer giant since 1993, and payments are set to continue until the year 2053.

Richardson, a northern suburb of Dallas, had the most deals of any city government with 290 incentive agreements.

But the database may not even capture all of these agreements, since it relies on local governments to report them, and the penalty for failing to report them is a mere $1,000.

— Maddy Sperling