It’s back, maybe.
Chapter 313 officially expired on Dec. 31.
Although the program caused division across the political spectrum, Chapter 313 tax incentives were credited with bringing billions of dollars in business investments to Texas. Pressure to reintroduce it, exerted by the business and investment community, has been intense.
As a result, tax incentives resembling those in Chapter 313 are back on the floor of the Texas State House under a new act called The Texas Jobs and Security Act, or House Bill 5 (HB5).
Rep. J.M. Lozano had attempted to reintroduce 313 as originally written in early February, shortly after the new session opened. He has now instead turned his support to HB5.
“We have seen companies that have gone to other states because we no longer have 313,” Lozano told the Austin Business Journal. “Our economic future is in the new technologies that we are seeing flourish. Here we have oil, gas and cattle, but we are now seeing solar farms and carbon sequestration. We cannot miss out on those opportunities.”
Although the contents of HB5 are not fully known, it is likely to be different than its predecessor. In particular, incentives may not be made available for wind, solar or other renewable energy-generating projects, a restriction supported by Texas Gov. Greg Abbott.
Abbott had given assurances to several state business groups that a revival of Chapter 313 was a priority for the upcoming House session.
“Chapter 313 is gone, and that said, there is a desire in the Capitol to make sure Texas does remain number one for economic development,” Abbott told the Greater Arlington Chamber of Commerce, “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 number one for economic development.”
Abbott said the absence of Chapter 313 was the prime reason Micron chose to build a massive new chip manufacturing facility in New York State, what he described as “one of the worst states for business in America,” rather than in Texas.
While the Chapter 313 incentive program was celebrated for bringing high profile companies like Tesla, Samsung and Toyota, many were critical of the tax break. Conservatives called it a giveaway and more liberal voices claimed it took money away from important state-supported social services.
Chapter 313 allowed companies a 10-year limitation on property tax assessments, a major revenue source for local school boards, in exchange for constructing new facilities and creating new jobs. Applications had to be approved by the district school board in question in order to go forward.
This created controversy. Some described Chapter 313 as “free money for business.”
“This program is literally sucking the blood out of our school funding system and state budget,” said Rosalie Tristan, a leader with Valley Interfaith, a non-partisan organization with a mission to hold governments accountable.
Chapter 313 supporters say school districts had few reasons not to approve program applications since the state made up any losses of revenue. In fact, several school boards had been vocal supporters of the original Chapter 313.
The Ector County School District in Odessa called the program, “an effective way to attract businesses to the state of Texas by providing tax incentives. Communities and school districts benefited from these agreements as they improved the local economy and contributed to the financial capacity of school districts.”
But there were also criticisms from groups claiming the incentive gave carte blanche to polluters.
As reported in Capital Main, a Californian non-profit publication focussed on environmental matters, “The petrochemical industry has been the program’s largest beneficiary — receiving abatements worth $7.6 billion in 2020 alone, compared to $2.1 billion for wind farm companies.”
It describes the transformation of the northern coastline of Corpus Christi Bay over the past 10 years “from a greenspace of wetlands and dunes into a miles-long corridor of petrochemical and industrial facilities, their cracking towers rising hundreds of feet into the air.”
Nate Jensen, a professor specializing in economic development strategy in the department of government at the University of Texas at Austin, told local media that HB5 is essentially a shell bill that is just Chapter 313 without any details.
“It looks like it was written on the back of a napkin,” said Jose Guerrero of Interfaith Action of Central Texas.
In one form or another, Chapter 313 seems certain to rise again.